<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH , 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
VISTA MEDICAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3845 94-3184035
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
5451 AVENIDA ENCINAS, SUITE A, CARLSBAD, CALIFORNIA 92008 (619) 603-9120
(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)
JOHN R. LYON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VISTA MEDICAL TECHNOLOGIES, INC.
5451 AVENIDA ENCINAS, SUITE A
CARLSBAD, CALIFORNIA 92008
(619) 603-9120
(Name, address, including zip code and telephone number, including area code, of
agent for service)
------------------
with copies to:
<TABLE>
<S> <C>
Craig S. Andrews, Esq. Douglas M. Mancino, Esq.
Faye H. Russell, Esq. Mark J. Mihanovic, Esq.
BROBECK, PHLEGER & HARRISON LLP McDERMOTT, WILL & EMERY
550 West "C" Street, Suite 1300 2049 Century Park East
San Diego, California 92101 34th Floor
Los Angeles, California 90067
</TABLE>
--------------
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: /X/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01......... 4,025,000 shares $13.00 $52,325,000 $15,857
</TABLE>
(1) Includes 525,000 shares of Common Stock that the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee.
--------------
THE 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 THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH , 1997
3,500,000 SHARES
[LOGO]
VISTA MEDICAL TECHNOLOGIES, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
--------------
All of the 3,500,000 shares of Common Stock offered hereby are being sold by
the Company. Prior to this Offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $11.00 and $13.00. For factors to be considered
in determining the initial public offering price, see "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
The Company has applied for quotation of the Common Stock on the Nasdaq
National Market under the symbol "VMTI."
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT (1) COMPANY (2)
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per Share................................................. $ $ $
Total (3)................................................. $ $ $
</TABLE>
- --------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 525,000 shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such option is exercised in full, the total initial public offering price,
underwriting discount and proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting."
--------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York on or about
, 1997, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO. SALOMON BROTHERS INC
---------
The date of this Prospectus is , 1997.
<PAGE>
INSIDE FRONT COVER
TEXT IN UPPER RIGHT CORNER:
VISTA MEDICAL'S 3D HMD FOR MINIMALLY INVASIVE MICROSURGERY
Vista Medical Technologies (Vista Medical) was originally founded by Kaiser
Aerospace and Electronics Corporation, a leader in the development and
manufacture of heads-up and head mounted displays (HMD) for aerospace
applications. Vista Medical's HMD, specifically designed for minimally invasive
microsurgery, incorporates the visualization, information and human factors
technology developed by Kaiser for its military customers.
(PRODUCT MARKETING IS SUBJECT TO FDA CLEARANCE.)
PHOTOGRAPH DESCRIPTIONS AND CAPTIONS
1. Background: Blue with clouds
2. Top left: Typical aerospace display
3. Top left (lower and more centered): A flight helmet (head mounted display).
4. Center: Vista Medical Head Mounted Display (HMD) for surgery.
5. Lower left hand corner: Typical surgical data which will be shown on the
HMD.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
The Company intends to furnish to its stockholders annual reports containing
audited financial statements certified by an independent public accounting firm
and quarterly reports containing unaudited interim financial information for the
first three fiscal quarters of each fiscal year of the Company.
THE COMPANY OWNS THE FOLLOWING TRADEMARKS: 3D SCOPE-REGISTERED TRADEMARK-,
DESIGN OF CONE AND VISTA MEDICAL TECHNOLOGIES & DESIGN. IN ADDITION, THE COMPANY
HAS FILED FOR TRADEMARK PROTECTION FOR THE FOLLOWING: MIM, STEREOSITE,
CARDIOCAMERA, CARDIOZOOM, INFOMATIX, CARDIOVIEW, CARDIOCONTROLLER, CARDIOGUIDE,
CARDIOCONSOLE AND CARDIOLIGHT. THIS PROSPECTUS ALSO INCLUDES NAMES AND
TRADEMARKS OF COMPANIES OTHER THAN THE COMPANY, INCLUDING HEARTPORT AND
PORT-ACCESS WHICH ARE TRADEMARKS OF HEARTPORT, INC.
2
<PAGE>
INSIDE FRONT (INSIDE)
Background: Blue with images of a heart
Text in center right of page: Series 8000 Advanced Visualization and
Information System for Cardiac Surgery
Center right: Cardiac surgeons using the Company's system.
Lower left: The Series 8000 Advanced Visualization and Information Sytem and
the Company's micro-cameras.
Text in lower right corner: The Series 8000 is a 3D image acquisition and
display system developed in consultation with the Company's Clinical Advisory
Board to respond to the requirements of minimally invasive cardiac surgical
applications. Vista Medical believes that the Series 8000 is the only
visualization and information system specifically designed for minimally
invasive cardiac surgery. The photograph shows cardiac surgeons wearing the
CardioView HMD and using the miniature 3D CardioCamera. Other illustrations show
the CardioConsole, the central control unit for the Series 8000, and a close-up
view of the camera options which will be available with the Series 8000.
(PRODUCT MARKETING IS SUBJECT TO FDA CLEARANCE.)
3
<PAGE>
INSIDE FLAP (OUTSIDE)
Text in upper right corner: StereoSite Systems for Head, Neck and Spine
Surgery
Background: Blue with imprint of the head.
Center: Two surgeons, with one using the Vista Medical System in a
neurological application.
Right Corner: Diagnostic data.
Text in lower left corner: Advances in neurosurgery and related specialities
are increasingly dependent on the provision of accurate diagnostic and guidance
information to the surgeon in real-time. Vista Medical's StereoSite system for
microscopic and microendoscopic applications are designed to give the surgeon
the ergonomic advantages of an HMD combined with the ability to integrate data
into the anatomical view. Illustrated here is an example of information in the
form of computer derived 3D reconstructions of the brain used by the
neurosurgeon for pre-operative surgical planning and intra-operative guidance.
The principal illustration shows a surgeon operating using a surgical microscope
for magnified visualization, with a colleague observing the same image on a
Vista Medical HMD.
(PRODUCT MARKETING IS SUBJECT TO FDA CLEARANCE.)
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND THE COMPANY'S FINANCIAL STATEMENTS (INCLUDING THE NOTES
THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED
HEREIN, ALL INFORMATION CONTAINED IN THIS PROSPECTUS (I) GIVES EFFECT TO A
THREE-FOR-FOUR REVERSE SPLIT OF THE COMMON STOCK, PAR VALUE $0.01 PER SHARE (THE
"COMMON STOCK"), OF THE COMPANY, (II) REFLECTS THE CONVERSION OF ALL OUTSTANDING
SHARES OF THE COMPANY'S PREFERRED STOCK, PAR VALUE $0.01 (THE "PREFERRED
STOCK"), INTO AN AGGREGATE OF 8,680,679 SHARES OF COMMON STOCK AND (III) ASSUMES
NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. THIS PROSPECTUS
CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS
THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED UNDER
THE HEADING "RISK FACTORS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS
PROSPECTUS. INVESTORS SHOULD CAREFULLY CONSIDER SUCH INFORMATION SET FORTH UNDER
THE HEADING "RISK FACTORS."
THE COMPANY
Vista Medical Technologies, Inc. ("Vista Medical" or the "Company")
develops, manufactures and intends to market proprietary visualization and
information systems that enable minimally invasive surgical solutions in
cardiothoracic, head, neck and spine ("HNS") and other selected microsurgical
procedures. The Company currently markets three-chip cameras for endoscopy and
related surgical instruments and accessories. Vista Medical's visualization and
information systems bring together head-mounted display ("HMD") technology
originally developed for applications in military aerospace by Kaiser Aerospace
and Electronics Corporation ("Kaiser Aerospace") and three-dimensional ("3-D")
imaging capability from its acquisition of Oktas, Inc.
The development and subsequent widespread adoption of minimally invasive
surgical approaches have revolutionized many surgical fields, including general
surgery, orthopedics, gynecology and urology. Minimally invasive surgical
procedures are performed through strategically placed ports or mini-incisions in
a patient's body, thereby avoiding the larger incisions used in traditional open
surgery. Minimally invasive procedures are designed to decrease complications,
reduce pain and suffering, speed recovery and decrease costs associated with
many aspects of patient care. This movement toward minimally invasive surgery
has been driven by advances in both device technology and surgical technique.
Minimally invasive microsurgery ("MIM") is an extension of minimally invasive
surgery and is characterized by greater complexity and precision. MIM procedures
have been made possible primarily by recent advances in medical technology.
The application of minimally invasive techniques to cardiothoracic surgery
is commonly regarded as a revolutionary development in modern surgery. Minimally
invasive cardiac procedures avoid the trauma caused by sternotomy and promise to
significantly decrease pain and trauma and shorten recovery times.
Cardiothoracic MIM requires the surgeon to perform technically challenging
procedures, including working on tiny delicate structures (such as a one
millimeter heart vessel) with highly restricted access through small incisions.
The Company believes that an advanced visualization technology which
provides the surgeon with an intuitive and ergonomic solution to the inherent
vision restrictions of the MIM approach will enable the use of the MIM technique
with increased safety, efficacy and precision. In order to meet this
visualization challenge, the Company has developed proprietary visualization and
information systems.
Vista Medical's proprietary technology is based on the following principles
which the Company believes are essential in advancing the techniques of MIM: (i)
three-dimensional view; (ii) high resolution images; (iii) improved access
through miniaturization technology; (iv) optimized surgical ergonomics; and (v)
integration of anatomical image with critical monitoring and diagnostic
information.
3
<PAGE>
Based on these principles, Vista Medical develops visualization products and
related information systems that are customized for the specific cardiothoracic
and HNS procedures to which they are directed. The Company's product lines
include the Series 8000 Advanced Visualization and Information System ("Series
8000"), designed for use in cardiothoracic procedures, and StereoSite, designed
for use in microscopic and endoscopic procedures in HNS. The Company also offers
surgical instruments and accessories designed for use in both cardiothoracic and
HNS MIM procedures.
BUSINESS STRATEGY
The Company's business strategy is to become the leading developer and
marketer of advanced visualization and information systems for MIM applications
in cardiothoracic, HNS and other selected surgical specialties. Key elements of
the Company's strategy include:
- Establish advanced visualization technologies as standard practice in
minimally invasive cardiac surgery.
- Promote Vista Medical's visualization solution for use in all types of
cardiac surgery.
- Develop MIM applications through specialty-focused business units by
leveraging the Company's technology platform.
- Accelerate adoption of the Series 8000 Advanced Visualization and
Information System in the cardiac market by implementing a per-procedure
pricing strategy.
- Increase the surgeon's real-time access to critical data.
- Enter into strategic relationships which complement Company resources.
To assist in implementing its business strategy, the Company has established
two Clinical Advisory Boards made up of leading surgeons, one focused on
minimally invasive cardiac surgery, the other focused on HNS microsurgery and a
number of other specialties. Members of the Clinical Advisory Boards consult
with the Company exclusively in the field of visualization. The Clinical
Advisory Boards are intended to act as a clinical reference for the Company and
to provide access to potential training sites for the Company's visualization
products.
RECENT DEVELOPMENTS
In November 1996, Vista Medical and Medtronic, Inc. ("Medtronic"), a leading
cardiac company, entered into a strategic alliance providing for the
distribution and co-promotion of the Company's current and future visualization
and information systems for cardiac surgery, including the Series 8000 (the
"Vista Systems"). Medtronic will act as Vista Medical's exclusive distributor
for the Vista Systems for use in cardiothoracic surgical procedures in Europe,
the Middle East (excluding Afghanistan and Pakistan) and Africa and will
co-promote the Vista Systems in North America. Vista Medical retains direct
distribution rights in North America as well as the worldwide right to
distribute its systems for use in all other procedures. In conjunction with
entering into the agreement, Medtronic made a $10.0 million equity investment in
the Company.
The Company believes that the control and processing of information is a key
component in the development of advanced visualization systems. As a result, in
February 1997, the Company obtained from GDE Systems, Inc. ("GDE"), a leading
military electronics and information management company, an exclusive worldwide
license to software and documentation and trademarks of GDE for use in the
medical field. Since 1993, GDE's subsidiary, Healthcom, has been adapting the
software licensed to Vista Medical to provide high-speed, image-based
information processing and networking capabilities specifically for medical
applications. In connection with the license, Vista Medical will issue to GDE
Common Stock with a value (based on the initial public offering price) of
$250,000.
4
<PAGE>
In February 1997, the Company entered into an agreement with Heartport, Inc.
("Heartport"), a leading company developing minimally invasive technology for
heart surgery. Vista Medical will sell four Series 8000 systems to Heartport,
for use in the Heartport Research and Training Center in Salt Lake City, Utah.
Heartport has agreed to use the Series 8000 in its training centers, to promote
that its training courses utilize the Series 8000 and to endorse the Series 8000
as the preferred 3-D video visualization and information solution for minimally
invasive heart surgery. In connection with the agreement, the Company issued to
Heartport a warrant to purchase up to 100,000 shares of Common Stock,
exercisable at any time after this Offering and prior to March 31, 2001, at a
price per share equal to the initial public offering price.
The Company believes that all of its products or products under development
are, or will be, eligible for 510(k) clearance to market by the United States
Food and Drug Administration ("FDA"). Applications for 510(k) clearance to
market have been filed, or clearance to market has been received, for all
components which are necessary for initial Series 8000 commercialization. The
Company believes that there are predicate devices which can be relied upon for
those of its products for which regulatory applications are in process. A
majority of these predicate devices were developed by the Company or its
strategic partners.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 3,500,000 shares
Common Stock to be outstanding after the
Offering.................................... 12,718,903 shares (1)
Use of proceeds.............................. Fund product introductions, sales and
marketing activities, research and
development, acquisition of capital equipment
for manufacturing scale-up and for working
capital and other general corporate purposes.
See "Use of Proceeds."
Nasdaq National Market symbol................ VMTI
</TABLE>
- --------------
(1) Based on shares outstanding as of December 31, 1996. Does not include
1,245,801 shares of Common Stock issuable upon exercise of options
outstanding as of December 31, 1996 at a weighted average exercise price of
$0.32 per share pursuant to the Company's stock option plans. Also does not
include securities issued subsequent to December 31, 1996, consisting of (i)
112,500 shares of Common Stock issuable upon the exercise of options granted
at a weighted average exercise price of $2.93 per share, (ii) 75,625 shares
of Common Stock issued upon the exercise of options at a weighted average
price of $0.46 per share, (iii) 100,000 shares of Common Stock issuable upon
the exercise of warrants granted at a weighted average exercise price equal
to the initial public offering price of the Common Stock offered hereby and
(vi) a number of shares of Common Stock equal to $250,000 divided by the
initial public offering price of the Common Stock offered hereby to be
issued to GDE immediately following the closing of this Offering.
RISK FACTORS
The shares offered hereby involve a high degree of risk, and prospective
purchasers should carefully consider the factors described under the heading
"Risk Factors."
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales......................................................................... $ 59 $ 1,719 $ 2,244
Costs and expenses:
Cost of sales............................................................... 43 1,272 2,253
Research and development.................................................... 1,328 1,904 3,880
Sales and marketing......................................................... 291 834 2,057
General and administrative.................................................. 758 1,034 3,103
--------- --------- -----------
Total costs and expenses.................................................. 2,420 5,044 11,293
--------- --------- -----------
Loss from operations.......................................................... (2,361) (3,325) (9,049)
Minority interest in net loss of consolidated partnership..................... 270 -- --
License income................................................................ -- -- 1,493
Interest income............................................................... -- 51 117
--------- --------- -----------
Net loss...................................................................... $ (2,091) $ (3,274) $ (7,439)
--------- --------- -----------
--------- --------- -----------
Pro forma net loss per share (1).............................................. $ (0.86)
Shares used in computing pro forma net loss per share (1)..................... 8,626,898
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
AS
ACTUAL ADJUSTED (2)
---------- ------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments.................................... $ 10,285 $ 48,645
Working capital...................................................................... 10,805 49,165
Total assets......................................................................... 14,316 52,676
Total debt........................................................................... -- --
Accumulated deficit.................................................................. (13,620) (13,620)
Total stockholders' equity........................................................... 12,961 51,321
</TABLE>
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(1) See Note 1 of Notes to Consolidated Financial Statements for information
concerning the computation of pro forma net loss per share and shares used
in computing pro forma net loss per share.
(2) Gives effect to the sale of 3,500,000 shares of Common Stock offered by the
Company in this Offering at the assumed offering price of $12.00 per share
(the mid-point of the range set forth on the front cover) and the
application of the net proceeds therefrom, after deducting the underwriting
discount and offering expenses payable by the Company. See "Use of
Proceeds."
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. THE FOLLOWING FACTORS, IN ADDITION TO THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS, SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE
COMPANY AND ITS BUSINESS BEFORE PURCHASING SHARES OF COMMON STOCK OFFERED
HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT
CAUSE SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW.
DEVELOPMENT STAGE COMPANY; SUBSTANTIAL FUTURE LOSSES AND FUTURE CAPITAL
REQUIREMENTS
Since its formation in July 1993, the Company has been engaged in the
development of visualization and information systems and related surgical
instruments and accessories that enable MIM solutions for applications in
cardiothoracic and other selected microsurgical procedures and in manufacturing
and marketing limited quantities of camera systems to customers as an original
equipment manufacturer ("OEM"). As of December 31, 1996, the Company had
incurred cumulative net losses of $13.6 million since its formation. The Company
expects to incur substantial and increasing operating losses before it will
reach profitability, if at all. Furthermore, the Company expects its expenses in
all categories to increase as its marketing and other business activities
expand. There can be no assurance that the Company will achieve or sustain
profitability in the future. Failure to achieve significant commercial revenues
or profitability would have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company's future liquidity and capital requirements will depend upon
numerous factors, including the following: the extent to which the Company's
products gain market acceptance; the progress and scope of product evaluations;
the timing and costs of filing future regulatory submissions; the timing and
costs required to receive both domestic and international governmental
approvals; the timing and costs of product introductions; the extent of the
Company's ongoing research and development programs; the costs of training
physicians to become proficient in the use of the Company's products and
procedures; and the costs of developing marketing and distribution capabilities,
if regulatory approvals are received. If the net proceeds of this Offering,
together with available funds and cash generated from operations, are
insufficient to satisfy the Company's cash needs, the Company may require
additional financing. There can be no assurance that such additional financing
will be available on terms acceptable to the Company, if at all. The Company's
inability to fund its capital and operational requirements would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
DEPENDENCE UPON AND UNCERTAINTY REGARDING COMMERCIALIZATION OF SERIES 8000
The Series 8000 for minimally invasive cardiac surgery is the Company's
primary near-term product focus and is expected to account for the majority of
the Company's revenues over the next several years. Some components of the
system have not been cleared for marketing by the FDA. Additional product
evaluation, as well as regulatory clearance or approval, is required before the
system can be widely marketed in the United States or internationally. There can
be no assurance that demand for the Series 8000 will be sufficient to achieve
profitable operations.
Development of certain peripheral components of the Series 8000 has not yet
been finalized, and final prototypes have not yet been completed. There can be
no assurance that such development efforts will be successful or that the
Company's products under development will be shown to be safe or effective,
capable of being manufactured in commercial quantities at acceptable costs,
cleared or approved by regulatory authorities or successfully marketed.
7
<PAGE>
Evaluations of the Series 8000 conducted to date have shown that there is a
learning process involved for surgeons and other members of the surgery team to
become proficient with the use of the system. Based on a limited number of
clinical and laboratory procedures performed to date, there can be no assurance
that visualization and information system enhancements incorporated, or to be
incorporated, in the Series 8000 will prove suitable for use by a substantial
number of cardiothoracic surgeons. If the Series 8000 proves unsuitable for a
number of surgeons to use, the potential markets and applications for the
Company's products would be significantly limited. Widespread use of the Series
8000 will require training of a large number of surgeons, and the time required
to institute a training program and to train such surgeons could adversely
affect market acceptance. Failure to successfully commercialize the Series 8000
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Product Lines," "Business
- -- Marketing and Sales," "Business -- Manufacturing" and "Business -- Government
Regulation."
UNCERTAINTY OF CLINICAL ADOPTION OF MINIMALLY INVASIVE MICROSURGICAL PROCEDURES
The Company's near-term products are being developed in order to enable
cardiothoracic and HNS surgeons to perform MIM surgical procedures using their
existing skills coupled with training and complementary equipment being
developed by other companies. Accordingly, the Company's success is dependent
upon acceptance of these procedures by the medical community as a reliable, safe
and cost effective alternative to existing treatments. To date, MIM surgical
procedures have only been performed on a very limited basis by a small number of
highly skilled surgeons. The Company is unable to predict how quickly, if at
all, MIM surgical procedures will be adopted by the medical community or, if
they are adopted, the number of procedures that will be performed.
Most patients with cardiovascular disease first consult with a cardiologist,
who then may treat the patient with pharmaceuticals or non-surgical
interventions, such as angioplasty and intravascular stents, or refer the
patient to a cardiac surgeon for open-chest coronary artery bypass graft
("CABG") surgery. Cardiologists may not recommend MIM procedures until such
time, if at all, as such procedures can successfully be demonstrated to be as
safe and cost-effective as other accepted treatments. In addition, cardiac
surgeons may choose not to recommend MIM procedures until such time, if at all,
as such procedures are proven to be more efficacious than conventional,
open-chest surgery methods, which have become widely adopted by cardiac surgeons
since the initial use of such surgery in the mid-1950s.
Even if the clinical efficacy of MIM procedures is established in cardiac
and other specialties, surgeons, specialists and other physicians may choose not
to recommend the procedures for any number of other reasons. Clinical adoption
will depend, for example, upon the Company's ability to facilitate training of
surgeons to perform MIM surgery and the willingness of such surgeons to perform
such procedures. Physicians may similarly elect not to recommend the MIM
procedure based on possible unavailability of acceptable reimbursement from
health care payors. Health care payor acceptance may require evidence of the
cost effectiveness of MIM procedures as compared to other currently available
treatments. The Company believes that physician endorsements will be essential
for clinical adoption of MIM procedures, and there can be no assurance that any
such endorsements will be obtained in a timely manner, if at all. Patient
acceptance of the procedure will depend upon such physician recommendations, as
well as other factors, including the effectiveness of, and the rate and severity
of complications associated with, the procedure as compared to other treatments.
There can be no assurance that MIM procedures will gain clinical adoption.
Failure of these procedures to achieve significant clinical adoption would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Background," "Business -- Product
Lines," "Business -- Marketing and Sales," "Business -- Competition" and
"Business -- Government Regulation."
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LACK OF COMMERCIAL MANUFACTURING EXPERIENCE; SCALE-UP RISK
The Company lacks experience in manufacturing the products under
development, including the Series 8000, in the quantities that would be
necessary for the Company to achieve significant commercial sales. The
manufacture of the Company's products primarily involves the assembly of a
number of sub-assemblies and components. Companies such as Vista Medical often
encounter difficulties in scaling up manufacturing of products, which
difficulties could include problems involving quality control and assurance,
component and service availability, adequacy of control policies and procedures,
lack of qualified personnel, compliance with FDA regulations and the need for
further FDA approval of new manufacturing processes and facilities and other
production constraints. There can be no assurance that reliable, high-volume
manufacturing can be established or maintained at commercially reasonable costs.
The Company will also require additional manufacturing facilities as production
volumes increase; acquisition of new manufacturing facilities will likely
involve relocation. Any of these factors could have a material adverse effect on
the Company's business, financial condition and results of operation.
The Company has and will continue to consider as appropriate, the internal
manufacture of sub-assemblies currently provided by third party subcontractors,
as well as the implementation of new production processes. There can be no
assurance that manufacturing yields or costs will not be adversely affected by
the transition to in-house production or to new production processes when such
efforts are undertaken, or that FDA Good Manufacturing Practices ("GMP")
requirements can be met and that such a transition would not materially
adversely affect the Company's business, financial condition and results of
operations. See "Business -- Manufacturing."
LIMITED SALES, MARKETING, DISTRIBUTION AND TECHNICAL SUPPORT EXPERIENCE
The Company has organized its sales and marketing efforts by the Company's
CardioThoracic Surgery and HNS Microsurgery divisions. The Company currently
markets its cardiothoracic products in North America through two direct (Company
employee) sales representatives and 35 independent sales representatives. The
Company is in the process of hiring up to 10 additional direct sales
representatives to support the introduction of its Series 8000 by the
CardioThoracic Surgery division. A similar combination of direct and independent
sales representatives will market the products of the Company's HNS Microsurgery
division. Establishment of a sales force capable of effectively commercializing
the Company's systems will require substantial efforts and significant
management and financial resources. There can be no assurance that the Company
will be able to establish such a sales capability on a timely basis or at all.
The Company believes that a critical element of its sales efforts in North
America will be the provision of technical support, including training and
clinical validation efforts, to its customers. Provision of an adequate level of
such support on a timely basis requires significant financial resources. There
can be no assurance that the Company will be able to provide an adequate level
of technical support on a timely basis, or at all. See "Business -- Strategic
Alliances" and "Business -- Marketing and Sales."
POTENTIAL COMPONENT SHORTAGES; DEPENDENCE ON SOLE SOURCES OF SUPPLY
The Company uses or relies on certain components and services used in its
systems that are provided by sole source suppliers. The manufacture of the
Company's products in larger commercial quantities will require a substantial
increase in component supplies and will likely necessitate the replacement of
current suppliers or the addition of new suppliers. The qualification of
additional or replacement vendors for certain components or services is a
lengthy process. In addition, the substitution of replacement vendors may entail
re-engineering time and cost and could delay the supply of the Company's
products.
The Company expects to manufacture its products based on forecasted product
orders and intends to purchase subassemblies and components prior to receipt of
purchase orders from customers. Lead
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times for materials and components ordered by the Company vary significantly and
depend on factors such as the business practices of the specific supplier,
contract terms and general demand for a component at a given time. Certain
components used in the Company's products have long lead times. As a result,
there is a risk of excess or inadequate inventory if orders do not match
forecasts.
Any significant supply interruption, or inventory shortage or overage, would
have a material adverse effect on the Company's ability to manufacture the
Company's products and, therefore, a material adverse effect on its business,
financial condition and results of operations. See "Business -- Manufacturing."
NO ASSURANCE OF REGULATORY CLEARANCE OR APPROVAL; SIGNIFICANT DOMESTIC AND
INTERNATIONAL REGULATION
The manufacture and sale of medical devices intended for commercial
distribution are subject to extensive governmental regulation in the United
States. Medical devices are regulated in the United States primarily by the FDA
and, to a lesser extent, by certain state agencies. Generally, medical devices
require pre-market clearance or pre-market approval prior to commercial
distribution. In addition, certain material changes or modifications to medical
devices also are subject to FDA review and clearance or approval. The FDA
regulates the research, testing, manufacture, safety, labeling, storage, record
keeping, promotion and distribution of medical devices in the United States and
the export of unapproved medical devices from the United States to other
countries. Noncompliance with applicable requirements can result in failure of
the government to grant pre-market clearance or approval for devices, withdrawal
of approval, total or partial suspension of production, fines, injunctions,
civil penalties, refunds, recall or seizure of products and criminal
prosecution.
In the United States, medical devices are classified into one of three
classes, Class I, II or III, on the basis of the controls deemed by the FDA to
be necessary to reasonably ensure their safety and effectiveness. The Company's
products to date have either been classified as Class I or Class II devices.
Class I devices are subject to general controls (e.g., established
registration and product listing, labeling, adulteration and misbranding
provisions and medical device reporting requirements and, unless exempt, to
pre-market notification and adherence to GMP standards). Class II devices are
subject to general controls and special controls (e.g., performance standards,
post-market surveillance, patient registries and FDA guidelines). Generally,
Class III devices are those that must receive pre-market approval by the FDA to
ensure their safety and effectiveness (e.g., life-sustaining, life-supporting
and implantable or new devices which have not been found to be substantially
equivalent to legally marketed devices). Class III devices ordinarily require
clinical testing to ensure safety and effectiveness and FDA approval prior to
marketing and distribution. The FDA also has the authority to require clinical
testing of Class I and Class II devices. A pre-market approval ("PMA")
application must be filed if a proposed device is not substantially equivalent
to a legally marketed predicate device or if it is a Class III device for which
the FDA has called for such application. A PMA typically takes several years to
be approved by the FDA.
Generally, before a new device can be introduced into the market in the
United States, the manufacturer or distributor must obtain FDA clearance of a
510(k) notification or submission and approval of a PMA application. If a
medical device manufacturer or distributor can establish that a device is
"substantially equivalent" to a legally marketed Class I or Class II device, or
to a Class III device for which the FDA has not called for a PMA, the
manufacturer or distributor may seek clearance from the FDA to market the device
by filing a 510(k) notification. The 510(k) notification may need to be
supported by appropriate performance, clinical or testing data establishing the
claim of substantial equivalence. The FDA requires a rigorous demonstration of
substantial equivalence.
Following submission of the 510(k) notification, the manufacturer or
distributor may not place the device into commercial distribution until a letter
clearing the 510(k) is issued by the FDA. At this time, the
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FDA typically responds to the submission of a 510(k) notification within 90 to
200 days. An FDA letter may declare that the device is substantially equivalent
to a legally marketed device and allow the proposed device to be marketed in the
United States. The FDA, however, may determine that the proposed device is not
substantially equivalent or requires further information, including clinical
data, to make a determination regarding substantial equivalence. Such
determination or request for additional information will delay market
introduction of the product that is the subject of the 510(k) notification.
All clinical investigations involving the use of an unapproved or uncleared
device on humans to determine the safety or effectiveness of the device must be
conducted in accordance with the FDA's investigational device exemption ("IDE")
regulations. If the device presents a "significant risk," the manufacturer or
distributor of the device is required to file an IDE application with the FDA
prior to commencing human clinical trials. The IDE application must be supported
by data, typically the result of animal and, possibly, mechanical testing. If
the IDE application is approved by the FDA, human clinical trials may begin at a
specific number of investigational sites with a maximum number of patients, as
approved by the FDA. If the device presents a "non-significant risk," approval
by an Institutional Review Board prior to commencing human clinical trials is
required, as well as compliance with labeling, record keeping, monitoring and
other requirements.
Any products manufactured or distributed by the Company are subject to
continuing regulation by the FDA, which includes record keeping requirements,
reporting of adverse experience with the use of the device GMP requirements and
post-market surveillance, and may include post-market registry and other actions
deemed necessary by the FDA. A 510(k) supplement, new 510(k) or PMA is also
required when a medical device manufacturer makes a change or modification to a
legally marketed device that could significantly affect the safety or
effectiveness of the device, or where there is a major change or modification in
the intended use of the device. When any change or modification is made to a
device or its intended use, the manufacturer is expected to make the initial
determination as to whether the change or modification is of a kind that would
necessitate the filing of a 510(k) supplement, new 510(K) or PMA.
Sales of medical device products outside the United States are subject to
foreign regulatory requirements that vary from country to country. The time
required to obtain approvals required by foreign countries may be longer or
shorter than that required for FDA clearance, and requirements for licensing may
differ from FDA requirements. Failure to comply with regulatory requirements
could have a material adverse effect on the Company's business, financial
condition and results of operations. The current regulatory environment in
Europe for medical devices differs significantly from that in the United States.
Europe is currently in the transitional process of implementing the Medical
Device Directive which was adopted on January 1, 1995 with a transition period
through June 1998. After June 1998, all medical devices sold in the European
Union must bear the CE mark. Devices are now classified by manufacturers
according to the risks they represent with a classification system giving Class
III as the highest risk devices and Class I as the lowest. Once the device has
been classified, the manufacturer can follow one of a series of conformity
assessment routes, typically through a registered quality system, and
demonstrate compliance to a European Notified Body. After that, the CE mark may
be applied to the device. Maintenance of the system is ensured through annual
on-site audits by the Notified Body and a post-market surveillance system
requiring the manufacturer to submit serious complaints to the appropriate
governmental authority.
Failure to comply with regulatory requirements could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Government Regulation."
RAPID TECHNOLOGICAL CHANGE; SIGNIFICANT COMPETITION
The medical device market is characterized by intensive development efforts
and rapidly advancing technology. The future success of the Company will depend,
in large part, upon its ability to anticipate and keep pace with advancing
technology and competing innovations. There can be no assurance,
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<PAGE>
however, that the Company will be successful in identifying, developing and
marketing new products or enhancing its existing products.
The Company believes that a number of large companies, with significantly
greater financial, manufacturing, marketing, distribution and technical
resources and experience than that of the Company, are focusing on the
development of visualization products for MIM. Several companies are currently
developing and marketing visualization products for MIM which could be applied
to cardiac surgery. There can be no assurance that the Company will be
successful in competing with any such companies.
Technological advances with other therapies for heart disease such as drugs,
interventional cardiology procedures or future innovations in cardiac surgery
techniques could make such other therapies more effective or lower in cost than
MIM surgical procedures and could render MIM cardiac surgery obsolete.
There can be no assurance that physicians will use MIM surgical procedures
to replace or supplement established treatments, such as conventional open-chest
heart surgery, angioplasty or intravascular stents, or that MIM cardiac surgery
will be competitive with current or future technologies. There can be no
assurance that the Company will be able to compete successfully against current
and future competitors. Failure to do so would have a material adverse effect
upon the Company's business, financial condition and results of operations. See
"Business -- Competition."
RELIANCE ON STRATEGIC RELATIONSHIPS
The Company intends to pursue strategic relationships with corporations and
research institutions with respect to the research, development, regulatory
approval and marketing of certain of its products. The Company's future success
may depend, in part, on its relationships with such partners, including, for
example, the Company's relationships with Medtronic and Heartport. The Company
will have limited or no control over the resources that any partner may devote
to the Company's products, or over partners' development and marketing efforts.
There can be no assurance that any of the Company's present or future
collaborative partners will perform their obligations as expected or will devote
sufficient resources to the development or marketing of the Company's potential
products. Any parallel development by a partner of alternate technologies,
preclusion from entering into competitive arrangements, failure to obtain timely
regulatory approvals, premature termination of a collaborative agreement or
failure by a partner to devote sufficient resources to the development and
commercialization of the Company's products would have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company anticipates that these partners may have the unilateral right to
terminate any such relationship without significant penalty. There can be no
assurance that the Company will be successful in establishing or maintaining any
such strategic relationships in the future or that any such relationship will be
successful. See "Business -- Strategic Alliances."
FLUCTUATIONS IN OPERATING RESULTS
Results of operations of the Company may vary significantly from quarter to
quarter depending upon numerous factors, including the following: timing and
results of product evaluations; delays associated with the FDA and other
regulatory approval processes; demand for and utilization of the Company's
products; changes in pricing policies by the Company or its competitors; the
number, timing and significance of product enhancements and new product
announcements by the Company and its competitors; the ability of the Company to
develop, introduce and market new and enhanced versions of the Company's
products on a timely basis; customer order deferrals in anticipation of
enhancements or new products offered by the Company or its competitors; product
quality problems; personnel changes; and the level of international sales. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
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UNCERTAINTY RELATING TO THIRD-PARTY PAYMENTS
The Company expects that sales volumes and prices of the Company's products
will be directly influenced by the profitability to, or cost-effectiveness for,
hospitals of the procedures in which the Company's products are involved.
Profitability levels are directly related to the level of payments for these
procedures, either by Medicare or private insurance companies, and it is a
continuing trend in U.S. health care for such payments to be under continual
scrutiny and downward pressure. The Company expects that its products typically
will be used by hospitals and surgical centers, which bill various third-party
payors, such as governmental programs and private insurance plans, for the
health care services provided to their patients. Third-party payors carefully
review and increasingly challenge the prices charged for medical products and
services or negotiate a flat rate fee in advance. Payment rates from private
companies also vary depending on the procedure performed, the third-party payor,
the insurance plan and other factors. Medicare compensates hospitals at a
prospectively determined fixed amount for the costs associated with an
in-patient hospitalization based on the patient's discharge diagnosis and
compensates physicians at a prospectively determined fixed amount based on the
procedure performed, regardless of the actual costs incurred by the hospital or
physician in furnishing the care and unrelated to the specific devices or
systems used in that procedure. Medicare and other third-party payors are
increasingly scrutinizing whether to cover new products and the level of payment
for new procedures. The flat fee reimbursement trend is causing hospitals to
control costs strictly in the context of a managed care system in which health
care providers contract to provide comprehensive health care for a fixed cost
per person. The Company is unable to predict what changes will be made in the
reimbursement methods utilized by third-party health care payors. The Company
could be adversely affected by changes in payment policies of government or
private health care payors, particularly to the extent any such changes affect
payment for the procedure in which the Company's products are intended to be
used.
If the Company obtains the necessary foreign regulatory registrations or
approvals, market acceptance of the Company's products in international markets
would be dependent, in part, upon the acceptance by the prevailing health care
financing system in each country. Health care financing systems in international
markets vary significantly by country and include both government sponsored
health care programs and private insurance. There can be no assurance that these
financing systems will endorse use of the Company's technology.
The Company believes that reimbursement in the future will be subject to
increased restrictions such as those described above, both in the United States
and in foreign markets. The Company believes that the overall escalating cost of
medical products and services has led to and will continue to lead to increased
pressures on the health care industry, both foreign and domestic, to reduce the
cost of products and services, including products offered by the Company. There
can be no assurance, as to either United States or foreign markets, that funding
will be available or adequate, or that future legislation, regulation or
reimbursement policies of third-party payors will not otherwise adversely affect
the demand for the Company's products or its ability to sell its products on a
profitable basis, particularly if the Company's systems are more expensive than
competing surgical procedures. The unavailability or inadequacy of third-party
payor coverage or reimbursement would have a material adverse effect on the
Company's business, financial condition and results of operations.
RISK RELATING TO INTERNATIONAL OPERATIONS
In the event the Company is successful in developing its products,
manufacturing them in commercial quantities and receiving necessary FDA and
foreign regulatory registrations or approvals, the Company plans to market its
products in international markets, either on its own or with its strategic
partners. The Company has limited experience in marketing its products overseas.
Changes in overseas economic conditions, currency exchange rates, foreign tax
laws or tariffs or other trade regulations could have a material adverse effect
on the Company's business, financial condition and results of operations.
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The anticipated international nature of the Company's business is also expected
to subject it and its representatives, agents and distributors to laws and
regulations of the foreign jurisdictions in which they operate or in which the
Company's products under development are sold. The regulation of medical devices
in a number of such jurisdictions, particularly in the European Union, continues
to develop and there can be no assurance that new laws or regulations will not
have an adverse effect on the Company's business, financial condition and
results of operations. In addition, the laws of certain foreign countries do not
protect the Company's intellectual property rights to the same extent as do the
laws of the United States. See "Business -- Government Regulation" and "Business
- -- Patents and Proprietary Rights."
PRODUCT LIABILITY RISK; LIMITED INSURANCE COVERAGE
The Company faces an inherent and significant business risk of exposure to
product liability claims in the event that the use of its products results in
personal injury or death and there can be no assurance that the Company will not
experience any material product liability losses in the future. Also, in the
event that any of the Company's products prove to be defective, the Company may
be required to recall or redesign such products. The Company's current product
liability insurance coverage limit is $4.0 million in the aggregate. There can
be no assurance that such coverage limits are adequate to protect the Company
from any liabilities it might incur in connection with the development,
manufacture and sale of its products. In addition, the Company may require
increased product liability coverage if any products are used in clinical
evaluations or successfully commercialized. Product liability insurance is
expensive and in the future may not be available to the Company on acceptable
terms, if at all. A successful product liability claim or series of claims
brought against the Company in excess of its insurance coverage or a product
recall could have a material adverse effect on the Company's business, financial
condition and results of operations.
UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF
FUTURE LITIGATION
Vista Medical relies on a combination of technical leadership, patent, trade
secret, copyright and trademark protection and nondisclosure agreements to
protect its proprietary rights. As of February 28, 1997, the Company had
exclusive rights to 11 issued United States patents, 12 pending United States
patent applications, three issued foreign patents and 17 pending foreign
applications covering various aspects of its devices and systems. The Company
intends to file additional patent applications in the future. The failure of
such patents to issue could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's future success will depend, in part, on its ability to
continue to develop patentable products, enforce its patents and obtain patent
protection for its products both in the United States and in other countries.
The patent positions of medical device companies, including the Company,
however, are generally uncertain and involve complex legal and factual
questions. There can be no assurance that patents will issue from any patent
applications owned by or licensed to the Company or that, if patents do issue,
the claims allowed will be sufficiently broad to protect the Company's
technology. In addition, there can be no assurance that any issued patents owned
by or licensed to the Company will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide competitive
advantages to the Company.
The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. Litigation, which
would result in substantial expense to the Company, may be necessary to enforce
any patents issued or licensed to the Company and/or to determine the scope and
validity of proprietary rights of third parties or whether the Company's
products, processes or procedures infringe any such third-party proprietary
rights. The Company may also have to participate in interference proceedings
declared by the United States Patent and Trademark Office, which could result
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in substantial expense to the Company, to determine the priority of inventions
covered by the Company's issued United States patents or pending patent
applications. Furthermore, the Company may have to participate at substantial
cost in International Trade Commission proceedings to enjoin importation of
products which would compete unfairly with products of the Company. Any adverse
outcome of any patent litigation (including interference proceedings) could
subject the Company to significant liabilities to third parties, require
disputed rights to be licensed from or to third parties or require the Company
to cease using the technology in dispute.
Patent applications in the United States are maintained in secrecy until a
patent issues, and patent applications in foreign countries are maintained in
secrecy for a period of time after filing. After such period of time, and
usually before the grant of the patent, patent applications in foreign countries
are published. While publication of discoveries in the scientific or patent
literature tends to lag behind actual discoveries and the filing of related
patent applications, such publication may enable the Company's competitors to
ascertain what areas of research or development the Company is engaged in prior
to the Company's receipt of patent protection in the United States or foreign
countries relating to such research or development.
In general, the development of visualization and information systems and
related surgical instruments and accessories is intensely competitive. Patents
issued and patent applications filed relating to medical devices are numerous
and there can be no assurance that current and potential competitors and other
third parties have not filed or in the future will not file applications for, or
have not received or in the future will not receive, patents or obtain
additional proprietary rights relating to products or processes used or proposed
to be used by the Company. There can also be no assurance that third parties
will not assert infringement claims against the Company in the future or that
any such assertions will not result in costly litigation or require the Company
to obtain a license to intellectual property rights of such parties. There can
be no assurance that any such licenses would be available on terms acceptable to
the Company, if at all. Furthermore, parties making such claims may be able to
obtain injunctive or other equitable relief that could effectively block the
Company's ability to make, use, sell or otherwise practice its intellectual
property (whether or not patented or described in pending patent applications),
or to further develop or commercialize its products in the United States and
abroad and could result in the award of substantial damages. Defense of any
lawsuit or failure to obtain any such license could have a material adverse
effect on the Company.
The Company relies on unpatented trade secrets to protect its proprietary
technology, and no assurance can be given that others will not independently
develop or otherwise acquire the same or substantially equivalent technologies
or otherwise gain access to the Company's proprietary technology or disclose
such technology or that the Company can ultimately protect its rights to such
unpatented proprietary technology. No assurance can be given that third parties
will not obtain patent rights to such unpatented trade secrets, which patent
rights could be used to assert infringement claims against the Company. The
Company also relies on confidentiality agreements with its collaborators,
employees, advisors, vendors and consultants to protect its proprietary
technology. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or be independently
developed by competitors. In addition, the Company's agreements with its
employees and consultants require disclosure to the Company of ideas,
developments, discoveries or inventions conceived during employment or
consulting, as the case may be, and assignment to the Company of proprietary
rights to such matters related to the business and technology of the Company.
The extent to which efforts by others will result in patents and the effect on
the Company of the issuance of such patents is unknown. Failure to obtain or
maintain patent and trade secret protection, for any reason, could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Patents and Proprietary Rights" and
"Business -- Competition."
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The Company has in-licensed certain aspects of its technology. In September
1995, Mr. H. McKinley and McKinley Optics, Inc. (collectively, "McKinley")
granted to the Company a perpetual, exclusive, worldwide license to make, have
made, modify, use, lease, market, sell and otherwise distribute certain
endoscopes and other medical products incorporating a stereo objective lens
and/or a relay lens configuration for medical purposes. Under the terms of this
license agreement, Vista Medical is obligated to pay McKinley an annual
maintenance royalty, additional royalties upon the sale of certain numbers of
systems incorporating the McKinley technology and royalties on net sales of
products incorporating the McKinley technology. The exclusive license granted
under this agreement becomes a non-exclusive license in the event Vista Medical
fails to pay any royalties following receipt of notice of such failure to pay.
In addition, Vista Medical has the right to terminate the agreement with limited
notice.
In June 1996, Fuji Film Co. and Fuji Photo Optical Co., Ltd. (collectively,
"Fuji") granted to the Company a non-exclusive license to certain optical zoom
technology for use in endoscopes. Vista Medical is obligated to pay royalties on
net sales of products in the United States which incorporate Fuji's technology.
Fuji may terminate the agreement if Vista Medical does not cure any violation of
the agreement within a limited period of time. Failure of the Company to retain
rights to these technologies could have a material, adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Patents and Proprietary Rights."
DEPENDENCE ON KEY PERSONNEL AND ADVISORS
The Company's future business and operating results depend in significant
part upon the continued contributions of its key technical and senior management
personnel, many of whom would be difficult to replace and certain of whom
perform important functions for the Company beyond those functions suggested by
their respective job titles or descriptions. The Company's business and future
operating results also depend in significant part upon its ability to attract
and retain qualified management, manufacturing, technical, marketing and sales
and support personnel for its operations. Competition for such personnel is
intense, and there can be no assurance that the Company will be successful in
attracting or retaining such personnel. The loss of any key employee, the
failure of any key employee to perform in his or her current position or the
Company's inability to attract and retain skilled employees, as needed, could
materially adversely affect the Company's business, financial condition and
results of operations. See "Management -- Executive Officers and Directors."
The Company has established two Clinical Advisory Boards made up of leading
surgeons, one focused on minimally invasive cardiac surgery, the other focused
on a number of HNS microsurgery and other specialties. Members of the Clinical
Advisory Boards consult with the Company exclusively in the field of
visualization, but are free to consult with other instrumentation companies and
are employed elsewhere on a full-time basis. As a result, they only spend a
limited amount of time on the Company's affairs. Although the Company has
entered into consulting agreements, with terms ranging from 12 months to two
years, including confidentiality provisions with each of the members of the
Clinical Advisory Boards, there can be no assurance that the consulting and
confidentiality agreements between the Company and each of the members of the
Clinical Advisory Boards will not be terminated or breached. In addition, there
can be no assurance that any of such agreements will be renewed upon
termination. See "Business -- Clinical Advisory Boards."
NEED TO MANAGE A CHANGING BUSINESS
In order to compete effectively against current and future competitors,
prepare additional products for potential commercialization and develop future
products, the Company, believes that it must continue to expand its operations,
particularly in the areas of development and manufacturing. If the Company were
to experience significant growth in the future, such growth would likely result
in new and increased responsibilities for management personnel and place
significant strain upon the Company's management, operating and financial
systems and resources. To accommodate such growth and compete effectively, the
Company must continue to implement and improve information systems,
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procedures and controls, and to expand, train, motivate and manage its work
force. The Company is in the process of implementing an integrated financial,
manufacturing and inventory information system. Implementing such a system can
be time-consuming and expensive and requires significant management resources.
There can be no assurance that such system will be implemented on a timely
basis. All of the foregoing demands will require the addition of new management
personnel. The Company's future success will depend to a significant extent on
the ability of its current and future management personnel to operate
effectively, both independently and as a group. There can be no assurance that
the Company's personnel, systems, procedures and controls will be adequate to
support the Company's future operations. Any failure to implement and improve
the Company's operational, financial and management systems or to expand, train,
motivate or manage employees could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Human Resources" and "Management."
NO PRIOR TRADING MARKET FOR COMMON STOCK; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained after this Offering. The initial public offering price will be
determined through negotiations among the Company and the representatives of the
Underwriters based on several factors and may not be indicative of the market
price of the Common Stock after this Offering. The market price of the shares of
Common Stock is likely to be highly volatile and may be significantly affected
by factors such as actual or anticipated fluctuations in the Company's operating
results, changes in financial estimates by securities analysts, announcements of
technological innovations, new products or new contracts by the Company or its
competitors, regulatory announcements, developments with respect to patents or
proprietary rights, conditions and trends in the medical device and other
technology industries, adoption of new accounting standards affecting the
medical device industry, general market conditions and other factors. In
addition, the stock market has from time to time experienced significant price
and volume fluctuations that have particularly affected the market prices for
shares of early stage companies. These broad market fluctuations may adversely
affect the market price of the Common Stock. In the past, following periods of
volatility in the market price of a particular company's securities, securities
class action litigation has often been brought against that company. Such
litigation, if brought against the Company, could result in substantial costs
and a diversion of management's attention and resources. See "Underwriting."
CONTROL BY EXISTING STOCKHOLDERS, OFFICERS AND DIRECTORS
Upon completion of this Offering, the present directors, executive officers
and principal stockholders of the Company and their affiliates will beneficially
own approximately 71.2% of the outstanding Common Stock. As a result, these
stockholders will be able to exercise control over all matters requiring
stockholder approval (including the election of directors and approval of
significant corporate transactions) irrespective of how other stockholders may
vote. Such concentration of ownership may have the effect of delaying or
preventing a change in control of the Company and thereby adversely affect the
market price of the Common Stock. See "Principal Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public market
following this Offering could adversely affect the market price for the Common
Stock. The number of shares of Common Stock available for sale in the public
market is limited by restrictions under the Securities Act of 1933, as amended
(the "Securities Act"), and by lock-up agreements under which the Company's
officers, directors and certain stockholders of the Company (who hold an
aggregate of approximately 9,171,000 shares of Common Stock upon the completion
of this Offering, including shares issued or issuable upon the exercise of
vested options and warrants outstanding as of February 28, 1997) have agreed not
to sell or otherwise dispose of any of their shares for a period of 180 days
after the date of this
17
<PAGE>
Prospectus without the prior written consent of Goldman, Sachs & Co. Goldman,
Sachs & Co. may, in its sole discretion and at any time without notice, release
all or any portion of the securities subject to lock-up agreements. As a result
of restrictions under the Securities Act and the lock-up agreements, the
following shares of Common Stock (including shares issued or issuable upon the
exercise of vested options and warrants outstanding as of February 28, 1997)
will be eligible for future sale: on the date of this Prospectus, 3,500,750
shares (including the 3,500,000 shares offered hereby) will be eligible for
sale; an additional approximately 7,571,000 shares will be eligible for sale 180
days after the date of this Prospectus; the remaining 1,600,000 shares of Common
Stock will become eligible for sale under Rule 144 at various dates thereafter
as the holding period provisions of Rule 144 are satisfied. In addition, the
Company intends to register on the effective date of this Offering a total of
2,820,000 shares of Common Stock subject to outstanding options or reserved for
issuance under the Company's 1997 Stock Option/Stock Issuance Plan and 200,000
shares of Common Stock reserved for issuance under its 1997 Employee Stock
Purchase Plan. Further, upon expiration of such lock-up agreements, holders of
approximately 8,780,679 shares of Common Stock will be entitled to certain
registration rights with respect to such shares. If such holders, by exercising
their registration rights, cause a large number of shares to be registered and
sold in the public market, such sales could have a material adverse effect on
the market price for the Common Stock.
The Company cannot predict the effect, if any, that market sales of shares
or the availability of shares for sale will have on the market price of the
Common Stock prevailing from time to time. Sales of significant amounts of the
Common Stock in the public market could adversely affect the market price of the
Common Stock and could impair the Company's ability to raise capital through an
offering of its equity securities. See "Description of Capital Stock --
Registration Rights" and "Shares Eligible for Future Sale."
HAZARDOUS MATERIALS
The Company's research and development may involve the controlled use of
hazardous materials and chemicals. Although the Company believes that its safety
procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any
resultant damages, and any such liability could exceed the resources of the
Company. The Company may incur substantial cost to comply with environmental
regulations.
NO DIVIDENDS
The Company currently intends to retain any future earnings for use in its
business and does not anticipate paying any cash dividends in the future. See
"Dividend Policy."
EFFECT OF CERTAIN CHARTER PROVISIONS; ANTITAKEOVER EFFECTS OF SECOND RESTATED
CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
Upon completion of this Offering, the Company's Board of Directors will have
the authority to issue up to 5,000,000 shares of preferred stock and to
determine the price, rights, preferences, privileges and restrictions, including
voting and conversion rights of such shares, without any further vote or action
by the Company's stockholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company.
In addition, the Company's Second Restated Certificate of Incorporation
provides for a classified Board of Directors such that approximately one-third
of the members of the Company's Board of
18
<PAGE>
Directors are elected at each annual meeting of stockholders. Such
classification of the Company's Board of Directors may have the effect of
delaying, deferring or discouraging changes in control of the Company.
Making more difficult or discouraging a change in control of the Company may
adversely affect the market price of the Common Stock. See "Description of
Capital Stock -- Preferred Stock" and "Description of Capital Stock -- Possible
Antitakeover Effect of Certain Charter Provisions."
SUBSTANTIAL DILUTION
Investors participating in this Offering will incur immediate, substantial
dilution. To the extent outstanding options to purchase the Common Stock are
exercised, there will be further dilution. If the net proceeds of this Offering,
together with available funds and cash generated from operations, are
insufficient to satisfy the Company's cash needs, the Company may be required to
sell additional equity or convertible debt securities. The sale of additional
equity or convertible debt securities could result in additional dilution to the
Company's stockholders. See "Dilution" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
19
<PAGE>
THE COMPANY
Vista Medical Technologies, Inc. ("Vista Medical" or the "Company")
develops, manufactures and intends to market proprietary visualization and
information systems that enable minimally invasive surgical solutions in
cardiothoracic, head, neck and spine ("HNS") and other selected microsurgical
procedures. The Company currently markets three-chip cameras for endoscopy and
related surgical instruments and accessories. Vista Medical's visualization and
information systems bring together head-mounted display ("HMD") technology
originally developed for applications in military aerospace by Kaiser Aerospace
and Electronics Corporation ("Kaiser Aerospace") and three-dimensional ("3-D")
imaging capability from its acquisition of Oktas, Inc.
The development and subsequent widespread adoption of minimally invasive
surgical approaches have revolutionized many surgical fields, including general
surgery, orthopedics, gynecology and urology. Minimally invasive surgical
procedures are performed through strategically placed ports or mini-incisions in
a patient's body, thereby avoiding the larger incisions used in traditional open
surgery. Minimally invasive procedures are designed to decrease complications,
reduce pain and suffering, speed recovery and decrease costs associated with
many aspects of patient care. This movement toward minimally invasive surgery
has been driven by advances in both device technology and surgical technique.
Minimally invasive microsurgery ("MIM") is an extension of minimally invasive
surgery and is characterized by greater complexity and precision. MIM procedures
have been made possible primarily by recent advances in medical technology.
The application of minimally invasive techniques to cardiothoracic surgery
is commonly regarded as a revolutionary development in modern surgery. Minimally
invasive cardiac procedures avoid the trauma caused by sternotomy and promise to
significantly decrease pain and trauma and shorten recovery times.
Cardiothoracic MIM requires the surgeon to perform technically challenging
procedures, including working on tiny delicate structures (such as a one
millimeter heart vessel) with highly restricted access through small incisions.
The Company believes that an advanced visualization technology which
provides the surgeon with an intuitive and ergonomic solution to the inherent
vision restrictions of the MIM approach will enable the use of the MIM technique
with increased safety, efficacy and precision. In order to meet this
visualization challenge, the Company has developed proprietary visualization and
information systems.
Vista Medical's proprietary technology is based on the following principles
which the Company believes are essential in advancing the techniques of MIM: (i)
three-dimensional view; (ii) high resolution images; (iii) improved access
through miniaturization technology; (iv) optimized surgical ergonomics; and (v)
integration of anatomical image with critical monitoring and diagnostic
information.
Based on these principles, Vista Medical develops visualization products and
related information systems that are customized for the specific cardiothoracic
and HNS procedures to which they are directed. The Company's product lines
include the Series 8000 Advanced Visualization and Information System ("Series
8000"), designed for use in cardiothoracic procedures, and StereoSite, designed
for use in microscopic and endoscopic procedures in HNS. The Company also offers
surgical instruments and accessories designed for use in both cardiothoracic and
HNS MIM procedures.
20
<PAGE>
BUSINESS STRATEGY
The Company's business strategy is to become the leading developer and
marketer of advanced visualization and information systems for MIM applications
in cardiothoracic, HNS and other selected surgical specialties. Key elements of
the Company's strategy include:
- Establish advanced visualization technologies as standard practice in
minimally invasive cardiac surgery.
- Promote Vista Medical's visualization solution for use in all types of
cardiac surgery.
- Develop MIM applications through specialty-focused business units by
leveraging the Company's technology platform.
- Accelerate adoption of the Series 8000 Advanced Visualization and
Information System in the cardiac market by implementing a per-procedure
pricing strategy.
- Increase the surgeon's real-time access to critical data.
- Enter into strategic relationships which complement Company resources.
To assist in implementing its business strategy, the Company has established
two Clinical Advisory Boards made up of leading surgeons, one focused on
minimally invasive cardiac surgery, the other focused on HNS microsurgery and a
number of other specialties. Members of the Clinical Advisory Boards consult
with the Company exclusively in the field of visualization. The Clinical
Advisory Boards are intended to act as a clinical reference for the Company and
to provide access to potential training sites for the Company's visualization
products.
RECENT DEVELOPMENTS
In November 1996, Vista Medical and Medtronic, Inc. ("Medtronic"), a leading
cardiac company, entered into a strategic alliance providing for the
distribution and co-promotion of the Company's current and future visualization
and information systems for cardiac surgery, including the Series 8000 (the
"Vista Systems"). Medtronic will act as Vista Medical's exclusive distributor
for the Vista Systems for use in cardiothoracic surgical procedures in Europe,
the Middle East (excluding Afghanistan and Pakistan) and Africa and will
co-promote the Vista Systems in North America. Vista Medical retains direct
distribution rights in North America as well as the worldwide right to
distribute its systems for use in all other procedures. In conjunction with
entering into the agreement, Medtronic made a $10.0 million equity investment in
the Company.
The Company believes that the control and processing of information is a key
component in the development of advanced visualization systems. As a result, in
January 1997, the Company obtained from GDE Systems, Inc. ("GDE"), a leading
military electronics and information management company, an exclusive worldwide
license to software and documentation and trademarks of GDE for use in the
medical field. Since 1993, GDE's subsidiary, Healthcom, has been adapting the
software licensed to Vista Medical to provide high-speed, image-based
information processing and networking capabilities specifically for medical
applications. In connection with the license, Vista Medical will issue to GDE
Common Stock with a value (based on the initial public offering price) of
$250,000.
In February 1997, the Company entered into an agreement with Heartport, Inc.
("Heartport"), a leading company developing minimally invasive technology for
heart surgery. Vista Medical will sell four Series 8000 systems to Heartport,
for use in the Heartport Research and Training Center in Salt Lake City, Utah.
Heartport has agreed to use the Series 8000 in its training centers, to promote
that its training courses utilize the Series 8000 and to endorse the Series 8000
as the preferred 3-D video visualization and information solution for minimally
invasive heart surgery. In connection with the agreement, the
21
<PAGE>
Company issued to Heartport a warrant to purchase up to 100,000 shares of Common
Stock, exercisable at any time after this Offering and prior to March 31, 2001,
at a price per share equal to the initial public offering price.
The Company believes that all of its products or products under development
are, or will be, eligible for 510(k) clearance to market by the United States
Food and Drug Administration ("FDA"). Applications for 510(k) clearance to
market have been filed or clearance to market has been received for all
components which are necessary for initial Series 8000 commercialization. The
Company believes that there are predicate devices which can be relied upon for
its products for which regulatory applications are in process. A majority of
these predicate devices were developed by the Company or its strategic partners.
The Company was incorporated in the State of California in July 1993 and
reincorporated in the State of Delaware in November 1996. Unless the context
indicates otherwise, the "Company" or "Vista Medical" refers to Vista Medical
Technologies, Inc. The Company's principal executive offices are located at 5451
Avenida Encinas, Suite A, Carlsbad, California 92008, and its telephone number
is (619) 603-9120.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,500,000 shares of
Common Stock offered hereby are estimated to be approximately $38,360,000
($44,219,000 if the Underwriters' over-allotment option is exercised in full),
assuming a public offering price of $12.00 per share (the mid-point of the range
set forth on the front cover) and after deducting the estimated underwriting
discounts and commissions and other estimated offering expenses.
The Company intends to use the net proceeds of this Offering, including the
interest thereon, to fund product introductions (approximately 33%), sales and
marketing activities (approximately 20%), research and development
(approximately 14%), the acquisition of capital equipment for manufacturing
scale-up (approximately 9%) and for working capital and general corporate
purposes (approximately 24%). The Company may also use a portion of the net
proceeds for the acquisition of products and technologies complementary to those
of the Company. There are no present arrangements or agreements for any such
acquisitions.
The amounts actually expended for each purpose may vary significantly
depending upon numerous factors, including the progress of the Company's product
development, the regulatory status of such products, the timing of regulatory
approvals, technological advances, the commercial potential of the Company's
products and the status of competitive products. In addition, expenditures will
also depend upon the establishment of collaborative research agreements with
other companies, the availability of additional financing and other factors. The
Company believes that its existing cash, cash equivalents and short-term
investments, combined with the net proceeds of this Offering, its committed
future contract revenue, projected funding from equipment leases and interest
income, will be adequate to satisfy its capital requirements and fund operations
for the current and foreseeable future. Pending application of the net proceeds
as described above, the Company intends to invest the net proceeds of this
Offering in short-term investment-grade securities.
DIVIDEND POLICY
The Company has never declared or paid dividends on its capital stock. The
Company does not anticipate paying any cash dividends in the foreseeable future.
Payments of future dividends, if any, will be at the discretion of the Company's
Board of Directors after taking into account various factors, including the
Company's financial condition, operating results, current and anticipated cash
needs and plans for expansion. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
22
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1996 (i) the actual
capitalization of the Company, after giving effect to the three-for-four reverse
split of the Common Stock, (ii) the pro forma capitalization of the Company,
after giving effect to the conversion of all outstanding shares of Preferred
Stock into Common Stock at the closing of this Offering and (iii) as adjusted to
give effect to the sale by the Company of 3,500,000 shares of Common Stock
offered hereby, assuming a public offering price of $12.00 per share (the
mid-point of the range set forth on the front cover) less estimated underwriting
discounts and commissions and other expenses of this Offering.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------
AS
ACTUAL PRO FORMA ADJUSTED
---------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash, cash equivalents and short-term investments........................... $ 10,285 $ 10,285 $ 48,645
---------- ----------- ----------
---------- ----------- ----------
Long-term obligations less current portion.................................. $ -- $ -- $ --
Stockholders' equity:
Convertible preferred stock, $.01 par value; 18,000,000 shares authorized
actual; 5,000,000 authorized pro forma and as adjusted; 11,574,252
issued and outstanding actual; and no shares issued and outstanding pro
forma and as adjusted................................................... 116 -- --
Common stock, $.01 par value; 25,000,000 shares authorized actual;
35,000,000 authorized pro forma and as adjusted; 538,224 shares issued
and outstanding actual; 9,218,903 shares pro forma; and 12,718,903
shares as adjusted (1).................................................. 5 92 127
Additional paid-in capital................................................ 28,615 28,644 66,969
Notes receivable stockholders............................................. (93) (93) (93)
Deferred compensation..................................................... (2,062) (2,062) (2,062)
Accumulated deficit....................................................... (13,620) (13,620) (13,620)
---------- ----------- ----------
Total stockholders' equity.............................................. 12,961 12,961 51,321
---------- ----------- ----------
Total capitalization.................................................... $ 12,961 $ 12,961 $ 51,321
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
- --------------
(1) Based on shares outstanding as of December 31, 1996. Does not include
1,245,801 shares of Common Stock issuable upon exercise of options
outstanding as of December 31, 1996 at a weighted average exercise price of
$0.32 per share pursuant to the Company's stock option plans. Also does not
include securities issued subsequent to December 31, 1996 consisting of (i)
112,500 shares of Common Stock issuable upon the exercise of options granted
at a weighted average exercise price of $2.93 per share, (ii) 75,625 shares
of Common Stock issued upon the exercise of options at a weighted average
price of $0.46 per share, (iii) 100,000 shares of Common Stock issuable upon
the exercise of warrants granted at a weighted average exercise price equal
to the initial public offering price of the Common Stock offered hereby and
(iv) a number of shares of Common Stock equal to $250,000 divided by the
initial public offering price of the Common Stock offered hereby to be
issued to GDE immediately following the closing of this Offering.
23
<PAGE>
DILUTION
The net tangible book value of the Company at December 31, 1996 was
$12,637,710, or $1.37 per share (after giving effect to the conversion of all
outstanding shares of Preferred Stock into Common Stock upon the consummation of
this Offering). Net tangible book value per share of Common Stock represents the
amount of total tangible assets of the Company less total liabilities divided by
the number of shares of the Common Stock outstanding. After giving effect to the
sale of the 3,500,000 shares of Common Stock offered hereby at an assumed public
offering price of $12.00 per share, and after deducting underwriting discounts
and commissions and estimated offering expenses payable by the Company, the
Company's net tangible book value as of December 31, 1996 would have been
$50,997,710 or $4.01 per share of Common Stock. This represents an immediate
increase in net tangible book value per share of Common Stock of $2.64 to
existing stockholders and immediate dilution in net tangible book value of $7.99
per share to new investors purchasing Common Stock in this Offering. The
following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 12.00
Net tangible book value per share of Common Stock at
December 31, 1996....................................... 1.37
Increase per share attributable to new investors.......... 2.64
---------
Net tangible book value per share of Common Stock after this
Offering.................................................. 4.01
---------
Dilution per share to new investors (1)..................... $ 7.99
---------
---------
</TABLE>
- --------------
(1) If the Underwriters' over-allotment option is exercised in full, dilution
per share to new investors would be $7.71.
The following table summarizes, on a pro forma basis as of December 31,
1996, the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the existing
stockholders and by new investors purchasing shares in this Offering (before
deduction of underwriting discounts and commissions and estimated offering
expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------------- --------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 9,218,903 72% $ 26,339,640 39% $ 2.86
New investors................. 3,500,000 28% 42,000,000 61% $ 12.00
------------- ----- -------------- -----
Total....................... 12,718,903 100% $ 68,339,640 100%
------------- ----- -------------- -----
------------- ----- -------------- -----
</TABLE>
All of the above computations assume no exercise of outstanding options or
warrants to purchase Common Stock. As of December 31, 1996, options to purchase
1,245,801 shares of Common Stock were outstanding at a weighted average exercise
price of approximately $0.32 per share under the Company's stock option plan. To
the extent these options become vested and are exercised, there will be further
dilution to new investors. Since December 31, 1996, the Company has (i) issued
options to purchase 112,500 shares of Common Stock at a weighted average
exercise price of $2.93 per share, (ii) issued 75,625 shares of Common Stock
upon the exercise of options at a weighted average price of $0.46 per share,
(iii) issued warrants to purchase 100,000 shares of Common Stock at a weighted
average price equal to the initial public offering price of the Common Stock
offered hereby and (iv) agreed to issue to GDE immediately following the closing
of this Offering a number of shares of Common Stock equal to $250,000 divided by
the initial public offering price of the Common Stock offered hereby. As of
February 28, 1997, the Company also had an additional 1,537,324 shares of Common
Stock available for grant pursuant to the Company's stock option plan. Further
dilution may result from the exercise of such outstanding options. See
"Management -- Benefit Plans."
24
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below with respect to the Company's
consolidated statements of operations for each of the three years in the period
ended December 31, 1996, and with respect to the Company's consolidated balance
sheets at December 31, 1995 and 1996, are derived from the financial statements
of the Company that have been audited by Ernst & Young LLP, independent
auditors, which are included elsewhere herein and are qualified by reference to
such financial statements. The statement of operations data for the period from
July 19, 1993 (inception) to December 31, 1993 and for the year ended December
31, 1994, and the balance sheet data at December 31, 1993 and 1994 have been
derived from financial statements audited by Ernst & Young LLP, independent
auditors which are not included herein. The selected financial data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's financial
statements and notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1993 (1) 1994 1995 1996
----------- --------- --------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales............................................................ $ 73 $ 59 $ 1,719 $ 2,244
Costs and expenses:
Cost of sales.................................................. 50 43 1,272 2,253
Research and development....................................... 310 1,328 1,904 3,880
Sales and marketing............................................ 48 291 834 2,057
General and administrative..................................... 562 758 1,034 3,103
----------- --------- --------- -----------
Total costs and expenses......................................... 970 2,420 5,044 11,293
----------- --------- --------- -----------
Loss from operations............................................. (897) (2,361) (3,325) (9,049)
Minority interest in net loss of consolidated partnership........ 80 270 -- --
License income................................................... -- -- -- 1,493
Interest income.................................................. -- -- 51 117
----------- --------- --------- -----------
Net loss......................................................... $ (817) $ (2,091) $ (3,274) $(7,439)
----------- --------- --------- -----------
----------- --------- --------- -----------
Pro forma net loss per share (2)................................. $ (0.86)
-----------
-----------
Shares used in computing pro forma net loss
per share (2).................................................. 8,626,898
-----------
-----------
<CAPTION>
DECEMBER 31,
----------------------------------------------
1993 1994 1995 1996
----------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................ $ 442 $ 9 $ 3,399 $ 10,285
Working capital.................................................. 409 (76) 4,224 10,805
Total assets..................................................... 855 475 5,208 14,316
Total debt....................................................... 1,293 3,243 -- --
Accumulated deficit.............................................. (817) (2,907) (6,181) (13,620)
Total stockholders' equity (deficit)............................. (816) (2,906) 4,707 12,961
</TABLE>
- --------------
(1) July 19, 1993 (inception) to December 31, 1993.
(2) See Note 1 of Notes to Consolidated Financial Statements for information
concerning the computation of pro forma net loss per share and shares used
in computing pro forma net loss per share.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with "Selected Financial Data"
and the Company's Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.
OVERVIEW
The Company develops, manufactures and intends to market proprietary
visualization and information systems that enable minimally invasive surgical
solutions in cardiothoracic, head, neck and spine ("HNS") and other selected
microsurgical procedures. The Company currently markets three-chip cameras for
endoscopy and related surgical instruments and accessories.
The Company has generated minimal revenues from the sale of products and has
been unprofitable since its formation in July 1993. For the period from the
Company's formation to December 31, 1996, the Company has incurred cumulative
net losses of approximately $13.6 million. The Company expects to continue to
incur substantial losses for at least the next 18 months. There can be no
assurance that the Company's development efforts will result in commercially
available products, that the Company will be successful in introducing its
products under development, or that the required regulatory approval of products
will be obtained in a timely manner, if ever.
The Company has increased its staffing each year to support its research and
development, manufacturing and sales and marketing activities. At December 31,
1994, 1995 and 1996, the Company had 11, 21 and 49 employees, respectively. The
Company expects to continue to increase staffing levels significantly in future
periods in support of its research and development, manufacturing scale up,
service and support, sales and marketing and general and administrative
activities related to new products. The Company expects that its increased
staffing needs will negatively impact operating income, which in turn may impact
the Company's ability to achieve profitability.
The Company recorded noncash deferred compensation of approximately $2.5
million in connection with the grant of certain stock options during 1996, of
which approximately $447,000 was recognized as an expense in 1996. The Company
will record an additional $743,000 of deferred compensation for stock options
granted in January and February 1997. The unamortized balance of the deferred
compensation will be expensed over the vesting periods of the options (typically
four or five years) and, therefore, will continue to impact the Company's
operating results through 2001.
This discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
RESULTS OF OPERATIONS
SALES
The Company had revenues from product sales of $59,000, $1,719,000 and
$2,244,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
The increase in revenues from 1994 to 1995 was primarily attributable to the
introduction of three-chip cameras by the Company. The increase in revenue from
1995 to 1996 was attributable to the increased sales of the Company's three-chip
cameras and the sale of surgical instruments and sutures for which the Company
acquired distribution rights during 1996. Sales to individual customers
exceeding 10% or more of revenues for the years ended December 31, 1994, 1995
and 1996 were as follows: during 1994, two customers accounted for 82% and 18%
of revenues; during 1995, one customer accounted for 85% of revenues; during
1996, three customers accounted for 30%, 27% and 25% of revenues. The Company
believes that the loss of any of these customers would not have a material
adverse effect on the Company's business, operating
26
<PAGE>
results or financial condition and that concentration of revenues to individual
customers will likely decrease in future periods as the Company introduces new
products.
COSTS AND EXPENSES
COST OF SALES. Cost of sales consist primarily of purchased parts and
supplies, labor, facilities-related expenses and equipment depreciation. The
Company's cost of sales were $43,000, $1,272,000 and $2,253,000 for the years
ended December 31, 1994, 1995 and 1996, respectively. The increase in cost of
sales from 1994 to 1995 was related to the growth in revenue from 1994 to 1995.
The increase in cost of sales from 1995 to 1996 was attributable to the increase
in revenues from 1995 to 1996 as well as the investment the Company made in its
manufacturing infrastructure to accommodate the scale-up for new product
introductions. This investment includes personnel expenses, consulting fees and
facilities-related costs and was approximately $208,000. The Company anticipates
it will continue to make significant investments in manufacturing infrastructure
in 1997 and 1998 and expects this investment to increase cost of sales during
such time period.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense consists
primarily of personnel expenses, fees paid to independent contractors, certain
purchased technology and development, and equipment and facilities costs to
support product development, prototyping and product evaluation. The Company's
research and development expenses were $1,328,000, $1,904,000 and $3,880,000 for
the years ended December 31, 1994, 1995 and 1996, respectively. The increase in
research and development expenses from 1994 to 1995 was primarily attributable
to increased staffing and purchased research and development expense. The
increase in research and development expenses from 1995 to 1996 was attributable
to significant increases in staffing, purchased research and development
expense, and consulting fees related to development, prototyping and evaluation
of future products. The Company anticipates it will continue to devote
substantial resources to research and development and that research and
development expenses, particularly the costs associated with increased staffing,
prototyping and product evaluation will increase substantially in 1997 and
beyond.
SALES AND MARKETING EXPENSES. Sales and marketing expenses consist
primarily of the cost of sales and marketing personnel and independent
contractors, commissions, office facilities, travel and promotional events such
as trade shows, seminars and technical conferences, as well as the costs
associated with marketing programs necessary to support the expansion of the
Company's business. Sales and marketing expenses increased from approximately
$291,000 in 1994 to $834,000 in 1995 and to approximately $2,057,000 in 1996.
The increase from 1994 to 1995 was primarily attributable to increased staffing
and consulting fees related to the introduction of new products and expansion of
the Company's product line. The increase from 1995 to 1996 was related to
significant increases in staffing and related expenses, commissions and
professional and consulting fees as the Company continued to build its sales
operations and expand its marketing activities in relation to future products.
The Company believes that its sales and marketing expenses will increase
substantially in 1997 and 1998 as it continues to build its sales force and
expand its marketing efforts in connection with commercialization of new
products.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of salaries and other related expenses of the administrative
and executive, finance and accounting, and information systems departments of
the Company and expenses associated with legal and accounting requirements.
General and administrative expenses were $758,000, $1,034,000 and $3,103,000 for
the years ended December 31, 1994, 1995 and 1996, respectively. The increase
from 1994 to 1995 was primarily attributable to increased staffing and related
costs associated with the growth of the Company's business during this period.
The increase from 1995 to 1996 was primarily attributable to the continued
development of corporate management and related support functions, the addition
of new facilities and expansion of current facilities, expansion of the
Company's information systems and the
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amortization of deferred compensation. The Company recorded noncash deferred
compensation of approximately $2.5 million in connection with the grant of
certain stock options during 1996, of which approximately $447,000 was
recognized as an expense in 1996. The Company will record an additional $743,000
of deferred compensation for stock options granted in January and February 1997.
The unamortized balance of the deferred compensation will be expensed over the
vesting periods of the options (typically four or five years) and, therefore,
will continue to impact the Company's operating results through 2001. The
Company also expects that its general and administrative expenses will increase
in the future as it expands its staffing, information systems and other related
infrastructure and as a result of increases in expenses associated with being a
public company.
OTHER INCOME
LICENSE INCOME. License income of $1,493,000 in 1996 represents the net
amount received by the Company from a perpetual license to certain of its
technology and patents. Prior to 1996, the Company had no license income.
INTEREST INCOME. Interest income represents the net amount of interest
earned by the Company on its cash and short-term investments and interest
expense on debt. Interest income increased from approximately $51,000 for the
year ended December 31, 1995 to approximately $117,000 for the year ended
December 31, 1996 due primarily to increasing average investment balances. The
Company had immaterial amounts of interest income prior to 1995.
TAXES
At December 31, 1996, the Company had federal and state tax net loss
carryforwards of approximately $8,494,000 and $5,146,000, respectively. The
federal and state tax loss carryforwards will expire in 2010 and 2000,
respectively, unless previously utilized. At December 31, 1996, the Company also
had federal and state research tax credit carryforwards of approximately
$135,000 and $143,000, respectively, which will expire in 2010 unless previously
utilized. The Company has provided a full valuation allowance on the deferred
tax assets as realization of such assets is uncertain.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had approximately $10,285,000 in cash,
cash equivalents and short-term investments. Since formation, the Company has
financed its operations and investments in equipment and inventories through
advances from a related party totaling $5,379,000, net proceeds from licensing
of certain of the Company's technology for $1,000,000 and from the private sale
of common and preferred stock totaling approximately $23,019,000, of which
$3,004,000 was used to repay advances from a related party.
Net cash used in operating activities was approximately $2,288,000,
$3,567,000 and $6,937,000 for 1994, 1995 and 1996, respectively. The increase in
net cash used from operating activities each year has resulted primarily from
increasing net losses during such periods and investments in inventories
associated with expansion of the Company's product line, partially offset by
increases in accounts payable and accrued expenses.
Net cash used in investing activities was approximately $94,000, $298,000
and $1,239,000 for 1994, 1995 and 1996, respectively. The increase in net cash
used in investing activities each year has resulted primarily from the purchase
of short-term investments and the purchase of property and equipment related to
increased staffing, expansion of manufacturing capabilities and marketing
demonstrations.
Cash flows from financing activities in 1994, 1995 and 1996 were $1,950,000,
$7,090,000 and $15,061,000, respectively. The increase in cash flows from
financing activities resulted primarily from
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increased advances from a related party in 1994 and primarily from the private
sale of common and preferred stock in 1995 and 1996.
Capital expenditures for equipment to support the Company's expanded
operations were approximately $57,000, $81,000 and $1,221,000 for 1994, 1995 and
1996, respectively. The Company expects its capital expenditures to continue to
grow as it expands its manufacturing base and scope of operations in future
periods. At December 31, 1996, the Company had commitments for capital
expenditures totaling $1,109,000 relating primarily to custom injection molded
tooling required for certain of the Company's products and for prototype systems
to be used for evaluation and demonstration purposes.
The Company expects it will continue to incur substantial expense in
additional research and development activities, production scale up, continued
establishment of its sales force and marketing organization and administrative
support activities. The Company anticipates that the net proceeds from this
Offering and the interest income thereon, together with its existing cash, cash
equivalents and short-term investments will be sufficient to fund operations for
the current and foreseeable future. Certain circumstances, however, including
delayed regulatory approvals, slow rate of market acceptance of the Company's
products and the Company's inability to scale up manufacturing, would accelerate
the Company's use of proceeds from the Offering. Therefore the Company may
require additional funds to support its operating requirements or for other
purposes. Accordingly, the Company may, from time to time, seek to raise such
additional funds through public or private equity financings or from other
sources. There can be no assurance that additional financing will be available
at all or that, if available, such financing would be obtainable on terms
acceptable to the Company.
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BUSINESS
OVERVIEW
Vista Medical develops, manufactures and intends to market proprietary
visualization and information systems that enable minimally invasive surgical
solutions in cardiothoracic, head, neck and spine and other selected
microsurgical procedures. The Company currently markets three-chip cameras for
endoscopy and related surgical instruments and accessories. Vista Medical's
visualization and information systems bring together head-mounted display
technology originally developed for applications in military aerospace by Kaiser
Aerospace and Electronics Corporation ("Kaiser Aerospace") and three-dimensional
imaging capability from its acquisition of Oktas, Inc.
BACKGROUND
MINIMALLY INVASIVE SURGERY
The development and subsequent widespread adoption of minimally invasive
surgical approaches have revolutionized many surgical fields, including general
surgery, orthopedics, gynecology and urology. Minimally invasive surgical
procedures are performed through strategically placed ports or mini-incisions in
a patient's body thereby avoiding the larger incisions used in traditional open
surgery. A minimally invasive approach is most advantageous in cases in which
significant trauma results from gaining surgical access to an affected organ or
site. Notable examples of minimally invasive surgical procedures include
laparoscopic procedures in the field of general surgery and arthroscopic
procedures in the field of orthopedic surgery, many of which have become the
standard of care and have achieved significant procedure volumes rapidly. For
example, according to Medical Data International, an independent research
organization, the number of laparoscopic surgical procedures performed annually
in the United States increased from approximately 84,000 in 1990 to more than an
estimated 2.4 million in 1995. Minimally invasive procedures are designed to be
as efficacious as conventional surgery, but with substantially reduced trauma.
Minimally invasive procedures are designed to reduce pain and suffering, speed
recovery, shorten the length of hospital stays and decrease many of the costs
associated with patient care. This movement toward minimally invasive surgery
has been driven by advances in both device technology and surgical technique, as
well as patient demand.
MINIMALLY INVASIVE MICROSURGERY
Minimally invasive microsurgery ("MIM") is an extension of minimally
invasive surgery, characterized by greater complexity and precision. MIM
procedures have been made possible primarily by recent advances in medical
technology. MIM is usually performed in very confined areas of the body,
involves critical anatomical structures, and often requires dissection and
reconstruction as well as excision. As a result, the Company believes that in
order for MIM procedures to be extensively adopted, surgeons must have access to
enhanced visualization and specialized instruments. Examples of MIM are emerging
procedures in cardiothoracic surgery and head, neck and spine ("HNS") surgery.
CARDIOTHORACIC SURGERY
CONVENTIONAL TREATMENTS. Cardiovascular disease, the leading cause of death
in the United States, is typically treated with drugs, various surgical
procedures or both. The two principal types of cardiovascular disease are
coronary artery disease and valvular heart disease. Methods of accessing the
heart for treatment include surgically opening the chest, threading a
balloon-tipped catheter through a major artery or, most recently, gaining
surgical access via a small incision in the chest. Conventional cardiology
procedures include angioplasty, atherectomy and inserting coronary stents;
conventional surgical procedures include coronary artery bypass graft ("CABG")
and valve replacement or repair. Angioplasty, atherectomy and inserting coronary
stents involve the use of a balloon-tipped catheter which is threaded into the
heart through an artery in a patient's leg. Although these procedures are less
invasive than conventional CABG, a major drawback is the high rate of restenosis
or renarrowing of the blood vessel at the treatment site. Traditional CABG and
valve replacement or repair procedures
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typically involve a sternotomy, whereby a surgeon makes a 12 to 18 inch incision
in the patient's chest, the sternum is cut in half with a bone saw, and the rib
cage is then spread open with a steel retractor to perform the grafting
procedures or to replace or repair the heart valves. According to the results of
a recent study, approximately one-third of all angioplasties experience
restenosis or renarrowing of the blood vessel at the treatment site within seven
months while the Company believes most traditional CABG procedures remain
effective for more than a decade.
According to the most recent data published by the American Heart
Association, there were approximately 628,000 open heart surgical procedures
performed in the United States in 1994. Of these, 501,000 were CABG procedures,
60,000 were valve procedures and 67,000 were other procedures including
congenital and pediatric repairs. The Company believes that worldwide there are
approximately 800,000 CABG procedures and approximately 100,000 valve
replacement or repair procedures performed each year.
CARDIOTHORACIC MIM. The application of minimally invasive techniques to
cardiothoracic surgery is commonly regarded as a revolutionary development in
modern surgery. Minimally invasive CABG and valve replacement or repair
procedures avoid the trauma caused by sternotomy and promise to significantly
decrease pain and trauma and shorten recovery times. The minimally invasive
approaches to surgical intervention are evolving and include methods performed
on either a beating or arrested heart. While few agree on the ultimate form of
the emerging techniques and practices, nearly all of those involved believe that
minimally invasive procedures will change the future practice of cardiothoracic
surgery, just as laparoscopy has revolutionized general surgery. However,
cardiothoracic MIM requires the surgeon to perform technically challenging
procedures, including working on tiny delicate structures (such as a one
millimeter heart vessel) with highly restricted access through small incisions.
The Company believes that a current limitation to widespread adoption of
cardiothoracic MIM is the non-existent or restricted visibility through keyhole
access or the minimal incisions currently used. As a result of these factors,
cardiothoracic MIM requires enhanced visualization, specialized instruments and
surgeon training in the new MIM techniques.
THE VISTA MEDICAL SOLUTION. The Company believes that an advanced
visualization technology which provides the surgeon with an intuitive and
ergonomic solution to the inherent vision restrictions of the MIM approach will
enable the use of the MIM technique with increased safety, efficacy and
precision. In the cardiothoracic MIM area, the Company's proprietary
technologies are equally applicable whether the surgeon elects to use either a
beating or arrested heart approach. In addition, the enhanced visualization
provided by the Company's products is expected to enable a significant number of
surgeons, who otherwise might be reluctant to perform MIM, to adopt the
procedures, thereby accelerating the rate of conversion towards a standard of
care. Finally, there is growing evidence of patient interest and demand for
cardiothoracic MIM procedures.
HEAD, NECK AND SPINE (HNS) SURGERY
CONVENTIONAL HNS TREATMENTS. Conventional head, neck and spine procedures
are often invasive and involve a lengthy and painful recovery. Neurosurgical
procedures involving the brain and spinal cord have traditionally been performed
under microscopic visualization to facilitate the delicate manipulations and
extreme precision which are required. More recently, the visualization system
often includes neuroendoscopes in combination with microscopes. The Company
estimates there were approximately 315,000 neurosurgical and skull base
procedures, 430,000 surgical sinus procedures and 650,000 spinal procedures
performed in the United States in 1995.
HNS MIM. The Company believes that there are significant opportunities to
advance MIM techniques in HNS procedures which involve manipulation in close
proximity to critical anatomical structures. The visualization techniques
currently available for these procedures are limited. Existing fiberoptic
neuroendoscopes have inferior resolution, do not provide depth perception and
require a surgeon to
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view the procedure on a video monitor. The position required for both the
principal and assistant surgeon to utilize a surgical microscope is both
ergonomically awkward and physically uncomfortable. In addition, many of these
procedures require the simultaneous monitoring of multiple information sources,
including the images used in the emerging technique of image guided surgery.
Image guided surgery converts the output from digital imaging modalities, such
as magnetic resonance imaging (MRI) and computerized tomography (CT) into highly
precise 3-D and volumetric computer models which help the surgeon with
pre-operative planning. In addition, image guided surgery helps the surgeon
choose the least destructive path when operating close to critical anatomy and
to locate and remove tissue with the highest degree of safety and accuracy.
THE VISTA MEDICAL SOLUTION. In the HNS MIM area, the Company's products
incorporate 3-D visualization into a small diameter endoscope which provides the
surgeon with the critical element of depth perception missing from conventional
endoscopes. In addition, the endoscopic image in the head-mounted display worn
by an assistant surgeon who is operating directly across from the principal
surgeon can be electronically reversed in order to align the assistant's
movements with those of the principal surgeon. The Company can also retrofit
surgical microscopes, so that both the principal surgeon and assistants can view
the case simultaneously on their head-mounted displays in 3-D, with superior
comfort and ergonomic positioning.
BUSINESS STRATEGY
The Company's business strategy is to become the leading developer and
marketer of advanced visualization and information systems for MIM applications
in cardiothoracic, HNS and other selected surgical specialties. Key elements of
the Company's strategy include:
ESTABLISH ADVANCED VISUALIZATION TECHNOLOGIES AS STANDARD PRACTICE IN
MINIMALLY INVASIVE CARDIAC SURGERY. The Company believes that it has the only
visualization system specifically designed for minimally invasive cardiac
surgery. The Company is currently working with its Cardiac Clinical Advisory
Board and other leading surgeons to develop operating protocols which
incorporate advanced visualization technologies as standard practice. The
Company then intends to provide training in these protocols, including the use
of the Company's visualization system, to other cardiac surgeons to accelerate
the general rate of conversion to MIM procedures, whether performed on a beating
or arrested heart.
PROMOTE VISTA MEDICAL'S VISUALIZATION SOLUTION FOR USE IN ALL TYPES OF
CARDIAC SURGERY. The Company believes that its technology is applicable to all
types of cardiac surgery, whether minimally invasive or conventional open heart,
especially where enhancement of the surgeon's view is particularly critical. The
Company believes that use of its advanced visualization product in open heart
surgeries will enhance visualization, improve the quality of procedures and
result in shorter operating times and reduced costs.
DEVELOP MIM APPLICATIONS THROUGH SPECIALTY-FOCUSED BUSINESS UNITS BY
LEVERAGING THE COMPANY'S TECHNOLOGY PLATFORM. The Company approaches its target
markets via its focused business units, the CardioThoracic Surgery division and
the HNS Microsurgery division. The business units concentrate on the specific
requirements of their target markets, with dedicated clinical marketing
programs, clinical advisory boards, sales forces and customer support teams for
the introduction and support of the Company's products. The Company's strategy
is to optimize its fundamental technology platform for each of these medical
specialties and to develop appropriate partnership and distribution systems both
in the United States and international markets.
ACCELERATE ADOPTION OF THE SERIES 8000 ADVANCED VISUALIZATION AND
INFORMATION SYSTEM IN THE CARDIAC MARKET BY IMPLEMENTING A PER-PROCEDURE PRICING
STRATEGY. The Company believes that it can accelerate the adoption of its
Series 8000 advanced visualization and information system by
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implementing a per-procedure pricing strategy. This strategy would require a
payment to the Company every time the Series 8000 is used in a procedure. The
Company commissioned market research in order to determine the viability of a
per-procedure pricing strategy in the United States market. The results of this
market research support the Company's belief that an integrated equipment and
service package, including installation, in-service training, on-going technical
support and system upgrades for a single procedure-based charge will maximize
market penetration and accelerate roll-out of the product line.
INCREASE THE SURGEON'S REAL-TIME ACCESS TO CRITICAL DATA. The surgeon's
access to critical monitoring and diagnostic data, on demand, in real time and
integrated with the anatomical image, enhances procedure performance. The
Company's head-mounted display, incorporating picture-in-picture capability, is
designed to give the surgeon this real-time access to critical information
integrated with the anatomical images generated by the Company's camera systems.
ENTER INTO STRATEGIC RELATIONSHIPS WHICH COMPLEMENT COMPANY RESOURCES. The
Company intends to leverage its position in both technology and distribution by
forming strategic alliances with partners. In November 1996, the Company and
Medtronic, Inc. ("Medtronic"), a leading cardiac company, entered into a
strategic alliance providing for the distribution and co-promotion of the
Company's current and future visualization and information systems for cardiac
surgery, including the Vista Systems. Medtronic will co-promote the product line
in the United States and Canada and act as the Company's exclusive distributor
in Europe, the Middle East (excluding Afghanistan and Pakistan) ("Middle East")
and Africa. In February 1997, the Company entered into an agreement with
Heartport, Inc. ("Heartport"), one of the leading companies applying minimally
invasive surgical techniques to cardiothoracic surgery. Vista Medical will sell
four Series 8000 systems to Heartport, for use in Heartport's Research and
Training Center in Salt Lake City, Utah. The Company has also formed strategic
partnerships with Cogent Light Technologies ("Cogent Light") and GDE Systems,
Inc. ("GDE") to incorporate light source and information technologies,
respectively, into its products. The Company expects to pursue additional
strategic relationships.
ADVANCED VISUALIZATION PRINCIPLES AND PRODUCT PLATFORM
Vista Medical's proprietary technology is based on the following principles
which the Company believes are both essential in advancing the techniques of MIM
and offer several key advantages over other visualization approaches:
- 3-D VIEW. The surgeon's ability to view the principal anatomical image in
3-D provides the accurate depth perception necessary so that vital
anatomical structures are accurately identified and located, thereby
improving safety, precision and speed of the procedure.
- HIGH RESOLUTION IMAGES. The availability of a high resolution image which
can be electronically managed under the surgeon's control significantly
enhances the surgeon's ability to differentiate critical tissues in a
confined setting and perform intricate dissection and reconstruction as
well as excision.
- ACCESS. The surgeon benefits from miniaturization technology which allows
for the direct insertion of a camera into the body cavities or organs and
provides high quality images from an optimal anatomical orientation.
- ERGONOMICS. Due to the complex and time consuming nature of MIM
procedures, the surgeon requires an ergonomic display system which allows
comfortable operating posture and maximizes hand-eye coordination without
strain.
- INFORMATION INTEGRATION. The surgeon's access to critical monitoring and
diagnostic data, on demand, in real time and integrated with the
anatomical image within the surgeon's visual field, enhances procedure
performance.
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The Company has applied its proprietary technology by incorporating the
above principles into its visualization product platform.
HEAD-MOUNTED DISPLAY
The head-mounted display ("HMD") was originally developed for mission
critical applications in military aerospace by Kaiser Aerospace, one of the
world's leading manufacturers of head-mounted displays for aviation
applications. The HMD was determined by the Company to be the optimal solution
to the display challenge of MIM. The fundamental technology and human factors
experience incorporated in the Company's HMD was originally developed by Kaiser
Aerospace and is the result of substantial investment in the technologies of
advanced aerospace display systems and incorporates extensive human factors
experience. This human factors knowledge, derived from many years of analysis
into the display characteristics which enable pilots performing critical
physical tasks to simultaneously absorb and react to crucial information, is a
key element in the Company's HMD design. The Vista Medical HMD, the first
specifically designed for surgical use, provides 3-D visualization of an
endoscopic or microscopic image, has the capability of integrating relevant data
and presents the images to a surgeon in an optically correct, intuitive and
ergonomic way. Wearing the HMD, the microsurgeon can also perform surgery
"in-line" -- the natural way people perform micro-critical tasks -- eyes, hands,
instruments and subject in line. This is not the case when the surgeon is
observing the anatomy on a remotely-positioned video monitor.
The Company's HMD is a lightweight, high resolution display designed to
allow the surgeon to view information on demand, whether such information is
generated from attached endoscopes, microscopes or monitoring equipment in the
operating room. It is presently contemplated that further enhancements to the
HMD will allow for voice-activated control and information display from other
diagnostic equipment in the hospital or from remote locations via information
networks. The video display in the HMD is fixed in relation to the surgeon's
eyes, but his or her head may move into any position necessary for comfort. The
HMD design allows the surgeon to have a constant view of the surgical anatomy
required for the procedure as well as full awareness of the surroundings in the
operating room. The HMD is designed to provide a true 3-D image by replicating
the way the human visual system works -- left and right acquired images are
delivered directly to left and right liquid crystal displays. The HMD is
designed so that it can be worn with conventional surgical loupes.
THREE-DIMENSIONAL IMAGE ACQUISITION
Vista Medical believes that 3-D visualization capability is critical in MIM
procedures such as cardiothoracic and neurosurgical procedures. The Company's
technology for stereo visualization consists of the following proprietary
elements: the optical system, the stereo camera and the stereo processor. The
3-D endoscopic optical system employed by Vista Medical was originally developed
and patented by noted optical designer, Mr. H. McKinley, and is licensed
exclusively to the Company for medical applications. The system is designed to
replicate the exact view that the surgeon would have if the procedures were
being performed open and he or she had direct sight of the anatomy. The Company
believes that the McKinley optical system will provide it with a significant and
enduring competitive advantage because it provides natural depth perception, and
it can be packaged with twin cameras in a very compact design. The twin cameras
acquire the image in a manner analogous to a human's two eyes.
Vista Medical's technology packages the twin cameras in two ways. In the
first method, a micro-camera is attached to the end of a flexible or rigid guide
which can then be inserted directly into the body cavity and organs. The image
is directly captured by the camera chips without being transmitted through
multiple rod lenses as in a conventional optical endoscope design. The
elimination of optical surfaces produces several important advantages, including
increased image quality, improved contrast, better reliability and improved
ability to sterilize by autoclaving. Alternatively, for applications where a
standard optical endoscope configuration remains preferable, a stereo
micro-camera can be mounted externally on a stereo endoscope. The image acquired
by either approach is then processed for display by control electronics
developed exclusively by the Company. The controller will also include image
management
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features which will contribute significantly to procedure performance, such as
zoom control, dual image presentation and picture-in-picture.
INFORMATION MANAGEMENT
Medicine is an information rich discipline, but the provision of relevant
information in real-time to surgeons has not been developed to the levels
attained, for example, in military aviation. The HMD is designed to give the
surgeon real-time access on demand to critical information, integrated with the
anatomical images generated by the Company's camera systems. Therefore, the
surgeon will be able to command the diagnostic and monitoring information
relevant to the specific procedure while it is taking place. In addition to
real-time display, the information can be managed (stored or transmitted) within
the hospital or to remote locations for training, advisory or administrative
purposes. The applications software to control this flow of information is a key
element in Vista Medical's long-term product strategy, which positions
visualization within the context of a total information service to the surgeon.
The Company's data integration capability has been enhanced by the recent
exclusive license from GDE which has added high speed image-based information
processing and networking software to the Company's technology platform. The
Company believes that its technology will demonstrate that real-time access to
relevant information, along with enhanced visualization, is a critical
requirement of performing MIM and other surgical procedures.
PRODUCT LINES
Vista Medical develops products based on the Company's core technology and
product platform described above, that are customized for the specific
cardiothoracic and HNS procedures to which they are directed. The Company's
product lines are as follows:
SERIES 8000 ADVANCED VISUALIZATION AND INFORMATION SYSTEM
The Company has developed the Series 8000 for minimally invasive and other
procedures in cardiothoracic surgery. The components of the Series 8000 are
individual modules, rack mounted in a custom console, and supplied as an
integrated, upgradeable system.
<TABLE>
<CAPTION>
COMPONENT DESCRIPTION
- ---------------------- ------------------------------------------------------------------------------------------
<S> <C>
CardioView (1) Head-mounted display (HMD) and information processing computer which integrates 3-D
visualization of surgical anatomy and related diagnostic and monitoring data (up to four
HMDs may be used simultaneously with each Series 8000).
CardioCamera 2-D and 3-D miniature high resolution digital cameras. Cameras can be delivered directly
into the surgical field by CardioGuide or externally by attachment to retractor systems.
CardioController High resolution stereo image processor which drives all the cameras in the cardiac
operating room.
CardioLight High power xenon light source incorporating micro-illuminated light delivery technology
developed by Cogent Light.
CardioGuide Flexible, steerable, disposable guidance system for CardioCamera.
CardioConsole Console for rack mounting of all Series 8000 modules.
Cardio3DScope (2) Small diameter, angled, rotatable Stereo Thoracoscope.
CardioRecorder (2) 3-D disk image recorder.
</TABLE>
- --------------
(1) The Company expects to introduce a voice-activated control feature for
CardioView in future versions of the Series 8000.
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(2) The Company expects to introduce the Cardio3DScope and the CardioRecorder in
future versions of the Series 8000.
The Company believes that all of the components of Series 8000 are eligible
for 510(k) clearance to market by the FDA. Applications for 510(k) clearance to
market have been filed, or clearance to market has been received, for all
components which are necessary for initial Series 8000 commercialization. The
Company believes that there are predicate devices which can be relied upon for
those of its products for which regulatory applications are in process. A
majority of these predicate devices were developed by the Company or its
strategic partners. Components of the Series 8000 required for initial Series
8000 commercialization are CardioView, CardioCamera, CardioController,
CardioLight and CardioConsole. A 510(k) clearance to market has been obtained
for CardioView, applications have been filed for CardioCamera, CardioController
and CardioLight and clearance is not required for CardioConsole.
STEREOSITE SYSTEMS FOR MICROSCOPY AND ENDOSCOPY
The Company is developing two systems, designed specifically for microscopic
and endoscopic procedures in HNS Microsurgery, which will be marketed under the
brand name of StereoSite.
<TABLE>
<CAPTION>
COMPONENT DESCRIPTION
- --------------------- -------------------------------------------------------------------------------------------
<S> <C>
HMD/Processor Head-mounted display and information processing computer which provides 3-D visualization
of surgical anatomy and related diagnostic and monitoring data (up to four HMDs may be used
simultaneously with each StereoSite system).
3-D Scope Small diameter, angled, rotatable 3-D endoscope.
MSVA Micro-stereo video adapter ("MSVA") which retrofits to the surgical microscope to produce a
3-D video image to be displayed on the HMD. The MSVA incorporates twin 3-chip cameras.
Light Source High power xenon light source incorporating micro-illuminated light delivery technology
developed by Cogent Light.
</TABLE>
In the same manner as the Series 8000, the StereoSite systems incorporate
advanced visualization principles and the Company's platform technology in
application specific packages. The Company expects that its StereoSite system
targeted at microscopy will incorporate the HMD and MSVA and expects that its
StereoSite system targeted at microendoscopy will incorporate the HMD, the 3-D
Scope and the light source.
The Company believes that all of the components of the StereoSite systems
which require clearance by the FDA are eligible for 510(k) clearance to market.
The Company believes that there are predicate devices which can be relied upon
for those of its products for which regulatory applications are in process. A
majority of these predicate devices were developed by the Company or its
strategic partners.
OTHER PRODUCTS
RELATED CARDIOTHORACIC AND HNS PRODUCTS. The Company's CardioThoracic
Surgery division is the exclusive North American distributor of instruments
manufactured by Delacroix-Chevalier, a French corporation, and sutures
manufactured by Peters, a French corporation, which are particularly appropriate
for the minimally invasive approach. The Company's HNS Microsurgery division is
the United States distributor of a line of hand instruments for functional
endoscopic sinus surgery, including exclusive distribution of instruments
developed by Dr. Hiroshi Moriyama of Jikei University, Tokyo.
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3-CHIP CAMERA. 3-chip cameras are the state-of-the-art in two-dimensional
endoscopic imaging. The Company currently manufactures a compact, high
resolution 3-chip camera under its own label and for OEM customers and strategic
partners. This product has historically accounted for a significant portion of
the Company's revenues.
ELECTRONIC ZOOM LAPAROSCOPE (EZL). The EZL represents a new generation of
laparoscopes in which the camera is placed on the distal end of the endoscope
and then inserted inside the body. The EZL incorporates Vista Medical's unique
proprietary zoom feature, which allows a surgeon to manipulate the image by
zooming in and out at the touch of a button, while remaining in focus and
without moving the scope. This capability is not available in any other
currently marketed endoscope and the Company is currently seeking a strategic
partner with distribution capability in laparoscopy. The Company may also
utilize the zoom technology in future products for the CardioThoracic Surgery
and HNS Microsurgery divisions.
STRATEGIC ALLIANCES
The Company intends to leverage its position in both technology and
distribution by forming strategic alliances with corporations and research
institutions with respect to the development, regulatory approval and marketing
of certain of its products. The Company has entered into strategic partnering
arrangements as follows:
MEDTRONIC
In November 1996, Vista Medical and Medtronic, a leading cardiac company,
entered into a strategic alliance providing for the distribution and
co-promotion of the Company's current and future visualization and information
systems for cardiac surgery, including the Series 8000 (the "Vista Systems").
The parties entered into a co-promotion agreement for the United States and
Canada under which Medtronic will promote the Vista Systems in conjunction with
Medtronic's own proprietary products for minimally invasive cardiac surgery.
Vista Medical will be responsible for the sale and distribution of the Vista
Systems to customers in the United States and Canada. The Company will be
responsible for obtaining all regulatory clearances in the United States and
Canada, will provide training and installation at its expense and will pay
Medtronic a sales commission based on net revenues generated by the installation
and use of the Vista Systems in the United States and Canada. During the term of
the co-promotion agreement, Medtronic has agreed not to market or sell in the
United States and Canada visualization products which are competitive with Vista
Medical in cardiothoracic surgical procedures. Medtronic's right to co-promote
will terminate in December 1999, subject to (i) earlier termination for
Medtronic's failure to meet certain objectives or breach of material obligations
by either party and (ii) automatic renewal if certain performance criteria are
met.
Medtronic will also act as Vista Medical's exclusive distributor for the
Vista Systems for use in cardiothoracic surgical procedures in Europe, the
Middle East and Africa. Medtronic will be responsible for obtaining all
regulatory clearances other than the CE mark and will provide training and
installation at its expense. Medtronic will purchase the Vista Systems for a
transfer price to be adjusted each year. Medtronic's exclusive distributorship
will terminate on the third anniversary of the initial commercial release of the
Vista Systems in Europe, subject to earlier termination for Medtronic's failure
to meet certain objectives or breach of material obligations by either party.
The initial term of co-promotion and/or distributorship will be
automatically renewed for an additional two-year term provided certain
performance criteria are met. Vista Medical retains the worldwide right to
distribute products based upon the technology incorporated in the Vista Systems
for use in specialties other than cardiac surgery. Vista Medical also retains
the right to make the Vista Systems available worldwide (other than in Europe,
the Middle East and Africa) for clinical and training programs organized by any
company. Medtronic has the right of first refusal to obtain distribution rights
for the Vista Systems in other areas of the world.
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In conjunction with entering into the co-promotion agreement, Medtronic made
a $10 million equity investment in the Company.
HEARTPORT
In February 1997, the Company entered into a Supply and Services Agreement
with Heartport, a leading company developing minimally invasive technology for
heart surgery. Vista Medical will sell four Series 8000 systems to Heartport,
for use in the Heartport Research and Training Center in Salt Lake City, Utah.
The four systems are scheduled to be delivered by approximately September 1997
or as soon as possible thereafter. Heartport has agreed to use the Series 8000
in its training centers, to promote that its training courses utilize the Series
8000 and to endorse the Series 8000 as the preferred 3-D video visualization and
information solution for minimally invasive heart surgery. Until December 31,
1999, the Company will maintain and support the four systems at the Heartport
Research and Training Center and will collaborate with Heartport with the goal
of ensuring that the Series 8000 is compatible with technology used in the
performance of Heartport's Port-Access procedures. During the period ending
December 31, 2003, the Company has also agreed to provide the Vista Systems to
hospitals, clinics or similar sites in North America whose surgeons have been
trained at the Heartport Research and Training Center, without discrimination
and on the best available terms and conditions the Company offers to any other
similarly situated customers of the Company. In connection with the agreement,
the Company issued to Heartport a warrant to purchase up to 100,000 shares of
Common Stock, exercisable at any time after this Offering and prior to March 31,
2001, at a price per share equal to the initial public offering price.
GDE SYSTEMS
In February 1997, GDE, a leading military electronics and information
management company, granted the Company an exclusive worldwide license to
software, documentation and trademarks of GDE for use in the medical field.
Since 1993, GDE's subsidiary, Healthcom, has been adapting the software licensed
to Vista Medical to provide high-speed, image-based information processing and
networking capabilities specifically for medical applications. In connection
with the license, Vista Medical will issue to GDE Common Stock with a value
(based on the initial public offering price) of $250,000 and will pay GDE a
royalty on revenues derived from any products based upon or derived from the GDE
software. Vista Medical has also agreed to make a non-refundable payment of at
least $250,000 by December 31, 1998 as a combination of royalty payments earned
through such date and a royalty advance creditable against future royalties due
thereafter. Pursuant to the license agreement, Vista Medical has the opportunity
to hire up to three of GDE's software development engineers. GDE has a right of
first refusal to license Vista Medical improvements to the software for use in
non-medical markets, subject to the payment of a royalty to Vista Medical. The
parties also agreed to negotiate in good faith to enter into a services
agreement which would provide Vista Medical with access to GDE consultancy
services on a project-by-project basis, on terms to be mutually agreed upon.
COGENT LIGHT
The Company and Cogent Light formed a strategic alliance in March 1996,
pursuant to a memorandum of understanding, to cooperate in the development of
products for minimally invasive cardiac surgery which incorporate Cogent Light's
proprietary light fiber delivery technology. Pursuant to the memorandum of
understanding, Cogent Light is currently providing its single fiber and
MicroBundle technologies exclusively for incorporation into the Series 8000,
including CardioCamera, CardioLight and Cardio3DScope. The memorandum of
understanding stipulates that Vista Medical will incorporate only a Cogent Light
source in its cardiac surgical instrumentation, for example, CardioLight,
provided such light source meets all of Vista Medical's performance
requirements. The parties retain rights to their respective intellectual
property, with new developments under the alliance being jointly owned and
cross-licensed to each party.
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UROHEALTH
In December 1996, the Company and Urohealth Systems, Inc. ("Urohealth")
entered into a license agreement under which the Company exclusively licensed
visual instrument technology developed principally for the field of gynecology
(the "Newman Technology") to Urohealth for use in gynecology, urology and
general surgery on a worldwide basis. Vista Medical has a right of first refusal
to manufacture Urohealth's requirements for the camera and light source
equipment required for medical office use of the products derived from the
Newman Technology for a specified period of time following the date of the
agreement. Urohealth will pay to Vista Medical a sliding royalty based on sales
of products incorporating the Newman Technology, subject to certain maximums and
minimums. The agreement may be terminated in the event of an uncured material
breach or insolvency by either party. In connection with the license agreement,
the parties entered into a consulting agreement whereby Vista Medical agreed to
use its reasonable efforts to provide the services of Allen Newman, the
Company's Vice President and General Manager, HNS Microsurgery, as a consultant
to Urohealth on a limited basis. The Company exclusively licensed the Newman
Technology from Mr. Newman in September 1994. The Newman license agreement was
amended in December 1996 to permit the Company to sublicense the Newman
Technology to Urohealth. In connection with the amendment of the Newman license
agreement, including the termination of royalty rights for camera systems, the
Company paid Mr. Newman an additional sum of money and agreed to pay Mr. Newman
a percentage of the royalties received from Urohealth for sales of disposable
products manufactured under the sublicense.
MARKETING AND SALES
The Company has organized its sales and marketing efforts by
specialty-specific divisions: Vista CardioThoracic Surgery division ("VCS") and
Vista HNS Microsurgery division ("VHNS"). The Company believes that this
organizational structure provides the commitment and focus necessary to
introduce and support new advanced technology to these two distinct markets.
Each division, however, will follow similar strategic principles in developing
its business.
TRAINING. The introduction of new technology requires training for both
surgeons and operating room personnel. VCS intends to establish training
programs by mid-1997 and expects to be able to train up to 250 surgeons each
year, and will also provide the visualization equipment for training programs
organized by Medtronic, Heartport and other cardiac surgery companies. The VCS
training format will involve one or two day sessions at selected locations where
surgeons will have the opportunity to use the Series 8000 in a laboratory
environment. Operating room personnel will receive in-service training from
company representatives when equipment is installed. VHNS intends to utilize a
similar format specifically designed for HNS surgeons. See "-- Strategic
Alliances."
CLINICAL EVALUATION. VCS and VHNS product lines have been developed with
frequent input from the Clinical Advisory Boards of each division. Once
marketing begins, this evaluation phase is expected to progress into a
publication phase with the Company's advisors publishing results of their
experience in leading publications and speaking at major clinical conferences.
The Company supports such research, although it has no control over the content
or timing of any publication or presentation, because impartial education of the
general clinical audience is a key component in establishing procedure and
equipment acceptance. As part of their strategy, VCS and VHNS also intend to
continue to support seminars and symposiums and participate in industry trade
shows.
SALES FORCE. VCS and VHNS will have separate sales forces, consisting of a
combination of direct and independent sales representatives. VCS currently
markets its products through two direct and 35 independent representatives and
is in the process of hiring up to 10 additional direct sales people to support
the introduction of the Series 8000. VHNS will market its products through a
similar combination of direct and independent sales representatives. VHNS
currently has two sales managers, one based in the United States and the other
in Europe.
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PATIENT EDUCATION. As the success of the Company's products is dependent on
the adoption of MIM procedures, it must support the purchasers of its products
in the introduction of these procedures to the local community. The Company has
therefore engaged a national firm, specializing in medical communications, to
provide public relations assistance to create patient awareness of the minimally
invasive surgical options. Initial emphasis will be to support the launch of the
Series 8000.
INTERNATIONAL SALES. The Company markets its products internationally
through independent distributors and has entered into a strategic relationship
with Medtronic for the distribution of the Vista Systems in Europe, the Middle
East and Africa. See "-- Strategic Alliances -- Medtronic."
MANUFACTURING
The Company has established a manufacturing facility in Westborough,
Massachusetts, which it believes generally meets the Good Manufacturing Practice
("GMP") standards set by the FDA. The Company believes this facility is adequate
for the Company's near-term manufacturing requirements which are principally
final assembly of sub-assemblies and components, including hardware and
software. The Company has been manufacturing OEM camera systems in limited
quantities for two years and has been developing the necessary procedures,
systems and controls and hiring supervisory staff throughout this period. The
Company believes that its current manufacturing facility will be adequate to
meet its forecasted requirements through 1997 and that additional space will be
available when required on reasonable commercial terms.
The Company lacks experience in manufacturing its products under
development, including the Series 8000, in the quantities that would be
necessary to achieve significant commercial sales. The manufacture of the
Company's products primarily involves the assembly of a number of sub-assemblies
and components either by the Company directly or by contract manufacturers.
Companies such as Vista Medical often encounter difficulties in scaling up
manufacturing of products, which could include problems involving quality
control and assurance, component and service availability, adequacy of control
policies and procedures, lack of qualified personnel, compliance with FDA
regulations and the need for further FDA review and possible approval of new
manufacturing processes and facilities or other production constraints. There
can be no assurance that reliable, high-volume manufacturing can be established
or maintained at commercially reasonable costs. The Company will also require
additional manufacturing facilities as production volumes increase; acquisition
of new manufacturing facilities will likely involve relocation. Any of these
factors could have a material adverse effect on the Company's business,
financial condition and results of operation.
The Company uses or relies on certain components and services used in its
devices that are provided by sole source suppliers. The qualification of
additional or replacement vendors for certain components or services is a
lengthy process. In addition, the substitution of replacement vendors may entail
re-engineering time and cost and could delay the supply of the Company's
products. Any significant supply interruption would have a material adverse
effect on the Company's ability to manufacture its products and, therefore, a
material adverse effect on its business, financial condition and results of
operations.
The Company has, and will continue to consider as appropriate, the internal
manufacture of sub-assemblies currently provided by third party subcontractors,
as well as the implementation of new design and production processes which
further reduce costs.
COMPETITION
The medical device market is characterized by intensive development efforts
and rapidly advancing technology. The future success of the Company will depend,
in large part, upon its ability to anticipate and keep pace with advancing
technology and competing innovations. There can be no assurance,
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however, that the Company will be successful in identifying, developing and
marketing new products or enhancing its existing products.
Although several companies compete with aspects of the Company's
visualization product line, the Company believes there is no single company
which offers a complete and integrated advanced visualization and information
system specifically directed at minimally invasive microsurgical applications.
In addition, the Company believes that no other head-mounted display has been
cleared for marketing in surgical applications by the FDA. The Company believes
that a number of large companies, with significantly greater financial,
manufacturing, marketing, distribution and technical resources and experience
than that of the Company, are focusing on the development of visualization
products for MIM. Several companies are currently developing and marketing
visualization products for MIM which could be applied to cardiac surgery. There
can be no assurance that the Company will be successful in competing with any
such companies.
Technological advances in other therapies for heart disease such as drugs,
interventional cardiology procedures or future innovations in cardiac surgery
techniques could make such other therapies more effective or lower in cost than
MIM surgical procedures and could render MIM cardiac surgery obsolete.
GOVERNMENT REGULATION
The manufacture and sale of medical devices intended for commercial
distribution are subject to extensive governmental regulation in the United
States. Medical devices are regulated in the United States primarily by the FDA
and, to a lesser extent, by certain state agencies. Generally, medical devices
require pre-market clearance or pre-market approval prior to commercial
distribution. In addition, certain material changes or modifications to medical
devices also are subject to FDA review and clearance or approval. The FDA
regulates the research, testing, manufacture, safety, labeling, storage, record
keeping, promotion and distribution of medical devices in the United States and
the export of unapproved medical devices from the United States to other
countries. Noncompliance with applicable requirements can result in failure of
the government to grant pre-market clearance or approval for devices, withdrawal
of approval, total or partial suspension of production, fines, injunctions,
civil penalties, refunds, recall or seizure of products and criminal
prosecution.
In the United States, medical devices are classified into one of three
classes, Class I, II or III, on the basis of the controls deemed by the FDA to
be necessary to reasonably ensure their safety and effectiveness. The Company's
products to date have either been classified as Class I or Class II devices.
Class I devices are subject to general controls (e.g., established
registration and product listing, labeling, adulteration and misbranding
provisions and medical device reporting requirements and, unless exempt, to
pre-market notification and adherence to GMP standards). Class II devices are
subject to general controls and special controls (e.g., performance standards,
post-market surveillance, patient registries and FDA guidelines). Generally,
Class III devices are those that must receive pre-market approval by the FDA to
ensure their safety and effectiveness (e.g., life-sustaining, life-supporting
and implantable or new devices which have not been found to be substantially
equivalent to legally marketed devices). Class III devices ordinarily require
clinical testing to ensure safety and effectiveness and FDA approval prior to
marketing and distribution. The FDA also has the authority to require clinical
testing of Class I and Class II devices. A pre-market approval ("PMA")
application must be filed if a proposed device is not substantially equivalent
to a legally marketed predicate device or if it is a Class III device for which
the FDA has called for such application. A PMA typically takes several years to
be approved by the FDA.
Generally, before a new device can be introduced into the market in the
United States, the manufacturer or distributor must obtain FDA clearance of a
510(k) notification or submission and approval of a
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PMA application. If a medical device manufacturer or distributor can establish
that a device is "substantially equivalent" to a legally marketed Class I or
Class II device, or to a Class III device for which the FDA has not called for a
PMA, the manufacturer or distributor may seek clearance from the FDA to market
the device by filing a 510(k) notification. The 510(k) notification may need to
be supported by appropriate performance, clinical or testing data establishing
the claim of substantial equivalence. The FDA requires a rigorous demonstration
of substantial equivalence.
The Company has received 510(k) clearance to market the following product
lines in the United States: (i) head mounted display (September 1996); (ii)
additional cardiothoracic indications for the 3-D scope (July 1996); (iii) sinus
telescopes (October 1995); (iv) video endoscope with zoom (January 1995); (v)
stereo viewing system (November 1994); (vi) dental camera (November 1994); (vii)
three-chip video camera (June 1994); and (viii) 3-D scope (December 1992). Three
510(k) pre-market notifications for the Company's 3-D video endoscope, mini
cameras and illumination system were filed in January 1997. Internationally, the
Company's three-chip video camera and the zoom endoscope have qualified for the
CE mark under the Electromagnetic Compatibility Directive for sale in Europe.
Following submission of the 510(k) notification, the manufacturer or
distributor may not place the device into commercial distribution until a letter
clearing the 510(k) is issued by the FDA. At this time, the FDA typically
responds to the submission of a 510(k) notification within 90 to 200 days. An
FDA letter may declare that the device is substantially equivalent to a legally
marketed device and allow the proposed device to be marketed in the United
States. The FDA, however, may determine that the proposed device is not
substantially equivalent or requires further information, including clinical
data, to make a determination regarding substantial equivalence. Such
determination or request for additional information will delay market
introduction of the product that is the subject of the 510(k) notification.
All clinical investigations involving the use of an unapproved or uncleared
device on humans to determine the safety or effectiveness of the device must be
conducted in accordance with the FDA's IDE regulations. If the device presents a
"significant risk," the manufacturer or distributor of the device is required to
file an IDE application with the FDA prior to commencing human clinical trials.
The IDE application must be supported by data, typically the result of animal
and, possibly, mechanical testing. If the IDE application is approved by the
FDA, human clinical trials may begin at a specific number of investigational
sites with a maximum number of patients, as approved by the FDA. If the device
presents a "non-significant risk," approval by an Institutional Review Board
prior to commencing human clinical trials is required, as well as compliance
with labeling, record keeping, monitoring and other requirements.
Any products manufactured or distributed by the Company are subject to
continuing regulation by the FDA, which includes record keeping requirements,
reporting of adverse experience with the use of the device, GMP requirements and
post-market surveillance, and may include post-market registry and other actions
deemed necessary by the FDA. A 510(k) supplement, new 510(k) or PMA is also
required when a medical device manufacturer makes a change or modification to a
legally marketed device that could significantly affect the safety or
effectiveness of the device, or where there is a major change or modification in
the intended use of the device. When any change or modification is made to a
device or its intended use, the manufacturer is expected to make the initial
determination as to whether the change or modification is of a kind that would
necessitate the filing of a 510(k) supplement, new 510(k) or PMA.
Sales of medical device products outside the United States are subject to
foreign regulatory requirements that vary from country to country. The time
required to obtain approvals required by foreign countries may be longer or
shorter than that required for FDA clearance, and requirements for licensing may
differ from FDA requirements. Failure to comply with regulatory requirements
could have a material adverse effect on the Company's business, financial
condition and results of operations. The current regulatory environment in
Europe for medical devices differs significantly from that in the United States.
Europe is currently in the transitional process of implementing the Medical
Device Directive which was adopted on January 1, 1995 with a transition period
through June 1998. After June 1998, all medical
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devices sold in the European Union must bear the CE mark. Devices are now
classified by manufacturers according to the risks they represent with a
classification system giving Class III as the highest risk devices and Class I
as the lowest. Once the device has been classified, the manufacturer can follow
one of a series of conformity assessment routes, typically through a registered
quality system, and demonstrate compliance to a European Notified Body. After
that, the CE mark may be applied to the device. Maintenance of the system is
ensured through annual on-site audits by the Notified Body and a post-market
surveillance system requiring the manufacturer to submit serious complaints to
the appropriate governmental authority. With respect to the Series 8000, the
Company is responsible for gaining, at its expense, the CE mark in Europe.
Medtronic is responsible for obtaining, at its expense, all necessary regulatory
and other approvals required for sale in the Middle East and Africa.
PATENTS AND PROPRIETARY RIGHTS
Vista Medical relies on a combination of technical leadership, patent, trade
secret, copyright and trademark protection and nondisclosure agreements to
protect its proprietary rights. As of February 28, 1997, the Company had
exclusive rights to 11 issued United States patents, 12 pending United States
patent applications, three issued foreign patents and 17 pending foreign
applications covering various aspects of its devices and systems. The Company
intends to file additional patent applications in the future. The failure for
such patents to issue could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company owns the following trademarks: 3D Scope-Registered Trademark-,
Design of Cone and Vista Medical Technologies & Design. In addition, the Company
has filed for trademark protection for the following: MIM, StereoSite,
CardioCamera, CardioZoom, Infomatix, CardioView, CardioController, CardioGuide,
CardioConsole and CardioLight.
The Company's future success will depend, in part, on its ability to
continue to develop patentable products, enforce its patents and obtain patent
protection for its products both in the United States and in other countries.
The patent positions of medical device companies, including the Company,
however, are generally uncertain and involve complex legal and factual
questions. There can be no assurance that patents will issue from any patent
applications owned by or licensed to the Company or that, if patents do issue,
the claims allowed will be sufficiently broad to protect the Company's
technology. In addition, there can be no assurance that any issued patents owned
by or licensed to the Company will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide competitive
advantages to the Company.
The Company has in-licensed certain aspects of its technology. Failure of
the Company to retain rights to these technologies could have a material,
adverse effect on the Company's business, financial condition and results of
operations. In September 1995, McKinley granted to the Company a perpetual,
exclusive, worldwide license to make, have made, modify, use, lease, market,
sell and otherwise distribute certain endoscopes and other medical products
incorporating a stereo objective lens and/or a relay lens configuration for
medical purposes. Under the terms of this license agreement, Vista Medical is
obligated to pay McKinley an annual maintenance royalty, additional royalties
upon the sale of certain numbers of systems incorporating the McKinley
technology and royalties on net sales of products incorporating the McKinley
technology. The exclusive license granted under this agreement becomes a
non-exclusive license in the event Vista Medical fails to pay any royalties
following receipt of notice of such failure to pay. In addition, Vista Medical
has the right to terminate the agreement with limited notice.
In June 1996, Fuji granted to the Company a non-exclusive license to certain
optical zoom technology for use in endoscopes. Vista Medical is obligated to pay
royalties on net sales of products in the United States which incorporate Fuji's
technology. Fuji may terminate the agreement if Vista Medical does not cure any
violation of the agreement within a limited period of time.
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The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. Litigation, which
would result in substantial expense to the Company, may be necessary to enforce
any patents issued or licensed to the Company and/or to determine the scope and
validity of proprietary rights of third parties or whether the Company's
products, processes or procedures infringe any such third-party proprietary
rights. The Company may also have to participate in interference proceedings
declared by the United States Patent and Trademark Office, which could result in
substantial expense to the Company, to determine the priority of inventions
covered by the Company's issued United States patents or pending patent
applications. Furthermore, the Company may have to participate at substantial
cost in International Trade Commission proceedings to enjoin importation of
products which would compete unfairly with products of the Company. Any adverse
outcome of any patent litigation (including interference proceedings) could
subject the Company to significant liabilities to third parties, require
disputed rights to be licensed from or to third parties or require the Company
to cease using the technology in dispute.
Patent applications in the United States are maintained in secrecy until a
patent issues, and patent applications in foreign countries are maintained in
secrecy for a period of time after filing. After such period of time, and
usually before the grant of the patent, patent applications in foreign countries
are published. While publication of discoveries in the scientific or patent
literature tends to lag behind actual discoveries and the filing of related
patent applications, such publication may enable the Company's competitors to
ascertain what areas of research or development the Company is engaged in prior
to the Company's receipt of patent protection in the United States or foreign
countries relating to such research or development.
In general, the development of visualization and information systems and
related surgical instruments and accessories is intensely competitive. Patents
issued and patent applications filed relating to medical devices are numerous
and there can be no assurance that current and potential competitors and other
third parties have not filed or in the future will not file applications for, or
have not received or in the future will not receive, patents or obtain
additional proprietary rights relating to products or processes used or proposed
to be used by the Company. There can also be no assurance that third parties
will not assert infringement claims against the Company in the future or that
any such assertions will not result in costly litigation or require the Company
to obtain a license to intellectual property rights of such parties. There can
be no assurance that any such licenses would be available on terms acceptable to
the Company, if at all. Furthermore, parties making such claims may be able to
obtain injunctive or other equitable relief that could effectively block the
Company's ability to make, use, sell or otherwise practice its intellectual
property (whether or not patented or described in pending patent applications),
or to further develop or commercialize its products in the United States and
abroad and could result in the award of substantial damages. Defense of any
lawsuit or failure to obtain any such license could have a material adverse
affect on the Company.
The Company relies on unpatented trade secrets to protect its proprietary
technology, and no assurance can be given that others will not independently
develop or otherwise acquire the same or substantially equivalent technologies
or otherwise gain access to the Company's proprietary technology or disclose
such technology or that the Company can ultimately protect its rights to such
unpatented proprietary technology. No assurance can be given that third parties
will not obtain patent rights to such unpatented trade secrets, which patent
rights could be used to assert infringement claims against the Company. The
Company also relies on confidentiality agreements with its collaborators,
employees, advisors, vendors and consultants to protect its proprietary
technology. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or be independently
developed by competitors. In addition, the Company's agreements with its
employees and consultants require disclosure to the Company of ideas,
developments, discoveries or inventions conceived during employment or
consulting, as the case may be, and assignment to the Company of proprietary
rights to such matters related to the business and technology of the Company.
The extent to which efforts by
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others will result in patents and the effect on the Company of the issuance of
such patents is unknown. Failure to obtain or maintain patent and trade secret
protection, for any reason, could have a material adverse effect on the
Company's business, financial condition and results of operations.
CLINICAL ADVISORY BOARDS
The Company has established two Clinical Advisory Boards made up of leading
surgeons, one focused on minimally invasive cardiac surgery, the other focused
on HNS microsurgery and a number of other specialties. Members of the Clinical
Advisory Boards consult with the Company exclusively in the field of
visualization, but may also consult with other non-competing instrumentation
companies and are employed elsewhere on a full-time basis. The Clinical Advisory
Boards are intended to act as a clinical reference for the Company and to
provide access to potential training sites for the Company's visualization
products. The Clinical Advisory Boards and their members are as follows:
CLINICAL ADVISORY BOARD: CARDIOTHORACIC SURGERY
<TABLE>
<CAPTION>
ADVISOR (1) INSTITUTION AND LOCATION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Delos M. Cosgrove III, M.D.............................. The Cleveland Clinic Foundation, Cleveland, OH
Federico Benetti, M.D................................... Fundacion Benetti, Rosario, Argentina
Alain Carpentier, M.D................................... Hopital Broussais, Paris, France
O. Howard Frazier, M.D.................................. Texas Heart Institute, Houston, TX
Laman Gray, M.D......................................... University of Louisville, Louisville, KY
Renee S. Hartz, M.D..................................... Illinois Masonic Hospital, Chicago, IL
Urban Lonn, M.D......................................... University Hospital, Linkoping, Sweden
William Northrup, III, M.D.............................. Minneapolis Heart, Minneapolis, MN
M. Clive Robinson, M.D.................................. University of Kentucky, Lexington, KY
William Santamore, Ph.D................................. University of Louisville, Louisville, KY
Meredith Scott, M.D..................................... Florida Hospital, Orlando, FL
Hani Af Shenib, M.D..................................... Montreal General Hospital, Montreal, Canada
Albert Starr, M.D....................................... St. Vincent Hospital, Portland, OR
Gus J. Vlahakes, M.D.................................... Massachusetts General Hospital, Boston, MA
John Wain, M.D.......................................... Massachusetts General Hospital, Boston, MA
</TABLE>
- --------------
(1) Each of the listed advisors specializes in cardiac surgery, with the
exceptions of Dr. John Wain, who specializes in thoracic surgery, and Dr.
William Santamore, who is a cardiovascular researcher.
CLINICAL ADVISORY BOARD: HNS MICROSURGERY AND OTHER SPECIALTIES
<TABLE>
<CAPTION>
ADVISOR ADVISORY FOCUS INSTITUTION AND LOCATION
- ------------------------------ ------------------------------- -------------------------------------------------
<S> <C> <C>
Desmond H. Birkett, M.D. 3-D endoscopic surgery Lahey Clinic, Woburn, MA
Richard D. Bucholz, M.D. Neuro-navigational surgery St. Louis University School of Medicine, St.
Louis, MO
James T. Caillouette, M.D. Information Technology Hoag Hospital, Newport Beach, CA
John Coller, M.D. Telemedicine Lahey Clinic, Woburn, MA
John Diaz Day, M.D. Skull base surgery Allegheny General Hospital, Pittsburgh, PA
Michael Levy, M.D. Neurosurgery University of California, Los Angeles, Los
Angeles, CA
Douglas Olsen, M.D. Spine surgery Vanderbilt University School of Medicine,
Nashville, TN
John H. Payne, Jr., M.D. Telemedicine Kaiser Permanente Hospital, Honolulu, HI
Stanley Shapshay, M.D. ENT/Sinus surgery New England Medical Center, Boston, MA
</TABLE>
45
<PAGE>
HUMAN RESOURCES
As of February 28, 1997, the Company had approximately 53 full-time
employees, of whom 9 hold advanced degrees. None of the Company's employees is
represented by a collective bargaining agreement, nor has the Company
experienced work stoppages. The Company believes its relations with its
employees are good.
FACILITIES
The Company's facilities consist of approximately 6,500 square feet of
office space located in Carlsbad, California, in which the Company's executive
offices and the HNS Microsurgery division are located, pursuant to a lease which
expires in November 1998. In addition, the Company maintains a facility of
approximately 22,500 square feet in Westborough, Massachusetts in which the
Company's development and manufacturing operations and the CardioThoracic
Surgery division are located, pursuant to several leases which expire at various
points in time beginning in May, 1999 and ending in October 2001. The Company
believes that suitable additional space will be available to it, when needed, on
commercially reasonable terms.
LEGAL PROCEEDINGS
As of the date of this Prospectus, the Company is not a party to any legal
proceedings. Notwithstanding the foregoing, from time to time, Vista Medical may
be involved in litigation.
46
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company as of February 28, 1997,
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
James C. Blair (1)................................... 57 Chairman of the Board and Director
John R. Lyon......................................... 50 President, Chief Executive Officer and Director
Koichiro (Ken) Hori.................................. 61 Senior Vice President, Advanced Technology
Nancy M. Briefs...................................... 42 Vice President and General Manager, CardioThoracic
Surgery division
Allen Newman......................................... 46 Vice President and General Manager, Head, Neck &
Spine Microsurgery division
Clifford F. Potocky.................................. 49 Vice President and General Manager, Oktas division
Robert J. De Vaere................................... 39 Chief Financial Officer and Director of Finance and
Administration
Olav B. Bergheim..................................... 46 Director
Nicholas B. Binkley (1).............................. 51 Director
Daniel J. Holland (2)................................ 61 Director
Larry M. Osterink (2)................................ 56 Director
</TABLE>
- --------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
JAMES C. BLAIR. Dr. Blair has served as Chairman of the Board and a
Director of the Company since July 1995. Dr. Blair has been a General Partner of
Domain Associates ("Domain"), a venture capital management company, since 1985.
From 1969 to 1985, Dr. Blair was an officer of three investment banking and
venture capital firms. Dr. Blair is a director of Amylin Pharmaceuticals, Inc.,
CoCensys Inc., Dura Pharmaceuticals, Inc., Gensia Sicor, Inc. and Houghten
Pharmaceuticals, Inc., all biopharmaceutical companies. Dr. Blair is a graduate
of Princeton University and holds a Ph.D. from the University of Pennsylvania.
JOHN R. LYON. Mr. Lyon co-founded the Company in July 1993 and has served
as President since July 1993, as Chief Executive Officer since December 1996 and
as a director of the Company since July 1995. Prior to co-founding Vista
Medical, Mr. Lyon served for three years with Cooper Companies, as President of
the International Division within Cooper's Health Care Group from January 1991
through December 1992, and as President of CooperSurgical, a manufacturer and
distributor of minimally invasive surgical products, from January 1992 through
January 1993. Mr. Lyon also was employed by Kaiser Aerospace in a business
development role from February 1993 until the Company was founded in July 1993.
Mr. Lyon holds a B.A. from the University of Durham, United Kingdom.
KOICHIRO (KEN) HORI. Mr. Hori co-founded Vista Medical and served as
Executive Vice President and Chief Technical Officer prior to being appointed
Senior Vice President, Advanced Technology in December 1996. Mr. Hori also
served as a director of the Company from July 1995 to December 1996. Prior to
co-founding the Company, Mr. Hori served as President of Technology for Imaging,
which was subsequently acquired by Bristol-Myers Squibb, from December 1985 to
May 1992 and then founded Oktas, Inc. in November 1992 and served as its
President until December 1996. Oktas, Inc. was a wholly-owned subsidiary of the
Company from July 1995 through December 1996, when it was legally dissolved as a
separate entity and its assets were transferred to the Company. Mr. Hori earned
his B.S.E.E. from Tokyo's Nihon University College of Science and Engineering.
47
<PAGE>
NANCY M. BRIEFS. Ms. Briefs joined the Company as a consultant in May 1995
and has served as Vice President and General Manager of the Company's
CardioThoracic Surgery division since December 1995. Prior to joining Vista
Medical, from August 1993 through April 1995, Ms. Briefs served as Vice
President of Marketing and Sales at American Surgical Technologies Corporation
("AST"), a company that developed and received approval for the first
three-dimensional endoscope before its assets were acquired by Vista Medical in
July 1995. Previously, Ms. Briefs served as Director of Worldwide Marketing and
Corporate Accounts at Stryker Corp.'s Endoscopy Division from January 1990
through August 1992, where she was responsible for both the arthroscopy and
laparoscopy business units. She holds a B.A. and B.S. from Emporia State
University in Kansas and an M.B.A. in Marketing from Golden Gate University in
San Francisco.
ALLEN NEWMAN. Mr. Newman joined Vista Medical in June 1994 and served as
the Company's Vice President, Business Development until being appointed as Vice
President and General Manager of Head, Neck & Spine Microsurgery division in
December 1996. Prior to joining the Company, Mr. Newman served as president of
Newman Medical, a medical consultancy, from October 1992 through June 1994.
Previously, he served as Vice President of Business Development at Birtcher
Medical Systems from March through October 1992 and in various sales and
management positions at Karl Storz Endoscopy America from 1982 through February
1992, serving as Vice President, Sales and Marketing from 1989. Mr. Newman holds
a B.A. from California State University (Sonoma) and graduated from the Medical
Marketing Program of the John E. Anderson Graduate School of Business at the
University of California, Los Angeles ("UCLA").
CLIFFORD F. POTOCKY. Mr. Potocky joined Vista Medical in January 1996 and
has served as the Company's Vice President and General Manager of its Oktas
division since December 1996. Prior to joining Vista Medical, Mr. Potocky worked
at Frigitronics from 1974 through October 1995, in a variety of positions,
including Executive Vice President, Vice President-Director of Engineering and
Product Manager/Product Engineer. Frigitronics, a subsidiary of Starr Surgical,
Inc., was acquired and became CooperSurgical in 1990, specializing in
cryosurgery and other minimally invasive medical devices. Mr. Potocky holds a
B.S. from the University of Massachusetts.
ROBERT J. DE VAERE. Mr. De Vaere has served as Chief Financial Officer
since December 1996 and as Director of Finance and Administration for the
Company since January 1996. From January 1991 until joining Vista Medical, Mr.
De Vaere served in various financial roles at several of Kaiser Aerospace's
business units, most recently as Director of Finance and Business Management at
Kaiser Electro-Optics. Mr. De Vaere holds a B.S. from UCLA.
OLAV B. BERGHEIM. Mr. Bergheim has served as a Director of the Company
since August 1996. Mr. Bergheim has been a Venture Partner of Domain Associates
since October 1995. From April to July 1995, Mr. Bergheim was Executive
Vice-President of Coram Healthcare and from 1977 to 1995 served in various
management capacities with Baxter Healthcare Corporation in Europe and the
United States. From 1992 to 1995, Mr. Bergheim was President of Baxter's
Cardiovascular Group. Mr. Bergheim is a director of Fusion Medical Technologies,
Inc. Mr. Bergheim graduated from the University of Oslo with a Masters degree in
Industrial Pharmacy.
NICHOLAS B. BINKLEY. Mr. Binkley has served as a Director of the Company
since July 1995. In June 1993, Mr. Binkley was one of the founding principals of
Forrest Binkley & Brown L.P., the managing general partner of SBIC Partners,
L.P., a private equity investment fund licensed as a small business investment
company by the U.S. Small Business Administration. From 1977, Mr. Binkley served
in a variety of senior executive positions at Security Pacific Corporation
("SPC"), including Chairman and Chief Executive Officer of Security Pacific
Financial Services System, SPC's non-banking subsidiary, from 1981, and Vice
Chairman of the Board of Directors of SPC from 1991. In April 1992, Mr. Binkley
became Vice Chairman of the Board of Directors of BankAmerica Corporation
("BankAmerica"), following the merger of SPC into BankAmerica, serving in such
capacity until his resignation in May 1993.
48
<PAGE>
Mr. Binkley is a graduate of The Colorado College and holds a masters degree
from Johns Hopkins School of Advanced International Studies.
DANIEL J. HOLLAND. Mr. Holland has served as a Director of the Company
since July 1995. Mr. Holland is a General Partner of One Liberty Fund III, a
venture capital fund organized in 1995. He served as President of Morgan,
Holland Ventures Corporation until 1995 when he was appointed Senior Officer of
OneLiberty Ventures, Inc. (formerly Morgan, Holland Ventures Corporation). He
has also served as a Managing General Partner of Morgan, Holland Fund and
Morgan, Holland Fund II since 1981 and 1988, respectively. Mr. Holland holds a
B.S. in mechanical engineering from The Massachusetts Institute of Technology
and an MBA from Harvard Business School.
LARRY M. OSTERINK. Dr. Osterink has been a Director of the Company since
July 1995. Since 1993, Dr. Osterink has served as President of Medical Optics
Inc., a subsidiary of Kaiser Aerospace. From 1984 to 1992, Dr. Osterink was
President of Kaiser Electro-Optics Inc. and from 1979 to 1984 he was General
Manager of the Industrial Laser Division of SpectraPhysics Inc. Dr. Osterink
graduated from Michigan State University and holds a Ph.D. in Electrical
Engineering from Stanford University.
Members of the Board currently hold office and serve until the next annual
meeting of the stockholders of the Company or until their respective successors
have been elected. The Board is currently comprised of six directors. Under the
Company's Restated Bylaws, beginning with the next annual meeting of
stockholders the Company's Board will be classified into three classes of
directors serving staggered three-year terms, with one class of directors to be
elected at each annual meeting of stockholders. The classification of directors
has the effect of making it more difficult to change the composition of the
Board. See "Description of Capital Stock -- Possible Anti-takeover Effect of
Certain Charter Provisions."
All executive officers are appointed annually by and serve at the discretion
of the Board. All of the Company's executive officers are employed by the
Company at will.
Pursuant to the Company's 1997 Stock Option/Issuance Plan, which was adopted
by the Board in February 1997 and approved by the Company's stockholders in
February 1997, directors who are not officers or employees of the Company will
receive periodic option grants beginning with the next annual meeting of
stockholders. See "-- Benefit Plans."
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing Compensation Committee currently composed of Dr.
Blair and Mr. Binkley. The Compensation Committee reviews and acts on matters
relating to compensation levels and benefit plans for executive officers and key
employees of the Company, including salary and stock options. The Committee is
also responsible for granting stock awards, stock options and stock appreciation
rights and other awards to be made under the Company's existing incentive
compensation plans. The Company also has a standing Audit Committee composed of
Mr. Holland and Dr. Osterink. The Audit Committee assists in selecting the
Company's independent auditors and in designating services to be performed by,
and maintaining effective communication with, those auditors.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company to the President and Chief Executive Officer and to each of the most
highly compensated executive officers who in 1996
49
<PAGE>
earned over $100,000 (the "Named Executive Officers") for services rendered in
all capacities to the Company for the year ended December 31, 1996:
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
-------------------------------------
ANNUAL COMPENSATION SECURITIES
------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (2) BONUS (3) OPTIONS/SARS (#) COMPENSATION
- ---------------------------------------- --------- ----------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
John R. Lyon ........................... 1996 $ 149,510 $ 75,000 246,000 $ --
President, Chief Executive Officer
and Director
Koichiro Hori .......................... 1996 129,754 32,400 75,000 --
Senior Vice President,
Advanced Technology
Allen Newman ........................... 1996 129,696 32,200 135,000 --
Vice President and General
Manager, HNS Microsurgery
division
Nancy M. Briefs ........................ 1996 118,582 32,000 135,000 --
Vice President and General
Manager, CardioThoracic
Surgery division
Clifford F. Potocky .................... 1996 99,414 16,000 78,750 19,685(4)
Vice President and General
Manager, Oktas division
</TABLE>
- --------------
(1) Pursuant to Instruction to Item 402(b) of Regulation S-K promulgated by the
Securities and Exchange Commission (the "Commission"), information with
respect to fiscal years prior to 1996 has not been included as the Company
was not a reporting company pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
information has not been previously reported to the Commission in response
to a filing requirement.
(2) Includes amounts deferred pursuant to the Company's 401(k) Plan.
(3) Includes cash payments for bonuses accrued for and related to 1995 and 1996
services.
(4) Reimbursement for per diem and temporary living expenses.
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made to each of the Named Executive Officers for the year ended December 31,
1996. The Company granted no stock appreciation rights ("SARs") to Named
Executive Officers during 1996.
50
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- -------------------------------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM (3)
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------
NAME GRANTED (1) FISCAL YEAR PER SHARE (2) DATE 5% 10%
- ------------------------------ ----------- --------------- --------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John R. Lyon.................. 11,250 1.0% $ 0.80 12/12/2006 $ 5,660 $ 14,344
234,750 20.0 0.20 05/21/2006 29,527 74,826
Koichiro Hori................. 75,000 6.4 0.20 05/21/2006 9,433 23,906
Allen Newman.................. 7,500 0.6 0.80 12/12/2006 3,773 9,562
127,500 10.9 0.20 05/21/2006 16,037 40,640
Nancy M. Briefs............... 7,500 0.6 0.80 12/12/2006 3,773 9,562
127,500 10.9 0.20 05/21/2006 16,037 40,640
Clifford F. Potocky........... 3,750 0.3 0.80 12/12/2006 1,887 4,781
45,000 3.8 0.20 05/21/2006 5,660 14,344
30,000 2.6 0.20 02/15/2006 3,773 9,562
</TABLE>
- --------------
(1) In accordance with the terms of the 1995 Stock Option Plan under which these
options were granted, 50% of the shares subject to each option will
immediately vest in the event the Company is acquired by a merger or asset
sale, unless the Company's repurchase rights with respect to those shares
are transferred to the acquiring entity. The other 50% of the shares vest if
employee is terminated without cause within two years of the merger or asset
sale. The grant dates for the above options are as follows:
<TABLE>
<CAPTION>
NAME OPTIONS GRANTED (#) GRANT DATE
- ----------------------------------------------------------- -------------------- -----------
<S> <C> <C>
John R. Lyon............................................... 11,250 12/12/96
234,750 05/21/96
Koichiro Hori.............................................. 75,000 05/21/96
Allen Newman............................................... 7,500 12/12/96
127,500 05/21/96
Nancy M. Briefs............................................ 7,500 12/12/96
127,500 05/21/96
Clifford F. Potocky........................................ 3,750 12/12/96
45,000 05/21/96
30,000 02/15/96
</TABLE>
(2) The exercise price per share of options granted represented the fair market
value of the underlying shares of Common Stock on the dates the respective
options were granted as determined by the Board, considering all relevant
factors. The exercise price may be paid in cash or in shares of Common Stock
valued at fair market value on the exercise date or a combination of cash or
shares or any other form of consideration approved by the Board. After the
effective date of the Registration Statement of which this Prospectus is a
part, the fair market value of shares of Common Stock will be determined in
accordance with certain provisions of the Plan based on the closing selling
price per share of a share of Common Stock on the date in question on the
primary exchange or national market system on which the Company's common
stock is listed or reported. If shares of the Common Stock are not listed or
admitted to trading on any stock exchange nor traded on the Nasdaq National
Market, then the fair market value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Commission. The price used for computing this
appreciation is the exercise price of the
51
<PAGE>
options, not the price of Common Stock in this Offering. There is no
assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
10-year option term will be at the assumed 5% or 10% levels or at any other
defined level.
OPTION EXERCISES AND HOLDINGS
The following table provides information concerning option exercises during
1996 by the Named Executive Officers and the value of unexercised options held
by each of the Named Executive Officers as of December 31, 1996. No SARs were
exercised during 1996 or outstanding as of December 31, 1996.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT DECEMBER
SHARES 31, 1996 (#)
ACQUIRED ON VALUE --------------------------------
NAME EXERCISE (#) REALIZED (1) EXERCISABLE (2) UNEXERCISABLE
- ---------------------------------- ------------ ------------ --------------- --------------
<S> <C> <C> <C> <C>
John R. Lyon...................... 168,750 $0 246,000 0
Koichiro Hori..................... -- -- 75,000 0
Allen Newman...................... 75,000 0 135,000 0
Nancy M. Briefs................... 75,000 0 135,000 0
Clifford F. Potocky............... -- -- 78,750 0
<CAPTION>
VALUE OF UNEXERCISED IN-THE-
MONEY OPTIONS
AT DECEMBER 31, 1996 (3)
-------------------------------
NAME EXERCISABLE (2) UNEXERCISABLE
- ---------------------------------- --------------- -------------
<S> <C> <C>
John R. Lyon...................... $140,850 $0
Koichiro Hori..................... 45,000 0
Allen Newman...................... 76,500 0
Nancy M. Briefs................... 76,500 0
Clifford F. Potocky............... 45,000 0
</TABLE>
- --------------
(1) "Value realized" is calculated on the basis of the fair market value of the
Common Stock on the date of exercise minus the exercise price and does not
necessarily indicate that the optionee sold such stock.
(2) The options are immediately exercisable, but subject to vesting over a
period of time.
(3) "Value" is defined as fair market price of the Common Stock at fiscal
year-end ($0.80) less exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1996, the Compensation Committee of the
Company's Board established the levels of compensation for the Company's
executive officers. The members of the Company's Compensation Committee are Dr.
Blair and Mr. Binkley. See "Certain Transactions." Mr. Lyon, the Company's
President and Chief Executive Officer, participated in the deliberations of the
Compensation Committee regarding executive compensation that occurred during
1996, but did not take part in the deliberations regarding his own compensation.
EMPLOYMENT ARRANGEMENTS
Fifty percent of the unvested shares subject to options outstanding to the
Company's executive officers will immediately vest if the Company is acquired by
a merger or asset sale, unless the Company's repurchase rights with respect to
those shares are transferred to the acquiring entity. The other 50% of the
shares vest if the employee is terminated without cause within two years of the
merger or asset sale. See "Benefit Plans -- 1997 Stock Option/Stock Issuance
Plan."
DIRECTOR COMPENSATION
The Company reimburses its directors for all reasonable and necessary travel
and other incidental expenses incurred in connection with their attendance at
meetings of the Board. Directors are not currently compensated for serving on
the Board. However, under the 1997 Stock Option/Issuance Plan
52
<PAGE>
(the "Plan"), as amended, which was adopted in February 1997 and amended in
March 1997, beginning with the first annual meeting of stockholders following
this Offering, each non-employee director who is first elected to the Board will
automatically receive an option to purchase 15,000 shares of Common Stock for
the first year of the director's Board term and 5,000 shares of Common Stock for
each additional year remaining on the director's Board term following the
automatic option grant. Each director who is currently serving on the Board will
receive an option to purchase 5,000 shares of Common Stock for each additional
year for which he is elected as a director. These options will have an exercise
price equal to 100% of the fair market value of the Common Stock on the grant
date. The grant of 15,000 shares will become exercisable in equal monthly
installments over four years of Board service completed by the director
following such grant, and the grants of 5,000 shares will become exercisable at
the end of one year of Board service completed by the director following the
date of grant. See "-- Benefit Plans -- 1997 Stock Option/Issuance Plan."
Under the Company's 1995 Stock Option Plan (the "Predecessor Plan"), each
non-employee director received a fully vested option to purchase 4,500 shares of
Common Stock in December 1996, and Mr. Lyon received an option to purchase
11,250 shares of Common Stock of the Company. The option grant to Mr. Lyon vests
over five years, subject to acceleration upon a change of control. Fifty percent
of the shares subject to Mr. Lyon's option will immediately vest in the event
the Company is acquired by a merger or asset sale, unless the Company's
repurchase rights with respect to those shares are transferred to the acquiring
entity. The other 50% of the shares will immediately vest if Mr. Lyon is
terminated without cause within two years of the merger or asset sale.
BENEFIT PLANS
1997 STOCK OPTION/STOCK ISSUANCE PLAN
The Plan serves as the successor equity incentive program to the Predecessor
Plan. The Plan became effective on February 28, 1997 upon adoption by the Board
and approval by the stockholders. 2,820,000 shares of Common Stock have been
authorized for issuance under the Plan. This share reserve is comprised of (i)
the shares that remain available for issuance under the Predecessor Plan,
including the shares subject to outstanding options thereunder, plus (ii) an
additional increase of 1,417,489 shares. However, in no event may any one
participant in the Plan receive option grants or direct stock issuances for more
than 50,000 shares in the aggregate per calendar year.
Outstanding options under the Predecessor Plan were incorporated into the
Plan upon its adoption, and no further option grants will be made under the
Predecessor Plan. The incorporated options will continue to be governed by their
existing terms, unless the Plan Administrator (described below) elects to extend
one or more features of the Plan to those options. However, except as otherwise
noted below, the outstanding options under the Predecessor Plan contain
substantially the same terms and conditions summarized below for the
Discretionary Option Grant Program in effect under the Plan.
The Plan is divided into three separate components: (i) the Discretionary
Option Grant Program under which eligible individuals in the Company's employ or
service (including officers and other employees, non-employee Board members and
independent consultants) may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock at an exercise price not less
than 85% of their fair market value on the grant date, (ii) the Stock Issuance
Program under which such individuals may, in the Plan Administrator's
discretion, be issued shares of Common Stock directly, through the purchase of
such shares at a price not less than 100% of their fair market value at the time
of issuance or as a bonus tied to the performance of services and (iii) the
Automatic Option Grant Program under which option grants will automatically be
made at periodic intervals to eligible non-employee Board members to purchase
shares of Common Stock at an exercise price equal to 100% of their fair market
value on the grant date.
53
<PAGE>
The Board or a committee appointed by the Board (the "Plan Administrator")
will administer the Discretionary Option Grant and Stock Issuance Programs. The
Plan Administrator, subject to the provisions of the plan, will have complete
discretion to determine which eligible individuals will receive option grants or
stock issuances, the time or times at which such option grants or stock issuance
are to be made, the number of shares subject to each such grant or issuance, the
vesting schedule to be in effect for the option grant or stock issuance, the
maximum term for which any granted option is to remain outstanding and whether
an option will be granted as an incentive stock option or a non-statutory stock
option under the Federal tax laws. The administration of the Automatic Option
Grant Program will be self-executing in accordance with the express provisions
of such Program and no Plan Administrator will exercise any discretionary
functions with respect to any option grants or stock issuances made under the
Program.
Under the Automatic Option Grant Program, at each Annual Stockholders
Meeting, beginning with the next Annual Stockholders Meeting, each individual
who (i) is elected or re-elected to serve as a non-employee Board member or (ii)
was appointed as a non-employee Board member since the last Annual Stockholders
Meeting (and whose Board term does not expire at such Meeting) will receive an
option grant to purchase shares of Common Stock. The number of shares subject to
the option will be equal to 15,000 shares for the first year that the optionee
is elected to the Board and 5,000 shares for each additional year served by such
optionee following the automatic option grant. Each option granted pursuant to
the Automatic Option Grant Program will have an exercise price equal to the fair
market value per share of Common Stock on the grant date and will have a maximum
term of 10 years, subject to earlier termination following the optionee's
cessation of Board service. The grant of 15,000 shares will vest in successive
equal monthly installments over forty-eight months of Board service completed by
the optionee measured from the date the optionee is first elected to the Board
of Directors, and the grants of 5,000 will vest at the end of each additional
year of Board service completed by the optionee. In addition, the option shares
will become fully vested upon (i) certain changes in the ownership or control of
the Company or (ii) the death or disability of the optionee while serving as a
Board member. The automatic options may only be exercised to the extent vested.
Payment of the exercise price for the shares of Common Stock subject to
option grants made under the Plan may be made in cash or in shares of Common
Stock valued at fair market value on the exercise date. The optionee may elect
to make payment for the option shares upon exercise through a same-day sale
program, which enables the optionee to purchase the option shares without making
any cash payment. In addition, the Plan Administrator may provide financial
assistance to one or more optionees in the exercise of their outstanding options
by allowing such individuals to deliver a full-recourse, interest-bearing
promissory note in full payment of the exercise price and associated withholding
taxes incurred in connection with such exercise.
In the event that the Company is acquired by merger or asset sale, the
unvested portion of each outstanding option under the Discretionary Option Grant
Program that is not to be assumed by the successor corporation will
automatically vest in full. Similarly, unless the Company assigns the repurchase
rights associated with any unvested shares under the Stock Issuance Program to
the successor corporation, such unvested shares will vest in full. Any
outstanding options assumed by the successor corporation and shares that remain
subject to repurchase rights assigned to the successor corporation will not vest
immediately, but will vest in accordance with their original vesting schedule.
The Plan Administrator will have the authority under the Discretionary Option
Grant and Stock Issuance Programs to grant options and to structure repurchase
rights so that the shares subject to those options or repurchase rights will
automatically vest in the event the individual's service is terminated, whether
involuntarily or through a resignation for good reason, within a specified
period (not to exceed 18 months) following (i) a merger or asset sale in which
those options are assumed or those repurchase rights are assigned, (ii) a
hostile change in control of the Company effected by a successful tender offer
for more than 50% of the outstanding voting stock or by proxy contest for the
election of Board members
54
<PAGE>
or (iii) the sale, transfer or disposition of all or substantially all of the
Company's assets (each a "Corporate Transaction"). The Plan Administrator will
also have the discretion to provide for the automatic acceleration of options
and the lapse of any repurchase rights upon (i) a hostile change in control of
the Company effected by a successful tender offer for more than 50% of the
Company's outstanding voting stock or by proxy contest for the election of Board
members or (ii) the termination of the individual's service, whether
involuntarily or through a resignation for good reason, within a specified
period (not to exceed 18 months) following such a hostile change in control. The
unvested portion of the options currently outstanding under the Predecessor Plan
will accelerate and such options will terminate and cease to be exercisable upon
an acquisition of the Company by merger or asset sale, unless those options are
assumed by the acquiring entity. The unvested portion of any options assumed by
the successor corporation will automatically accelerate upon the involuntary
termination of the optionee's service within 18 months following the occurrence
of a Corporate Transaction in which the options are assumed or replaced by the
successor corporation.
Stock appreciation rights may be issued in tandem with option grants made
under the Discretionary Option Grant Program. The holders of these rights will
have the opportunity to elect between the exercise of their outstanding stock
options for shares of Common Stock or the surrender of those options for an
appreciation distribution from the Company equal to the excess of (i) the fair
market value of the vested shares of Common Stock subject to the surrendered
option over (ii) the aggregate exercise price payable for such shares. The
appreciation distribution may be made in cash or in shares of Common Stock.
There are currently no outstanding stock appreciation rights.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program (including
options incorporated from the Predecessor Plan) in return for the grant of new
options for the same or a different number of option shares with an exercise
price per share based upon the fair market value of the Common Stock on the new
grant date.
The Board may amend or modify the Plan at any time. The Plan will terminate
10 years from its effective date unless otherwise terminated by the Board prior
to such date.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by the Board on February 19, 1997 and was subsequently approved by the
stockholders on February 20, 1997. The Purchase Plan is designed to allow
eligible employees of the Company to purchase shares of Common Stock, at
semi-annual intervals, through periodic payroll deductions under the Purchase
Plan. A reserve of 200,000 shares of Common Stock has been established for this
purpose.
The Purchase Plan will be implemented in a series of successive offering
periods, each with a maximum duration of 24 months. However, the initial
offering period will begin on the day the underwriting agreements are executed
in connection with the Offering and will end on the last business day in March
1999.
Individuals who are eligible employees on the start date of any offering
period may enter the Purchase Plan on that start date or on any subsequent
semi-annual entry date (April 1 or October 1 each year). Individuals who become
eligible employees after the start date of the offering period may join the
Purchase Plan on any subsequent semi-annual entry date within that period.
Payroll deductions may not exceed 10% of the participant's base salary for
each semi-annual period of participation, and the accumulated payroll deductions
will be applied to the purchase of shares on the participant's behalf on each
semi-annual purchase date (the last business day of March and September each
year, with the first purchase date to occur on the last business day of
September 1997) at a purchase price per share not less than 85% of the LOWER of
(i) the fair market value of the Common Stock on the participant's entry date
into the offering period or (ii) the fair market value of the Common Stock
55
<PAGE>
on the semi-annual purchase date. Should the fair market value of the Common
Stock on any semi-annual purchase date be less than the fair market value of the
Common Stock on the first day of the offering period, then the current offering
period will automatically end and a new 24-month offering period will begin,
based on the lower fair market value.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
The Company's Second Restated Certificate of Incorporation eliminates,
subject to certain exceptions, directors' personal liability to the Company or
its stockholders for monetary damages for breaches of fiduciary duties. The
Second Restated Certificate of Incorporation does not, however, eliminate or
limit the personal liability of a director for (i) any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
or (iv) any transaction from which the director derived an improper personal
benefit.
The Company's Restated Bylaws provide that the Company shall indemnify its
directors and executive officers to the fullest extent permitted under the
Delaware General Corporation Law and may indemnify its other officers, employees
and other agents as set forth in the Delaware General Corporation Law. In
addition, the Company has entered into indemnification agreements with its
directors and officers. The indemnification agreements contain provisions that
require the Company, among other things, to indemnify its directors and
executive officers against certain liabilities (other than liabilities arising
from intentional or knowing and culpable violations of law) that may arise by
reason of their status or service as directors or executive officers of the
Company or other entities to which they provide service at the request of the
Company and to advance expenses they may incur as a result of any proceeding
against them as to which they could be indemnified. The Company believes that
these provisions and agreements are necessary to attract and retain qualified
directors and officers. The Company has obtained an insurance policy covering
directors and officers for claims that such directors and officers may otherwise
be required to pay or for which the Company is required to indemnify them,
subject to certain exclusions.
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<PAGE>
CERTAIN TRANSACTIONS
Since its formation in July 1993, the Company has issued, in private
placement transactions, shares of its Preferred Stock as follows (not adjusted
for the three-for-four reverse stock split): 8,094,340 shares of Series A-1
Preferred Stock at a price of $1.325 per share in July 1995; 154,581 shares of
Series A-3 Preferred Stock at a price of $1.325 per share in September 1995;
1,325,331 shares of Series B Preferred Stock at a price of $4.00 per share in
July 1996; and 2,000,000 shares of Series C Preferred Stock at a price of $5.00
per share in November 1996. The purchasers of Preferred Stock include, among
others, the following executive officers and holders of more than five percent
of the Company's outstanding stock and their respective affiliates (all shares
of Preferred Stock are convertible into Common Stock on a three-for-four basis):
<TABLE>
<CAPTION>
PREFERRED STOCK
EXECUTIVE OFFICERS, DIRECTORS AND 5% ------------------------------------------------ TOTAL
STOCKHOLDERS SERIES A-1 SERIES A-3 SERIES B SERIES C CONSIDERATION
- --------------------------------------------- ----------- ----------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Funds advised by Domain Associates (1)....... 2,113,207 32,215 326,341 -- $ 4,148,048
SBIC Partners, L.P. (2)...................... 1,886,792 -- 291,375 -- 3,665,499
Foster City Partners (3)..................... 1,792,453 -- 276,807 -- 3,482,228
Biotechnology Investments Limited............ 1,056,604 15,875 163,170 -- 2,073,715
One Liberty Fund III, L.P. (4)............... 747,170 -- 115,385 -- 1,451,540
Koichiro Hori................................ 264,151 -- 8,244 -- 382,976
Nancy M. Briefs.............................. -- -- 50,000 -- 200,000
Medtronic Asset Management, Inc. (5)......... -- -- -- 2,000,000 10,000,000
</TABLE>
- --------------
(1) Includes Domain Partners III, L.P., DP III Associates, L.P. and Domain
Partners II, L.P., associated with Dr. Blair.
(2) Associated with Mr. Binkley.
(3) Includes shares originally issued to Kaiser Aerospace and subsequently
transferred to Foster City Partners. Does not include 750 shares of Common
Stock held by Kaiser Aerospace.
(4) Associated with Mr. Holland.
(5) A wholly-owned subsidiary of Medtronic.
Holders of Preferred Stock are entitled to certain registration rights with
respect to the Common Stock issued or issuable upon conversion thereof. See
"Description of Capital Stock -- Registration Rights."
In July 1995, the Company raised approximately $8 million from various
venture capital funds, including funds which are principal stockholders of the
Company and/or are affiliated with directors of the Company, in a private
placement of its Series A-1 Preferred Stock. As a result of this financing, the
Company repaid its indebtedness to Kaiser Aerospace by permitting Kaiser
Aerospace to cancel $2.4 million of indebtedness owed by the Company as payment
for shares of Series A-1 Preferred Stock and by repaying an additional $3
million debt owed to Kaiser Aerospace with funds received pursuant to the
private placement transaction. As part of this Series A-1 Preferred Stock
financing, the Company also acquired Oktas, Inc. as its wholly-owned subsidiary
pursuant to the receipt of all of the outstanding shares of Oktas, Inc. as
payment for shares of Series A-1 Preferred Stock received by Mr. Koichiro Hori,
the founder and sole shareholder of Oktas, Inc. and currently an executive
officer of the Company.
In September 1995, the Company purchased substantially all of the assets of
AST, which was engaged in the business of designing, developing, marketing and
supporting stereoscopic endoscopes. The purchase price for such assets consisted
of $25,000 and 154,581 shares of Series A-3 Preferred Stock of Vista Medical,
which is non-voting stock. Pursuant to its rights under the purchase
57
<PAGE>
agreement, AST assigned its rights to receive the consideration payable by Vista
Medical to various venture capital funds, including funds which are principal
stockholders of the Company and/or are affiliated with directors of the Company.
In September 1994, the Company entered into a license agreement with Allen
Newman, currently an executive officer of the Company, under which Mr. Newman
granted the Company an exclusive license to use the Newman Technology. In
December 1996, the Company and Urohealth entered into a license agreement under
which the Company exclusively sublicensed the Newman Technology to Urohealth for
use in gynecology, urology and general surgery on a worldwide basis. In
connection with the license agreement, the parties entered into a consulting
agreement whereby Vista Medical agreed to use its reasonable efforts to provide
the services of Mr. Newman as a consultant. The Newman license agreement was
amended in December 1996 to permit the Company to sublicense the Newman
Technology to Urohealth. In connection with the amendment of the Newman license
agreement, the Company paid Mr. Newman $200,000 and agreed to pay Mr. Newman a
percentage of the royalties received from Urohealth. Previously, the Company
made advance royalty payments of $37,500 to Mr. Newman in connection with the
execution of the initial license agreement.
In November 1996, Vista Medical and Medtronic entered into a strategic
alliance providing for the distribution and co-promotion of the Vista Systems.
In connection with entering into a co-promotion agreement, Medtronic made a $10
million equity investment in the Company.
In May 1996, the Company loaned certain officers of the Company an aggregate
of $63,750 in connection with the exercise of certain stock options by such
officers.
All of the Company's officers are employed by the Company at will. The
Company has entered into indemnification agreements with each of its directors
and executive officers. See "Management -- Limitations on Liability and
Indemnification Matters."
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The Company expects that all future transactions
between the Company and its officers, directors and principal stockholders and
their affiliates will be approved in accordance with the Delaware General
Corporation Law by a majority of the Board, as well as by a majority of the
independent and disinterested directors of the Board, and will be on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of February 28, 1997, and as adjusted to
reflect the sale of the shares of the Common Stock offered hereby by the
Company, by (i) all those known by the Company to be beneficial owners of more
than 5% of its outstanding Common Stock, (ii) each director of the Company,
(iii) each of the Named Executive Officers of the Company and (iv) all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED (2)
NUMBER OF --------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES (1) PRIOR TO OFFERING AFTER OFFERING
- ------------------------------------------------------------------ ----------- ------------------- -----------------
<S> <C> <C> <C>
Funds advised by Domain Associates (3) ........................... 1,873,320 20.2% 14.6%
One Palmer Square
Princeton, NJ 08542
SBIC Partners, L.P. .............................................. 1,633,625 17.6% 12.8%
201 Main Street, Suite 2302
Fort Worth, TX 76102
Foster City Partners ............................................. 1,551,944 16.7% 12.1%
950 Tower Lane, Suite 800
Foster City, CA 94404
Medtronic Asset Management, Inc. ................................. 1,500,000 16.1% 11.7%
7000 Central Avenue NE
Minneapolis, MN 55432
Biotechnology Investments Limited (B.I.L.). ...................... 926,736 10.0% 7.2%
Post Office Box 58
St. Julian's Court
St. Peter Port
Guernsey, Channel Islands
One Liberty Fund III, L.P. ....................................... 646,915 7.0% 5.1%
1 Liberty Square, 2nd Floor
Boston, MA 02109
James C. Blair (3)................................................ 1,873,320 20.2% 14.6%
John R. Lyon (4).................................................. 414,750 4.3% 3.2%
Olav B. Bergheim (5).............................................. 19,500 * *
Nicholas B. Binkley (6)........................................... 1,640,125 17.6% 12.8%
Daniel J. Holland (7)............................................. 666,415 7.2% 5.2%
Larry Osterink (8)................................................ 1,692,195 18.2% 13.2%
Koichiro Hori (9)................................................. 279,296 3.0% 2.2%
Nancy M. Briefs (10).............................................. 247,500 2.6% 1.9%
Allen Newman (11)................................................. 210,000 2.2% 1.6%
Clifford F. Potocky (12).......................................... 78,750 * *
All directors and executive officers as a group (11 persons)
(13)............................................................. 7,185,601 71.8% 53.2%
</TABLE>
- ----------------
* Less than 1%
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them. Share ownership in each
case includes shares issuable upon exercise of certain outstanding options
as described in the footnotes below. The address for those individuals for
which an address is not otherwise indicated is: 5451 Avenida Encinas, Suite
A, Carlsbad, California 92008.
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<PAGE>
(2) Percentage of ownership is calculated pursuant to Commission Rule
13d-3(d)(1).
(3) Includes 1,767,787 shares beneficially owned by Domain Partners III, L.P.,
24,161 shares beneficially owned by Domain Partners, II L.P., 61,872 shares
beneficially owned by DP III Associates, L.P. and 19,500 shares beneficially
owned by Domain Associates. Dr. Blair is a general partner of One Palmer
Square Associates, II, L.P., which is the general partner of Domain Partners
II, L.P., and he is also a general partner of One Palmer Square Associates,
III, L.P., the general partner of Domain Partners III, L.P. and DP III
Associates. Dr. Blair has an indirect beneficial ownership of these shares.
Dr. Blair is a general partner of Domain Associates. Excludes 926,736 shares
beneficially owned by BIL. Pursuant to a contractual agreement, Domain
Associates is the U.S. venture capital advisor to BIL. Domain Associates has
neither voting nor investment power over BIL and Dr. Blair and Domain
Associates disclaim beneficial ownership of the BIL shares.
(4) Includes 246,000 shares issuable upon exercise of options exercisable
within 60 days of February 28, 1997.
(5) Mr. Bergheim is employed by Domain Associates as a Venture Partner. Mr.
Bergheim has no beneficial ownership of any of the shares owned by funds
advised by Domain Associates.
(6) Includes 1,500 shares issuable upon exercise of options exercisable within
60 days of February 28, 1997. Also includes 5,000 shares beneficially owned
by The Binkley Family Trust, of which Mr. Binkley is a trustee, and
1,633,625 shares beneficially owned by SBIC Partners, L.P., a Texas limited
partnership ("SBIC Partners"). SBIC Partners is the beneficial owner of all
shares of the Company's Common Stock registered in its name. Forrest Binkley
& Brown L.P., a Texas limited partnership ("FBB"), is the managing general
partner of SBIC Partners, and Forrest Binkley & Brown Venture Co., a Texas
corporation ("Venture Co."), is the sole general partner of FBB. Mr. Binkley
is a limited partner of FBB, and is an executive officer, director and
shareholder of Venture Co. Mr. Binkley disclaims beneficial ownership with
respect to all shares of Common Stock owned by SBIC Partners, except to the
extent of his pecuniary interest therein.
(7) Includes 19,500 shares issuable upon exercise of options exercisable within
60 days of February 28, 1997. Also includes 646,915 shares beneficially
owned by One Liberty Fund III, L.P. Mr. Holland is a general partner of One
Liberty Partners III, L.P., which is a general partner of One Liberty Fund
III, L.P. Mr. Holland disclaims beneficial ownership with respect to all
shares of Common Stock owned by One Liberty Fund III, L.P.
(8) Includes 19,500 shares issuable upon exercise of options exercisable within
60 days of February 28, 1997. Also includes 1,551,944 shares beneficially
owned by Foster City Partners and 750 shares beneficially owned by Kaiser
Aerospace. Dr. Osterink, president of a subsidiary of Kaiser Aerospace,
disclaims beneficial ownership of the shares owned by Foster City Partners
and Kaiser Aerospace.
(9) Includes 75,000 shares issuable upon exercise of options exercisable within
60 days of February 28, 1997.
(10) Includes 135,000 shares issuable upon exercise of options exercisable
within 60 days of February 28, 1997. Also includes 37,500 shares
beneficially owned by Delaware Charter Guarantee & Trust TTEE FBO Nancy
Briefs (the "Briefs Trust"). Ms. Briefs is a beneficiary of the Briefs
Trust.
(11) Includes 135,000 shares issuable upon exercise of options exercisable
within 60 days of February 28, 1997.
(12) Includes 78,500 shares issuable upon exercise of options exercisable within
60 days of February 28, 1997.
(13) Includes 714,000 shares issuable upon exercise of options exercisable
within 60 days of February 28, 1997. See also footnotes 3, 6, 7 and 8.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of the Offering, the Company will be authorized to issue
35,000,000 shares of Common Stock, $.01 par value per share, of which 12,718,903
shares will be issued and outstanding, and 5,000,000 shares of undesignated
Preferred Stock, $.01 par value per share, of which no shares will be issued and
outstanding.
COMMON STOCK
At February 28, 1997, there were 9,294,528 shares of Common Stock
outstanding and held of record by approximately 44 stockholders. The holders of
Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the stockholders. Subject to preferences that may
be applicable to any outstanding shares of Preferred Stock, holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board out of funds legally available. See "Dividend Policy." All outstanding
shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
After completion of the Offering, the Board will have the authority, without
further action by the stockholders, to issue up to 5,000,000 shares of Preferred
Stock in one or more series and to fix the rights, priorities, preferences,
qualifications, limitations and restrictions, including dividend rights,
conversion rights, voting rights, terms of redemption, terms of sinking funds,
liquidation preferences and the number of shares constituting any series or the
designation of such series, which could decrease the amount of earnings and
assets available for distribution to holders of Common Stock or adversely affect
the rights and powers, including voting rights, of the holders of the Common
Stock. The issuance of Preferred Stock could have the effect of delaying or
preventing a change in control of the Company or make removal of management more
difficult. Additionally, the issuance of Preferred Stock may have the effect of
decreasing the market price of the Common Stock and may adversely affect the
voting and other rights of the holders of Common Stock.
WARRANTS
In February 1997, in connection with the agreement with Heartport, the
Company issued to Heartport a warrant to purchase up to 100,000 shares of Common
Stock, exercisable at any time after the closing of this Offering and prior to
March 31, 2001 at a price per share equal to the initial public offering price.
The warrant contains provisions for the adjustment of the exercise price and the
aggregate number of shares issuable upon exercise of the warrant under certain
circumstances, including stock dividends, stock splits, reorganizations,
reclassifications or consolidations. The holder of the warrant is entitled to
certain registration rights with respect to the Common Stock issued or issuable
upon exercise thereof. See "-- Registration Rights."
REGISTRATION RIGHTS
The holders of approximately 8,780,679 shares of Common Stock or their
permitted transferees (the "Holders") are entitled to certain rights with
respect to the registration of such shares under the Securities Act. Under the
terms of agreements between the Company and such Holders, if the Company
proposes to register any of its securities under the Securities Act for its own
account, such Holders are entitled to notice of such registration and are
entitled to include shares of such Common Stock therein, provided, among other
conditions, that the underwriters of any such offering have the right to limit
the number of shares included in such registration. In addition, Holders of at
least 40% of approximately 8,780,679 shares of Common Stock with demand
registration rights may require the Company to prepare and file a registration
statement under the Securities Act with respect to the shares entitled to demand
registration rights, and the Company is required to use its best efforts to
effect such registration,
61
<PAGE>
subject to certain conditions and limitations. The Company is not obligated to
effect more than two of these stockholder-initiated registrations nor to effect
such a registration within 90 days following an offering of the Company's
securities, including the Offering made hereby. The Holders of approximately
8,780,679 shares of Common Stock may also request the Company to register such
shares on Form S-3 provided the shares registered have an aggregate market value
of at least $7.5 million. The Company is not obligated to effect more than two
of these registrations pursuant to Form S-3 per year. Generally, the Company is
required to bear the expense of all such registrations. The registration rights
of the Holders expire on the seventh anniversary of the effective date of this
Offering or, if earlier, for an individual Holder, at such time after the
Offering as all shares held by such Holder can be sold within any three-month
period pursuant to Rule 144. All rights of the Holders to require registration
of the resale of their shares in connection with this Offering have been waived.
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
SECOND RESTATED CERTIFICATE OF INCORPORATION AND RESTATED BYLAWS
The Company's Second Restated Certificate of Incorporation authorizes the
Board to establish one or more series of undesignated Preferred Stock, the terms
of which can be determined by the Board at the time of issuance. See "--
Preferred Stock." The Second Restated Certificate of Incorporation also provides
that all stockholder action must be effected at a duly called meeting of
stockholders and not by a consent in writing. The Company's Restated Bylaws
provide that the Company's Board will be classified into three classes of
directors beginning at the next annual meeting of stockholders. See "Management
- -- Executive Officers and Directors." In addition, the Restated Bylaws do not
permit stockholders of the Company to call a special meeting of stockholders;
only the Company's Chief Executive Officer, President, Chairman of the Board or
a majority of the Board are permitted to call a special meeting of stockholders.
The Restated Bylaws also require that stockholders give advance notice to the
Company's secretary of any nominations for director or other business to be
brought by stockholders at any stockholders' meeting and require a supermajority
vote of members of the Board and/or stockholders to amend certain Bylaw
provisions. These provisions of the Second Restated Certificate of Incorporation
and the Restated Bylaws could discourage potential acquisition proposals and
could delay or prevent a change in control of the Company. Such provisions may
also have the effect of preventing changes in the management of the Company.
DELAWARE TAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder (defined as any person or entity that is the beneficial owner of at
least 15% of a corporation's voting stock) for a period of three years following
the time that such stockholder became an interested stockholder, unless: (i)
prior to such time, the board of directors of the corporation approved either
the business combination or the transaction that resulted in the stockholder's
becoming an interested stockholder; (ii) upon consummation of the transaction
that resulted in the stockholder's becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding, for purposes of
determining the number of shares outstanding, those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time, the business combination is approved by
the Board and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.
62
<PAGE>
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, lease, exchange, mortgage, transfer, pledge or other disposition involving
the interested stockholder and 10% or more of the assets of the corporation;
(iii) subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation to the
interested stockholder; (iv) any transaction involving the corporation that has
the effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Boston EquiServe.
63
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 12,718,903 shares of
Common Stock outstanding (assuming no exercise of options or other convertible
securities or issuances of Common Stock pursuant to the 1997 Employee Stock
Purchase Plan subsequent to December 31, 1996). The 3,500,000 shares sold in
this Offering will be freely tradeable without restriction or further
registration under the Securities Act, except that any shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act ("Affiliates"), may generally be sold only in compliance with
certain of the limitations of Rule 144 described below.
The remaining approximately 9,219,000 shares of Common Stock are deemed
"Restricted Shares" under Rule 144. Of the Restricted Shares, approximately 750
shares may be eligible for sale in the public market immediately after this
offering pursuant to Rule 144(k) under the Securities Act. Approximately
6,800,000 additional Restricted Shares may be eligible for sale in the public
market in accordance with Rule 144 or Rule 701 under the Securities Act
beginning 90 days after the date of this Prospectus. The holders of
approximately 6,730,000 of these Restricted Shares have agreed not to sell or
otherwise dispose of any of their shares for a period of 180 days after the date
of this Prospectus without the prior written consent of Goldman, Sachs & Co.
Goldman, Sachs & Co. may, in its sole discretion, and at any time without
notice, release all or any portion of the securities subject to lock-up
agreements.
Upon expiration of the lock-up agreements 180 days after the date of this
Prospectus, approximately 7,571,000 shares of Common Stock (including shares
issued or issuable upon the exercise of vested options and warrants outstanding
as of February 28, 1997) will become available for sale in the public market;
the remaining 1,600,000 shares will become eligible for sale under Rule 144 at
various dates thereafter as the holding period provisions of Rule 144 are
satisfied.
In general, under Rule 144 as recently amended, effective April 29, 1997,
beginning approximately 90 days after the effective date of the Registration
Statement of which this Prospectus is a part, a stockholder, including an
Affiliate, who has beneficially owned his or her restricted securities (as that
term is defined in Rule 144) for at least one year from the later of the date
such securities were acquired from the Company or (if applicable) the date they
were acquired from an Affiliate is entitled to sell, within any three-month
period, a number of such shares that does not exceed the greater of 1% of the
then outstanding shares of Common Stock (approximately 127,000 immediately after
the Offering) or the average weekly trading volume in the Common Stock during
the four calendar weeks preceding the date on which notice of such sale was
filed under Rule 144, provided certain requirements concerning availability of
public information, manner of sale and notice of sale are satisfied. In
addition, under Rule 144(k), if a period of at least two years has elapsed
between the later of the date restricted securities were acquired from the
Company or (if applicable) the date they were acquired from an Affiliate of the
Company, a stockholder who is not an Affiliate of the Company at the time of
sale and has not been an Affiliate of the Company for at least three months
prior to the sale is entitled to sell the shares immediately without compliance
with the foregoing requirements under Rule 144.
Securities issued in reliance on Rule 701 (such as shares of Common Stock
that may be acquired pursuant to the exercise of certain options granted prior
to this Offering) are also restricted securities and, beginning 90 days after
the date of this Prospectus, may be sold by stockholders other than an Affiliate
of the Company subject only to the manner of sale provisions of Rule 144 and by
an Affiliate under Rule 144 without compliance with its one-year holding period
requirement.
Prior to this Offering, there has been no public market for the Common
Stock. No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price of
the Common Stock prevailing from time to time. The Company is unable to estimate
the number of shares that may be sold in the public market pursuant to Rule 144,
since this will depend on the market price of the Common Stock, the personal
circumstances of the sellers and other factors. Nevertheless, sales of
significant amounts of the Common Stock of the Company in the public market
64
<PAGE>
could adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital through an offering of its equity securities.
In addition, the Company intends to register on the effective date of this
Offering a total of 2,820,000 shares of Common Stock subject to outstanding
options or reserved for issuance under the Company's 1997 Stock Option/Stock
Issuance Plan and 200,000 shares of Common Stock reserved for issuance under its
1997 Employee Stock Purchase Plan. Further, upon expiration of such lock-up
agreements, holders of approximately 8,780,679 shares of Common Stock will be
entitled to certain registration rights with respect to such shares. If such
holders, by exercising their registration rights, cause a large number of shares
to be registered and sold in the public market, such sales could have a material
adverse effect on the market price for the Common Stock.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, San Diego, California. Partners of
such firm own 7,500 shares of the Common Stock. Certain legal matters will be
passed upon for the Underwriters by McDermott, Will & Emery.
EXPERTS
The consolidated financial statements of Vista Medical Technologies, Inc. at
December 31, 1995 and 1996 and for each of the three years in the period ended
December 31, 1996 appearing in this Prospectus and the Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein and in the Registration
Statement and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission the Registration Statement under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which is part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules filed therewith. For further information with respect to the Company
and the Common Stock offered hereby, reference is hereby made to such
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respect by
such reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at Seven World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and copies of all of any part thereof may be obtained
at prescribed rates from the Commission's Public Reference Section at such
addresses. Also, the Commission maintains a World Wide Web site on the Internet
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. Upon approval of the Common Stock for quotation on the Nasdaq
National Market, such reports, proxy and information statements and other
information also can be inspected at the office of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
65
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets at December 31, 1995 and 1996............................. F-3
Consolidated Statements of Operations for the years ended December 31, 1994,
1995 and 1996........................................................................ F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994,
1995 and 1996........................................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996........................................................................ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Vista Medical Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Vista
Medical Technologies, Inc. as of December 31, 1995 and 1996 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Vista Medical Technologies, Inc. at December 31, 1995 and 1996 and the results
of its consolidated operations and its cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
San Diego, California
January 30, 1997,
except for Note 9, as to which the date is
March 3, 1997
F-2
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY AT
DECEMBER 31, DECEMBER 31,
------------------------------- 1996
1995 1996 (UNAUDITED)
-------------- --------------- ---------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................................... $ 3,234,175 $ 10,119,529 $
Short-term investments....................................... 165,000 165,000
Accounts receivable.......................................... 568,854 526,119
Inventories.................................................. 685,456 1,212,825
Other current assets......................................... 70,445 136,400
-------------- ---------------
Total current assets........................................... 4,723,930 12,159,873
Property and equipment, net.................................... 187,874 1,082,103
Patents and other assets....................................... 296,083 1,073,741
-------------- ---------------
TOTAL ASSETS................................................... $ 5,207,887 $ 14,315,717
-------------- ---------------
-------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................. $ 350,058 $ 607,639
Accrued compensation......................................... 147,410 226,543
Accrued liabilities.......................................... 2,970 520,584
-------------- ---------------
Total current liabilities...................................... 500,438 1,354,766
Commitments
Stockholders' equity:
Convertible preferred stock, $.01 par value:
Authorized shares -- 18,000,000 actual (5,000,000 pro
forma)
Issued and outstanding shares -- 8,248,921 in 1995 and
11,574,252 in 1996 (no shares pro forma).................. 82,490 115,742 --
Preference in liquidation -- $26,231,145
Common stock, $.01 par value:
Authorized shares -- 25,000,000 actual (35,000,000 pro
forma)
Issued and outstanding shares -- 148,875 in 1995 and
538,224 in 1996 (9,218,903 shares pro forma).............. 1,489 5,382 92,189
Additional paid-in capital................................... 10,834,428 28,615,223 28,644,158
Notes receivable from stockholders........................... (29,625) (93,375) (93,375)
Deferred compensation........................................ -- (2,061,549) (2,061,549)
Accumulated deficit.......................................... (6,181,333) (13,620,472) (13,620,472)
-------------- --------------- ---------------
Total stockholders' equity..................................... 4,707,449 12,960,951 $ 12,960,951
-------------- --------------- ---------------
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................... $ 5,207,887 $ 14,315,717
-------------- ---------------
-------------- ---------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Sales............................................................ $ 59,362 $ 1,719,223 $ 2,243,756
Costs and expenses:
Cost of sales.................................................. 43,123 1,272,010 2,252,509
Research and development....................................... 1,327,608 1,903,618 3,880,069
Sales and marketing............................................ 291,169 834,518 2,056,767
General and administrative..................................... 757,877 1,034,434 3,103,256
-------------- -------------- --------------
Total cost and expenses.......................................... 2,419,777 5,044,580 11,292,601
-------------- -------------- --------------
Loss from operations............................................. (2,360,415) (3,325,357) (9,048,845)
Minority interest in net loss of consolidated partnership........ 269,706 -- --
License income................................................... -- -- 1,493,000
Interest income.................................................. -- 51,407 116,706
-------------- -------------- --------------
Net loss......................................................... $ (2,090,709) $ (3,273,950) $ (7,439,139)
-------------- -------------- --------------
-------------- -------------- --------------
Pro forma net loss per share..................................... $ (0.86)
--------------
--------------
Shares used in computing pro forma net loss per share 8,626,898
--------------
--------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED NOTES
STOCK COMMON STOCK ADDITIONAL RECEIVABLE
--------------------- ---------------------- PAID-IN FROM DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION
---------- --------- --------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993....... -- $ -- 750 $ 8 $ 992 $ -- $ --
Net loss......................... -- -- -- -- --
---------- --------- --------- ----------- ----------- ------------- --------------
BALANCE AT DECEMBER 31, 1994....... -- -- 750 8 992 -- --
Issuance of Series A convertible
preferred stock for cash........ 6,037,736 60,377 -- -- 7,897,585 -- --
Issuance of Series A convertible
preferred stock to retire
debt............................ 1,792,453 17,925 -- -- 2,357,075 -- --
Issuance of Series A convertible
preferred stock for assets...... 154,581 1,546 -- -- 203,274 -- --
Issuance of Series A convertible
preferred stock for minority
partnership interest............ 264,151 2,642 -- -- 347,358 -- --
Exercise of stock options........ 148,125 1,481 28,144 (29,625) --
Net loss......................... -- -- -- -- -- -- --
---------- --------- --------- ----------- ----------- ------------- --------------
BALANCE AT DECEMBER 31, 1995....... 8,248,921 82,490 148,875 1,489 10,834,428 (29,625) --
Issuance of Series B convertible
preferred stock for cash........ 1,279,331 12,792 -- -- 5,065,848 -- --
Issuance of Series B convertible
preferred stock for assets...... 46,000 460 -- -- 183,540 -- --
Issuance of Series C convertible
preferred stock for cash........ 2,000,000 20,000 -- -- 9,948,619 -- --
Exercise of stock options for
notes receivable and cash....... -- -- 389,349 3,893 73,977 (63,750) --
Deferred compensation............ -- -- -- -- 2,508,811 -- (2,508,811)
Amortization of deferred
compensation.................... -- -- -- -- -- -- 447,262
Net loss......................... -- -- -- -- -- -- --
---------- --------- --------- ----------- ----------- ------------- --------------
BALANCE AT DECEMBER 31, 1996....... 11,574,252 $ 115,742 538,224 $ 5,382 $28,615,223 $ (93,375) $ (2,061,549)
---------- --------- --------- ----------- ----------- ------------- --------------
---------- --------- --------- ----------- ----------- ------------- --------------
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
------------- -----------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1993....... $ (816,674) $ (815,674)
Net loss......................... (2,090,709) (2,090,709)
------------- -----------
BALANCE AT DECEMBER 31, 1994....... (2,907,383) (2,906,383)
Issuance of Series A convertible
preferred stock for cash........ -- 7,957,962
Issuance of Series A convertible
preferred stock to retire
debt............................ -- 2,375,000
Issuance of Series A convertible
preferred stock for assets...... -- 204,820
Issuance of Series A convertible
preferred stock for minority
partnership interest............ -- 350,000
Exercise of stock options........ -- --
Net loss......................... (3,273,950) (3,273,950)
------------- -----------
BALANCE AT DECEMBER 31, 1995....... (6,181,333) 4,707,449
Issuance of Series B convertible
preferred stock for cash........ -- 5,078,640
Issuance of Series B convertible
preferred stock for assets...... -- 184,000
Issuance of Series C convertible
preferred stock for cash........ -- 9,968,619
Exercise of stock options for
notes receivable and cash....... -- 14,120
Deferred compensation............ -- --
Amortization of deferred
compensation.................... 447,262
Net loss......................... (7,439,139) (7,439,139)
------------- -----------
BALANCE AT DECEMBER 31, 1996....... $(13,620,472) $12,960,951
------------- -----------
------------- -----------
</TABLE>
See accompanying notes.
F-5
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996
------------- ------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................................ $ (2,090,709) $ (3,273,950) $ (7,439,139)
Adjustments to reconcile net loss to net cash used for operating
activities:
Depreciation and amortization......................................... 20,328 36,138 351,256
Amortization of deferred compensation................................. -- -- 447,262
Acquired in-process research and development.......................... -- 350,000 --
Write-off of non recoverable patent costs............................. -- 28,733 --
Minority interest in partnership...................................... (269,706) -- --
Common stock received in exchange for license agreement............... -- -- (693,000)
Changes in operating assets and liabilities:
Accounts receivable................................................. 38,353 (568,264) 126,752
Inventories......................................................... (17,755) (472,579) (405,706)
Other current assets................................................ 976 (30,846) (64,105)
Accounts payable.................................................... 12,544 255,192 171,714
Accrued compensation................................................ 14,841 108,750 79,133
Accrued liabilities................................................. 3,394 (424) 488,591
------------- ------------- --------------
Net cash flows used for operating activities............................ (2,287,734) (3,567,250) (6,937,242)
INVESTING ACTIVITIES
Purchase of short-term investments...................................... -- (165,000) --
Increase in patent and other assets..................................... (37,500) (51,975) (17,895)
Purchase of property and equipment...................................... (56,509) (80,954) (1,220,888)
------------- ------------- --------------
Net cash flows used for investing activities............................ (94,009) (297,929) (1,238,783)
FINANCING ACTIVITIES
Advances from a related party........................................... 1,949,508 2,136,000 --
Repayment of advances to a related party................................ -- (3,004,000) --
Issuance of common stock................................................ -- -- 14,120
Issuance of convertible preferred stock, net............................ -- 7,957,962 15,047,259
------------- ------------- --------------
Net cash flows provided by financing activities......................... 1,949,508 7,089,962 15,061,379
Net (decrease) increase in cash and cash equivalents.................... (432,235) 3,224,783 6,885,354
Cash and cash equivalents at beginning of year.......................... 441,627 9,392 3,234,175
------------- ------------- --------------
Cash and cash equivalents at end of year................................ $ 9,392 $ 3,234,175 $ 10,119,529
------------- ------------- --------------
------------- ------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................................. $ -- $ 1,711 $ 183
------------- ------------- --------------
------------- ------------- --------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Debt obligation to related party converted to Series A convertible
preferred stock........................................................ $ -- $ 2,375,000 $ --
------------- ------------- --------------
------------- ------------- --------------
Exercise of stock options for stockholder notes receivable.............. $ -- $ 29,625 $ 63,750
------------- ------------- --------------
------------- ------------- --------------
Common stock received in exchange for license agreement................. $ -- $ -- $ 693,000
------------- ------------- --------------
------------- ------------- --------------
ISSUANCE OF CONVERTIBLE PREFERRED STOCK IN CONNECTION WITH ACQUISITIONS:
Minority partnership interest........................................... $ -- $ 350,000 $ --
------------- ------------- --------------
------------- ------------- --------------
For assets.............................................................. $ -- $ 204,820 $ 184,000
------------- ------------- --------------
------------- ------------- --------------
</TABLE>
See accompanying notes.
F-6
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS ACTIVITY
Vista Medical Technologies, Inc. ("the Company") was founded in July 1993 as
a wholly-owned subsidiary of Kaiser Aerospace and Electronics Corporation
("Kaiser Aerospace") to develop an advanced technology business concentrated on
visualization products for minimally invasive surgery.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Oktas, Inc. In 1993, the Company acquired a 65%
interest in a partnership established to perform further research and
development related to certain of the Company's technology. This partnership is
included in the consolidated financial statements and because the Company
provided all the financial resources to the partnership, the Company has
recorded all losses in excess of the minority partners original contribution. In
1995, the minority partner, Oktas, Inc., was acquired by issuing shares of
Series A convertible preferred stock. On December 31, 1996, the partnership was
dissolved. The Company charged the $350,000 value of the preferred stock to
expense as acquired research and development. Significant intercompany accounts
and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
disclosures made in the accompanying notes to the consolidated financial
statements. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized upon shipment of product.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents and short-term investments consist of money market funds
and a certificate of deposit. The Company considers all highly liquid
investments with maturities when purchased of three months or less to be cash
equivalents. The Company evaluates the financial strength of institutions at
which significant investments are made and believes the related credit risk is
limited to an acceptable level.
The Company has adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," and has
classified its cash equivalents and short-term investments as available-for-sale
in accordance with that standard. Available-for-sale securities are carried at
fair value, with unrealized gains and losses, net of tax, reported in a separate
component of stockholders' equity. At December 31, 1996, the cost of cash
equivalents and short-term investments was equal to estimated fair value.
Accordingly, there were no unrealized gains or losses.
F-7
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company provides credit, in the normal course of business, to commercial
entities that meet specified credit requirements. The Company's principal
customers consist of original equipment manufacturers in the United States and
Asia. The Company provides for losses from uncollectable accounts and such
losses have not exceeded management's expectations.
INVENTORIES
Inventories are stated at lower of cost (determined on a first-in, first-out
basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. The Company provides for
depreciation on property and equipment using the straight-line method over the
estimated useful lives of the assets, generally five to seven years. Marketing
demonstration equipment is amortized over a one-year useful life.
PATENTS
Capitalized patent costs are amortized over the lesser of the remaining
useful life of the related technology or the remaining patent life, commencing
on the date the patent is issued. The Company reviews its patents for impairment
on an annual basis or whenever events or changes in circumstances indicate that
the carrying value of the asset would not be recoverable. If the sum of expected
future net cash flows of an individual asset would be less than the carrying
amount of the asset, an impairment loss would be recognized.
STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which is effective for the year
ending December 31, 1996. SFAS No. 123 allows companies to either account for
stock-based compensation under the new provisions of SFAS No. 123 or under the
provisions of Accounting Principles Opinion No. 25, ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES ("APB 25"), but requires pro forma disclosure in the footnotes to
the financial statements as if the measurement provisions of SFAS No. 123 had
been adopted. The Company has continued accounting for its stock-based
compensation in accordance with the provisions of APB 25.
ASSET IMPAIRMENT
In March 1995, the FASB issued SFAS No.121, "ACCOUNTING FOR THE IMPAIRMENT
OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the estimated
undiscounted cash flows to be generated by those assets are less than the
assets' carrying amount. SFAS 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted the provisions
of SFAS No. 121 effective January 1, 1996. There was no effect of such adoption
on the Company's financial position or results of operations.
F-8
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER SHARE
Historical net loss per share is calculated using the weighted average
number of common shares outstanding and common stock equivalents outstanding
during the periods presented. Common equivalent shares result from stock options
and preferred stock. For loss periods, common equivalent shares are excluded
from the computation as their effect would be antidilutive, except that the
Securities and Exchange Commission requires common and common share equivalents
issued during the twelve-month period prior to the initial filing of a proposed
public offering, to be included in the calculation as if they were outstanding
for all periods presented (using the treasury stock method and the assumed
initial public offering price).
Historical net loss per share information is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Net loss per share.............................. $ (0.91) $ (1.39) $ (3.05)
------------- ------------- -------------
------------- ------------- -------------
Shares used in computing net loss per share..... 2,292,382 2,356,502 2,440,507
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
PRO FORMA NET LOSS PER SHARE AND UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of the preferred stock, which will automatically
convert to common stock immediately prior to the completion of the Company's
initial public offering, using the as converted method from the original date of
issuance.
If the offering contemplated by the Prospectus is consummated, all of the
convertible preferred stock outstanding as of the closing date will
automatically be converted into 8,680,679 shares of common stock. Unaudited pro
forma stockholders' equity at December 31, 1996, as adjusted for the conversion
of preferred stock, is disclosed in the accompanying balance sheet.
2. BALANCE SHEET COMPONENTS
Inventories consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -------------
<S> <C> <C>
Parts and supplies................................................ $ 325,899 $ 567,707
Work in process................................................... 127,307 286,099
Finished goods.................................................... 232,250 359,019
----------- -------------
$ 685,456 $ 1,212,825
----------- -------------
----------- -------------
</TABLE>
F-9
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. BALANCE SHEET COMPONENTS (CONTINUED)
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -------------
<S> <C> <C>
Machinery and equipment........................................... $ 63,610 $ 271,747
Office computers, furniture and equipment......................... 121,068 352,911
Marketing demonstration equipment................................. 64,216 776,420
Leasehold improvements............................................ -- 68,704
----------- -------------
248,894 1,469,782
Less: accumulated depreciation.................................... (61,020) (387,679)
----------- -------------
$ 187,874 $ 1,082,103
----------- -------------
----------- -------------
</TABLE>
Patents and other assets consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -------------
<S> <C> <C>
Investment in common stock........................................ $ -- $ 693,000
Patents and other intangible assets, net.......................... 258,583 323,241
Prepaid royalties................................................. 37,500 57,500
----------- -------------
$ 296,083 $ 1,073,741
----------- -------------
----------- -------------
</TABLE>
3. MAJOR CUSTOMERS
Sales to individual customers exceeding 10% or more of revenues for the
years ended December 31, 1994, 1995 and 1996 were as follows: during 1994, two
customers accounted for 82% and 18% of revenues; during 1995, one customer
accounted for 85% of revenues; during 1996, three customers accounted for 30%,
27% and 25% of revenues.
4. COMMITMENTS
The Company leases its corporate facilities and certain equipment under
operating leases that expire on various dates through 2001. Annual future
minimum lease payments as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ---------------------------------------------------------------------------------
<S> <C>
1997............................................................................. $ 306,000
1998............................................................................. 307,000
1999............................................................................. 152,000
2000............................................................................. 110,000
2001............................................................................. 95,000
-----------
$ 970,000
-----------
-----------
</TABLE>
F-10
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
4. COMMITMENTS (CONTINUED)
Rent expense was approximately $55,000, $75,000 and $183,000 for the years
ended December 31, 1994, 1995 and 1996, respectively.
5. LICENSE INCOME
In December 1996, the Company granted a perpetual license to certain of its
technology and patents to Urohealth Systems Inc. ("Urohealth"). In exchange for
the license the Company received $1,000,000 in cash and 110,000 shares of common
stock valued at $693,000. The common stock received is restricted stock of a
publicly traded company with restrictions on the sale of the stock for two years
from the date of the agreement in accordance with the provisions of Rule 144
under the Securities Act of 1933 as amended. The licensed technology and patent
rights were obtained by the Company through a perpetual license and royalty
agreement with an officer of the Company. In connection with the license
agreement with Urohealth, the Company amended an existing license agreement with
the officer to make its terms consistent with the licensing agreement with
Urohealth in exchange for $200,000.
6. STOCKHOLDERS' EQUITY
CHANGES IN CAPITALIZATION
In November 1996, the Company reincorporated in the State of Delaware which
was accomplished through a merger between the California corporation and its
wholly-owned Delaware subsidiary. Each share of convertible preferred stock was
exchanged for one share of convertible preferred stock of the Delaware
corporation. Each share of common stock in the California corporation was
exchanged for one share of common stock of the Delaware corporation.
CONVERTIBLE PREFERRED STOCK
In November 1996, the Company issued 2,000,000 shares of Series C
convertible preferred stock at $5.00 per share for net proceeds to the Company
of $9,968,619. The purchaser of the Series C convertible preferred stock entered
into a three year sales and distribution agreement with the Company for certain
of the Company's cardiovascular products.
Convertible preferred stock is as follows:
<TABLE>
<CAPTION>
SHARES ISSUED AND
OUTSTANDING
AGGREGATE DECEMBER 31,
LIQUIDATION DESIGNATED --------------------------
SERIES PREFERENCE SHARES 1995 1996
- --------------------------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
A-1.............................. $ 10,725,001 8,300,000 8,094,340 8,094,340
A-3.............................. 204,820 500,000 154,581 154,581
B................................ 5,301,324 3,100,000 -- 1,325,331
C................................ 10,000,000 2,000,000 -- 2,000,000
-------------- ------------- ----------- -------------
$ 26,231,145 13,900,000 8,248,921 11,574,252
-------------- ------------- ----------- -------------
-------------- ------------- ----------- -------------
</TABLE>
Each share of the convertible preferred stock is convertible at the option
of the holder into three-quarters of a share of common stock. Conversion is
mandatory upon the closing of an underwritten
F-11
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
6. STOCKHOLDERS' EQUITY (CONTINUED)
public offering in which the aggregate gross proceeds received by the Company
are at least $15,000,000 with a per share price of no less than $5.00. The
conversion ratio is subject to certain anti dilution adjustments, and the
holders of each share of Series A-1, B and C convertible preferred stock are
entitled to one vote for each share of common stock into which it would convert.
Series A-3 convertible preferred stock has no voting rights until the Series A-3
convertible preferred stock converts to common stock.
The holders of convertible preferred stock are entitled to receive
non-cumulative dividends when and as declared by the Board of Directors at the
rate of 8% per annum. No dividends have been declared to date.
STOCK OPTION PLAN
The Company has reserved 2,015,610 shares of common stock under the 1995
Stock Option Plan ("the 1995 Plan") for issuance to eligible employees,
officers, directors, advisors and consultants. The 1995 Plan provides for the
grant of incentive and nonstatutory stock options. Terms of the stock option
agreements, including vesting requirements, are determined by the Board of
Directors, subject to the provisions of the 1995 Plan. Options granted by the
Company generally vest over four to five years and are exercisable from the date
of grant for a period of ten years. The exercise price of the incentive stock
options must equal at least the fair market value of the stock on the date of
grant. The exercise price of nonstatutory stock options must equal at least 85%
of the fair market value of the stock on the date of grant. The Company has the
option, in the event of termination of employment to repurchase unvested shares
issued under the 1995 Plan at the original issue price.
The Company recorded $2,508,811 of deferred compensation for options granted
during the year ended December 31, 1996, representing the difference between the
option exercise price and the deemed value for financial statement presentation
purposes. The Company is amortizing the deferred compensation over the vesting
period of the options. The Company recorded $447,262 of compensation expense
during the year ended December 31, 1996.
The Company will record $743,000 of additional deferred compensation
representing the difference between the option exercise price and the deemed
value for financial statement presentation purposes for stock options granted in
January and February 1997.
F-12
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
6. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes stock option activity under the Plan:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF PRICE PER AVERAGE PRICE
SHARES SHARE PER SHARE
----------- ------------- -------------
<S> <C> <C> <C>
Balance at December 31, 1994......................... -- $ -- $ --
Granted.............................................. 655,322 $ .20 $ .32
Exercised............................................ (148,125) $ .20 $ .32
Canceled............................................. -- -- $ --
----------- ------------- ---
Balance at December 31, 1995......................... 507,197 $ .20 $ .32
Granted.............................................. 1,173,888 $ .20 - $.80 $ .33
Exercised............................................ (389,349) $ .20 $ .32
Canceled............................................. (45,935) $ .20 $ .32
----------- ------------- ---
Balance at December 31, 1996......................... 1,245,801 $ .20 - $.80 $ .32
----------- ------------- ---
----------- ------------- ---
</TABLE>
At December 31, 1996, 157,806 options to purchase common shares were vested
and 232,335 options were available for future grant.
Adjusted pro forma information regarding net income is required by SFAS 123,
and has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using the "minimal value" method for
option pricing with the following weighted-average assumptions: risk-free
interest rate range of 5.5% to 6.0%; dividend yield of 0%; and a
weighted-average expected life of the options of 2.5 to 5 years.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1995 1996
-------------- --------------
<S> <C> <C>
Adjusted pro forma net loss................................... $ (3,279,671) $ (7,452,481)
-------------- --------------
-------------- --------------
Adjusted pro forma net loss per share......................... $ (1.39) $ (3.05)
-------------- --------------
-------------- --------------
</TABLE>
The weighted average remaining life of the options at December 31, 1996 is
9.24 years.
COMMON STOCK RESERVED
At December 31, 1996, a total of 10,158,815 shares of the Company's common
stock have been reserved for the conversion of preferred stock, the exercise of
stock options and for stock options available for future grant.
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets as of December 31, 1996 are
F-13
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
7. INCOME TAXES (CONTINUED)
shown below. A valuation allowance has been recognized to offset the deferred
tax assets, as realization of such assets is uncertain.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ --------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.................................................. $ (6,000) $ (51,000)
Deferred tax assets:
Net operating loss carryforwards.............................. 529,000 3,197,000
Research and development credits.............................. 14,000 229,000
Other, net.................................................... 15,000 32,000
------------ --------------
Total deferred tax assets....................................... 558,000 3,458,000
Valuation allowance for deferred tax assets..................... (552,000) (3,407,000)
------------ --------------
Net deferred tax assets......................................... 6,000 51,000
------------ --------------
Net deferred taxes.............................................. $ -- $ --
------------ --------------
------------ --------------
</TABLE>
As the Company was part of a consolidated group prior to the change in
ownership in July 1995, all tax loss and tax credit carryforwards up to the date
of change in ownership have been reported by the previous consolidated group.
All tax loss and tax credit carryforwards reflected in the accompanying
financial statements reflect activity only for the seventeen-month period ending
December 31, 1996.
At December 31, 1996, the Company has federal and state tax net loss
carryforwards of approximately $8,494,000 and $5,146,000, respectively. The
federal and state tax loss carryforwards will expire in 2010 and 2000,
respectively, unless previously utilized. The Company also has federal and state
research tax credit carryforwards of approximately $135,000 and $143,000
respectively, which will expire in 2010 unless previously utilized.
In accordance with Sections 382 and 383 of the Internal Revenue Code, a
change in ownership of greater than 50 percent of a corporation within a
three-year period will place an annual limitation on the Company's ability to
utilize its existing tax loss and tax credit carryforwards.
8. TRANSACTIONS WITH RELATED PARTIES
Kaiser Aerospace financed the initial operations of the Company through cash
advances. In 1995 upon the closing of the Series A convertible preferred stock,
total advances by Kaiser Aerospace aggregated $5,379,000 which were settled in
full with cash payments of $3,004,000 and the issuance of Series A convertible
preferred stock valued at $2,375,000.
The Company has a technology strategic alliance and a manufacturing supply
agreement with a Kaiser Aerospace Subsidiary for the development and
manufacturing of certain of the Company's proprietary products. Under the terms
of the agreements, which expire in July 1998, Kaiser Aerospace will provide
development and consulting services and a minimum of 75% of certain of the
Company's product requirements provided certain competitive criteria are met.
Payments made to Kaiser under these arrangements totaled approximately $292,000
and $1,205,000 for the years ending December 31,
F-14
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
8. TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
1995 and 1996, respectively. At December 31, 1996, the Company had approximately
$1,335,000 in purchase commitments to Kaiser under these agreements.
9. SUBSEQUENT EVENT
REVERSE STOCK SPLIT
In February 1997, the Company's stockholders approved a three-for-four
reverse stock split of the Company's common stock. All share data has been
retroactively restated to reflect the reverse stock split.
INCREASE IN CAPITALIZATION
In February 1997, the Board of Directors approved an amendment to the
Articles of Incorporation increasing the number of authorized shares of common
stock to 35,000,000 shares and the authorized preferred stock to 5,000,000
shares.
REGISTRATION STATEMENT
In January 1997, the Board of Directors approved filing a registration
statement with the Securities and Exchange Commission to sell 3,500,000 shares
of the Company's Common Stock to the public. If the Offering is consummated
under the proposed terms, the Company's outstanding shares of Series A, B and C
convertible preferred stock will automatically convert into shares of its Common
Stock. This conversion has been reflected in the accompanying pro forma
stockholders' equity as of December 31, 1996.
1997 STOCK OPTION PLAN/ STOCK ISSUANCE PLAN
In February 1997, the Company adopted the 1997 Stock Option Plan/Stock
Issuance Plan (the "1997 Plan") and reserved 2,820,000 shares for issuance
thereunder. The 1997 Plan incorporates the outstanding options under the 1995
Plan and no further options will be granted under the 1995 Plan.
1997 EMPLOYEE STOCK PURCHASE PLAN
In February 1997, the Company adopted the 1997 Employee Stock Purchase Plan
( the "Purchase Plan") and reserved 200,000 shares for issuance, thereunder. The
Purchase Plan permits eligible employees of the Company to purchase shares of
Common Stock, at semi-annual intervals, through periodic payroll deductions.
Payroll deductions may not exceed 10% of the participant's base salary, and the
purchase price per share will not be less than 85% of the lower of the fair
market value of the common stock at either the beginning or the end of the
semi-annual intervals.
NEW AGREEMENTS
In February 1997, the Company entered into an agreement with Heartport, Inc.
whereby the Company will sell four visualization and information systems used
for minimally invasive cardiothoracic surgery for use in Heartport's training
centers. In connection with the agreement the Company issued a warrant to
purchase up to 100,000 shares of common stock, exercisable until March 31, 2001
for a price
F-15
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
9. SUBSEQUENT EVENT (CONTINUED)
per share equal to the initial public offering price. If an initial public
offering is not completed by June 30, 1997, the price will be $6.67 per share.
In February 1997, the Company entered into an agreement whereby the Company
will receive an exclusive worldwide license to certain software, documentation
and trademarks of GDE Systems, Inc. In connection with the agreement, the
Company will issue to GDE Systems, Inc. $250,000 of the Company's common stock
valued at the initial public offering price. The Company is required to pay
future minimum royalties of $250,000 payable by December 31, 1998.
F-16
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for which Goldman, Sachs & Co. and Salomon Brothers Inc are
acting as representatives, has severally agreed to purchase from the Company,
the respective number of shares of Common Stock set forth opposite its name
below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ----------------------------------------------------------------------------- ---------------
<S> <C>
Goldman, Sachs & Co..........................................................
Salomon Brothers Inc.........................................................
---------------
Total....................................................................
---------------
---------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 525,000
additional shares of Common Stock solely to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 3,500,000 shares of Common
Stock offered in the Offering.
The Company has agreed that it will not, during the period beginning from
the date of this Prospectus and continuing to and including the date 180 days
after the date of this Prospectus, offer, sell, contract to sell or otherwise
dispose of any securities of the Company (other than pursuant to employee stock
option plans existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus) which are
substantially similar to the shares of Common Stock or which are convertible
into or exchangeable for securities which are substantially similar to the
shares of Common Stock, without the prior written consent of Goldman, Sachs &
Co., except for the shares of Common Stock offered in connection with the
Offering. Certain directors, officers and stockholders of the Company have
agreed not to offer, sell, contract to sell or otherwise dispose of any of such
securities held thereby for a period of 180 days after the date of this
Prospectus without the prior written consent of Goldman, Sachs & Co.
U-1
<PAGE>
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed 5% of the total number of shares of Common
Stock offered thereby.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price will be negotiated among the Company and the
representatives of the Underwriters. Among the factors to be considered in
determining the initial public offering price of the Common Stock, in addition
to prevailing market conditions, will be the Company's historical performance,
estimates of the business potential and earnings prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to market valuation of companies in related businesses.
During and after the Offering, the Underwriters may purchase and sell Common
Stock in the open market. These transactions may include overallotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Common Stock sold in the Offering for their
account may be reclaimed by the syndicate if such securities are repurchased by
the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Stock
which may be higher than the price that might otherwise prevail in the open
market. These transactions may be effected in the Nasdaq National Market, the
over-the-counter market, or otherwise, and these activities, if commenced, may
be discontinued at any time.
The Company has applied for quotation of the Common Stock on the Nasdaq
National Market under the symbol "VMTI."
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
U-2
<PAGE>
INSIDE BACK
Background: Blue
Center: Vista Medical's HMD for surgery against a background of the clinical
specialities and procedures in which the Company is involved.
Text on bottom of page:
VISUALIZATION IS INFORMATION
Vista Medical believes that the management of information under surgeon
control, is a key component in the development of advanced visualization systems
for minimally invasive microsurgery (MIM). The HMD is designed to facilitate the
display of critical diagnostic and monitoring data integrated in real-time with
the anatomical images generated by the Company's camera systems. This capability
will be enhanced by the recent addition of high speed image-based information
processing and networking software to the Company's technology portfolio.
(PRODUCT MARKETING IS SUBJECT TO FDA CLEARANCE.)
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCE IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
The Company............................................................... 20
Use of Proceeds........................................................... 22
Dividend Policy........................................................... 22
Capitalization............................................................ 23
Dilution.................................................................. 24
Selected Financial Data................................................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 26
Business.................................................................. 30
Management................................................................ 47
Certain Transactions...................................................... 57
Principal Stockholders.................................................... 59
Description of Capital Stock.............................................. 61
Shares Eligible for Future Sale........................................... 64
Legal Matters............................................................. 65
Experts................................................................... 65
Additional Information.................................................... 65
Index to Financial Statements............................................. F-1
Underwriting.............................................................. U-1
</TABLE>
--------------
THROUGH AND INCLUDING , 1997 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
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.
3,500,000 SHARES
VISTA MEDICAL
TECHNOLOGIES, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
[LOGO]
-------------------
GOLDMAN, SACHS & CO.
SALOMON BROTHERS INC
REPRESENTATIVES OF THE UNDERWRITERS
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates,
except for the registration fee, the Nasdaq National Market filing fee and the
NASD fee.
<TABLE>
<S> <C>
Registration fee................................................. $ 15,857
Nasdaq National Market fee....................................... 25,125
NASD fee......................................................... 5,733
Blue Sky fees and expenses....................................... 10,000
Printing and engraving expenses.................................. 125,000
Legal fees and expenses.......................................... 250,000
Accounting fees and expenses..................................... 150,000
Transfer Agent and Registrar fees................................ 5,000
Miscellaneous expenses........................................... 113,285
---------
TOTAL........................................................ $ 700,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors of the Company under certain conditions and subject to
certain limitations. Section 145 of the Delaware General Corporation Law also
provides that a corporation has the power to purchase and maintain insurance on
behalf of its officers and directors against any liability asserted against such
person and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
him or her against such liability under the provisions of Section 145 of the
Delaware General Corporation Law.
Article VII, Section (1) of the Restated Bylaws of the Company provides that
the Company shall indemnify its directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law. The rights to
indemnity thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
executive officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding by reason of the fact that he or she is
or was a director or officer of the Company (or was serving at the Company's
request as a director or officer of another corporation) shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Company as authorized by the relevant section
of the Delaware General Corporation Law.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
Article V, Section (A) of the Company's Second Restated Certificate of
Incorporation provides that a director of the Company shall not be personally
liable for monetary damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
acts or omissions that involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for
any transaction from which the director derived any improper personal benefit.
II-1
<PAGE>
The Company has entered into indemnification agreements with each of its
directors and executive officers. Generally, the indemnification agreements
attempt to provide the maximum protection permitted by Delaware law as it may be
amended from time to time. Moreover, the indemnification agreements provide for
certain additional indemnification. Under such additional indemnification
provisions, however, an individual will not receive indemnification for
judgments, settlements or expenses if he or she is found liable to the Company
(except to the extent the court determines he or she is fairly and reasonably
entitled to indemnity for expenses), for settlements not approved by the Company
or for settlements and expenses if the settlement is not approved by the court.
The indemnification agreements provide for the Company to advance to the
individual any and all reasonable expenses (including legal fees and expenses)
incurred in investigating or defending any such action, suit or proceeding. In
order to receive an advance of expenses, the individual must submit to the
Company copies of invoices presented to him or her for such expenses. Also, the
individual must repay such advances upon a final judicial decision that he or
she is not entitled to indemnification.
The Company intends to enter into additional indemnification agreements with
each of its directors and executive officers to effectuate these indemnity
provisions and to purchase directors' and officers' liability insurance.
The Underwriting Agreement (Exhibit 1.1 hereto) contains provisions by which
the Underwriters have agreed to indemnify the Company, each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act,
each director of the Company, and each officer of the Company who signs this
Registration Statement, with respect to information furnished in writing by or
on behalf of the Underwriters for use in the Registration Statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since February 15, 1994, the Company has sold and issued the following
unregistered securities (which numbers have not been adjusted for the reverse
stock split effected in February 1997):
(1) From February 15, 1994 to February 15, 1997, the Company issued an
aggregate of 2,527,701 options to purchase shares of Common Stock with exercise
prices ranging from $0.15 to $3.00 per share under the Predecessor Plan and an
aggregate of 817,466 shares of Common Stock were issued through the exercise of
options granted under the Predecessor Plan for an aggregate exercise price of
$145,045. For additional information concerning these transactions, reference is
made to the information contained under the caption "Management -- Benefit
Plans" in the form of the Prospectus included herein.
(2) On July 19, 1993, the Company issued an aggregate of 1,000 shares of
Common Stock to Kaiser Aerospace for an aggregate consideration of $1000.00.
(3) On July 27, 1995, the Company issued an aggregate of 6,207,548 shares of
Series A-1 Preferred Stock to various venture capital funds and certain other
investors for an aggregate consideration of $8,225,001.10.
(4) On August 1, 1995, the Company issued an aggregate of 1,886,792 shares
of Series A-1 Preferred Stock to a certain venture capital fund for an aggregate
consideration of $2,499,999.40.
(5) On September 19, 1995, the Company issued an aggregate of 154,581 shares
of Series A-3 Preferred Stock to certain venture capital funds and other
institutional investors in consideration for substantially all of the assets of
AST.
(6) On July 12, 1996, the Company issued an aggregate of 1,269,331 shares of
Series B Preferred Stock to various venture capital funds and certain other
investors for an aggregate consideration of $5,077,324.00.
II-2
<PAGE>
(7) On July 26, 1996, the Company issued an aggregate of 56,000 shares of
Series B Preferred Stock to various venture capital funds and certain other
investors for an aggregate consideration of $224,000.00.
(8) On November 27, 1996, the Company issued an aggregate of 2,000,000
shares of Series C Preferred Stock to Medtronic Asset Management, Inc. for an
aggregate consideration of $10,000,000.00.
(9) On February 22, 1997, the Company issued a warrant to purchase 100,000
shares of Common Stock at an exercise price per share equal to the initial
public offering price of the Common Stock offered hereby to Heartport in
consideration of Heartport entering into a certain Supply and Services Agreement
with the Company.
(10) On February 28, 1997, the Company entered into a License Agreement with
HealthCom, Inc. and GDE, pursuant to which the Company is obligated to issue
20,833 shares of Common Stock to GDE within ten business days of the close of
this Offering, assuming an initial public offering price of $12.00 per share
(the midpoint of the range set forth on the cover page of this Prospectus).
The sales and issuances of securities in the above transactions were deemed
to be exempt under the Act by virtue of Section 4(2) thereof and/or Regulation D
and Rule 701 promulgated thereunder as transactions not involving any public
offering. The purchasers in each case represented their intention to acquire the
securities for investment only and not with a view to the distribution thereof.
Appropriate legends were affixed to the stock certificates issued in such
transactions. Similar representations of investment intent were obtained and
similar legends imposed in connection with any subsequent transfers of any such
securities. The Company believes that all recipients had adequate access,
through employment or other relationships, to information about the Company to
make an informed investment decision.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Form of Second Restated Certificate of Incorporation of the Company to become effective immediately prior
to the Offering.
3.3 Bylaws of the Company, as amended.
3.4 Form of Restated Bylaws of the Company to be effective upon completion of the Offering.
4.1+ Form of Certificate for Common Stock.
5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the Common Stock being registered.
10.1 Asset Purchase Agreement between the Company and AST, dated September 15, 1995.
10.2 Asset Purchase Agreement between the Company, ProMedica Distribution, Inc. (ProMedica) and certain
stockholders of ProMedica, dated July 26, 1996.
10.3+ Series A-1 Preferred Stock Purchase Agreement among the Company and the purchasers listed on Schedule A
thereto, dated July 27, 1995.
10.4 Series B Preferred Stock Purchase Agreement among the Company and the investors listed on Schedule A
thereto, dated July 12, 1996.
10.5 Series C Preferred Stock Purchase Agreement between the Company and Medtronic Asset Management, Inc.,
dated November 27, 1996.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.6 Common Stock Purchase Warrant between the Company and Heartport, Inc. (Heartport), dated February 22,
1997.
10.7* International Distribution Agreement between AST and AMCO, Inc., dated September 20, 1994.
10.8* Manufacturing Supply Agreement between the Company and Kaiser Electro-Optics, Inc., dated July 19, 1995.
10.9* U.S.A. and Canada Distribution Agreement between the Company and Delacroix-Chevalier Inc., dated July 11,
1996.
10.10* Distributor Agreement between the Company and Peters, dated July 15, 1996.
10.11* Sales Agreement between the Company and Medtronic, Inc., dated November 27, 1996.
10.12* Supply and Services Agreement between the Company and Heartport, dated February 22, 1997.
10.13* Supplemental Rights Agreement between the Company and Medtronic, Inc., dated November 27, 1996.
10.14 Amended and Restated Investors' Rights Agreement between the Company and the stockholders listed on
Schedule A thereto, dated November 27, 1996.
10.15 Amendment to the Amended and Restated Investors' Rights Agreement between the Company, Heartport and the
stockholders listed on Exhibit A thereto, dated February 22, 1997.
10.16 Letter Agreement regarding Investment Representations and Registration Rights between the Company and
Urohealth Systems, Inc. (Urohealth), dated December 13, 1996.
10.17* Consulting Agreement between the Company and Harry R. McKinley, dated September 15, 1995.
10.18* Consulting Agreement between the Company and Urohealth, dated December 13, 1996.
10.19 Form of Professional Services Agreement.
10.20 Form of Non-Disclosure Agreement for Proprietary or Business Confidential Information.
10.21 Non-Competition, Non-Disclosure and Patent and Inventions Assignment Agreement among Harry R. McKinley,
McKinley Optics, Inc. and AST, dated December 18, 1991.
10.22* License and Development Agreement among Harry R. McKinley, McKinley Optics, Inc. and AST, dated December
18, 1991, as amended on June 28, 1994.
10.23* License Agreement between the Company and Allen Newman, dated September 2, 1994, as amended December 13,
1996.
10.24* Agreement to Amend License and Development Agreement between Harry R. McKinley and the Company, dated
September 15, 1995.
10.25* License Agreement between the Company and Kaiser Aerospace, dated July 19, 1995.
10.26* Technology Strategic Alliance: Memorandum of Understanding between the Company and Kaiser Aerospace,
dated July 19, 1995.
10.27* Non-Exclusive License Agreement between the Company, Fuji Film Co. and Fuji Photo Optical Co., dated June
25, 1996.
10.28 Memorandum of Understanding between the Company and Cogent Light Technologies, dated March 27, 1996.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.29* License Agreement between the Company and Urohealth, dated December 13, 1996.
10.30* License Agreement between the Company and GDE Systems, Inc., dated February 28, 1997.
10.31 Lease dated April 14, 1994, as amended by a certain First Amendment to Lease dated March 29, 1996 and a
certain Second Amendment to Lease dated October 22, 1996 between the Company and Robert F. Tambone, as
Trustee of MAT Realty Trust, u/d/t dated June 4, 1986.
10.32 Standard Sublease between the Company and Quintiles Pacific, Inc., dated January 23, 1996.
10.33 Standby Letter of Credit from Silicon Valley Bank, dated August 9, 1996.
10.34 1995 Stock Option Plan.
10.35 1995 Stock Option Plan Form of Notice of Grant.
10.36 1995 Stock Option Plan Form of Stock Option Agreement.
10.37 1995 Stock Option Plan Form of Stock Purchase Agreement.
10.38 1997 Stock Option/Stock Issuance Plan, as amended.
10.39 1997 Stock Option/Stock Issuance Plan Form of Notice of Grant.
10.40 1997 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.41+ 1997 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.
10.42 1997 Employee Stock Purchase Plan.
10.43 Form of Indemnification Agreement between the Company and each of its directors.
10.44 Form of Indemnification Agreement between the Company and each of its officers.
10.45 Form of Waiver of Registration Rights, dated February 28, 1997.
11.1 Statement re: Computation of Per Share Data.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion filed as Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (see page II-7).
27.1 Financial Data Schedule.
</TABLE>
- --------------
+ To be filed by amendment.
* Certain confidential portions of this Exhibit were omitted by means of
redacting a portion of the text (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Company's Application Requesting Confidential Treatment under Rule 406
under the Securities Act.
(b) Financial Statement Schedules included separately in the Registration
Statement.
All other schedules are omitted because they are not required, are not
applicable or the information is included in the Financial Statements or Notes
thereto.
ITEM 17. UNDERTAKINGS.
The undersigned hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-5
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described in Item 14, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, County of San
Diego, State of California, on the day of March, 1997.
VISTA MEDICAL TECHNOLOGIES, INC.
By: /s/ JOHN R. LYON
-----------------------------------------
John R. Lyon
PRESIDENT AND CHIEF EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John R. Lyon and James C. Blair, or either of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any registration statement
related to this Registration Statement and filed pursuant to Rule 462 under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, 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 has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ JOHN R. LYON Officer and Director
- ------------------------------ (Principal Executive , 1997
(John R. Lyon) Officer)
Director of Finance and
/s/ ROBERT J. DE VAERE Administration and Chief
- ------------------------------ Financial Officer , 1997
(Robert J. De Vaere) (Principal Financial and
Accounting Officer)
/s/ JAMES C. BLAIR
- ------------------------------ Chairman of the Board and , 1997
(James C. Blair) Director
/s/ OLAV B. BERGHEIM
- ------------------------------ Director , 1997
(Olav B. Bergheim)
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ NICHOLAS B. BINKLEY
- ------------------------------ Director , 1997
(Nicholas B. Binkley)
/s/ DANIEL J. HOLLAND
- ------------------------------ Director , 1997
(Daniel J. Holland)
/s/ LARRY M. OSTERINK
- ------------------------------ Director , 1997
(Larry M. Osterink)
</TABLE>
II-8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
VOLUME I
VISTA MEDICAL TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
VOLUME II
VISTA MEDICAL TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ---------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Form of Second Restated Certificate of Incorporation of the Company to become effective
immediately prior to the Offering.
3.3 Bylaws of the Company, as amended.
3.4 Form of Restated Bylaws of the Company to be effective upon completion of the Offering.
4.1+ Form of Certificate for Common Stock.
5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the Common Stock being registered.
10.1 Asset Purchase Agreement between the Company and AST, dated September 15, 1995.
10.2 Asset Purchase Agreement between the Company, ProMedica Distribution, Inc. (ProMedica) and
certain stockholders of ProMedica, dated July 26, 1996.
10.3+ Series A-1 Preferred Stock Purchase Agreement among the Company and the purchasers listed on
Schedule A thereto, dated July 27, 1995.
10.4 Series B Preferred Stock Purchase Agreement among the Company and the investors listed on
Schedule A thereto, dated July 12, 1996.
10.5 Series C Preferred Stock Purchase Agreement between the Company and Medtronic Asset Management,
Inc., dated November 27, 1996.
10.6 Common Stock Purchase Warrant between the Company and Heartport, Inc. (Heartport), dated February
22, 1997.
10.7* International Distribution Agreement between AST and AMCO, Inc., dated September 20, 1994.
10.8* Manufacturing Supply Agreement between the Company and Kaiser Electro-Optics, Inc., dated July
19, 1995.
10.9* U.S.A. and Canada Distribution Agreement between the Company and Delacroix-Chevalier Inc., dated
July 11, 1996.
10.10* Distributor Agreement between the Company and Peters, dated July 15, 1996.
10.11* Sales Agreement between the Company and Medtronic, Inc., dated November 27, 1996.
10.12* Supply and Services Agreement between the Company and Heartport, dated February 22, 1997.
10.13* Supplemental Rights Agreement between the Company and Medtronic, Inc., dated November 27, 1996.
10.14 Amended and Restated Investors' Rights Agreement between the Company and the stockholders listed
on Schedule A thereto, dated November 27, 1996.
10.15 Amendment to the Amended and Restated Investors' Rights Agreement between the Company, Heartport
and the stockholders listed on Exhibit A thereto, dated February 22, 1997.
10.16 Letter Agreement regarding Investment Representations and Registration Rights between the Company
and Urohealth Systems, Inc. (Urohealth), dated December 13, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ---------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.17* Consulting Agreement between the Company and Harry R. McKinley, dated September 15, 1995.
10.18* Consulting Agreement between the Company and Urohealth, dated December 13, 1996.
10.19 Form of Professional Services Agreement.
10.20 Form of Non-Disclosure Agreement for Proprietary or Business Confidential Information.
10.21 Non-Competition, Non-Disclosure and Patent and Inventions Assignment Agreement among Harry R.
McKinley, McKinley Optics, Inc. and AST, dated December 18, 1991.
10.22* License and Development Agreement among Harry R. McKinley, McKinley Optics, Inc. and AST, dated
December 18, 1991, as amended on June 28, 1994.
10.23* License Agreement between the Company and Allen Newman, dated September 2, 1994, as amended
December 13, 1996.
10.24* Agreement to Amend License and Development Agreement between Harry R. McKinley and the Company,
dated September 15, 1995.
10.25* License Agreement between the Company and Kaiser Aerospace, dated July 19, 1995.
10.26* Technology Strategic Alliance: Memorandum of Understanding between the Company and Kaiser
Aerospace, dated July 19, 1995.
10.27* Non-Exclusive License Agreement between the Company, Fuji Film Co. and Fuji Photo Optical Co.,
dated June 25, 1996.
10.28 Memorandum of Understanding between the Company and Cogent Light Technologies, dated March 27,
1996.
10.29* License Agreement between the Company and Urohealth, dated December 13, 1996.
10.30* License Agreement between the Company and GDE Systems, Inc., dated February 28, 1997.
10.31 Lease dated April 14, 1994, as amended by a certain First Amendment to Lease dated March 29, 1996
and a certain Second Amendment to Lease dated October 22, 1996 between the Company and Robert F.
Tambone, as Trustee of MAT Realty Trust, u/d/t dated June 4, 1986.
10.32 Standard Sublease between the Company and Quintiles Pacific, Inc., dated January 23, 1996.
10.33 Standby Letter of Credit from Silicon Valley Bank, dated August 9, 1996.
10.34 1995 Stock Option Plan.
10.35 1995 Stock Option Plan Form of Notice of Grant.
10.36 1995 Stock Option Plan Form of Stock Option Agreement.
10.37 1995 Stock Option Plan Form of Stock Purchase Agreement.
10.38 1997 Stock Option/Stock Issuance Plan, as amended.
10.39 1997 Stock Option/Stock Issuance Plan Form of Notice of Grant.
10.40 1997 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.41+ 1997 Stock Option/Stock Issuance Plan Form of Stock Purchase Agreement.
10.42 1997 Employee Stock Purchase Plan.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ---------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.43 Form of Indemnification Agreement between the Company and each of its directors.
10.44 Form of Indemnification Agreement between the Company and each of its officers.
10.45 Form of Waiver of Registration Rights, dated February 28, 1997.
11.1 Statement re: Computation of Per Share Data.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion filed as Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (see page II-7).
27.1 Financial Data Schedule.
</TABLE>
- --------------
+ To be filed by amendment.
* Certain confidential portions of this Exhibit were omitted by means of
redacting a portion of the text (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Company's Application Requesting Confidential Treatment under Rule 406
under the Securities Act.
<PAGE>
Draft -- March 6, 1997
Vista Medical Technologies, Inc.
Common Stock
($.01 par value per share)
---------------------------------------------
---------------------------------------------
Underwriting Agreement
, 1997
-----------------
Goldman, Sachs & Co.,
Salomon Brothers Inc
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004.
Ladies and Gentlemen:
Vista Medical Technologies, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of _________ shares (the "Firm Shares") and, at the election of the
Underwriters, up to _______ additional shares (the "Optional Shares") of common
stock, $.01 par value per share (the "Common Stock"), of the Company (the Firm
Shares and the Optional Shares that the Underwriters elect to purchase pursuant
to Section 2 hereof being collectively called the "Shares").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-....) (the "Initial
Registration Statement") in respect of the Shares has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such form; other
than a registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement") filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Act"), which became effective upon
filing, no other
<PAGE>
document with respect to the Initial Registration Statement has heretofore
been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or threatened by
the Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a)
of the rules and regulations of the Commission under the Act, is hereinafter
called a "Preliminary Prospectus"; the various parts of the Initial
Registration Statement, and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto and including the information contained in the
form of final prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and deemed by virtue of
Rule 430A under the Act to be part of the Initial Registration Statement at
the time it was declared effective, each as amended at the time such part of
the Initial Registration Statement became effective or such part of the Rule
462(b) Registration Statement, if any, became or hereafter becomes effective,
is hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
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; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement and
any amendment thereto, and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED, HOWEVER, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(d) The Company has not sustained since the date of the latest audited
financial statements included in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any change in the capital stock or long-term debt of the Company or any
of its subsidiaries, if any, material adverse change, or any development
involving a prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company, or any of its subsidiaries, if any, otherwise than as
set forth or contemplated in the Prospectus;
-2-
<PAGE>
(e) The Company does not own any real property; the Company has good and
marketable title to all personal property owned thereby, free and clear of all
liens, encumbrances and defects except such as are described in the Prospectus
or such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease by the Company are
held thereby under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company;
(f) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is subject to
no material liability or disability by reason of the failure to be so qualified
in any such jurisdiction;
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the Common Stock contained in the Prospectus;
and the Company has no subsidiaries;
(h) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description of the Common Stock contained in the Prospectus;
(i) The issue and sale of the Shares by the Company and the compliance by
the Company with all of the provisions of this Agreement and the consummation of
the transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of the property or assets of the Company is subject,
nor will such action result in any violation of the provisions of the Second
Restated Certificate of Incorporation (the "Certificate of Incorporation") or
By-laws, as amended (the "By-laws"), of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue and sale of
the Shares or the consummation by the Company of the transactions contemplated
by this Agreement, except the registration under the Act of the issuance of the
Shares and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the Underwriters;
(j) The Company is not in violation of its Certificate of Incorporation or
By-laws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound;
-3-
<PAGE>
(k) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the capital Stock of the Company and under the caption
"Underwriting", insofar as they purport to describe the provisions of the laws
and documents referred to therein, are accurate, complete and fair;
(l) Each of the License and Development Agreement by and between Harry R.
McKinley ("McKinley"), McKinley Optics, Inc. ("MOI") and American Surgical
Technologies Corporation ("AST"), dated December 18, 1991, and the Non-
Competition, Non-Disclosure and Patent and Invention Assignment Agreement by and
between McKinley, MOI and AST, dated December 18, 1991, in each case as amended
by that certain letter agreement between MOI and AST, dated June 28, 1994, as
further amended by that certain Agreement to Amend License and Development
Agreement by and between MOI, McKinley and the Company, dated September 15,
1995, relating to technology developed by MOI and McKinley for use in endoscopes
incorporating a stereo objective lens for medical purposes; the Consulting
Agreement by and between McKinley and the Company, dated September 15, 1995;the
License Agreement by and between Allen Newman and the Company, dated September
2, 1994, as amended by that certain Amendment to License Agreement by and
between the Company and Allen Newman, dated December 13, 1996, relating to
specific medical instruments employing advanced optical technologies; the
License Agreement by and between the Company and Kaiser Aerospace and
Electronics Corporation ("Kaiser"), dated February 9, 1995, relating to the
technology of an optical collimating apparatus; and the License Agreement by and
between the Company and Fuji Photo Optical Lab Co. Ltd., dated June 25, 1996,
relating to an imaging system with a varifocal lens for use in endoscopes
(collectively, the "License Agreements"); is in full force and effect and
constitutes a valid and binding agreement between the parties thereto,
enforceable in accordance with its terms, and there has not occurred any default
under any License Agreement or any event that with the giving of notice or lapse
of time would constitute a default thereunder;
(m) Each of the Sales Agreement by and between the Company and Medtronic,
Inc. ("Medtronic"), dated November 29, 1996, relating to the sale and/or
distribution of the Company's Series 8000 in North America, Europe, the Middle
East and Africa; the License Agreement by and between the Company and Urohealth
Systems, Inc. ("Urohealth"), dated December 13, 1996, relating to the license by
the Company to Urohealth of visual instrument technology developed for the
gynecology field; the Memorandum of Understanding between the Company and Cogent
Light Technologies, Inc. ("Cogent"), dated March 26, 1996, relating to the
development and marketing of Company products which incorporate Cogent's single
fiber light technologies; the Agreement between the Company and GDE Systems,
Inc., dated February 28, 1997, relating to the granting to the Company of a
worldwide exclusive license to certain software, documentation and trademarks of
GDE used in the medical field; and the Supply and Services Agreement by and
between the Company and Heartport, Inc. ("Heartport"), dated February 22, 1997,
relating to the Company's sale and subsequent maintenance of Series 8000 systems
to Heartport (collectively, the "Alliance Agreements"); is in full force and
effect and constitutes a valid and binding agreement between the parties
thereto, enforceable in accordance with its terms, and there has not occurred
any default under any Alliance Agreement or any event that with the giving of
notice or lapse of time would constitute a default thereunder;
(n) The Company is conducting business in compliance with all applicable
statutes, rules, regulations and orders administered or issued by any
governmental or regulatory authority in the jurisdictions in which it is
conducting business, including, without limitation, the United States Food and
Drug Administration;
-4-
<PAGE>
(o) Except as disclosed in the Prospectus, the Company is not in violation
of any statute, or any rule, regulation, decision or order of any governmental
agency or body or any court relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), does not own or operate any real property
contaminated with any substance that is subject to any environmental laws, is
not liable for any off-site disposal or contamination pursuant to any
environmental laws, and is not subject to any claim relating to any
environmental laws; and the Company is not aware of any pending investigation
which could reasonably be expected to lead to such a claim;
(p) Except as disclosed in the Prospectus, the Company owns or possesses
valid, binding, enforceable licenses or other rights to use any patents, patent
licenses, trademarks, service marks, trade names, service names, copyrights,
mask works, technology, know-how and other proprietary intellectual property
rights ("Intellectual Property") necessary to conduct the business now or
proposed to be conducted by it as described in the Prospectus and the Company
has not received any notice of infringement of or conflict with (and knows of no
such infringement of or conflict with) asserted rights of others with respect to
any patents, trademarks, service marks, trade names, copyrights, mask works,
technology or know-how which could result in any material adverse effect on the
current or future financial position, stockholders' equity or results of
operations of the Company; the Company or its assignor has duly and properly
filed with the U.S. Patent and Trademark Office the pending patent applications
referred to in the Prospectus (the "Patent Applications"); the information
contained in the Registration Statement and Prospectus concerning the Patent
Applications and patents owned by or licensed to the Company is accurate in all
material respects; and the discoveries, inventions, products or processes owned
or licensed by the Company referred to in the Prospectus do not, to the
knowledge of the Company, infringe or conflict, and the Company has not received
any notice that its Intellectual Property or activities infringe or conflict
with any right or patent, or any discovery, invention, product or process which
is the subject of a patent application known to the Company;
(q) The Company holds all material licenses, certificates and permits from
state, federal and other regulatory authorities which are necessary for the
conduct of its business.
(r) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a party or of which any
property of the Company is the subject which, if determined adversely to the
Company, would individually or in the aggregate have a material adverse effect
on the current or future financial position, stockholders' equity or results of
operations of the Company; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(s) The Company is not and, after giving effect to the offering and sale
of the Shares, will not be an "investment company" or an entity "controlled" by
an "investment company", as such terms are defined in the Investment Company Act
of 1940, as amended (the "Investment Company Act");
(t) Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075, Florida Statutes; and
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(u) Ernst & Young LLP, who have certified certain financial statements of
the Company, are independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder.
2. Subject to the terms and conditions herein set forth (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $___________, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction, the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to _________________ Optional Shares, at the purchase price
per share set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., for the account of such Underwriter, against payment by or
on behalf of such Underwriter of the purchase price therefor by certified or
official bank check or checks, payable to the order of the Company in
immediately available funds. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the offices of Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004 (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City
time, on _______ 1997, or such other time and date as Goldman, Sachs & Co. and
the Company may agree upon in writing, and, with respect to the Optional Shares,
9:30 a.m., New York City time, on the date specified by Goldman, Sachs & Co. in
the written notice given by Goldman, Sachs & Co. of the Underwriters election to
purchase such Optional Shares, or such other time and date as Goldman, Sachs &
Co. and the Company may agree upon in writing.
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Such time and date for delivery of the Firm Shares is herein called the "First
Time of Delivery", such time and date for delivery of the Optional Shares, if
not the First Time of Delivery, is herein called the "Second Time of Delivery",
and each such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(j) hereof, will be delivered at the offices of McDermott,
Will & Emery, [2049 Century Park East, Suite 3400, Los Angeles, CA 90067-3208]
(the "Closing Location"), and the Shares will be delivered at the Designated
Office, all at such Time of Delivery. A meeting will be held at the Closing
Location at ______ p.m., Los Angeles time, on the New York Business Day (as such
term is hereinafter defined) next preceding such Time of Delivery, at which
meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus which shall be
disapproved by you promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to
the Prospectus or any amended Prospectus has been filed and to furnish you with
copies thereof; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or suspending any
such qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the Shares, provided
that in connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business Day
next succeeding the date of this Agreement, and from time to time, to furnish
the Underwriters with copies of the Prospectus in New York City in such
quantities as you may reasonably request, and, if the delivery of a prospectus
is required at any time prior to the expiration of nine months after the time of
issue of the Prospectus in
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connection with the offering or sale of the Shares and if at such time any event
shall have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be necessary
during such period to amend or supplement the Prospectus in order to comply with
the Act, to notify you and upon your request to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies as you
may from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission or
effect such compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Shares at any time nine months
or more after the time of issue of the Prospectus, upon your request but at the
expense of such Underwriter, to prepare and deliver to such Underwriter as many
copies as you may request of an amended or supplemented Prospectus complying
with Section 10(a)(3) of the Act;
(d) If the Company elects to rely upon Rule 462(b), the Company shall file
a Rule 462(b) Registration Statement with the Commission in compliance with Rule
462(b) by 10:00 p.m. Washington, D.C. time, on the date of this Agreement, and
the Company shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act.
(e) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
thereunder (including, at the option of the Company, Rule 158);
(f) During the period beginning from the date hereof and continuing to and
including the date 180 days after the date of the Prospectus, not to offer,
sell, contract to sell or otherwise dispose of, except as provided hereunder,
any securities of the Company that are substantially similar to the Shares,
including, but not limited, to, any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock option
plans existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement), without
the prior written consent of Goldman, Sachs & Co.;
(g) To furnish to its stockholders as soon as practicable after the end of
each fiscal year an annual report (including a balance sheet and statements of
income, stockholders' equity and cash flows of the Company and any of its
subsidiaries, if any, certified by independent public accountants) and, as soon
as practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company, and any of its subsidiaries, if any, for such quarter in reasonable
detail;
(h) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of
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securities of the Company is listed; and (ii) such additional information
concerning the business and financial condition of the Company as you may from
time to time reasonably request;
(i) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under the
caption "Use of Proceeds";
(j) To use its best efforts to list for quotation the Shares on the Nasdaq
National Market ("NNM"); and
(k) To file with the Commission such reports on Form SR as may be required
by Rule 463 under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) all fees and expenses in connection with listing the Shares on the NNM; (v)
the filing fees incident to, and the fees and disbursements of counsel for the
Underwriters in connection with, securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the Shares;
(vi) the cost of preparing stock certificates; (vii) the cost and charges of any
transfer agent or registrar; and (viii) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees
and disbursements of their counsel, stock transfer taxes on resale of any of the
Shares by them, and any advertising expenses connected with any offers they may
make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a) hereof;
if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 p.m. Washington,
D.C. time, on the date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the
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Commission; and all requests for additional information on the part of the
Commission shall have been complied with to your reasonable satisfaction;
(b) McDermott, Will & Emery, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated such Time of Delivery, with respect
to the matters covered in paragraphs (i), (ii), (vi), (xiii) and (xv) of
subsection (c) below as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) Brobeck, Phleger and Harrison LLP, counsel for the Company, shall have
furnished to you their written opinion (a draft of each such opinion is attached
as Annex II(b) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of Delivery)
have been duly and validly authorized and issued and are fully paid and
non-assessable; and the Shares conform to the description of the Stock
contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification or is subject to no
material liability or disability by reason of failure to be so qualified in
any such jurisdiction (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel and in respect of
matters of fact upon certificates of officers of the Company, provided that
such counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(iv) The real property and buildings held under lease by the Company
are held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company (in
giving the opinion in this clause, such counsel may state that they are
relying upon opinions of counsel to the lessors of such property and, in
respect to matters of fact, upon certificates of officers of the Company,
provided that such counsel shall state that they believe that both you and
they are justified in relying upon such opinions, abstracts, reports,
policies and certificates);
(v) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company is a party or of which any property of the
Company is the subject which, if determined adversely to the Company would
individually or in the aggregate have a material adverse effect on the
current or
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future consolidated financial position, stockholders' equity or results of
operations of the Company and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(vi) This Agreement has been duly authorized, executed and delivered
by the Company;
(vii) The issue and sale of the Shares being delivered at such Time
of Delivery by the Company and the compliance by the Company with all of
the provisions of this Agreement and the consummation of the transactions
herein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Company is a
party or by which the Company is bound or to which any of the property or
assets of the Company is subject, nor will such action result in any
violation of the provisions of the Certificate of Incorporation or By-laws
of the Company or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its properties;
(viii) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the
Company of the transactions contemplated by this Agreement, except the
registration under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(ix) The Company is not in violation of its Certificate of
Incorporation or By-laws or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of its
properties may be bound;
(x) Each of the License Agreements is in full force and effect and
constitutes a valid and binding agreement between the parties thereto,
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; and the statements in the Prospectus under the captions
["Risk Factors - Uncertainty Regarding Patents and Protection of
Proprietary Technology; Risk of Future Litigation" and "Business -
Strategic Alliances and Patents, Trade Secrets and Proprietary Rights,"]
insofar as they purport to describe the provisions of the License
Agreements, are accurate, complete and fair summaries thereof in all
material respects;
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(xi) Each of the Alliance Agreements is in full force and effect and
constitutes a valid and binding agreement between the parties thereto,
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; and the statements in the Prospectus under the captions
"Risk Factors - Reliance on Strategic Relationships" and "Business -
Strategic Alliances and Patents and Proprietary Rights", insofar as they
purport to describe the provisions of the Alliance Agreements, are
accurate, complete and fair summaries thereof in all material respects;
(xii) The statements set forth in the Prospectus under the captions
"Risk Factors - Shares Eligible for Future Sale; Registration Rights" and
"Shares Eligible for Future Sale", insofar as such statements purport to
describe the provisions of the laws and documents referred to therein, are
accurate, complete and fair summaries thereof in all material respects;
(xiii) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, and under the caption "Underwriting",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(xiv) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act; and
(xv) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
rules and regulations thereunder; although they do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, except for those
referred to in the opinion in subsections (x), (xi), (xii) and (xiii) of
this section 7(c), they have no reason to believe that, as of its effective
date, the Registration Statement or any further amendment thereto made by
the Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) contained an 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, as of its date, the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading or
that, as of such Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel need express no
opinion) contains an untrue statement
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of a material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as required;
(d) Each of Pandiscio & Pandiscio, Fish & Richardson, Arant, Kleinberg,
Lerner & Ram, Weingarten, Schurgin, Gagnebin & Hayes and Lappin & Kusmer, patent
and/or trademark counsel for the Company, shall have furnished to you their
written opinions (a draft of each such opinion is attached hereto as Annex
II(c), II(d), II(e), II(f), II(g), respectively), dated such Time of Delivery,
in form and substance satisfactory to you;
(e) __________________, regulatory counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached
hereto as Annex II(h) hereto) dated such Time of Delivery, in form and substance
satisfactory to you to the effect that it has examined the Registration
Statement and;
(i) The statements under the caption "Risk Factors - No Assurance of
Regulatory Clearance or Approval; Significant Domestic and International
Regulation" and "Business - Government Regulation" in the Prospectus, are,
in all material respects, accurate and fair statements or summaries of
applicable federal law and regulation as applied by the FDA, subject to the
qualifications set forth therein;
(ii) No facts have come to the attention of such counsel that lead it to
believe that the information contained under the captions "Risk Factors -
No Assurance of Regulatory Clearance or Approval; Significant Domestic and
International Regulation" and "Business - Government Regulation" (a) in the
Registration Statement, at the time the Registration Statement became
effective, contained any untrue statement of a material fact, or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, or (b) in the Prospectus, at the
time the Prospectus was issued or at the date hereof, contained any untrue
statement of a material fact, or omitted to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
and
(iii) Such counsel has no actual knowledge of any action, suit or
proceeding pending or threatened by the FDA against the Company seeking
limitation, suspension, or revocation of any license, permit, approval or
authorization required by the Company to conduct its business as described
in the Registration Statement and the Prospectus;
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(f) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., [New York City time], on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Ernst & Young, LLP,
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you (the executed copy
of the letter delivered prior to the execution of this Agreement is attached as
Annex I(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration Statement and
as of each Time of Delivery is attached as Annex I(b) hereto);
(g) (i) The Company shall not have sustained since the date of the latest
audited financial statements included in the Prospectus any loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Prospectus, the effect of
which, in any such case described in Clause (i) or (ii), is in the judgment of
the Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(h) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on the NNM; (ii) a
suspension or material limitation in trading of the Company's securities on
NMM; (iii) a general moratorium on commercial banking activities declared by
either Federal, New York or California State authorities; or (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the
effect of any such event specified in this Clause (iv) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such Time of
Delivery on the terms and in the manner contemplated in the Prospectus;
(i) The Shares to be sold at such Time of Delivery shall have been duly
listed for quotation on the NNM; and
(j) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from each of the executive officers, directors,
stockholders, option holders and warrant holders listed on Schedule 7(j)
attached hereto, substantially to the effect set forth in Subsection 5(f) hereof
in form and substance satisfactory to you;
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<PAGE>
(k) The Company shall have complied with the provisions of Subsection 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement.
(l) The Company shall have furnished or caused to be furnished to you at
such Time of Delivery certificates of officers of the Company satisfactory to
you as to the accuracy of the representations and warranties of the Company
herein at and as of such Time of Delivery, as to the performance by the Company
of all of its obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (e) of this Section
and as to such other matters as you may reasonably request; and
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or 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 for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that 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 any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or 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 any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made
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<PAGE>
against the indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by PRO RATA allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or
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<PAGE>
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), 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 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has so arranged for
the purchase of such Shares, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase
-17-
<PAGE>
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter except as provided in Sections 6
and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
Representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
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<PAGE>
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us [one for the Company and each of the Representatives plus one for
each counsel] counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth
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<PAGE>
in a form of Agreement among Underwriters, the form of which shall be submitted
to the Company for examination upon request, but without warranty on your part
as to the authority of the signers thereof.
Very truly yours,
VISTA MEDICAL TECHNOLOGIES, INC.
By:
-------------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Name(s) of Co-Representative
By:
--------------------------------
Name:
Title:
Salomon Brothers Inc
Name(s) of Co-Representative
By:
--------------------------------
Name:
Title:
On behalf of each of the Underwriters
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<PAGE>
SCHEDULE I
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ---------
Goldman, Sachs & Co.
Salomon Brothers Inc
Total
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<PAGE>
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company within the meaning of the Act and the applicable published
rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus as
indicated in their reports thereon copies of which have been separately
furnished to the Representatives and on the basis of specified procedures
including inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i) below
comply as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations,
nothing came to their attention that cause them to believe that the
unaudited condensed consolidated financial statements do not comply as to
form in all material respects with the applicable accounting requirements
of the Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
and its subsidiaries for the three most recent fiscal years included in the
Prospectus agrees with the corresponding amounts (after restatements where
applicable) in the audited consolidated financial statements for such three
fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation
S-K;
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<PAGE>
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company since the date of the latest audited financial
statements included in the Prospectus, inquiries of officials of the
Company responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing came
to their attention that caused them to believe that:
(A) any unaudited income statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items
in the unaudited consolidated financial statements from which such
data and items were derived, and any such unaudited data and items
were not determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated financial
statements included in the Prospectus;
(B) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (A) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(C) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(D) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the capital stock
(other than issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance shares and
upon conversions of convertible securities, in each case which were
outstanding on the date of the latest financial statements included in
the Prospectus) or any increase in the long-term debt of the Company
or any decreases in net current assets or stockholders= equity or
other items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are described
in such letter; and
(E) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in Clause
(D) there were any decreases in net revenues or operating profit or
the total or per share amounts of net income or other items specified
by the Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
decreases or increases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
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<PAGE>
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(vi) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company and its subsidiaries, which
appear in the Prospectus, or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have
found them to be in agreement.
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<PAGE>
ANNEX II(a)
[Form Of Opinion - McDermott, Will & Emery]
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<PAGE>
ANNEX II(b)
[Form Of Opinion - Brobeck, Phleger & Harrison]
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<PAGE>
ANNEX II(c)
[Letterhead of Pandiscio & Pandiscio]
March ___, 1997
Goldman, Sachs & Co.
SALOMON BROTHERS INC
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Gentlemen:
We have acted as patent counsel to Vista Medical Technologies, Inc. ("the
Company"), a Delaware corporation, with respect to the patent matters reflected
on Schedule A attached hereto (the "Relevant Patent Matters") and in connection
with the sale of __________ shares of common stock of the Company, par value
$.01 per share, pursuant to a Registration Statement on Form S-1. This opinion
is rendered to you pursuant to Section 7(g) of the Underwriting Agreement, dated
March ___, 1997, between you and the Company. It is our opinion, as patent
counsel for the Company, that:
A. The Company owns or possesses adequate patents, patent licenses,
licenses or other rights to use all trademarks, service marks, trade names,
service names, copyrights, mask works, technology, know-how and other
proprietary intellectual property rights ("Intellectual Property") necessary to
conduct the business presently and as proposed to be conducted by the Company as
described in the Registration Statement and the Prospectus, and, except as
described in the Registration Statement and the Prospectus, the Company has not
received any notice of infringement of or conflict with, and does not otherwise
know of any basis for, notice of any such infringement of or conflict with,
asserted rights of others;
(ii) Except as set forth in Schedule B to this letter or as described in
the Registration Statement and the Prospectus, insofar as the Relevant Patent
Matters are concerned, the Company's discoveries, inventions, products or
processes referred to in the Registration Statement and the Prospectus do not,
to my knowledge, infringe or conflict with any right which is the subject of a
patent known to the Company, which infringement or conflict could result in any
material adverse effect upon the Company's business, financial condition and
results of operations; and
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<PAGE>
(iii) To the extent that the statements contained in the Prospectus under
the sub-heading "Business--Patents and Proprietary Rights" refer to our opinions
on matters of law or purport to summarize the status of litigation or the
provisions of statutes, regulations, contracts, agreements or other documents in
respect of the Relevant Patent Matters, such statements (A) have been prepared
or reviewed by me and accurately reflect the status of any such litigation, the
provisions purported to be summarized and any such opinions of ours, and (B) are
correct and complete.
In connection with the opinion expressed in paragraph (i), we have relied,
with your consent, on the legal opinions of Fish & Richardson, Weingarten,
Schurgin, Gagnebin & Hayes, Arant, Kleinberg, Lerner & Ram and Lappin & Kusmer
dated today and addressed to you. We have reviewed such legal opinions as to
scope and form and we believe that you and we are justified in relying thereon.
-2-
<PAGE>
ANNEX II(d)
[Letterhead of Arant, Kleinberg, Lerner & Ram]
March ___, 1997
Goldman, Sachs & Co.
SALOMON BROTHERS INC
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Gentlemen:
We have acted as trademark counsel to Vista Medical Technologies, Inc.
("the Company"), a Delaware corporation, with respect to the trademark matters
reflected on Schedule A attached hereto (the "Relevant Trademark Matters").
This opinion is rendered to you pursuant to Section 7(g) of the Underwriting
Agreement, dated March ___, 1997, between you and the Company entered into in
connection with the sale of __________ shares of common stock of the Company,
par value $.01 per share, pursuant to a Registration Statement on Form S-1. It
is our opinion, as trademark counsel for the Company, that:
A. Insofar as the Relevant Trademark Matters are concerned, the Company
owns or possesses adequate licenses or other rights to use all trademarks,
service marks, trade names and service names ("Intellectual Property") necessary
to conduct the business presently and as proposed to be conducted by the Company
as described in the Registration Statement and the Prospectus, and, except as
described in the Registration Statement and the Prospectus, the Company has not
received any notice of infringement of or conflict with, and does not otherwise
know of any basis for, notice of any such infringement of or conflict with,
asserted rights of others with respect to the Relevant Trademark Matters;
(ii) Except as set forth in Schedule B to this letter or as described in
the Registration Statement and the Prospectus, insofar as the Relevant Trademark
Matters are concerned, the Company's trademarks referred to in the Registration
Statement and the Prospectus do not, to my knowledge, infringe or conflict with
any right which is the subject of a trademark known to the Company, which
infringement or conflict could result in any material adverse effect upon the
Company's business, financial condition and results of operations; and
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<PAGE>
(iii) To the extent that the statements contained in the Prospectus under
the sub-heading "Business--Patents and Proprietary Rights" refer to our opinions
on matters of law or purport to summarize the status of litigation or the
provisions of statutes, regulations, contracts, agreements or other documents in
respect of the Relevant Trademark Matters, such statements (A) have been
prepared or reviewed by us and accurately reflect the status of any such
litigation, the provisions purported to be summarized and any such opinions of
ours, and (B) are correct and complete.
-2-
<PAGE>
ANNEX II(e)
[Letterhead of Fish & Richardson]
March ___, 1997
Goldman, Sachs & Co.
SALOMON BROTHERS INC
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Gentlemen:
We have acted as patent and trademark counsel to Vista Medical
Technologies, Inc. ("the Company"), a Delaware corporation, with respect to the
patent and trademark matters reflected on Schedule A attached hereto (the
"Relevant Intellectual Property Matters"). This opinion is rendered to you
pursuant to Section 7(g) of the Underwriting Agreement, dated March ___, 1997,
between you and the Company, entered into in connection with the sale of
__________ shares of common stock of the Company, par value $.01 per share,
pursuant to a Registration Statement on Form S-1. It is our opinion, as patent
and trademark counsel for the Company, that:
A. Insofar as the Relevant Intellectual Property Matters are concerned,
the Company owns or possesses adequate patents, patent licenses, licenses or
other rights to use all trademarks, service marks, trade names, service names,
copyrights, mask works, technology, know-how and other proprietary intellectual
property rights ("Intellectual Property") necessary to conduct the business
presently and as proposed to be conducted by the Company as described in the
Registration Statement and the Prospectus, and, except as described in the
Registration Statement and the Prospectus, the Company has not received any
notice of infringement of or conflict with, and does not otherwise know of any
basis for, notice of any such infringement of or conflict with, asserted rights
of others with respect to the Relevant Intellectual Property Matters;
(ii) Except as set forth in Schedule B to this letter or as described in
the Registration Statement and the Prospectus, insofar as the Relevant
Intellectual Property Matters are concerned, the Company's discoveries,
inventions, products, processes or trademarks referred to in the Registration
Statement and the Prospectus do not, to our knowledge, infringe or conflict with
any right which is the subject of a patent or trademark known to the Company,
which infringement or conflict could result in any material adverse effect upon
the Company's business, financial condition and results of operations; and
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<PAGE>
(iii) Insofar as the Relevant Intellectual Property Matters are concerned,
to the extent that the statements contained in the Prospectus under the sub-
heading "Business--Patents and Proprietary Rights" refer to our opinions on
matters of law or purport to summarize the status of litigation or the
provisions of statutes, regulations, contracts, agreements or other documents in
respect of the Relevant Intellectual Property Matters, such statements (A) have
been prepared or reviewed by me and accurately reflect the status of any such
litigation, the provisions purported to be summarized and any such opinions of
ours, and (B) are correct and complete.
-2-
<PAGE>
ANNEX II(f)
[Letterhead of Weingarten, Schurgin, Gagnebin & Hayes]
March ___, 1997
Goldman, Sachs & Co.
SALOMON BROTHERS INC
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Gentlemen:
We have acted as patent counsel to Vista Medical Technologies, Inc. ("the
Company"), a Delaware corporation, with respect to the patent matters reflected
on Schedule A attached hereto (the "Relevant Patent Matters"). This opinion is
rendered to you pursuant to Section 7(g) of the Underwriting Agreement, dated
March ___, 1997, between you and the Company, entered into in connection with
the sale of __________ shares of common stock of the Company, par value $.01 per
share, pursuant to a Registration Statement on Form S-1. It is our opinion, as
patent counsel for the Company, that:
A. Insofar as the Relevant Patent Matters are concerned, the Company owns
or possesses adequate patents, patent licenses, licenses or other rights to use
all trademarks, service marks, trade names, service names, copyrights, mask
works, technology, know-how and other proprietary intellectual property rights
("Intellectual Property") necessary to conduct the business presently and as
proposed to be conducted by the Company as described in the Registration
Statement and the Prospectus, and, except as described in the Registration
Statement and the Prospectus, the Company has not received any notice of
infringement of or conflict with, and does not otherwise know of any basis for,
notice of any such infringement of or conflict with, asserted rights of others
with respect to the Relevant Patent Matters;
(ii) Except as set forth in Schedule B to this letter or as described in
the Registration Statement and the Prospectus, insofar as the Relevant Patent
Matters are concerned, the Company's discoveries, inventions, products or
processes referred to in the Registration Statement and the Prospectus do not,
to our knowledge, infringe or conflict with any right which is the subject of a
patent known to the Company, which infringement or conflict could result in any
material adverse effect upon the Company's business, financial condition and
results of operations; and
-1-
<PAGE>
(iii) Insofar as the Relevant Patent Matters are concerned, to the extent
that the statements contained in the Prospectus under the sub-heading "Business-
- -Patents and Proprietary Rights" refer to our opinions on matters of law or
purport to summarize the status of litigation or the provisions of statutes,
regulations, contracts, agreements or other documents in respect of the Relevant
Patent Matters, such statements (A) have been prepared or reviewed by us and
accurately reflect the status of any such litigation, the provisions purported
to be summarized and any such opinions of ours, and (B) are correct and
complete.
-2-
<PAGE>
ANNEX II(g)
[Letterhead of Lappin & Kusmer]
March ___, 1997
GOLDMAN, SACHS & CO.
SALOMON BROTHERS INC
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Gentlemen:
We have acted as patent counsel to Harry R. McKinley ("McKinley") and
McKinley Optics, Inc. ("McKinley Optics") with respect to the patent matters
reflected on Schedule A attached hereto (the "Relevant Patent Matters") and with
respect to the licensing agreements reflected on Schedule B hereto (the
"Relevant License Agreements"). This opinion is rendered to you at the request
of McKinley and McKinley Optics pursuant to Section 7(g) of the Underwriting
Agreement, dated March ____, 1997, between you and the Vista Medical
Technologies, Inc. ("the Company"), entered into in connection with the sale of
_________ shares of common stock of the Company, par value $.01 per share,
pursuant to a Registration Statement on Form S-1. . It is our opinion, as
intellectual property counsel for McKinley, that:
(i) Each of the Relevant License Agreements is in full force and effect
and constitutes a legal, valid and binding obligation of each of McKinley Optics
and McKinley, enforceable in accordance with its terms against each of them,
subject to the effect of (i) bankruptcy, insolvency, reorganization, moratorium
and other similar laws now or hereafter in effect affecting creditors' rights
generally, and (ii) general principles of equity, including, without limitation,
concepts of materiality, reasonableness, public policy, good faith and fair
dealing (regardless of whether considered in a proceeding in equity or at law).
(ii) Each of McKinley and McKinley Optics owns certain patents,
technology and know-how, and other proprietary intellectual property rights
("Intellectual Property") as described in the Relevant License Agreements and on
Schedule A hereto, and neither McKinley nor McKinley Optics has received any
notice of infringement of or conflict with, and does not otherwise know of any
basis for, notice of any such infringement of or conflict with, asserted rights
of others regarding such Intellectual Property;
(iii) The Company is the sole and exclusive licensee of the technology set
forth in Appendix A to the License Agreement (as defined on Schedule B) and no
other person or entity has been granted any rights in, to or under such
technology.
(iv) The patent applications referred to in the Relevant Patent Matters
were prepared and submitted in accordance with all applicable legal and
procedural requirements, all annuity, maintenance and other necessary fees have
been timely paid and we are not aware of any facts which could form a basis for
a successful challenge to the validity or enforceability of any patent issued
from such patent applications. The patents referred to in the Relevant Patent
Matters were obtained in accordance with all applicable legal and procedural
requirements, all annuity, maintenance and other necessary fees have been timely
paid and we are not aware of any facts which could form a basis for a successful
challenge to the validity or enforceability of such patents;
-1-
<PAGE>
(v) Except as set forth in Schedule C to this letter, the discoveries,
inventions, products, processes, technology and know-how which are a part of the
Relevant Patent Matters and Relevant License Agreements do not, to our knowledge
after due inquiry, infringe or conflict with any right which is the subject of a
patent known to McKinley or McKinley Optics, which infringement or conflict
could result in any material adverse effect upon the Company's ability to
utilize and enjoy the benefits and rights provided to the Company under the
Relevant License Agreements; and
(vi) We have reviewed the statements contained in the Prospectus under
the sub-heading "Business--Patents and Proprietary Rights" and insofar as such
statements relate to the Relevant Patent Matters or the Relevant License
Agreements, such statements are correct and complete.
-2-
<PAGE>
SCHEDULE B
1. License and Development Agreement (the "License Agreement"), dated December
18, 1991, as amended.
2. Non-Competition, Non-Disclosure and Patent and Invention Assignment
Agreement, as amended.
3. Agreement to Amend License and Development Agreement, dated September 15,
1995, as amended.
4. Consulting Agreement, dated September 15, 1995, as amended.
-3-
<PAGE>
ANNEX II(h)
[Form Of Opinion - "Company Regulatory Counsel"]
-1-
<PAGE>
SCHEDULE 7(j)
LOCK-UP AGREEMENT
Goldman, Sachs & Co.
Salomon Brothers Inc.
As Representatives of the Several Underwriters
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
The undersigned understands that you, as representatives of the several
underwriters (the "Representatives"), propose to enter into an Underwriting
Agreement with Vista Medical Technologies, Inc. (the "Company") providing for
the public offering (the "Public Offering") by the several underwriters,
including yourselves, of the common stock (the "Common Stock"), $.01 par value
per share, of the Company. The undersigned recognizes that the Public Offering
will benefit the Company by, among other things, raising additional capital for
product introduction, marketing and general corporate purposes.
In consideration of the underwriters' agreement to purchase shares of
Common Stock and conduct the Public Offering, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
undersigned irrevocably agrees that, without the prior written consent of the
Representatives, the undersigned will not, directly or indirectly, offer, sell,
contract to sell, grant any option to purchase, make any short sale, or
otherwise dispose of any Common Stock of the Company, or other securities of the
Company that are substantially similar to Common Stock (including, without
limitation, any securities that are convertible into or exchangeable for, or
that represent the right to receive upon exercise or otherwise, Common Stock or
any substantially similar securities), or any Common Stock of the Company which
may be deemed to be beneficially owned by the undersigned in accordance with the
rules and regulations of the Securities and Exchange Commission, for a period of
180 days from and after the date of the final Prospectus covering the public
offering of shares of the Common Stock. The undersigned acknowledges that you
and the Company are relying on the agreements of the undersigned contained
herein in carrying out the Public Offering and in entering into underwriting
arrangements with respect thereto.
The foregoing restriction is expressly agreed to preclude the undersigned
from engaging in any hedging or other transaction which is designed to or
reasonably expected to lead to or result in a sale or disposition of the shares
of Common Stock even if such shares of Common Stock would be disposed of by
someone other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale or any purchase,
sale or grant of any right (including without limitation any put or call option)
with respect to any of the shares of Common Stock or with respect to any
security that includes, relates to, or derives any significant part of its value
from such shares.
-1-
<PAGE>
The Company and _________________, the Company's Transfer Agent, are hereby
authorized to enforce this Lock-Up Agreement by refusing to permit transfers
which the Company believes may violate this agreement. The undersigned
understands that this Lock-Up Agreement is irrevocable and shall be binding upon
the undersigned's heirs, legal representatives, successors and assigns.
Sincerely,
--------------------------
Signature
--------------------------
Name (Print or Type)
--------------------------
Date
-2-
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION EXHIBIT 3.1
OF
VISTA MEDICAL TECHNOLOGIES, INC.
The undersigned, John Lyon and Robert DeVaere, hereby certify that:
ONE: The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on October 31, 1996.
TWO: The Certificate of Incorporation of this corporation is amended and
restated to read as follows:
ARTICLE I.
The name of the corporation (hereinafter called "Corporation") is Vista
Medical Technologies, Inc.
ARTICLE II.
The address of the registered office of the Corporation in the State of
Delaware is 30 Old Rudnick Lane, City of Dover, County of Kent 19901, and the
name of the registered agent of the Corporation in the State of Delaware at such
address is CorpAmerica, Inc.
ARTICLE III.
The purpose of this Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV.
A. CLASSES OF STOCK. This Corporation is authorized to issue two (2)
classes of shares, to be designated "Common" and "Preferred" and referred to
herein as the "Common Shares" or the "Preferred Shares" respectively. The total
number of Common Shares the Corporation is authorized to issue is twenty-five
million (25,000,000). The par value is $0.01 per share. The total number of
Preferred Shares the Corporation is authorized to issue is eighteen million
(18,000,000). The par value is $0.01 per share.
The Board of Directors of the Corporation may divide the Preferred
Shares into any number of series. The Board of Directors shall fix the
designation and number of
1.
<PAGE>
shares of each such series. The Board of Directors may determine and alter the
rights, preferences, privileges and restrictions granted to and imposed upon any
wholly unissued series of the Preferred Shares. The Board of Directors (within
the limits and restrictions of any resolution adopted by it, originally fixing
the number of shares of any series) may increase or decrease the number of
shares of any such series after the issue of shares of that series, but not
below the number of then outstanding shares of such series.
B. RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF THE SERIES A-1
PREFERRED STOCK, SERIES A-3 PREFERRED STOCK, SERIES B PREFERRED STOCK AND SERIES
C PREFERRED STOCK.
1. DESIGNATION OF SERIES A-1 PREFERRED STOCK, SERIES A-3 PREFERRED
STOCK, SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK. Eight Million
Three Hundred Thousand (8,300,000) shares of Preferred Stock are designated
Series A-1 Preferred Stock (the "Series A-1 Preferred") with the rights,
preferences and privileges specified herein. Five Hundred Thousand (500,000)
shares of Preferred Stock are designated Series A-3 Preferred Stock (the "Series
A-3 Preferred") with the rights, preferences and privileges specified herein.
Three Million One Hundred Thousand (3,100,000) shares of Preferred Stock are
designated Series B Preferred Stock (the "Series B Preferred") with the rights,
preferences and privileges specified herein. Two Million (2,000,000) shares of
Preferred Stock are designated Series C Preferred Stock (the "Series C
Preferred") with the rights, preferences and privileges specified herein. As
used in this Article IV, Section B., the term "Series A Preferred" shall refer
to the Series A-1 Preferred and the Series A-3 Preferred. As used in this
Article IV, Section B., the term "Preferred Stock" shall refer to the Series A-1
Preferred, the Series A-3 Preferred, the Series B Preferred and the Series C
Preferred.
2. DIVIDEND RIGHTS OF PREFERRED STOCK. The holders of the then
outstanding shares of Preferred Stock shall be entitled to receive dividends pro
rata, in preference to any dividend on the Common Stock of this Corporation
("Common"), at the rate of eight percent (8%) of the Original Purchase Price per
share (as defined below) per annum, whenever funds are legally available and
when and as declared by the Board of Directors. The dividends shall be non-
cumulative. The original purchase price of the Series A Preferred shall be
$1.325 per share (the "Series A Original Purchase Price"). The original
purchase price of the Series B Preferred shall be $4.00 per share (the "Series B
Original Purchase Price"). The original purchase price of the Series C
Preferred shall be $5.00 per share (the "Series C Original Purchase Price"). As
used in this Section 2, the term "Original Purchase Price" shall refer to the
Series A Original Purchase Price, the Series B Original Purchase Price or the
Series C Original Purchase Price, as the case may be.
3. LIQUIDATION PREFERENCE.
a. In the event of any liquidation event, either voluntary or
involuntary, the holders of the Preferred Stock shall be entitled to receive pro
rata, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common by reason of their
ownership thereof, with respect to the Series C Preferred, the sum of (i) $5.00
per share for each share of Series C Preferred then
2.
<PAGE>
held by them and (ii) an amount equal to all declared but unpaid dividends on
the Series C Preferred then held by them, with respect to the Series B
Preferred, the sum of (i) $4.00 per share for each share of Series B Preferred
then held by them and (ii) an amount equal to all declared but unpaid dividends
on the Series B Preferred then held by them, and, with respect to the Series A
Preferred, the sum of (i) $1.325 per share for each share of Series A Preferred
then held by them and (ii) an amount equal to all declared but unpaid dividends
on the Series A Preferred then held by them. If, upon the occurrence of such
event, the assets and funds thus distributed among the holders of the Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Preferred Stock in proportion to the preferential
amount each such holder would have been entitled to receive pursuant to this
Section 3 if such distribution had been sufficient to permit the full payment of
such preferential amount.
b. After payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled pursuant to Section
3.a. above, the holders of the Common and Preferred Stock shall be entitled to
receive the remaining assets of the Corporation in proportion to the shares of
Common Stock then held by them and the shares of Common Stock which they have
the right to acquire upon conversion of Preferred Stock until such time as the
distributions made to the holders of the Preferred Stock (taken together with
all payments made pursuant to Section 3.a. above) equal, with respect to the
Series A Preferred, $3.975 per share for each share of Series A Preferred then
held by them, with respect to the Series B Preferred, $12.00 per share for each
share of Series B Preferred then held by them and, with respect to the Series C
Preferred, $15.00 per share for each share of Series C Preferred then held by
them. If, upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire remaining assets and funds of the Corporation legally available
for distribution after payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled pursuant to Section
3.a. above shall be distributed ratably among the holders of the Common and
Preferred Stock in proportion to the preferential amount each such holder would
have been entitled to receive pursuant to this Section 3 if such distribution
had been sufficient to permit the full payment of the preferential amounts under
this Section 3.b. to the holders of the Preferred Stock.
c. After payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled pursuant to Sections
3.a. and 3.b. above, the holders of the Common shall be entitled to receive all
remaining assets of the Corporation in proportion to the shares of Common Stock
then held by them.
d. For purposes of this Section 3, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, or to
include, the Corporation's sale of all or substantially all of its assets or the
acquisition of this Corporation by another entity by means of merger or
consolidation resulting in the exchange of the outstanding shares of this
Corporation for securities or consideration issued, or caused
3.
<PAGE>
to be issued, by the acquiring Corporation or its subsidiary in which the
stockholders of the Corporation are holders of less than 50% of voting power of
the surviving corporation.
4. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
a. OPTIONAL AND AUTOMATIC CONVERSION. Each share of Preferred
Stock shall be convertible at the option of the holder thereof, without payment
of additional consideration, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for the Preferred
Stock, into such number of fully paid and nonassessable shares of Common as is
determined by dividing, with respect to the Series A Preferred, $1.325, with
respect to the Series B Preferred, $4.00, or, with respect to the Series C
Preferred, $5.00 by the Conversion Price, determined as hereinafter provided, in
effect at the time of conversion. The price at which shares of Common shall be
deliverable upon conversion of the Series A-1 Preferred (the "Series A-1
Conversion Price") shall initially be $1.325 per share of Common. The price at
which shares of Common shall be deliverable upon conversion of the Series A-3
Preferred (the "Series A-3 Conversion Price") shall initially be $1.325 per
share of Common. The price at which shares of Common shall be deliverable upon
conversion of the Series B Preferred (the "Series B Conversion Price") shall
initially be $4.00 per share of Common. The price at which shares of Common
shall be deliverable upon conversion of the Series C Preferred (the "Series C
Conversion Price") shall initially be $5.00 per share of Common. As used in
this Section 4., the term "Conversion Price" shall refer to the Series A-1
Conversion Price, the Series A-3 Conversion Price, the Series B Conversion Price
or the Series C Conversion Price, as the case may be. The initial Series A-1
Conversion Price, Series A-3 Conversion Price, Series B Conversion Price and
Series C Conversion Price shall be subject to adjustment as hereinafter
provided.
Each share of Preferred Stock shall automatically be converted into shares
of Common at the then effective Conversion Price in the event of either (i) the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), covering the offer and sale of Common (whether for the account of
the Corporation or for the account of one or more stockholders of the
Corporation) of the Corporation to the public in which the aggregate gross cash
proceeds to the Corporation (prior to underwriters' discounts and expenses) are
equal to or exceed $15,000,000 and the public offering price is equal to or
exceeds $5.00 per share of Common (as adjusted for any stock dividends,
combinations or splits with respect to such shares) (a "Qualified Public
Offering") or (ii) the written consent of holders of more than fifty percent
(50%) of the then outstanding shares of Preferred Stock voting together as a
single class (a "Qualifying Consent"). In the event of the automatic conversion
of the Preferred Stock upon a Qualified Public Offering, the conversion of
Preferred Stock shall be deemed to have occurred immediately prior to the
closing of such Qualified Public Offering. In the event of the automatic
conversion of the shares of Preferred Stock upon a Qualifying Consent, the
conversion of Preferred Stock shall be deemed to have occurred on the date
specified in such Qualifying Consent.
4.
<PAGE>
b. MECHANICS OF CONVERSION. No fractional shares of Common
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
pay cash equal to such fraction multiplied by the then effective Conversion
Price. Before any holder of Preferred Stock shall be entitled to convert the
same into full shares of Common, it shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Preferred Stock, and shall give written notice to the
Corporation at such office that it elects to convert the same (except that no
such written notice of election to convert shall be necessary in the event of an
automatic conversion pursuant to Section 4.a.). The Corporation shall, as soon
as practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock a certificate or certificates, registered in such names as
specified by the holder, for the number of shares of Common to which he shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common, and any declared and unpaid dividends on the converted Preferred Stock.
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 Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common on such date (except that in the
event of an automatic conversion (i) upon a Qualified Public Offering pursuant
to Section 4.a. such conversion shall be deemed to have been made immediately
prior to the closing of the Qualified Public Offering and (ii) upon a Qualifying
Consent pursuant to Section 4.a. such conversion shall be deemed to have been
made on the date specified in such Qualifying Consent). If the conversion is in
connection with an underwritten offering of securities registered pursuant to
the Act, the conversion may, at the option of any holder tendering Preferred
Stock for conversion, be conditioned upon the closing with the underwriter of
the sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common issuable upon such conversion of the Preferred
Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.
c. ADJUSTMENTS TO SERIES A-1 CONVERSION PRICE, SERIES A-3
CONVERSION PRICE, SERIES B CONVERSION PRICE AND SERIES C CONVERSION PRICE FOR
DILUTIVE ISSUES.
(1) SPECIAL DEFINITIONS. For purposes of this Section 4.c.
and Section 5, the following definitions shall apply:
(a) "OPTION" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common or Convertible
Securities.
(b) "ORIGINAL ISSUE DATE" shall mean, with respect to
the Series A-1 Preferred, the date on which a share of Series A-1 Preferred was
first issued, and with respect to the Series A-3 Preferred, the date on which a
share of Series A-3 Preferred was first issued, with respect to the Series B
Preferred, the date on which a share
5.
<PAGE>
of Series B Preferred was first issued and with respect to the Series C
Preferred, the date on which a share of Series C Preferred was first issued.
(c) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares (other than Common and Preferred Stock) or other
securities directly or indirectly convertible into or exchangeable for Common.
(d) "ADDITIONAL SHARES OF COMMON" shall mean all
shares of Common issued (or, pursuant to Section 4.c.(3), deemed to be issued)
by the Corporation after the Original Issue Date, other than shares of Common
issued or issuable:
i) upon conversion of shares of Preferred Stock
authorized herein;
ii) to officers, directors or employees of, or
consultants to, the Corporation pursuant to any plan or agreement approved by
the Board of Directors;
iii) as a dividend or distribution on the
Preferred Stock or any event for which adjustment is made pursuant to Sections
4.d. or 4.e. hereof;
iv) in connection with equipment leasing or bank
financing transactions, provided such shares are issued for other than primarily
equity financing purposes;
v) pursuant to transactions involving technology
licensing, research or development activities or the distribution or manufacture
of the Corporation's products, provided that each of the forgoing transactions
is for other than primarily equity financing purposes; or
vi) by way of dividend or other distribution on
shares excluded from the definition of Additional Shares of Common by the
foregoing clauses i) through v) or this clause vi) or on shares of Common so
excluded.
(2) NO ADJUSTMENT OF SERIES A-1 CONVERSION PRICE,
SERIES A-3 CONVERSION PRICE, SERIES B CONVERSION PRICE OR SERIES C CONVERSION
PRICE. No adjustment in the Series A-1 Conversion Price, Series A-3 Conversion
Price, Series B Conversion Price or Series C Conversion Price shall be made in
respect of the issuance of Additional Shares of Common unless the consideration
per share for an Additional Share of Common issued or deemed to be issued by the
Corporation is less than the Series A-1 Conversion Price, Series A-3 Conversion
Price, Series B Conversion Price or Series C Conversion Price, respectively, in
effect on the date of, and immediately prior to, the issue of such Additional
Shares.
6.
<PAGE>
(3) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES
OF COMMON -- OPTIONS AND CONVERTIBLE SECURITIES. In the event the Corporation
at any time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that in any such case in which Additional
Shares of Common are deemed to be issued:
(a) no further adjustment in the Series A-1 Conversion
Price, Series A-3 Conversion Price, Series B Conversion Price or Series C
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common upon the exercise of such Options or conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decreases in the number of shares
of Common issuable, upon the exercise, conversion or exchange thereof, the
Series A-1 Conversion Price, Series A-3 Conversion Price, Series B Conversion
Price and Series C Conversion Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(c) no readjustment pursuant to clause (b) above shall
have the effect of increasing the Series A-1 Conversion Price, Series A-3
Conversion Price, Series B Conversion Price or Series C Conversion Price to an
amount which exceeds the lower of (i) such Series A-1 Conversion Price,
Series A-3 Conversion Price, Series B Conversion Price or Series C Conversion
Price, respectively, on the original adjustment date with respect to such deemed
issuance of Additional Shares of Common, or (ii) such Series A-1 Conversion
Price, Series A-3 Conversion Price, Series B Conversion Price or Series C
Conversion Price, respectively, that would have resulted from any issuance of
Additional Shares of Common between such original adjustment date and such
readjustment date; and
(d) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any decrease in the
consideration payable to the Corporation upon the exercise, conversion or
exchange thereof, the Series A-1 Conversion Price, Series A-3 Conversion Price,
Series B Conversion Price and Series C Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
decrease becoming effective, be recomputed to reflect such decrease insofar
7.
<PAGE>
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities.
(4) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON. In the event this Corporation shall issue
Additional Shares of Common (including Additional Shares of Common deemed to be
issued pursuant to Section 4.c.(3)) without consideration or for a consideration
per share less than the Series A-1 Conversion Price, Series A-3 Conversion
Price, Series B Conversion Price or Series C Conversion Price in effect on the
date of and immediately prior to such issue, then and in such event, such Series
A-1 Conversion Price, Series A-3 Conversion Price, Series B Conversion Price or
Series C Conversion Price, respectively, shall be reduced, concurrently with
such issue, to a price (calculated to the nearest cent) determined by
multiplying such Series A-1 Conversion Price, Series A-3 Conversion Price,
Series B Conversion Price or Series C Conversion Price, respectively, by a
fraction, the numerator of which shall be the number of shares of Common
outstanding immediately prior to such issue plus the number of shares of Common
which the aggregate consideration received by the Corporation for the total
number of Additional Shares of Common so issued would purchase at such Series A-
1 Conversion Price, Series A-3 Conversion Price, Series B Conversion Price or
Series C Conversion Price, respectively, in effect immediately prior to such
issue; and the denominator of which shall be the number of shares of Common
outstanding immediately prior to such issue plus the number of such Additional
Shares of Common so issued; and provided further that, for the purposes of this
Section 4.c.(4): (i) no shares of Common issued or issuable upon conversion of
Preferred Stock shall be deemed to be outstanding and all such shares shall be
excluded from such calculation, (ii) all shares of Common issuable upon
conversion of outstanding Options and Convertible Securities (excluding
outstanding Preferred Stock) shall be deemed to be outstanding and all such
shares shall be included in such calculation, and (iii) except as provided in
the foregoing clauses (i) and (ii) above, immediately after any Additional
Shares of Common are deemed issued pursuant to Section 4.c.(3), such Additional
Shares of Common shall be deemed to be outstanding. The Series A-1 Conversion
Price, Series A-3 Conversion Price, Series B Conversion Price and Series C
Conversion Price shall not be increased except as set forth in Section
4.c.(3)(b) and in Section 4.d.
(5) DETERMINATION OF CONSIDERATION. For purposes of this
Section 4.c., the consideration received by the Corporation for the issue of any
Additional Shares of Common shall be computed as follows:
(a) CASH AND PROPERTY. Such consideration shall:
i) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
ii) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
8.
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iii) in the event Additional Shares of Common are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses i) and ii) above, as
reasonably determined in good faith by the Board of Directors.
(b) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common deemed to have been issued pursuant to Section 4.c.(3), relating to
Options and Convertible Securities, shall be determined by dividing:
i) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
ii) the maximum number of shares of Common (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
d. ADJUSTMENT FOR STOCK SPLITS, DIVIDENDS AND COMBINATIONS. If
the Corporation shall at any time or from time to time effect a subdivision of
the outstanding Common, or shall issue a dividend of Common on its outstanding
Common, the Series A-1 Conversion Price, Series A-3 Conversion Price, Series B
Conversion Price and Series C Conversion Price then in effect immediately before
that subdivision or dividend shall be proportionately decreased, and conversely,
if the Corporation shall combine the outstanding shares of Common, the Series A-
1 Conversion Price, Series A-3 Conversion Price, Series B Conversion Price and
Series C Conversion Price then in effect immediately before the combination
shall be proportionately increased. Any adjustment under this Section 4.d.
shall become effective at the close of business on the date the subdivision or
combination becomes effective or on the date on which the dividend is declared.
e. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time shall make or issue, or
fix a record date for the determination of holders of Common entitled to receive
a dividend or other distribution payable in securities of the Corporation other
than shares of Common, then, and in each such event, provision shall be made so
that the holders of Series A-1 Preferred, Series A-3 Preferred, Series B
Preferred and Series C Preferred shall receive upon conversion thereof, in
addition to the number of shares of Common receivable thereupon, the amount of
securities of the Corporation that they would have received had their Series A-1
Preferred, Series A-3 Preferred, Series B Preferred and Series C Preferred been
9.
<PAGE>
converted into Common on the date of such event, giving effect to all
adjustments called for with respect to such securities during the period from
the date of such event to and including the conversion date.
f. ADJUSTMENT FOR MERGER OR REORGANIZATION. In case of any
consolidation or merger of the Corporation with or into another corporation or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation (other than a consolidation, merger or conveyance provided
for elsewhere in this Section 4 or Section 3), provisions shall be made so that
holders of shares of Series A-1 Preferred, Series A-3 Preferred, Series B
Preferred and Series C Preferred shall thereafter be convertible into the number
of shares of stock or other securities or property to which a holder of the
number of shares of Common of the Corporation deliverable upon conversion of
such Series A-1 Preferred, Series A-3 Preferred, Series B Preferred and Series C
Preferred would have been entitled upon such consolidation, merger or
conveyance; and, in any case, appropriate adjustment (as reasonably determined
in good faith by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interest thereafter
of the holders of the Series A-1 Preferred, Series A-3 Preferred, Series B
Preferred and Series C Preferred, to the end that the provisions set forth
herein (including provisions with respect to changes in and other adjustments of
the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A-1 Preferred, Series A-3
Preferred, Series B Preferred and Series C Preferred.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If the Common issuable upon the conversion of the Series A-1 Preferred,
Series A-3 Preferred, Series B Preferred and Series C Preferred shall be changed
into the same or different number of shares of any class or series of stock,
whether by capital reorganization, reclassification or otherwise (other than as
set forth above in this Section 4), then and in each such event the holder of
each share of Series A-1 Preferred, Series A-3 Preferred, Series B Preferred and
Series C Preferred shall have the right thereafter to convert such share into
the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change by holders
of the number of shares of Common into which such shares of Series A-1
Preferred, Series A-3 Preferred, Series B Preferred and Series C Preferred might
have been converted immediately prior to such reorganization, reclassification
or change, all subject to further adjustment as provided herein.
h. NO IMPAIRMENT. The Corporation will not, by amendment of
this Amended and Restated Certificate of Incorporation or through any
reorganization, 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 the Series A-1 Preferred, Preferred, Series
A-3 Preferred, Series B Preferred and Series C Preferred against impairment.
10.
<PAGE>
i. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series A-1 Conversion Price, Series A-3
Conversion Price, Series B Conversion Price or Series C Conversion Price
pursuant to this Section 4, the Corporation at its expense shall promptly
compute such adjustments or readjustments in accordance with the terms hereof
and furnish to each holder of any 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 Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Series A-1 Conversion Price, Series A-3
Conversion Price, Series B Conversion Price or Series C Conversion Price at the
time in effect, and (iii) the number of shares of Common and the amount, if any,
of other property which at the time would be received upon the conversion of
such holder's shares.
j. 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 which is the same as cash dividends paid in
previous quarters) or other distribution, the Corporation shall mail to each
holder of 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 or distribution. Each such written notice
shall be given by first class mail, postage prepaid, addressed to the holders of
Preferred Stock at the address for each such holder as shown on the books of
this Corporation.
k. COMMON STOCK RESERVED. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common,
solely for the purpose of effecting the conversion of the shares of Preferred
Stock, such number of shares of Common as shall from time to time be sufficient
to effect the conversion of all outstanding shares of Preferred Stock, and if at
any time the number of authorized but unissued shares of Common shall not be
sufficient to effect the conversion of all then outstanding shares of Preferred
Stock, the Corporation shall take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common to such number of shares as shall be sufficient for such purpose.
5. VOTING RIGHTS. Each holder of shares of Series A-1 Preferred
shall be entitled to the number of votes equal to the number of shares of Common
into which such shares of Series A-1 Preferred could be converted on the record
date for the vote or the date of the solicitation of any written consent of
stockholders and shall have voting rights and powers equal to the voting rights
and powers of the Common. The Series A-3 Preferred shall be non-voting
Preferred, except as otherwise required by law. Each holder of shares of Series
B Preferred shall be entitled to the number of votes equal to the number of
shares of Common into which such shares of Series B Preferred could be converted
on the record date for the vote or the date of the solicitation of any written
consent of stockholders and shall have voting rights and powers equal to the
voting rights and powers of the Common. Each holder of shares of Series C
Preferred shall be entitled to the number of votes equal to the number of shares
of Common into which such shares of Series C Preferred could be
11.
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converted on the record date for the vote or the date of the solicitation of any
written consent of stockholders and shall have voting rights and powers equal to
the voting rights and powers of the Common. Each holder of Common shall be
entitled to one vote per share of Common held by such holder. The holder of
each share of Series A-1 Preferred, Series B Preferred and Series C Preferred
shall be entitled to notice of any stockholders' meeting in accordance with the
Bylaws of the Corporation and shall vote with holders of the Common upon all
matters submitted to a vote of stockholders, except those matters required by
law to be submitted to a class vote and except as provided in Section 6 below.
Fractional votes by the holders of Series A-1 Preferred, Series B Preferred and
Series C Preferred shall not, however, be permitted and any fractional voting
rights resulting from the above formula shall be rounded to the nearest whole
number.
6. RESTRICTIONS AND LIMITS.
a. So long as fifty percent (50%) or more of the originally
issued shares of Series A-1 Preferred, Series B Preferred and Series C Preferred
shall be outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than sixty-six
and two-thirds percent (66-2/3%) of the then outstanding shares of Series A-1
Preferred, Series B Preferred and Series C Preferred, voting as a class:
(1) amend or repeal any provision of, or add any provision
to, the Corporation's Amended and Restated Certificate of Incorporation or
Bylaws if such action would adversely alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of the
Series A-1 Preferred, Series B Preferred or Series C Preferred;
(2) create any new series or class of stock having any
rights, preferences or privileges senior to or on a parity with any such rights,
preferences or privileges of the Series A-1 Preferred, Series B Preferred or
Series C Preferred;
(3) increase or decrease the authorized number of shares of
Series A Preferred, Series B Preferred, Series C Preferred or Preferred;
(4) pay any dividend on, or redeem, repurchase or otherwise
acquire any shares of, the Common or Preferred (other than (i) any repurchases
of shares of Common held by an employee of the Corporation upon termination of
employment, and (ii) as approved by the Board of Directors);
(5) merge into or consolidate with any other corporation or
entity (other than any transaction in which the Corporation's stockholders own a
majority of the securities of the surviving corporation) or sell all or
substantially all of the assets of the Corporation;
(6) amend, or take any action intended to circumvent, the
provisions of this Section 6.
12.
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7. STATUS OF CONVERTED STOCK. In the event any shares of Preferred
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be cancelled and shall not be issuable by the Corporation. The
Certificate of Incorporation of this Corporation shall be appropriately amended
to effect the corresponding reduction in the Corporation's authorized capital
stock.
8. RESIDUAL RIGHTS. All rights accruing to the outstanding shares
of the Corporation not otherwise expressly provided for in this Amended and
Restated Certificate of Incorporation shall be vested in the Common.
9. REPURCHASE OF SHARES. In connection with repurchases by this
Corporation of its Common Stock pursuant to agreements with certain of the
holders thereof approved by this Corporation's Board of Directors, each holder
of Preferred Stock shall be deemed to have waived the application, in whole or
in part, of any provisions of the Delaware General Corporation Law or any
applicable law of any other state which might limit or prevent or prohibit such
repurchases.
ARTICLE V.
A. EXCULPATION.
1. CALIFORNIA. The liability of each and every director of this
Corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
2. DELAWARE. A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
3. CONSISTENCY. In the event of any inconsistency between Sections
1 and 2 of this subsection A, the controlling Section, as to any particular
issue with regard to any particular matter, shall be the one which provides to
the director in question the greatest protection from liability.
B. INDEMNIFICATION.
1. CALIFORNIA. This Corporation is authorized to indemnify the
directors and officers of this Corporation to the fullest extent permissible
under California law. Moreover, this Corporation is authorized to provide
indemnification of (and advancement
13.
<PAGE>
of expenses to) agents (as defined in Section 317 of the California Corporations
Code) through bylaw provisions, agreements with agents, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 317 of the California Corporations
Code, subject only to applicable limits set forth in Section 204 of the
California Corporations Code, with respect to actions for breach of duty to the
Corporation and its stockholders.
2. DELAWARE. To the extent permitted by applicable law, this
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
3. CONSISTENCY. In the event of any inconsistency between Sections
1 and 2 of this subsection B, the controlling Section, as to any particular
issue with regard to any particular matter, shall be the one which authorizes
for the benefit of the agent or other person in question the provision of the
fullest, promptest, most certain or otherwise most favorable indemnification
and/or advancement.
C. EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of any
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI.
The Corporation shall have perpetual existence.
ARTICLE VII.
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the Corporation.
ARTICLE VIII.
Elections of directors need not be by written ballot except and to the
extent provided in the bylaws of the Corporation.
14.
<PAGE>
ARTICLE IX.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
* * * * *
THREE: The foregoing Amendment and Restatement of Certificate of
Incorporation has been duly approved by the Board of Directors.
FOUR: The foregoing amendment and restatement of the Certificate of
Incorporation has been duly approved by the required vote of stockholders in
accordance with Section 242 of the Delaware General Corporation Law. The total
number of outstanding shares of the Corporation is 712,250 shares of Common
Stock, 8,094,340 shares of Series A-1 Preferred Stock, 154,581 shares of Series
A-3 Preferred Stock and 1,325,331 shares of Series B Preferred Stock. The
number of shares voting in favor of the amendment equaled or exceeded the vote
required, such required vote being (a) a majority of the outstanding shares of
Common Stock, Series A-1 Preferred Stock and Series B Preferred Stock (voting
together on an as-converted basis), (b) a majority of the outstanding shares of
Series A-1 Preferred Stock and Series B Preferred Stock (voting together as a
class) and (c) 66 2/3% of the outstanding shares of Series A-1 Preferred Stock
and Series B Preferred Stock (voting together as a class). The holders of
Series A-3 are not entitled to vote, except as required by law.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
15.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this certificate on
November 25, 1996.
/s/ John Lyon
---------------------------------------------
John Lyon, President
/s/ Robert De Vaere
---------------------------------------------
Robert De Vaere, Assistant Secretary
The undersigned certify under penalty of perjury that they have read
the foregoing Amended and Restated Certificate of Incorporation and know the
contents thereof, and that the statements therein are true.
Executed at San Diego, California, on November 25, 1996.
/s/ John Lyon
-----------------------------------
John Lyon
/s/ Robert De Vaere
-----------------------------------
Robert De Vaere
16.
<PAGE>
CERTIFICATE OF AMENDMENT OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
VISTA MEDICAL TECHNOLOGIES, INC.
Vista Medical Technologies, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of Directors of the
Corporation setting forth proposed amendments to the Amended and Restated
Certificate of Incorporation of the Corporation, and declaring said amendments
to be advisable and recommended for approval by the stockholders of the
Corporation. The resolutions setting forth the proposed amendments are as
follows:
NOW, THEREFORE, BE IT RESOLVED, that the FIRST paragraph of Section A of
Article IV of the Amended and Restated Certificate of Incorporation of the
Corporation be amended in its entirety to read as follows:
"A. CLASSES OF STOCK. This Corporation is authorized to issue two
(2) classes of shares, to be designated "Common" and "Preferred" and
referred to herein as the "Common Stock" or the "Preferred Stock"
respectively. The total number of shares of Common Stock the Corporation
is authorized to issue is twenty-five million (25,000,000). The par value
is $0.01 per share. The total number of shares of Preferred Stock the
Corporation is authorized to issue is eighteen million (18,000,000). The
par value is $0.01 per share.
Upon the amendment of this Article IV as set forth herein, each four
shares of Common Stock, par value $0.01, issued and outstanding at such
time shall be combined, reclassified and converted into three shares of
Common Stock, par value $0.01 (the "new shares"). No fractional share
shall be issued upon the combination, reclassification and conversion of
any share or shares of Common Stock. All shares of Common Stock (including
fractions thereof) issuable upon the combination, reclassification and
conversion of one or more shares of Common Stock by a holder thereof
(including, for this purpose, a holder of shares of Common Stock issuable
upon conversion of Preferred Stock) shall be aggregated for purposes of
determining whether the combination, reclassification and conversion would
result in the issuance of any fractional share. If, after the
aforementioned aggregation, the combination, reclassification and
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay
<PAGE>
the holder otherwise entitled to such fraction a sum in cash equal to the
fraction multiplied by the fair market value per share of the Common Stock
(as determined in a reasonable manner by the Board of Directors or a
committee thereof) as of the date of filing of this Certificate of
Amendment. An amount shall be transferred from capital to surplus so that
the amount of capital represented by the new shares in the aggregate at the
time of filing of this Certificate of Amendment shall equal the aggregate
number of new shares multiplied by $0.01. Unless otherwise requested by
the holders thereof, the share certificates representing the shares
outstanding prior to the filing of this Certificate of Amendment shall
represent such number of new shares as combined, reclassified and converted
following the filing of this Certificate of Amendment. Upon surrender by a
holder of Common Stock of a certificate or certificates for Common Stock,
$0.01 par value, duly endorsed, at the office of this Corporation, this
Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Common Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of new shares
to which such holder shall be entitled as aforesaid."
SECOND: That, thereafter, the stockholders approved the foregoing
amendment by written consent in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law. The total
number of outstanding shares of the Corporation is 720,633 shares of Common
Stock, 8,094,340 shares of Series A-1 Preferred Stock, 154,581 shares of Series
A-3 Preferred Stock, 1,325,331 shares of Series B Preferred Stock and 2,000,000
shares of Series C Preferred Stock. The number of shares voting in favor of the
amendment equaled or exceeded the vote required, such required vote being (a) a
majority of the outstanding shares of Common Stock, Series A-1 Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock (voting together on an as-
converted basis), (b) a majority of the outstanding shares of Series A-1
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (voting
together as a class) and (c) 66 2/3% of the outstanding shares of Series A-1
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (voting
together as a class). The holders of Series A-3 are not entitled to vote,
except as required by law.
2.
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FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.
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3.
<PAGE>
IN WITNESS WHEREOF, said Vista Medical Technologies, Inc. has caused this
certificate to be signed by John R. Lyon, its President, and Robert De Vaere,
its Secretary, this 28th day of February, 1997.
By: /s/ John R. Lyon
---------------------------------------------
John R. Lyon, President
By: /s/ Robert De Vaere
---------------------------------------------
Robert De Vaere, Secretary
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
4.
<PAGE>
EXHIBIT 3.2
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF VISTA MEDICAL TECHNOLOGIES, INC.,
a Delaware corporation
Vista Medical Technologies, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Vista Medical Technologies, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on October 31, 1996 and was amended
pursuant to an Amended and Restated Certificate of Incorporation of the
corporation filed with the Secretary of State of the State of Delaware on
November 26, 1996 and pursuant to a Certificate of Amendment of the Amended and
Restated Certificate of Incorporation of the corporation filed with the
Secretary of State of the State of Delaware on February 28, 1997.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Second Restated Certificate of Incorporation was adopted
by the corporation's Board of Directors and stockholders.
3. The text of the Certificate of Incorporation as heretofore amended or
supplemented is hereby restated and further amended to read in its entirety as
follows:
ARTICLE I
The name of this corporation is Vista Medical Technologies, Inc.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 1050 S. State Street, City of Dover, County of Kent. The name of
its registered agent at such address is CorpAmerica, Inc.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
(A) CLASSES OF STOCK. This corporation is authorized to issue two classes
of stock, denominated Common Stock and Preferred Stock. The Common Stock shall
have
<PAGE>
a par value of $0.01 per share and the Preferred Stock shall have a par value of
$0.01 per share. The total number of shares of Common Stock which the
Corporation is authorized to issue is thirty-five million (35,000,000), and the
total number of shares of Preferred Stock which the Corporation is authorized to
issue is five million (5,000,000), which shares of Preferred Stock shall be
undesignated as to series.
(B) ISSUANCE OF PREFERRED STOCK. The Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is hereby
authorized, by filing one or more certificates pursuant to the Delaware General
Corporation Law (each, a "Preferred Stock Designation"), to fix or alter from
time to time the designations, powers, preferences and rights of each such
series of Preferred Stock and the qualifications, limitations or restrictions
thereof, including without limitation the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), redemption price or prices, and the liquidation
preferences of any wholly-unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series and the
designation thereof, or any of them; and to increase or decrease the number of
shares of any series subsequent to the issuance of shares of that series, but
not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be decreased in accordance with the
foregoing sentence, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
(C) RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior or equal rights of holders
of all classes of stock at the time outstanding having prior or equal rights as
to dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. REDEMPTION. The Common Stock is not redeemable upon demand of any
holder thereof or upon demand of this corporation.
3. VOTING RIGHTS. The holder of each share of Common Stock shall have
the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
(A) EXCULPATION. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of
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the Delaware General Corporation Law or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is hereafter amended to further reduce or to authorize, with the
approval of the corporation's stockholders, further reductions in the liability
of the corporation's directors for breach of fiduciary duty, then a director of
the corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
(B) INDEMNIFICATION. To the extent permitted by applicable law, this
corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
corporation, its stockholders and others.
(C) EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of any
of the foregoing provisions of this Article V shall be prospective and shall not
adversely affect any right or protection of a director, officer, agent or other
person existing at the time of, or increase the liability of any director of the
corporation with respect to any acts or omissions of such director occurring
prior to, such repeal or modification.
ARTICLE VI
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation. At the next Annual Meeting of
Stockholders, the Directors shall be classified into three classes, as nearly
equal in number as possible as determined by the Board of Directors, with the
term of office of the first class to expire at the second Annual Meeting of
Stockholders, the term of office of the second class to expire at the third
Annual Meeting of Stockholders and the term of office of the third class to
expire at the fourth Annual Meeting of Stockholders. At each Annual Meeting of
Stockholders following such initial classification and election, Directors
elected to succeed those Directors whose terms expire shall be elected for a
term of office to expire at the third succeeding Annual Meeting of Stockholders
after their election. Additional directorships resulting from an increase in
the number of Directors shall be apportioned among the classes as equally as
possible as determined by the Board of Directors.
ARTICLE VII
No holder of shares of stock of the corporation shall have any preemptive
or other right, except as such rights are expressly provided by contract, to
purchase or subscribe for or receive any shares of any class, or series thereof,
of stock of the corporation, whether now or hereafter authorized, or any
warrants, options, bonds,
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debentures or other securities convertible into, exchangeable for or carrying
any right to purchase any share of any class, or series thereof, of stock; but
such additional shares of stock and such warrants, options, bonds, debentures or
other securities convertible into, exchangeable for or carrying any right to
purchase any shares of any class, or series thereof, of stock may be issued or
disposed of by the Board of Directors to such persons, and on such terms and for
such lawful consideration as in its discretion it shall deem advisable or as the
corporation shall have by contract agreed.
ARTICLE VIII
The corporation is to have a perpetual existence.
ARTICLE IX
The corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Second Restated Certificate of Incorporation and/or
any provision contained in any amendment to or restatement of this Second
Restated Certificate of Incorporation, in the manner now or hereafter prescribed
by statute, and all rights conferred on stockholders herein are granted subject
to this reservation.
ARTICLE X
The Board of Directors may from time to time make, amend, supplement or
repeal the Bylaws by the requisite affirmative vote of Directors as set forth in
the Bylaws; provided, however, that the stockholders may change or repeal any
bylaw adopted by the Board of Directors by the requisite affirmative vote of
stockholders as set forth in the Bylaws; and, provided further, that no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
ARTICLE XI
No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of stockholders called in accordance with the
Bylaws, and no action shall be taken by the stockholders by written consent.
ARTICLE XII
Advance notice of stockholder nominations for the election of directors and
of business to be brought by stockholders before any meeting of the stockholders
of the corporation shall be given in the manner provided in the Bylaws of the
corporation.
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IN WITNESS WHEREOF, this Second Restated Certificate of Incorporation has
been signed under the seal of the corporation as of this ___ day of _________,
1997.
VISTA MEDICAL TECHNOLOGIES, INC.,
a Delaware corporation
By:
-----------------------------------
John R. Lyon,
President and Chief Executive Officer
ATTEST:
- ----------------------------------
Robert J. DeVaere, Secretary
[SIGNATURE PAGE TO SECOND RESTATED CERTIFICATE OF
INCORPORATION OF VISTA MEDICAL TECHNOLOGIES, INC.]
<PAGE>
BYLAWS
OF EXHIBIT 3.3
VISTA MEDICAL TECHNOLOGIES, INC.
I.
OFFICES
Section 1. The registered office shall be in the City of Dover,
County of Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
II.
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of San Diego, State of California, at such
place as may be fixed from time to time by the Board of Directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held on such date and at such time as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting,
at which they shall elect
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by a plurality vote a board of directors, and transact such other business as
may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
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Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a
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different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Directors may not be elected by
written consent except by unanimous written consent to all shares entitled to
vote for the election of directors.
III.
DIRECTORS
Section 1. The authorized number of directors of this Corporation
shall be not less than five (5) nor more than nine (9), the exact number of
directors to be fixed
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from time to time within such limit by a duly adopted resolution of the Board of
Directors or stockholders. The exact number of directors presently authorized
shall be seven (7) until changed within the limits specified above by a duly
adopted resolution of the Board of Directors or stockholders.
Directors shall hold office until the next annual meeting of stockholders
and until their respective successors are elected. If any such annual meeting
is not held, or the directors are not elected thereat, the directors may be
elected at any special meeting of stockholders held for that purpose. Directors
need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation
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and do all such lawful acts and things as are not by statute or by the
certificate of incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
President on four (4) days' notice to each director by mail or 48 hours' notice
to each director either personally or by telephone, facsimile or telegram;
special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of two
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(2) directors unless the board consists of only one (1) director, in which case
special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of the sole director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
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COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or
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names as may be determined from time to time by resolution adopted by the Board
of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
IV.
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her address
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as it appears on the records of the corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telephone, facsimile or telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
V.
OFFICERS
Section 1. The officers of the corporation shall be elected by the
Board of Directors and shall include a President and a Secretary. The Board of
Directors may elect from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Board of Directors may also elect a Treasurer and/or
one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers.
Any number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall elect a President and a Secretary and may
also elect Vice Presidents and a Treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise
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such powers and perform such duties as shall be determined from time to time by
the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which such officer
shall be present. The Chairman of the Board shall have and may exercise such
powers as are, from time to time, assigned to him or her by the Board and as may
be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which such officer shall be present. The
Vice Chairman of the Board shall have and may exercise such powers as are, from
time to time, assigned to him or her by the Board and as may be provided by law.
THE PRESIDENT AND VICE PRESIDENT
Section 8. The President shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board
such officer shall preside at all meetings of the stockholders and the Board of
Directors. The
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Vice President shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 9. The President shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation.
Section 10. In the absence of the President or in the event of such
officer's inability or refusal to act, the Vice President, if any, (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. The Vice Presidents shall perform such other duties and have
such other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by
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the Board of Directors or President, under whose supervision he or she shall be.
The Secretary shall have custody of the corporate seal of the corporation and
the Secretary, or an Assistant Secretary, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by such
Secretary's signature or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by such officer's signature.
Section 12. The Assistant Secretary, or, if there be more than one,
the Assistant Secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the Secretary or in the event of his or her inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The Treasurer may also be referred to as the "Chief
Financial Officer." The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. The Treasurer shall disburse the funds of the corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or
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when the Board of Directors so requires, an account of all his or her
transactions as Treasurer and of the financial condition of the corporation.
Section 15. If required by the Board of Directors, the Treasurer shall
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of such office and for the
restoration to the corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in such Treasurer's possession or under his or
her control belonging to the corporation.
Section 16. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
VI.
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a Vice
President and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the corporation, certifying the number of shares owned by
such officer in the corporation.
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Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
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LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his or
her legal representative, to advertise the same in such manner as it shall
require and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any
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rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
VII.
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in
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cash, in property, or in shares of the capital stock, subject to the provisions
of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
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INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation, provided, however, that the
corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the corporation. The indemnification provided for in this Section
6 shall: (i) not be deemed exclusive of any other rights to which those
indemnified may be entitled under the corporation's certificate of
incorporation, any bylaw, agreement or vote of stockholders or disinterested
directors or otherwise, both as to action in their official capacities and as to
action in another capacity while holding such office, (ii) continue as to a
person who has ceased to be a director, and (iii) inure to the benefit of the
heirs, executors and administrators of such a person. The corporation's
obligation to provide indemnification under this Section 6 shall be offset to
the extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the corporation or any other
person.
Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that such
director is or was a director of the corporation (or was serving at the
corporation's request as a director or officer of another corporation) shall be
paid by the corporation in advance of the final
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disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director to repay such amount if it shall ultimately be
determined that such director is not entitled to be indemnified by the
corporation as authorized by relevant sections of the General Corporation Law of
Delaware. Notwithstanding the foregoing, the corporation shall not be required
to advance such expenses to an agent who is a party to an action, suit or
proceeding brought by the corporation and approved by a majority of the Board of
Directors of the corporation which alleges willful misappropriation of corporate
assets by such agent, disclosure of confidential information in violation of
such agent's fiduciary or contractual obligations to the corporation or any
other willful and deliberate breach in bad faith of such agent's duty to the
corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action, suit or proceeding by reason of the fact that such person, such
person's testator or intestate, is or was an officer or employee of the
corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been
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"fiduciaries" of any employee benefit plan of the corporation which may exist
from time to time, Section 145 of the General Corporation Law of Delaware shall,
for the purposes of this Section 6, be interpreted as follows: an "other
enterprise" shall be deemed to include such an employee benefit plan, including
without limitation, any plan of the corporation which is governed by the Act of
Congress entitled "Employee Retirement Income Security Act of 1974," as amended
from time to time; the corporation shall be deemed to have requested a person to
serve an employee benefit plan where the performance by such person of his or
her duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
Section 7. The corporation shall indemnify its directors to the
fullest extent not prohibited by the California General Corporation Law;
PROVIDED, HOWEVER, that the corporation shall not be required to indemnify any
director in connection with any proceeding (or part thereof) initiated by such
person or any proceeding by such person against the corporation or its
directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the board of directors of the corporation or (iii) such indemnification is
provided by the corporation, in its sole discretion, pursuant to the powers
vested in the corporation under the California General Corporation Law.
The corporation shall have power to indemnify its officers, employees and
other agents as set forth in the California General Corporation Law.
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Promptly after receipt of a request for indemnification hereunder (and in
any event within 90 days thereof) a reasonable, good faith determination as to
whether indemnification of the director is proper under the circumstances
because each director has met the applicable standard of care shall be made by:
(i) a majority vote of a quorum consisting of directors who are not parties to
such proceeding; (ii) if such quorum is not obtainable, by independent legal
counsel in a written opinion; or (iii) approval or ratification by the
affirmative vote of a majority of the shares of this corporation represented and
voting at a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum) or by
written consent of a majority of the outstanding shares entitled to vote; where
in each case the shares owned by the person to be indemnified shall not be
considered entitled to vote thereon.
For purposes of any determination under this bylaw, a director shall be
deemed to have acted in good faith and in a manner he or she reasonably believed
to be in the best interests of the corporation and its stockholders, and, with
respect to any criminal action or proceeding, to have had no reasonable cause to
believe that his or her conduct was unlawful, if his or her action is based on
information, opinions, reports and statements, including financial statements
and other financial data, in each case prepared or presented by: (i) one or
more officers or employees of the corporation whom the director believed to be
reliable and competent in the matters presented; (ii) counsel, independent
accountants or other persons as to matters which the director believed to be
within such person's professional competence; and (iii) a committee of the Board
upon which such director does not serve, as to matters within such committee's
designated
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authority, which committee the director believes to merit confidence; so long
as, in each case, the director acts without knowledge that would cause such
reliance to be unwarranted.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in the best interests of the
corporation and its stockholders or that he or she had reasonable cause to
believe that his or her conduct was unlawful.
The provisions of the preceding two paragraphs shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the
California General Corporation Law.
The corporation shall advance, prior to the final disposition of any
proceeding, promptly following request therefor, all expenses incurred by any
director in connection with such proceeding upon receipt of an undertaking by or
on behalf of such person to repay said amounts if it shall be determined
ultimately that such person is not entitled to be indemnified under this bylaw
or otherwise.
Without the necessity of entering into an express contract, all rights to
indemnification and advances to directors under this bylaw shall be deemed to be
contractual rights and be effective to the same extent and as if provided for in
a contract between the corporation and the director. Any right to
indemnification or advances granted by this bylaw to a director shall be
enforceable by or on behalf of the person holding such right in the forum in
which the proceeding is or was pending or, if such
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forum is not available or a determination is made that such forum is not
convenient, in any court of competent jurisdiction if (i) the claim for
indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his or her claim.
The corporation shall be entitled to raise as a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
connection with any proceeding in advance of its final disposition when the
required undertaking has been tendered to the corporation) that the claimant has
not met the standards of conduct that make it permissible under the California
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed. Neither the failure of the corporation (including its board of
directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because the claimant has met the
applicable standard of conduct set forth in the California General Corporation
Law, nor an actual determination by the corporation (including its board of
directors, independent legal counsel or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
To the fullest extent permitted by the corporation's Certificate of
Incorporation and the California General Corporation Law, the rights conferred
on any person by this bylaw shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, bylaws,
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agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding office. The corporation is specifically authorized to enter into
individual contracts with any or all of its directors, officers, employees or
agents respecting indemnification and advances, to the fullest extent permitted
by the California General Corporation Law and the corporation's Certificate of
Incorporation.
The rights conferred on any person by this bylaw shall continue as to a
person who has ceased to be a director and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The corporation, upon approval by the board of directors, may purchase
insurance on behalf of any person required or permitted to be indemnified
pursuant to this bylaw. The corporation's obligation to provide indemnification
under this Section 7 shall be offset to the extent of any other source of
indemnification or any otherwise applicable insurance coverage under a policy
maintained by the corporation or any other person.
Any repeal or modification of this bylaw shall only be prospective and
shall not affect the rights under this bylaw in effect at the time of the
alleged occurrence of any action or omission to act that is the cause of any
proceeding against any agent of the corporation.
The corporation shall indemnify the directors and officers of the
corporation who serve at the request of the corporation as trustees, investment
managers or other fiduciaries of employee benefit plans to the fullest extent
permitted by the California General Corporation Law.
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If this bylaw or any portion hereof shall be invalidated on any ground by
any court of competent jurisdiction, then the corporation shall nevertheless
indemnify each director to the fullest extent permitted by any applicable
portion of this bylaw that shall not have been invalidated, or by any other
applicable law.
For the purposes of this bylaw, the following definitions shall apply:
(i) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement and appeal of any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative.
(ii) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines, amounts
paid in settlement or judgment and any other costs and expenses of any nature or
kind incurred in connection with any proceeding, including expenses of
establishing a right to indemnification under this bylaw or any applicable law.
(iii) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this bylaw with respect to the resulting or surviving corporation as he or
she
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would have with respect to such constituent corporation if its separate
existence had continued.
(iv) References to a "director," "officer," "employee," or "agent" of
the corporation shall include, without limitation, situations where such person
is serving at the request of the corporation as a director, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
Section 8. In the event of any inconsistency between Section 6 and
Section 7 of this Article VII, the controlling Section as to any particular
issue with regard to any particular matter, shall be the one which authorizes
for the benefit of the agent or the other person in question the provision of
the fullest, promptest, most certain or otherwise most favorable indemnification
and/or advancement.
VIII.
AMENDMENT
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
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CERTIFICATE OF ASSISTANT SECRETARY
The undersigned, being the Assistant Secretary of Vista Medical
Technologies, Inc., a Delaware corporation, does hereby certify the foregoing to
be the Bylaws of said Corporation, as adopted by the directors of the
Corporation and which remain in full force and effect as of the date hereof.
Executed at San Diego, California effective as of October 31, 1996.
/s/ Robert De Vaere
--------------------------------------------
Robert De Vaere, Assistant Secretary
<PAGE>
RESTATED BYLAWS EXHIBIT 3.4
OF
VISTA MEDICAL TECHNOLOGIES, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the City
of Dover, County of Kent, State of Delaware.
Section 2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of Directors shall be held in the City of Carlsbad, State of
California, at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of
California as shall be designated from time to time by the Board of Directors
and stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
California, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the
corporation, for the purpose of election of Directors and for such other
business as may lawfully come before it, shall be held on such date and at such
time as may be designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be:
(A) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (B) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or
(C) otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation. To be timely, a stockholder's notice must be delivered to
<PAGE>
or mailed and received at the principal executive offices of the corporation no
later than the date specified in the corporation's proxy statement released to
stockholders in connection with the previous year's annual meeting of
stockholders, which date shall be not less than one hundred twenty (120)
calendar days in advance of the date of such proxy statement; provided, however,
that in the event that no annual meeting was held in the previous year or the
date of the annual meeting has been changed by more than thirty (30) days from
the date contemplated at the time of the previous year's proxy statement, notice
by the stockholder to be timely must be so received a reasonable time before the
solicitation is made. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the annual meeting:
(i) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting,
(ii) the name and address, as they appear on the corporation's books, of the
stockholder proposing such business, (iii) the class and number of shares of the
corporation which are beneficially owned by the stockholder, (iv) any material
interest of the stockholder in such business and (v) any other information that
is required to be provided by the stockholder pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), in such
stockholder's capacity as a proponent to a stockholder proposal. In addition to
the foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
stockholders must provide notice as required by the regulations promulgated
under the 1934 Act to the extent such regulations require notice that is
different from the notice required above. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b) of this
Section 2. The chairman of the annual meeting shall, if the facts warrant,
determine and declare at the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this paragraph (b),
and, if he or she should so determine, the chairman shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of Directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 2. Timely notice shall also be
given of any stockholder's intention to cumulate votes in the election of
Directors at a meeting if cumulative voting is available. Such stockholder's
notice shall set forth (i) as to each person, if any, whom the stockholder
proposes to nominate for election or re-election as a Director: (A) the name,
age, business address and residence address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares of
the corporation that are beneficially owned by such person, (D) a description of
all arrangements or understandings between the stockholder and
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each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are to be made by the stockholder, and (E) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a Director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to subitems (ii), (iii) and (iv) of paragraph (b) of this Section 2 and, if
cumulative voting is available to such stockholder, whether such stockholder
intends to request cumulative voting in the election of Directors at the
meeting. At the request of the Board of Directors, any person nominated by a
stockholder for election as a Director shall furnish to the Secretary of the
corporation that information required to be set forth in the stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a Director of the corporation unless nominated in accordance
with the procedures set forth in this paragraph (c). The chairman of the
meeting shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if the chairman should so determine, he or she shall so declare at
the meeting, and the defective nomination shall be disregarded.
Section 3. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 4. VOTING LIST. The officer who has charge of the stock ledger of
the corporation shall prepare and make, or have prepared and made, at least ten
(10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, as amended from time to time, may only be called
as provided in this Section 5 by the President, Chief Executive Officer or
Chairman of the Board and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors. Such request shall
state the purpose or purposes of the proposed meeting. The place, date and time
of any special meeting shall be determined by the
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Board of Directors. Such determination shall include the record date for
determining the stockholders having the right of and to vote at such meeting.
Section 6. NOTICE OF SPECIAL MEETING. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, to each stockholder entitled to
vote at such meeting.
Section 7. ACTION AT SPECIAL MEETING. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
Section 8. QUORUM AND ADJOURNMENTS.
(a) The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation, as amended. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
(b) When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of statute or of the
Certificate of Incorporation, as amended, a different vote is required, in which
case such express provision shall govern and control the decision of such
question.
Section 9. VOTING RIGHTS. Unless otherwise provided in the Certificate of
Incorporation, as amended, each stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three (3) years from its date, unless the proxy provides
for a longer period.
Section 10. ACTION WITHOUT MEETING. No action shall be taken by the
stockholders of the corporation except at an annual or special meeting of
stockholders called in accordance with these Bylaws, and no action shall be
taken by the stockholders by written consent.
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ARTICLE III
DIRECTORS
Section 1. CLASSES, NUMBER, TERM OF OFFICE AND QUALIFICATION. At the next
annual meeting of stockholders following the adoption of these Bylaws, the
Directors shall be classified into three classes, as nearly equal in number as
possible as determined by the Board of Directors, with the term of office of the
first class to expire at the second annual meeting of stockholders following the
adoption of these Bylaws, the term of office of the second class to expire at
the third annual meeting of stockholders following the adoption of these Bylaws
and the term of office of the third class to expire at the fourth annual meeting
of stockholders following the adoption of these Bylaws. At each annual meeting
of stockholders following such initial classification and election, Directors
elected to succeed those Directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election. Additional directorships resulting from an increase in
the number of Directors shall be apportioned among the classes as equally as
possible as determined by the Board of Directors. The number of Directors which
shall constitute the whole Board shall be fixed by resolution of the Board of
Directors, with the number initially fixed at seven (7). The number of
Directors shall be determined by resolution of sixty-six and two-thirds percent
(66-2/3%) of the Directors then in office or by sixty-six and two-thirds percent
(66-2/3%) of the stockholders at the annual meeting of the stockholders, and
each Director elected shall hold office until his or her successor is elected
and qualified. Directors need not be stockholders.
Section 2. VACANCIES. Vacancies may be filled only by a two-thirds
majority of the Directors then in office or by a sole remaining Director. Each
Director so chosen shall hold office until a successor is duly elected and shall
qualify or until his or her earlier death, resignation or removal. If there are
no Directors in office, then an election of Directors may be held in the manner
provided by statute; provided, however, that each Director shall be elected by
an affirmative vote of at least two-thirds of the stockholders. If, at the time
of filling any vacancy, the Directors then in office shall constitute less than
a majority of the whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such Directors, summarily
order an election to be held to fill any such vacancies, or to replace the
Directors chosen by the Directors then in office.
Section 3. POWERS. The business of the corporation shall be managed by or
under the direction of its Board of Directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the Certificate of Incorporation, as amended, or by these Bylaws directed
or required to be exercised or done by the stockholders.
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Section 4. REGULAR AND SPECIAL MEETINGS. The Board of Directors of the
corporation may hold meetings, both regular and special, either within or
without the State of California.
Section 5. ANNUAL MEETING. The annual meeting of the Board of Directors
shall be held without notice other than this Bylaw immediately after, and at the
same place as, the annual meeting of stockholders. In the event the annual
meeting of the Board of Directors shall not be held immediately after, and at
the same place as, the annual meeting of stockholders, the meeting may be held
at such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors.
Section 6. NOTICE OF REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 7. NOTICE OF SPECIAL MEETINGS. Special meetings of the Board may
be called by the Chief Executive Officer or President on no less than
forty-eight (48) hours notice to each Director either personally, or by
telephone, mail, telegram or facsimile; special meetings shall be called by the
Chief Executive Officer, President or Secretary in like manner and on like
notice on the written request of two Directors unless the Board consists of only
one Director, in which case special meetings shall be called by the Chief
Executive Officer, President or Secretary in like manner and on like notice on
the written request of the sole Director. A written waiver of notice, signed by
the person entitled thereto, whether before or after the time of the meeting
stated therein, shall be deemed equivalent to notice.
Section 8. QUORUM. At all meetings of the Board a majority of the
Directors shall constitute a quorum for the transaction of business and the act
of a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by these Bylaws, by statute or by the Certificate of
Incorporation, as amended. If a quorum shall not be present at any meeting of
the Board of Directors, the Directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 9. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation, as amended, or these Bylaws, any action required
or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 10. MEETINGS BY TELEPHONE CONFERENCE CALLS. Unless otherwise
restricted by the Certificate of Incorporation, as amended, or these Bylaws,
members of the Board of Directors, or any committee designated by the Board of
Directors, may
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participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 11. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, as amended,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
Bylaws of the corporation; and, unless the resolution or the Certificate of
Incorporation, as amended, expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
Section 12. FEES AND COMPENSATION. Unless otherwise restricted by the
Certificate of Incorporation, as amended, or these Bylaws, the Board of
Directors shall have the authority to fix the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
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Section 13. REMOVAL. Subject to any limitations imposed by law or the
Certificate of Incorporation, as amended, the Board of Directors, or any
individual Director, may be removed from office at any time only with cause by
the affirmative vote of the holders of at least a majority of shares entitled to
vote at an election of Directors.
ARTICLE IV
NOTICES
Section 1. NOTICE. Whenever, under the provisions of statute or of the
Certificate of Incorporation, as amended, or of these Bylaws, notice is required
to be given to any Director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such Director or stockholder, at his, her or its address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to Directors may also be given by telephone, telegram and
facsimile.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of statute or of the Certificate of Incorporation, as
amended, or of these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. ENUMERATION. The officers of the corporation shall be chosen
by the Board of Directors and shall include a Chief Executive Officer, a Chief
Financial Officer and a Secretary. The Board of Directors may elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
of Directors may also choose a President, one or more Vice Presidents and one or
more Assistant Secretaries. Any number of offices may be held by the same
person, unless the Certificate of Incorporation, as amended, or these Bylaws
otherwise provide.
The compensation of all officers and agents of the corporation shall be
fixed by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of such officer also being a Director of
the corporation.
Section 2. ELECTION OR APPOINTMENT. The Board of Directors at its first
meeting after each annual meeting of stockholders shall choose a Chief Executive
Officer, a Chief Financial Officer and a Secretary and may choose a President,
one or more Vice Presidents and one or more Assistant Secretaries.
The Board of Directors may appoint such other officers and agents as it
shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
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Section 3. TENURE, REMOVAL AND VACANCIES. The officers of the corporation
shall hold office until their successors are chosen and qualified. Any officer
elected or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the corporation shall be filled by the Board of Directors.
Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors and of the stockholders
at which he or she shall be present. The Chairman of the Board shall have and
may exercise such powers as are, from time to time, assigned to him or her by
the Board and as may be provided by law.
Section 5. VICE CHAIRMAN OF THE BOARD. In the absence of the Chairman of
the Board, the Vice Chairman of the Board, if any, shall preside at all meetings
of the Board of Directors and of the stockholders at which he or she shall be
present. The Vice Chairman of the Board shall have and may exercise such powers
as are, from time to time, assigned to him or her by the Board and as may be
provided by law.
Section 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the corporation. In the absence or nonexistence of a Chairman of the Board and
a Vice Chairman of the Board, the Chief Executive Officer shall preside at all
meetings of the Board of Directors and of the stockholders. The Chief Executive
Officer shall have the general powers and duties of management usually vested in
the Chief Executive Officer of a corporation, including general supervision,
direction and control of the business and supervision of other officers of the
corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
The Chief Executive Officer shall, without limitation, have the authority
to execute bonds, mortgages and other contracts requiring a seal, under the seal
of the corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
Section 7. PRESIDENT. Subject to such supervisory powers as may be given
by these Bylaws or the Board of Directors to the Chairman of the Board or the
Chief Executive Officer, if there be such officers, the President shall have
general supervision, direction and control of the business and supervision of
other officers of the corporation, and shall have such other powers and duties
as may be prescribed by the Board of Directors or these Bylaws. In the event a
Chief Executive Officer shall not be appointed, the President shall have the
duties of such office.
Section 8. VICE PRESIDENTS. The Vice President, or if there shall be more
than one, the Vice Presidents in the order determined by the Board of Directors,
shall, in the absence or disability of the President, act with all of the powers
and be subject to all the
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restrictions of the President. The Vice Presidents shall also perform such
other duties and have such other powers as the Board of Directors, the Chief
Executive Officer, the President or these Bylaws may, from time to time,
prescribe.
Section 9. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors, all meetings of the committees thereof and all meetings of
the stockholders and record all the proceedings of the meetings in a book or
books to be kept for that purpose. Under the Chief Executive Officer's or
President's supervision, the Secretary shall give, or cause to be given, all
notices required to be given by these Bylaws or by law; shall have such powers
and perform such duties as the Board of Directors, the Chief Executive Officer,
the President or these Bylaws may, from time to time, prescribe; and shall have
custody of the seal of the corporation. The Secretary, or an Assistant
Secretary, shall have authority to affix the seal of the corporation to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his or her signature.
Section 10. ASSISTANT SECRETARY. The Assistant Secretary, if any, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors, shall, in the absence, disability or refusal to act of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors,
the Chief Executive Officer, the President, the Secretary or these Bylaws may,
from time to time, prescribe.
Section 11. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
act as Treasurer and shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors. The Chief
Financial Officer may alternatively be designated by the title "Treasurer."
The Chief Financial Officer shall disburse the funds of the corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer or, if there be
no Chief Executive Officer, the President and the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all
his or her transactions as Chief Financial Officer and of the financial
condition of the corporation.
If required by the Board of Directors, the Chief Financial Officer shall
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his or her office and
for the restoration to the corporation, in case of his or her death,
resignation, retirement or removal from office, of all books,
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papers, vouchers, money and other property of whatever kind in the Chief
Financial Officer's possession or under his or her control belonging to the
corporation.
Section 12. OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these Bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by the Board of Directors, the Chief
Executive Officer or the President.
Section 13. ABSENCE OR DISABILITY OF OFFICERS. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may delegate the powers and duties of such
officer to any officer or to any Director, or to any other person who it may
select.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. CERTIFICATES OF STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the Chairman or Vice Chairman of the Board of Directors,
or the Chief Executive Officer or the President or a Vice President and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the corporation, certifying the number of shares owned by him in the
corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. EXECUTION OF CERTIFICATES. Any or all of the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased
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to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
Section 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or the owner's legal representative, to advertise the same in such
manner as it shall require and/or to give the corporation a bond in such sum as
it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 4. TRANSFER OF STOCK. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 5. FIXING RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholder or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 6. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
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ARTICLE VII
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS. The
corporation shall indemnify its Directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law; provided,
however, that the corporation may limit the extent of such indemnification by
individual contracts with its Directors and executive officers; and, provided,
further, that the corporation shall not be required to indemnify any Director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person or any proceeding by such person against the corporation or its
Directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the corporation and (iii) such indemnification is
provided by the corporation, in its sole discretion, pursuant to the powers
vested in the corporation under the Delaware General Corporation Law.
Section 2. INDEMNIFICATION OF OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS.
The corporation shall have power to indemnify its other officers, employees and
other agents as set forth in the Delaware General Corporation Law.
Section 3. GOOD FAITH.
(a) For purposes of any determination under this Bylaw, a Director or
executive officer shall be deemed to have acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe that his or her conduct was unlawful, if his or
her action is based on information, opinions, reports and statements, including
financial statements and other financial data, in each case prepared or
presented by:
(1) one or more officers or employees of the
corporation whom the Director or executive officer believed
to be reliable and competent in the matters presented;
(2) counsel, independent accountants or other persons
as to matters which the Director or executive officer
believed to be within such person's professional competence;
and
(3) with respect to a Director, a committee of the
Board upon which such Director does not serve, as to matters
within such committee's designated authority, which
committee the Director believes to merit confidence; so long
as, in each case, the Director or executive officer acts
without knowledge that would cause such reliance to be
unwarranted.
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(b) The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, that
such person had reasonable cause to believe that his or her consent was
unlawful.
(c) The provisions of this Section 3 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the Delaware
General Corporation Law.
Section 4. EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 4 of this Bylaw, no advance shall be made by the corporation if a
determination is reasonably and promptly made (i) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to the
proceeding or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested Directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
Section 5. ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to Directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the Director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a Director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting such claim. The corporation shall be entitled to raise as a
defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law for
the corporation to indemnify the claimant for the amount claimed. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the
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corporation (including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 6. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, as amended, Bylaws, agreement, vote of stockholders or
disinterested Directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding office.
The corporation is specifically authorized to enter into individual contracts
with any or all of its Directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent not prohibited by the
Delaware General Corporation Law.
Section 7. SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a Director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 8. INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
Section 9. AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
Section 10. SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated or by any other applicable law.
Section 11. CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(a) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of the testimony
in, any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative.
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(b) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(c) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
Directors, officers, and employees or agents, so that any person who is or was a
Director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
(d) References to a "Director," "officer," "employee," or
"agent" of the corporation shall include, without limitation, situations where
such person is serving at the request of the corporation as a Director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
(e) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a Director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such Director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE VIII
LOANS TO OFFICERS
Section 1. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the Corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the corporation. Nothing in this Bylaw shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
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ARTICLE IX
GENERAL PROVISIONS
Section 1. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
as amended, if any, may be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation, as amended.
Section 2. DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purposes as the Directors shall think conducive to the interest
of the corporation, and the Directors may modify or abolish any such reserve in
the manner in which it was created.
Section 3. EXECUTION OF CORPORATE INSTRUMENTS. All checks or demands for
money and notes of the corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The Board of Directors may adopt a corporate
seal having inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE X
AMENDMENTS
Section 1. AMENDMENTS.
(a) Except as otherwise set forth in Section 9 of Article
VII of these Bylaws, the Bylaws may be altered or amended or new Bylaws adopted
by the affirmative vote of a majority of the voting power of all of the
then-outstanding shares of capital stock of the corporation entitled to vote
generally in the election of Directors (the "Voting Stock"). The Board of
Directors shall also have the power, if such power is conferred upon the Board
of Directors by the Certificate of Incorporation, as amended, to adopt, amend or
repeal Bylaws by a vote of the majority of the Board of Directors unless a
greater or different vote is required pursuant to the provisions of the Bylaws,
the Certificate of Incorporation or any applicable provision of law.
(b) Notwithstanding any other provisions of these Bylaws or
any provision of law which might otherwise permit a lesser vote or no vote, but
in addition to
-17-
<PAGE>
any affirmative vote of the holders of any particular class or series of the
Voting Stock required by law, the Certificate of Incorporation, as amended, or
any Preferred Stock Designation (as the term is defined in the Certificate of
Incorporation, as amended), the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the Voting Stock, voting together as a single class,
shall be required to alter, amend or repeal this paragraph (b) or Section 2,
Section 5 or Section 10 of Article II or Section 1, Section 2 or Section 13 of
Article III of these Bylaws.
(c) Notwithstanding any other provisions of these Bylaws or
any provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation, as
amended, or any Preferred Stock Designation (as the term is defined in the
Certificate of Incorporation, as amended), the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the Continuing Directors (as
defined below), shall be required to alter, amend or repeal this paragraph (c)
or Section 2, Section 5 or Section 10 of Article II or Section 1, Section 2 or
Section 13 of Article III of these Bylaws. For purposes of this paragraph,
"Continuing Director" shall mean either (i) those Directors (the "Original
Directors") who are members of the Board of Directors on the date these Restated
Bylaws are adopted; or (ii) Directors who are nominated for election or are
elected by (A) a majority of the seven (7) Original Directors or (B) Directors,
constituting a then majority of the Board of Directors, who were all either
Original Directors or were nominated for election or elected by a then majority
of the Board of Directors whose nomination or election can be traced directly
through other Directors to the Original Directors.
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<PAGE>
CERTIFICATE OF SECRETARY
The undersigned, being the Secretary of Vista Medical Technologies, Inc., a
Delaware corporation, does hereby certify the foregoing to be the Bylaws of said
Corporation, as adopted by a majority of the stockholders and Directors of the
Corporation and which remain in full force and effect as of the date hereof.
Executed at Carlsbad, California effective as of April ___, 1997.
___________________________________
Robert De Vaere, Secretary
<PAGE>
April ___, 1997
Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, California 92008
Re: 3,500,000 SHARES OF COMMON STOCK OF VISTA MEDICAL TECHNOLOGIES, INC.
Ladies and Gentlemen:
We have acted as counsel to Vista Medical Technologies, Inc., a Delaware
corporation (the "Company"), in connection with the proposed issuance and sale
by the Company of 3,500,000 shares of the Company's Common Stock (the "Shares"),
pursuant to the Company's Registration Statement on Form S-1 filed on March __,
1997, as amended by Amendment No. 1 filed on _________, 1997, Amendment No. 2
filed on ________, 1997, and the Rule 462(b) Registration Statement filed on
_______, 1997 (the "Registration Statement").
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Amended and
Restated Certificate of Incorporation, as amended, the Second Restated
Certificate of Incorporation which the Registration Statement contemplates will
be filed before the sale and issuance of the Shares, the Company's bylaws, and
originals, or copies certified to our satisfaction, of such other records,
documents, certificates, memoranda and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinion expressed below.
On the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Shares, if, as and when sold and issued in accordance with the
Registration Statement and Prospectus (as amended and supplemented through the
date of issuance), will be validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters"
in the Registration Statement and related Prospectus and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
by and between
Vista Medical Technologies, Inc., a California corporation, and
American Surgical Technologies Corporation, a Delaware corporation,
Dated as of September 15, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF ASSETS......................... 1
Section 1.1 Description of Assets to be Acquired....................... 1
Section 1.2 Excluded Assets............................................ 2
ARTICLE II
ASSUMED LIABILITIES............................ 3
Section 2.1 Assumed Liabilities...................................... 3
Section 2.2 Liabilities Not Assumed.................................. 3
ARTICLE III
PURCHASE PRICE............................ 3
Section 3.1 Consideration............................................ 3
Section 3.2 Payment of Purchase Price................................ 3
Section 3.3 Offset................................................... 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES........................... 6
Section 4.1 Representations and Warranties of Seller................. 6
(a) Organization of Seller................................... 6
(b) Authorization of Seller.................................. 7
(c) Financial Information.................................... 7
(d) Returns.................................................. 7
(e) Absence of Certain Changes and Events.................... 7
(f) Undisclosed Liabilities.................................. 8
(g) Inventory................................................ 8
(h) Taxes.................................................... 8
(i) Compliance With Law...................................... 9
(j) Governmental Consents.................................... 9
(k) Proprietary Rights....................................... 9
(l) Contracts and Commitments................................ 10
(m) Title to the Assets...................................... 11
(n) Litigation............................................... 11
(o) No Conflict or Default................................... 11
<PAGE>
(p) Brokers' and Finders' Fees............................... 11
(q) Customers................................................ 11
(r) Books and Records........................................ 12
(s) Complete Disclosure...................................... 12
(t) Limitation............................................... 12
(u) Experience............................................... 12
(v) Investment............................................... 12
(w) Rule 144................................................. 12
(x) No-Public Market......................................... 13
Section 4.2 Representations and Warranties of Purchaser.............. 13
(a) Organization of Purchaser................................ 13
(b) Authorization of Purchaser............................... 13
(c) Financial Information.................................... 13
(d) Capitalization........................................... 13
(e) Governmental Consents.................................... 14
(f) Litigation............................................... 14
(g) No Conflict or Default................................... 14
(h) Brokers' and Finders' Fees............................... 15
(i) Complete Disclosure...................................... 15
(j) Financing................................................ 15
ARTICLE V
COVENANTS................................. 15
Section 5.1 Covenants Against Disclosure............................. 15
Section 5.2 Maintenance of Business.................................. 15
Section 5.3 Access to Information.................................... 16
Section 5.4 Other Discussions........................................ 17
Section 5.5 Certain health benefits; COBRA........................... 17
Section 5.6 Novations................................................ 17
Section 5.7 Post Closing Transactions................................ 17
Section 5.8 Sales and Transfer Taxes................................. 18
Section 5.9 Tax Returns.............................................. 18
Section 5.10 Employee Benefit Plans................................... 18
Section 5.11 Representations of Distributees.......................... 18
Section 5.12 Indemnification.......................................... 18
Section 5.13 Sales of 3D Scope Systems................................ 19
ARTICLE VI
CLOSING................................... 19
Section 6.1 Time of Closing.......................................... 19
Section 6.2 Deliveries by Seller..................................... 19
Section 6.3 Deliveries by Purchaser.................................. 20
ii.
<PAGE>
Section 6.4 Further Assurances....................................... 20
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS...................... 20
Section 7.1 Conditions to Obligations of Purchaser................... 20
(a) Representations and Warranties........................... 20
(b) Performance of Agreement................................. 20
(c) No Material Adverse Change............................... 21
(d) Absence of Governmental or Other Objection............... 21
(e) Approval of Documentation................................ 21
(f) McKinley Consent and Release. .......................... 21
(g) Bulk Sales............................................... 21
(h) Tax Lien Waivers......................................... 21
Section 7.2 Conditions to Obligations of Seller...................... 21
(a) Representations and Warranties........................... 21
(b) Performance of Agreement................................. 21
(c) Absence of Governmental or Other Objection............... 22
(d) Approval of Documentation................................ 22
(e) Purchase Price........................................... 22
(f) Instrument of Bill of Sale, Assignment and Assumption of
Liabilities Agreement.................................... 22
(g) Investors Rights Agreement............................... 22
ARTICLE VIII
MISCELLANEOUS PROVISIONS............................ 22
Section 8.1 Notice................................................... 22
Section 8.2 Entire Agreement......................................... 23
Section 8.3 Binding Effect; Assignment............................... 23
Section 8.4 Expenses of Transaction; Taxes........................... 23
Section 8.5 Waiver; Consent.......................................... 23
Section 8.6 Counterparts............................................. 23
Section 8.7 Severability............................................. 23
Section 8.8 Absence of Third Party Beneficiary Rights................ 24
Section 8.9 Attorneys' Fees.......................................... 24
Section 8.10 Cooperation and Records Retention........................ 24
Section 8.11 Termination.............................................. 24
Section 8.12 Expense Reimbursement; .................................. 25
Section 8.13 Governing Law ........................................... 26
iii.
<PAGE>
SCHEDULES
1.1(a) List of Related Property
1.1(b) List of Inventory
1.1(c) List of Contracts
1.1(d) List of Permits
1.1(e) List of Proprietary Rights
1.1(j) List of Other Assets
1.2 List of Excluded Assets
4.1(d) Returns
4.1(k) Proprietary Rights Not Exclusively Owned
4.1(m) List of Encumbered Assets
4.1(n) List of Litigation
4.1(q) List of Customers
iv.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is dated as of September 15, 1995 by and between Vista
Medical Technologies, Inc., a California corporation ("Purchaser"), and American
Surgical Technologies Corporation, a Delaware corporation ("Seller").
WHEREAS, Seller is engaged in the business of designing, developing,
marketing, and supporting stereoscopic endoscopes (the "Business"); and
WHEREAS, Purchaser desires to acquire from Seller and Seller desires
to transfer to Purchaser, all or substantially all of the properties, assets,
and rights of Seller related to the Business, and to assume certain specified
liabilities of Seller, all upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
SECTION 1.1 DESCRIPTION OF ASSETS TO BE ACQUIRED. Upon the terms and
subject to the conditions set forth in this Agreement, at the Time of Closing
(as defined in Section 6.1 hereof), Seller agrees to convey, sell, transfer,
assign, and deliver to Purchaser, and Purchaser agrees to purchase from Seller,
all right, title, and interest of Seller at the Time of Closing in and to
certain assets, properties, and rights related to the Business, as follows:
(a) All machinery, equipment, software and quality assurance
equipment (the "Related Property") listed on Schedule 1.1(a) hereto;
(b) All inventory owned by Seller related to the Business
(whether located on the premises of the facilities leased by Seller in
Chelmsford, Massachusetts, in transit to or from such premises, in other storage
or warehouse facilities, or otherwise) including, without limitation, raw
materials, work-in-progress, finished goods and supplies that are listed on
Schedule 1.1(b) hereto (the "Inventory");
(c) All claims and rights under all agreements, contracts,
contract rights, licenses, purchase and sale orders, quotations, and other
executory commitments associated with the Business (collectively, the
"Contracts"), that are listed on Schedule
1.
<PAGE>
1.1(c) hereto including the "Contracts Requiring Novation or Consents to
Assignment" as such phrase is defined in Section 4.1(l)(C) hereof;
(d) All claims and rights under all franchises, licenses,
permits, consents, authorizations, certificates and approvals (collectively
referred to herein as "Permits") of any federal, state, or local regulatory,
administrative, or other governmental agency or body issued to or held by Seller
which are necessary, related or incidental to the Business, that are listed on
Schedule 1.1(d) hereto;
(e) All rights, title and interest to patents, trademarks,
patent applications, trademark rights, trade secrets, information, proprietary
rights, license rights, service marks, inventions, tradenames, copyrights,
processes, technical information, software, licenses, designs and
confidentiality agreements, logos, and customer and supplier lists related to
the Business, together with the goodwill associated therewith (collectively, the
"Proprietary Rights"), that are listed on Schedule 1.1(e) hereto;
(f) Original sales invoices and purchase orders and all other
records of Seller relating to the Assets; provided that, from and after the Time
of Closing, Purchaser shall make all such documents available for Seller's
inspection, at Seller's expense, during Purchaser's normal business hours;
(g) All rights, if any, under express or implied warranties from
suppliers and vendors of Seller which are related to the Business to the extent
such rights are assignable;
(h) All of Seller's causes of action, judgments, and claims or
demands of whatever kind or description arising out of or relating to the
Business other than those arising under this Agreement;
(i) All goodwill associated with the Business (the "Goodwill");
and
(j) Such other properties or assets ("Other Assets") that are
listed on Schedule 1.1(j) hereto.
The assets, properties, and rights to be conveyed, sold, transferred,
assigned, and delivered to Purchaser pursuant to this Section 1.1 are sometimes
hereinafter collectively referred to as the "Assets".
SECTION 1.2 EXCLUDED ASSETS. Notwithstanding the provisions of
Section 1.1 hereof, the Assets to be transferred to Purchaser pursuant to this
Agreement shall not include assets listed on Schedule 1.2 hereof (collectively,
the "Excluded Assets").
2.
<PAGE>
ARTICLE II
ASSUMED LIABILITIES
SECTION 2.1 ASSUMED LIABILITIES. Subject to Section 2.2 hereof,
Purchaser hereby agrees at the Time of Closing to assume, satisfy or perform
when due those liabilities and obligations of Seller arising after the Time of
Closing under the Contracts and Permits. The liabilities assumed hereunder by
the Purchaser are hereinafter called the "Assumed Liabilities".
SECTION 2.2 LIABILITIES NOT ASSUMED. Other than the Assumed
Liabilities, Purchaser shall not assume, nor shall Purchaser or any affiliate of
Purchaser, be deemed to have assumed or guaranteed, any other liability or
obligation of any nature of Seller, or claims of such liability or obligation,
whether accrued, matured or unmatured, liquidated or unliquidated, fixed or
contingent, known or unknown arising out of (i) acts or occurrences, or related
to any of the Assets, prior to the Time of Closing, (ii) any of Seller's
products sold by Seller prior to the Time of Closing, or (iii) any other
liability or obligation of Seller (collectively, the "Unassumed Liabilities").
In the event Purchaser is deemed responsible for any Unassumed Liabilities,
Seller shall indemnify Purchaser pursuant to Section 5.15 of this Agreement from
and against all losses incurred by Purchaser in satisfying such liabilities or
obligations.
ARTICLE III
PURCHASE PRICE
SECTION 3.1 CONSIDERATION. Upon the terms and subject to the
conditions contained in this Agreement, in consideration for the Assets to be
given by Seller and in full payment therefor, Purchaser will pay, or cause to be
paid, the purchase price set forth in Section 3.2 hereof to Seller, subject to
adjustment in accordance with the provisions set forth herein, and Purchaser
will assume all of the Assumed Liabilities.
SECTION 3.2 PAYMENT OF PURCHASE PRICE. The consideration
("Purchase Price") to be paid by Purchaser to Seller for the Business and the
other forms of consideration to be given by Seller shall be:
(a) (i) One Hundred Fifty Four Thousand Five Hundred Eighty One
(154,581) shares of Purchaser's Non-Voting Series A-3 Preferred Stock (the
"Shares") and (ii) $25,000 payable by check or wire transfer. The $25,000
payable pursuant to this Section 3.2(a)(ii) shall be credited as $30,000 against
any amounts owed to Seller or its assignees pursuant to Section 3.2(b) below;
3.
<PAGE>
(b) (i) Fifty percent (50%) of the net revenues from the sale by
Purchaser of up to twenty (20) of Seller's 3D Scope Systems or components
thereof or (ii) Fifty percent (50%) of the net revenues from all sales by
Purchaser of Seller's 3D Scope Systems or components thereof made prior to
December 3, 1996, whichever shall occur first. The net revenue calculation
shall be based on the cash receipts by Purchaser for the sale of Seller's 3D
Scope Systems constructed primarily from Inventory or sales of components, less
(i) Purchaser's documented costs in placing such 3D Scope Systems or components
into salable condition, calculated in accordance with generally accepted
accounting procedures and consistent with Purchaser's existing business
practices, and (ii) that portion of the sales proceeds of 3D Scope Systems or
components thereof placed in the Warranty Withholding Account (as defined
below). Purchaser shall be entitled to withhold from Seller or its assignees an
amount equal to 10% of the sales proceeds of each 3D Scope System or component
to cover warranty costs (the "Warranty Withholding Account"), subject to
disbursement to Seller or its assignees in accordance with Section 3.2(c) (ii)
below. Purchaser shall be entitled to reimburse itself from the Warranty
Withholding Account for any warranty costs incurred by Purchaser in connection
with the 3D Scope Systems or components. In the event of Seller's dissolution,
Seller may assign its rights under this Section 3.2(b) and shall deliver to
Purchaser a certificate signed by Seller's chief executive officer setting forth
the name and address of any such assignee and the percentage of any such sums
distributed to which such assignee is entitled; provided, however, that any such
assignee must agree to be subject to Section 3.3 below.
(c) (i) Purchaser shall disburse to Seller or its assignees any
sums owed pursuant to Section 3.2(b)(i) or (ii), on a quarterly basis within 30
days of the end of Purchaser's quarterly accounting period; and
(ii) Purchaser shall disburse sums from the Warranty
Withholding Account to Seller or its assignees as the applicable warranty period
for each 3D Scope System lapses less any documented warranty costs incurred in
connection with 3D Scope Systems (1) constructed primarily from Inventory, and
(2) sold by Seller prior to the Time of Closing.
(d) Seller or, in the event of Seller's liquidation and
dissolution, each of the distributees of Seller's remaining assets
("Distributees"), may elect to receive any sums owed pursuant to Section 3.2(b)
in the form of shares of Purchaser's Non-Voting Series A-3 Preferred Stock by
delivering to Purchaser within 10 days of the end of Purchaser's quarterly
accounting period notice of such election; provided that, such election may be
conditioned upon the determination of the Fair Market Value of the Non-Voting
Series A-3 Preferred Stock, as provided below. The number of shares to be
delivered to Seller (or such Distributees) shall be the quotient obtained by
dividing (i) the product of the cash amount payable to such Stockholder
multiplied by 1.33, by (ii) the Fair Market Value of Purchaser's preferred
stock, and rounding such quotient to the nearest whole share. The Fair Market
Value of Purchaser's preferred stock shall be as
4.
<PAGE>
determined in good faith by Purchaser's board of directors, but in no event
shall it be less than the price per share received by Purchaser in its latest
round of equity financing. If Seller or its Distributees holding a majority in
interest of the Non-Voting Series A-3 Preferred Stock to be distributed pursuant
to this Section 3.2(d) shall disagree with the Purchaser's determination of the
Fair Market Value of the Non-Voting Series A-3 Preferred Stock, then Purchaser
and Seller or such Distributees, as the case may be, shall appoint an
independent third-party appraiser to determine the Fair Market Value of the
Series A-3 Preferred Stock. Any such sums paid in shares of preferred stock
shall be subject to the receipt by Purchaser from Seller or its assignees of the
representations and warranties contained in Sections 4.1(w) through 4.1(z).
(e) Any or all of the Assets may be transferred to the Purchaser
to be held in escrow pending the Time of Closing; provided, however, that
Purchaser shall not be liable for any damage of loss to any of such Assets
except as may result from Purchaser's own negligence.
SECTION 3.3 OFFSET. (a) Any payments to be made to Seller pursuant
to Section 3.2(b) shall be subject to offset, and shall be accordingly reduced
to the extent of any payments made by Purchaser in connection with any and all
actions, causes of action, claims, demands, costs, liabilities, expenses, and
damages incurred by Purchaser (collectively, "Damages") arising out of or
related to the actual breach of any representation or warranty or the
nonperformance of any of Seller's covenants or agreements contained in this
Agreement or any assertion against Purchaser by any third party of any debt,
liability, obligation, or commitment of Seller not otherwise assumed by
Purchaser under this Agreement for which Purchaser becomes liable.
(b) Upon receipt by Seller, or its designated representative, of a
certificate signed by any officer of Purchaser (an "Officer's Certificate"):
(i) stating that Damages exist, and
(ii) specifying in reasonable detail the individual items
of such Damages included in the amount so stated, the date each
such item was paid, or properly accrued or arose, the nature of
the misrepresentation, breach of warranty or claim to which such
item is related,
Purchaser shall be entitled, subject to the provisions of Section 3.4(c) hereof,
to withhold from Seller without any liability therefor, an amount equal to the
value of such Damages.
(c) (i) Seller, or its designated representative, shall have
thirty (30) days from the date of mailing to Seller of any such Officer's
Certificate to make written objection to Purchaser of the nature and amount of
any such Damages. In the event Seller shall so object, Purchaser shall have
thirty (30) days to respond in writing to the
5.
<PAGE>
objection of Seller. If after such thirty (30) day period there remains a
dispute as to any claims, Seller and Purchaser shall attempt in good faith for
thirty (30) days to agree upon the rights of the respective parties with respect
to each of such claims. If Seller and Purchaser should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties.
Purchaser and Seller shall be entitled to rely on any such memorandum and act in
accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Purchaser or Seller may, by written notice to the other,
demand arbitration of the matter unless the amount of the damage or loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by three arbitrators. Within fifteen (15) days after such written
notice is sent, Purchaser and Seller shall each select one arbitrator, and the
two arbitrators so selected shall select a third arbitrator. The decision of
the arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in this Section 3.4, Purchaser shall be entitled to
act in accordance with such decision and make or withhold payments to Seller in
accordance therewith.
(iii) Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction. Any such arbitration shall be held
in San Diego County, California under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 3.4(c), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, Purchaser shall be deemed to be the
Non-Prevailing Party unless the arbitrators award Purchaser more than one-half
(1/2) of the amount in dispute, plus any amounts not in dispute; otherwise,
Seller shall be deemed to be the Non-Prevailing Party. The Non-Prevailing Party
to an arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration Association, and the expenses,
including with limitation, attorneys' fees and costs, incurred by the other
party to the arbitration.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
hereby represents and warrants to Purchaser that:
(a) ORGANIZATION OF SELLER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and has all requisite power and authority to own and operate the
Business in the places where the Business is now conducted and to directly own,
lease, and operate the Assets.
6.
<PAGE>
Seller is duly qualified or licensed to do business as a corporation in each of
the jurisdictions in which the nature of the Business or location of properties
related to the Business requires such qualification or licensing and where the
failure to be so qualified would have a material adverse effect on the Business.
(b) AUTHORIZATION OF SELLER. Seller has full power and
authority to enter into this Agreement, to perform its obligations hereunder,
and to consummate the transactions contemplated hereby, including, without
limitation, the execution and delivery of this Agreement, bills of sale,
assignments and assumptions, novations and other instruments evidencing the
conveyance of the Assets or delivered in accordance with Section 6.2 hereunder
(the "Closing Documents"). Seller has taken all necessary and appropriate
corporate action, including obtaining all necessary board and shareholder
consents, with respect to the execution and delivery of this Agreement and the
Closing Documents. This Agreement constitutes the valid and binding obligation
of Seller enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium, and other similar laws affecting the
rights and remedies of creditors and subject to the general principles of
equity.
(c) FINANCIAL INFORMATION. Seller has delivered to Purchaser
its audited balance sheets and related statements of operations and cash flows
of the Seller at and for the fiscal year ended March 3, 1994 and unaudited
balance sheets and related statements of operations at and for the period ended
May 3, 1995 of the Business (collectively, the "Financial Statements"). Each
Financial Statement is complete and correct in all material respects and has
been or will be as of the Time of Closing, prepared on a consistent basis
throughout the periods indicated and with each other and prepared in accordance
with generally accepted accounting principles ("GAAP") (except that the interim
statements (i) are prepared in a manner including all material adjustments,
consisting only of normal recurring accruals necessary for a fair presentation
of the results for these periods, (ii) are not necessarily indicative of the
results for the full fiscal year and (iii) are unaudited and do not include
footnotes). The Financial Statements fairly describe the financial condition
and operating results of Seller as of the dates, and for the periods, indicated
therein.
(d) RETURNS. Except as set forth on Schedule 4.1(d) Seller has
not had any of its products related to the Business returned by a purchaser or
user thereof, other than for minor, nonrecurring warranty problems. Seller is
not aware of any (i) pending warranty claims for such products, (ii) right to
return such products (other than units under customary evaluation terms), or
(iii) evaluation units expected to be returned after their evaluation period.
(e) ABSENCE OF CERTAIN CHANGES AND EVENTS. Since May 3, 1995,
there has not been:
7.
<PAGE>
(i) Any material adverse change in the assets or
liabilities of Seller;
(ii) Any sale, lease, or disposition of, or any
agreement to sell, lease, or dispose of any of the Assets other than pursuant to
this Agreement;
(iii) Any modification, waiver, change, amendment,
release, rescission, accord and satisfaction, or termination of, or with respect
to, any term, condition, or provision of any material Contract relating to or
affecting the Business, the Assets, or the Assumed Liabilities, other than any
satisfaction by performance in accordance with the terms thereof in the usual
and ordinary course of Business;
(iv) Any borrowing or lending of money by Seller,
including to or from its shareholders, but excluding for this purpose sales made
on ordinary trade terms; or
(v) Any other event or condition of any character that
has had a material adverse effect, or may reasonably be expected to have a
material adverse effect, on the Assets or the Business.
(f) UNDISCLOSED LIABILITIES. There are no debts, claims,
liabilities, or obligations with respect to the Business (except as incurred in
the ordinary course of business since the date of the Financial Statements) or
to which the Assets are subject, liquidated, unliquidated, accrued, absolute,
contingent, or otherwise, that are not identified in the Financial Statements.
(g) INVENTORY. Schedule 1.1(b) hereto lists all of Seller's
inventory other than excess, unused or obsolete items. All items included in
the Inventory are the property of Seller and, as of the Time of Closing, are
free and clear of any mortgage, pledge, lien, security interest or other
encumbrance.
(h) TAXES. Seller has completed and duly filed (or has received
an extension of time to file and will complete and file in such extended time)
in correct form with the appropriate United States, state and local governmental
agencies and with the appropriate foreign countries and political subdivisions
thereof, all Tax (as hereinafter defined) returns and reports required to be
filed; all of such returns and reports are accurate and complete; and Seller has
paid in full or made adequate provisions on its financial statements for all
Taxes, assessments or deficiencies shown to be due on such Tax returns and
reports or claimed to be due by any taxing authority or otherwise due or owing.
Seller has made all payments of estimated income Tax through the date hereof and
all withholdings of Tax required to be made under all applicable United States,
foreign, state and local tax laws and regulations, and such withholdings have
either been paid to the respective governmental agencies or set aside in
accounts for such purpose or accrued, reserved against and entered upon the
books of such company. The Assets are not subject to any liens for Taxes,
except liens for current
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Taxes not yet due. There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
current or former employee of the Business that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Section 280G or Section 162 of the Code.
For purposes of this Agreement, "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means (i) any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental, regulatory or
administrative entity or agency responsible for the imposition of any such tax
(domestic or foreign), (ii) any liability for the payment of any amounts of the
type described in (i) as a result of being a member of an affiliated,
consolidated, combined, unitary or other group for any Taxable period and
(iii) any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of any express or implied obligation to indemnify any other
person.
(i) COMPLIANCE WITH LAW. Seller has complied and is in
compliance in all material respects with all applicable federal, state, and, to
the best of Seller's knowledge, local laws, statutes, licensing requirements,
rules, and regulations, and judicial or administrative decisions applicable to
the Business. There is no order issued, investigation, or proceeding pending
or, to the best of Seller's knowledge, threatened, or notice served with respect
to any violation of any law, ordinance, order, writ, decree, rule, or regulation
issued by any federal, state, local, or foreign court or governmental or
regulatory agency or instrumentality applicable to the Business.
(j) GOVERNMENTAL CONSENTS. No consent, approval, order, or
authorization of, or registration, qualification, designation, declaration, or
filing with any federal, state, local, or provincial governmental authority on
the part of Seller is required in connection with the consummation of the
transactions contemplated hereunder.
(k) PROPRIETARY RIGHTS. Set forth on Schedule 1.1(e) hereto is
a complete and accurate list and brief description of all Proprietary Rights
owned or held by Seller used in the Business. Except as set forth on Schedule
4.1(k), Seller has complete and undisputed title and ownership of or adequate
rights (license or otherwise) to utilize all Proprietary Rights necessary for or
used in the Business, without any conflict with or infringement of the rights of
others.
Except as set forth on Schedule 4.1(k), there are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
Seller bound by or a party to any options, licenses or agreements of any kind
with respect to the
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proprietary rights of any other person or entity. Seller has not received any
communications nor is it aware of any entity alleging that Seller has violated
or, by conducting the Business as currently conducted, would violate any
proprietary rights of any other person or entity. Seller is not aware that any
of its employees or consultants associated with the Business is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of Seller or that would conflict with the
Business as now conducted. Neither the execution nor delivery of this Agreement
nor the carrying on of the Business by its employees or consultants will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument of which
Seller is aware under which any of such employees or consultants or Seller is
now obligated.
Schedule 1.1(e) also indicates all patents, patent applications,
trademarks (registered or unregistered), licenses and, independent contractor or
consulting agreements and any other Proprietary Rights that require a consent or
waiver to consummate the transactions contemplated in this Agreement. Except as
set forth on Schedule 1.1(e), all of Seller's license agreements with respect to
its Proprietary Rights are in writing and evidence legitimate ownership of such
rights in Seller.
(l) CONTRACTS AND COMMITMENTS.
(A) There is set forth on Schedule 1.1(c) a list of all
outstanding contracts, setting forth the parties and the dates, including
expiration dates, thereto which relate to the Business, whether or not in
writing, to which Seller is a party or to which any of the Assets are subject.
(B) Seller has performed all of its obligations under the
terms of each Contract and is not in default thereunder. No event or omission
has occurred which but for the giving of notice or lapse of time or both would
constitute a default by any party thereto under any such Contract, where such
default by any party could have a material adverse effect on the Business or the
Assets. Each such Contract is valid and binding on all parties thereto and in
full force and effect. Seller has received no notice of default, cancellation,
or termination in connection with any such Contract.
(C) Schedule 1.1(c) lists all Contracts, under the heading
"Contracts Requiring Novation or Consent to Assignment," that require a novation
or consent to assignment, as the case may be, prior to the Time of Closing so
that Purchaser shall be made a party in place of Seller or as assignee (the
"Contracts Requiring Novation or Consent to Assignment"). Such list is
complete, accurate and includes every Contract which, if no novation occurs to
make Purchaser a party thereto or if no consent to assignment is obtained, would
have a material adverse effect on
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Purchaser's ability to operate the Business in the same manner as the Business
was operated by Seller prior to the Time of Closing.
(m) TITLE TO THE ASSETS.
(A) Except as set forth on Schedule 4.1(m) attached hereto
and except for Permitted Encumbrances, Seller has good and marketable title to
the Assets free and clear of any pledges, liens, encumbrances, security
interests, equities, charges, and restrictions of any nature whatsoever
(collectively, the "Liens"). The term "Permitted Encumbrances" shall mean (a)
Liens for current taxes not due and payable and (b) Liens reflected in the
Financial Statements. Any and all Liens set forth on Schedule 4.1(m), with the
exception of Permitted Encumbrances, shall be terminated as of the Time of
Closing, and Seller shall transfer the Assets to Purchaser free and clear of all
such Liens.
(B) By virtue of the deliveries made at the Closing,
Purchaser will obtain good and marketable title to the Assets, free and clear of
all Liens except for Permitted Encumbrances.
(n) LITIGATION. Except as set forth on Schedule 4.1(n), there
is no claim, litigation, action, suit, or proceeding, administrative or
judicial, pending or, to Seller's knowledge, threatened against Seller relating
to the Business, or involving the Assets, at law or in equity, before any
federal, state, local, or foreign court, or regulatory agency, or other
governmental authority, including, without limitation, any unfair labor practice
or grievance proceedings or otherwise.
(o) NO CONFLICT OR DEFAULT. Neither the execution and delivery
of this Agreement nor compliance with the terms and provisions hereof, including
without limitation, the consummation of the transactions contemplated hereby,
will violate any statute, regulation, or ordinance of any governmental
authority, or conflict with or result in the breach of any term, condition, or
provision of Seller's Certificate of Incorporation or Bylaws, or, subject to
obtaining the consents described in Section 5.7 below, of any material
agreement, deed, contract, mortgage, indenture, writ, order, decree, legal
obligation, or instrument to which Seller is a party or by which it or any of
the Assets are or may be bound, or constitute a default (or an event which, with
the lapse of time or the giving of notice, or both, would constitute a default)
thereunder.
(p) BROKERS' AND FINDERS' FEES. Seller is not obligated to pay
any fees or expenses of any broker or finder in connection with the origin,
negotiation, or execution of this Agreement or in connection with any
transactions contemplated hereby.
(q) CUSTOMERS. Schedule 4.1(q) attached hereto lists all
customers of the Business since the date of Seller's incorporation. Prior to
the Time of
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Closing, Seller shall furnish Purchaser with complete and accurate copies or
descriptions of all current agreements with such customers.
(r) BOOKS AND RECORDS. The books and records of Seller to which
Purchaser and its accountants and attorneys have been given access are the true
books and records of Seller and, to the best of Seller's knowledge, truly and
fairly reflect the underlying facts and transactions in all material respects.
(s) COMPLETE DISCLOSURE. No representation or warranty by
Seller in this Agreement, and no exhibit, schedule, statement, certificate, or
other writing furnished to Purchaser pursuant to this Agreement or in connection
with the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein in the context in
which they were made not misleading.
(t) LIMITATION. EXCEPT FOR THE EXPRESS REPRESENTATIONS AND
WARRANTIES SET FORTH IN THIS ARTICLE IV, NO REPRESENTATION OR WARRANTY
WHATSOEVER IS MADE BY SELLER AND SELLER HEREBY DISCLAIMS ANY REPRESENTATIONS OR
WARRANTIES IMPLIED AS TO THE CONDITION, VALUE OR QUALITY OF THE ASSETS AND
SPECIFICALLY DISCLAIMS WITH RESPECT TO THE ASSETS ANY REPRESENTATIONS AND
WARRANTIES OF MERCHANTABILITY, USAGE OR FITNESS FOR ANY PARTICULAR PURPOSE.
(u) EXPERIENCE. Seller has, either individually or through the
personal experience of one or more of its current officers or directors,
experience in evaluating and investing in start-up companies.
(v) INVESTMENT. Seller is acquiring the Shares (and any Common
Stock issuable upon conversion of the Shares) for investment for its own account
and not with the view to, or for resale in connection with, any distribution
thereof (other than to the Distributees as contemplated by Section 6.3(a)
hereof). Seller understands that the Shares (and any Common Stock issuable upon
conversation of the Shares) to be purchased have not been 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 as expressed herein.
(w) RULE 144. Seller acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Seller is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things the existence
of a public market for the shares, the availability of certain current public
information about Purchaser, the resale occurring not less than two years after
a party
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has purchased and paid for the securities to be sold, the sale being through a
"brokers transaction" or in transactions directly with a "market maker" (as
provided by Rule 144(f) and the number of shares being sold during any
three-month period not exceeding specified limitation. Seller is aware that the
condition for resale set forth in Rule 144 have not been satisfied and that
Purchaser has no plan to satisfy these conditions in the foreseeable future.
(x) NO-PUBLIC MARKET. Seller understands that no public market
now exists for the Shares and that a public market may never develop for the
Shares.
SECTION 4.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
hereby represents and warrants to Seller that:
(a) ORGANIZATION OF PURCHASER. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has all requisite power and authority to own and operate its
business.
(b) AUTHORIZATION OF PURCHASER. Purchaser has full power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby, including, without
limitation, the execution and delivery of this Agreement. Purchaser has taken
all necessary and appropriate corporate action, including obtaining all
necessary board consents, with respect to the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, subject
to bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the rights and remedies of creditors and subject to general principles
of equity.
(c) FINANCIAL INFORMATION. Purchaser has delivered to Seller
its audited balance sheets and related statements of operations and cash flows
at and for the fiscal year ended December 3, 1994 and unaudited balance sheets
and related statements of operations at and for the period ended July 1, 1995.
Each financial statement is complete and correct in all material respects and
has been or will be as of the Time of Closing, prepared on a consistent basis
throughout the periods indicated and with each other and prepared in accordance
with generally accepted accounting principles ("GAAP") (except that the interim
statements (i) are prepared in a manner including all material adjustments,
consisting only of normal recurring accruals necessary for a fair presentation
of the results for these periods, (ii) are not necessarily indicative of the
results for the full fiscal year and (iii) are unaudited and do not include
footnotes). The financial statements fairly describe the financial condition
and operating results of Purchaser as of the dates, and for the periods,
indicated therein.
(d) CAPITALIZATION. The authorized capital of Purchaser
consists, or will consist immediately prior to the Time of Closing, of
25,000,000 shares of Common Stock, of which 1000 shares are issued and
outstanding, and 18,000,000 shares
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of Preferred Stock, of which 8,300,000 are designated Series A-1 Preferred
Stock, 8,094,340 of which are issued and outstanding, 8,300,000 are designated
Series A-2 Preferred Stock, none of which are issued and outstanding, 500,000
are designated Series A-3 Preferred Stock, none of which are issued and
outstanding prior to the Time of Closing, and 500,000 are designated Series A-4
Preferred Stock, none of which are issued and outstanding. No other shares of
capital stock or other securities of Purchaser are outstanding. All such issued
and outstanding shares have been duly authorized and validly issued and are
filly paid and nonassessable and have been offered, issued , sold and delivered
by Purchaser in compliance with applicable federal and state securities laws.
The Shares have the rights, preferences and privileges set forth in the Restated
Articles. Purchaser has reserved 896,208 shares of its Common Stock (the
"Reserved Shares") for issuance pursuant to Purchaser's 1995 Stock Plan, 469,513
shares of which are subject to outstanding options and 426,695 shares of which
are available for future grants under such plan.
(e) GOVERNMENTAL CONSENTS. No consent, approval, order, or
authorization of, or registration, qualification, designation, declaration, or
filing with any federal, state, local or provincial governmental authority on
the part of Purchaser is required in connection with the consummation of the
transactions contemplated hereunder other than under the blue sky laws of the
states of California and Massachusetts and the bulk sales of the state of
Massachusetts.
(f) LITIGATION. There is no claim, litigation, action, suit or
proceeding, administrative or judicial, pending or, to Purchaser's knowledge,
threatened against Purchaser relating to this Agreement or the transactions
contemplated hereunder, at law or in equity, before any federal, state, local or
foreign court, or regulatory agency, or other governmental authority, which
could result in the institution of legal proceedings to prohibit or restrain the
consummation or performance of this Agreement or the transactions contemplated
hereby or claim damages as a result of this Agreement or the transactions
contemplated hereby.
(g) NO CONFLICT OR DEFAULT. Neither the execution and delivery
of this Agreement nor compliance with the terms and provisions hereof,
including, without limitation, the consummation of the transactions contemplated
hereby, will violate any statute, regulation, or ordinance of any governmental
authority, or conflict with or result in the breach of any term, condition, or
provision of Purchaser's Articles of Incorporation or Bylaws, or of any material
agreement, deed, contract, mortgage, indenture, writ, order, decree, legal
obligation, or instrument to which Purchaser is a party or by which it is or may
be bound, or constitute a default (or an event which, with the lapse of time or
the giving or notice, or both, would constitute a default) thereunder.
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(h) BROKERS' AND FINDERS' FEES. Purchaser is not obligated to
pay any fees or expenses of any broker or finder in connection with the origin,
negotiation, or execution of this Agreement or in connection with any
transactions contemplated hereby.
(i) COMPLETE DISCLOSURE. No representation or warranty by
Purchaser in this Agreement, and no exhibit, schedule, statement, certificate,
or other writing furnished to Seller pursuant to this Agreement or in connection
with the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein in the context in
which they were made not misleading.
(j) FINANCING. Purchaser entered into a Series A-1 Preferred
Stock Purchase Agreement, dated July 27, 1995, pursuant to which Purchaser
agreed to issue and sell an aggregate of 8,094,340 shares of Series A-1
Preferred Stock for an aggregate purchase price of $10,725,000.52
ARTICLE V
COVENANTS
SECTION 5.1 COVENANTS AGAINST DISCLOSURE. Until the Time of
Closing, no party or its affiliates shall disseminate any press release or
announcement or otherwise make any disclosure to third parties concerning the
transactions contemplated by this Agreement and Purchaser will not make any
disclosures to third parties, excluding the announcement of this Agreement, that
could be reasonably expected to damage the Business or products of Seller
without the prior consent of Seller and Purchaser, except as, in the reasonable
opinion of a party, required by law.
SECTION 5.2 MAINTENANCE OF BUSINESS. Except as otherwise required
to perform its obligations under this Agreement, during the period from the date
hereof through the Time of Closing, Seller shall carry on and use its reasonable
efforts to preserve the Assets in substantially the same manner as Seller did
prior to the date hereof. Seller shall not, without the prior written consent of
Purchaser:
(a) (i) Enter into any commitment or transaction not in the
ordinary course of business to purchase fixed assets with an aggregate
purchase price exceeding $5,000, or (ii) sell or commit to sell any
products with an aggregate purchase price greater than $5,000;
(b) Transfer to any person or entity any rights to Seller's
Proprietary Rights;
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(c) Enter into or amend any agreements pursuant to which any
other party is granted manufacturing, marketing, distribution or other
similar rights of any type or scope with respect to any products of
Seller;
(d) Amend or otherwise modify the terms of any material Contract;
(e) Commence a lawsuit other than for the routine collection of
bills, to protect assets of Seller or for breach of this Agreement;
(f) Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets (other than the
purchase of inventory in the ordinary course of business) which are
material, individually or in the aggregate, to Seller;
(g) Sell, lease, license, encumber or otherwise dispose of any of
the Assets;
(h) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee
any debt securities of others;
(i) Engage in any activities or transactions that are outside the
ordinary course of its business;
(j) Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith;
(k) Waive or commit to waive any right insofar as any such right
is included in the Assets or the Assumed Liabilities;
(l) Take, or agree in writing or otherwise to take, any of the
actions described in subsections (a) through (k) above.
SECTION 5.3 ACCESS TO INFORMATION. Seller shall give Purchaser and
its Representatives (as such term is defined below) full access, during normal
Business hours, to all of the properties, books, contracts, commitments, and
records relating to the Business and the Assets, provided that such access shall
not unreasonably interfere with the normal operations of the Business, and
Seller will furnish to Purchaser and its officers, directors, employees, agents
or representatives (collectively, "Representatives") during such period all such
information concerning the Business or the Assets as Purchaser may reasonably
request; provided, that any furnishing of such information
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pursuant hereto or any investigation by Purchaser shall not affect Purchaser's
right to rely on the representations, warranties, agreements and covenants made
by Seller in this Agreement. All requests for permissions under this Section
5.3 shall be made by Purchaser through an individual designated for the purpose
by Seller.
SECTION 5.4 OTHER DISCUSSIONS. Unless and until the earlier of (A)
this Agreement having been terminated by mutual consent or by either party
pursuant to Section 8.11 hereof or (B) September 29, 1995 Seller shall not,
directly or indirectly, through any officer, director, affiliate, agent or
otherwise solicit, initiate, or encourage any proposals or offers from any third
party relating to any possible acquisition of Seller or any of its subsidiaries
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) (an "Alternative Acquisition"), or contract for or engage in any sale
of equity interests in Seller (other than pursuant to the exercise of
outstanding options or warrants) (an "Equity Transaction"); nor will Seller
participate in any negotiations regarding or furnish to any person any
information with respect to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any person to do or seek any Alternative
Acquisition or Equity Transaction. Seller shall immediately cease and cause to
be terminated any such contacts or negotiations with third parties and shall
immediately notify Purchaser of all inquiries related to an Alternative
Transaction or Equity Transaction Seller receives after the date hereof and
prior to September 29, 1995. Other than as contemplated under this Agreement,
disclosure by Seller of the terms of this Agreement shall be a violation of this
Section 5.4; provided, however, that disclosure by Seller of the prohibitions of
this Section 5.4 to a third party in response to an Alternative Acquisition or
Equity Transaction shall not be a violation of this Section 5.4.
SECTION 5.5 CERTAIN HEALTH BENEFITS; COBRA. Seller shall be
responsible for compliance with the health care continuation coverage
requirements of COBRA applicable to employees of Seller. Seller shall be
responsible for any associated notice requirements for employees of the Business
who are terminated on or prior to the Time of Closing.
SECTION 5.6 NOVATIONS. Seller agrees to use reasonable efforts to
obtain contract novations or consents to assignment, as necessary, for all
contracts requiring Novation or Consent to Assignment prior to or as soon as
practicable after the Time of Closing.
SECTION 5.7 POST CLOSING TRANSACTIONS.
(a) Seller shall remit to Purchaser all collections by it under the
Contracts, novated or otherwise, within ten (10) business days after Seller's
receipt of such collections.
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(b) Subject to any approvals required by Seller's customers, Seller
shall subcontract the rights and obligations of any Contracts not novated to
Purchaser on the same terms and conditions provided in such Contracts.
SECTION 5.8 SALES AND TRANSFER TAXES. Seller agrees to take all
actions reasonably requested by Purchaser to minimize any sales, use and other
transfer taxes and fees incurred in connection with the assignment, conveyance,
transfer and/or delivery of the Assets hereunder.
SECTION 5.9 TAX RETURNS. Seller shall properly file all returns,
statements, reports, forms or other documents (collectively, "Tax Returns") that
Seller is required by any applicable law to file with respect to Taxes arising
in or related to periods ending on or prior to the Time of Closing or related to
transactions or events occurring prior to the Time of Closing and shall pay all
such Taxes when due (which amount shall be reimbursed by Purchaser to Seller,
other than with respect to federal and state corporate income taxes). With
respect to state and local ad valorem taxes on the Assets (whether personal or
real, owned or leased) for the current Tax year, Purchaser shall be responsible
for the payment of all such Taxes for the period up to and including the Time of
Closing as well as for the payment of all such Taxes for the period after the
Time of Closing. Any supplemental property Taxes or assessments which arise out
of a revaluation of an Asset which revaluation would not have occurred except
for the change in ownership of the Asset shall be borne by Purchaser. Any
payment of Taxes due from one party to the other pursuant to this Section 5.10
shall be paid at the Time of Closing.
SECTION 5.10 EMPLOYEE BENEFIT PLANS. Seller may disperse, in
accordance with the terms of the applicable employee benefit plan and applicable
law, all funds from its employee medical and benefit and other compensatory
plans that are due and owing to employees of the Business.
SECTION 5.11 REPRESENTATIONS OF DISTRIBUTEES. Seller agrees that in
the event it should distribute the Shares received, or assign the rights
granted, pursuant to Section 3.2 hereof, prior to any such distribution or
assignment, any such Distributee shall agree to be bound by the provisions of
Article III and shall make the representations contained in Sections 4.1(w),
(u), (v), and (x).
SECTION 5.12 INDEMNIFICATION.
(a) Seller shall indemnify Purchaser from and hold it harmless
against any liabilities, damages, costs, and expenses resulting from or arising
out of any action brought or levy made as a result of Seller's failure to pay
its liabilities owed to creditors, other than those liabilities which have been
expressly assumed, on such terms as expressly assumed, by Purchaser pursuant to
this Agreement.
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(b) Purchaser shall indemnify and hold harmless Seller, any affiliate
thereof and the directors, officers and employees of Seller or any such
affiliate from and against any and all losses arising out of the Assumed
Liabilities and the Assets from and after the Closing.
SECTION 5.13 SALES OF 3D SCOPE SYSTEMS. Purchaser will use its best
efforts to sell the 3D Scope Systems constructed primarily from Inventory;
provided, however, that Purchaser shall incur no liability to Seller or any
Distributee for the failure of Purchaser to sell any such 3D Scope Systems.
ARTICLE VI
CLOSING
SECTION 6.1 TIME OF CLOSING. The transactions contemplated by this
Agreement shall be completed on the first Business day on which the last of the
conditions contained in Article VII hereof is fulfilled or waived (the "Time of
Closing"), with the expectation that the Closing shall occur on September 19,
1995 at 10:00 A.M., P.S.T., unless otherwise agreed to by Purchaser and Seller.
The Closing shall take place at the offices of Brobeck, Phleger & Harrison, Two
Embarcadero Place, 2200 Geng Road, Palo Alto, CA, or at such other place or date
as may be agreed to by Purchaser and Seller. The "Closing" shall mean the
deliveries to be made by the parties hereto at the Time of Closing in accordance
with this Agreement.
SECTION 6.2 DELIVERIES BY SELLER. At the Closing, Seller shall
deliver, or cause to be delivered, to Purchaser the following:
(a) A good and sufficient Bill of Sale and an Assignment and
Assumption of Liabilities Agreement for the Assets in the form mutually agreed
to by Purchaser and Seller, selling, delivering, transferring, and assigning to
Purchaser title to all of Seller's right, title, and interest to the Assets,
free and clear of all mortgages, pledges, liens, encumbrances, security
interests, equities, charges, and restrictions of any nature whatsoever except
as otherwise provided herein.
(b) Good and sufficient assumptions and assignments of the
Proprietary Rights and Contracts, which shall be in form and substance
reasonably satisfactory to Purchaser and shall include the written consents of
all parties necessary in order to transfer all of Seller's rights thereunder to
Purchaser.
(c) An Officers' Certificate executed by the Vice President and
Chief Financial Officer of Seller certifying that the conditions specified in
subsections (a)-(d) of Section 7.1 have been satisfied.
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(d) An Opinion Letter of Ropes & Gray, counsel for Seller, dated
as of the Time of Closing, in the form mutually agreed to by Purchaser and
Seller.
SECTION 6.3 DELIVERIES BY PURCHASER. At the Closing, Purchaser
shall deliver, or cause to be delivered, to Seller:
(a) The payment of that portion of the Purchase Price set forth
in Section 3.2(a) hereof (which payment shall, at Seller's election, be made to
the Distributees designated by Seller in a written notice to Purchaser at least
five business days prior to the Closing);
(b) A good and sufficient Bill of Sale and an Assignment and
Assumption of Liabilities Agreement in the form mutually agreed to by Purchaser
and Seller, covering those liabilities of Seller assumed by Purchaser pursuant
to Section 2.1 hereof;
(c) An Officer's Certificate executed by the President of
Purchaser certifying that the conditions specified in subsections (a) - (c) of
Section 7.2 have been satisfied; and
SECTION 6.4 FURTHER ASSURANCES. At or after the Time of Closing,
each party shall prepare, execute, and deliver, such further instruments of
conveyance, sale, assignment, or transfer, and shall take or cause to be taken
such other or further action, as any party shall reasonably request of any other
party at any time or from time to time in order to perfect, confirm, or evidence
in Purchaser title to all or any part of the Assets or to consummate, in any
other manner, the terms and provisions of this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS
SECTION 7.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. Each and every
obligation of Purchaser to be performed at the Closing shall be subject to the
satisfaction as of or before the Time of Closing of the following conditions
(unless waived in writing by Purchaser):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth in Section 4.1 of this Agreement shall have been
true and correct when made and shall be true and correct at and as of the Time
of Closing as if such representations and warranties were made as of such date
and time.
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions, and
other obligations under this Agreement which are to be performed or complied
with by Seller shall have been fully performed and complied with at or prior to
the Time of
20.
<PAGE>
Closing, including the delivery of the instruments and documents in accordance
with Section 6.2 hereof.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been no
material adverse change in the Assets or Assumed Liabilities.
(d) ABSENCE OF GOVERNMENTAL OR OTHER OBJECTION. There shall be
no pending or threatened lawsuit challenging the transaction by any body or
agency of the federal, state or local government or by any third party, and the
consummation of the transaction shall not have been enjoined by a court of
competent jurisdiction as of the Time of Closing.
(e) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions and other documents delivered or to be
delivered to Purchaser under this Agreement shall be reasonably satisfactory to
Purchaser and its counsel in all respects.
(f) MCKINLEY CONSENT AND RELEASE. Purchaser shall have received
from McKinley Optics, Inc. ("McKinley") a consent to assignment and a general
release of liability under that certain License and Development Agreement by and
between McKinley and Seller, as amended to date.
(g) BULK SALES. All notifications, authorizations, consents and
approvals required pursuant to the Bulk Sales laws of any state in which any of
the Assets are located shall have been obtained.
(h) TAX LIEN WAIVERS. Purchaser shall have received from Seller
a copy of a waiver of tax lien issued by all applicable state tax authorities.
SECTION 7.2 CONDITIONS TO OBLIGATIONS OF SELLER. Each and every
obligation of Seller to be performed at the Time of Closing shall be subject to
the satisfaction as of or before such time of the following conditions (unless
waived in writing by Seller):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser set forth in Section 4.2 of this Agreement shall have
been true and correct when made and shall be true and correct at and as of the
Time of Closing as if such representations and warranties were made as of such
date and time.
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions, and
other obligations under this Agreement which are to be performed or complied
with by Purchaser shall have been fully performed and complied with at or prior
to the Time of Closing, including the delivery of the instruments and documents
in accordance with Section 6.3 hereof.
21.
<PAGE>
(c) ABSENCE OF GOVERNMENTAL OR OTHER OBJECTION. There shall be
no pending or threatened lawsuit challenging the transaction by any body or
agency of the federal, state, or local government or by any third party, and the
consummation of the transaction shall not have been enjoined by a court of
competent jurisdiction as of the Time of Closing.
(d) APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions, and other documents delivered or to be
delivered to Seller under this Agreement shall be reasonably satisfactory to
Seller and its counsel in all respects.
(e) PURCHASE PRICE. Purchaser shall have delivered to Seller a
certificate or certificates representing the Shares together with a check or
wire transfer in the amount of $25,000, as set forth in Section 3.2(a) hereof.
(f) INSTRUMENT OF BILL OF SALE, ASSIGNMENT AND ASSUMPTION OF
LIABILITIES AGREEMENT. Purchaser shall have executed and delivered an
Instrument of Bill of Sale and an Assignment and Assumption of Liabilities
Agreement covering those liabilities of Seller assumed by Purchaser pursuant to
Section 2.1 hereof in the form mutually agreed to by Purchaser and Seller.
(g) INVESTORS RIGHTS AGREEMENT. Purchaser shall have taken all
steps reasonably necessary to permit Seller (or Distributees designated by
Seller in a written notice to Purchaser received at least two days prior to
Closing) to become a party to the Investors Rights Agreement dated as of July
27, 1995.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 NOTICE. All notices and other communications required
or permitted under this Agreement shall be delivered to the parties at the
address set forth below their respective signature blocks, or at such other
address that they designate by notice to all other parties in accordance with
this Section 8.1. Any party delivering notice to Seller shall deliver a copy to
Ropes & Gray, One International Place, Boston, MA 02110, Attn: Gregory
Sheehan, Esq., and any party delivering notice to Purchaser shall deliver a copy
to: Brobeck, Phleger & Harrison, Two Embarcadero Place, 2200 Geng Road, Palo
Alto, CA 94303, Attn: Gari L. Cheever, Esq. All notices and communications
shall be deemed to have been received unless otherwise set forth herein: (i) in
the case of personal delivery, on the date of such delivery; (ii) in the case of
telex or facsimile transmission, on the date on which the sender receives
confirmation by telex or facsimile transmission that such notice was received by
the addressee, provided that a copy of such transmission is additionally sent by
mail as set forth in (iv) below; (iii) in the case of overnight air courier, on
the second Business day following the
22.
<PAGE>
day sent, with receipt confirmed by the courier; and (iv) in the case of mailing
by first class certified or registered mail, postage prepaid, return receipt
requested, on the fifth Business day following such mailing.
SECTION 8.2 ENTIRE AGREEMENT. This Agreement, the exhibits and
schedules hereto, the documents referred to herein, and the documents executed
contemporaneously hereto at the Time of Closing, embody the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and supersede all prior and contemporaneous agreements and understandings, oral
or written, relative to such subject matter.
SECTION 8.3 BINDING EFFECT; ASSIGNMENT. This Agreement and the
various rights and obligations arising hereunder shall inure to the benefit of
and be binding upon Seller, its successors and permitted assigns, and Purchaser
and its successors and permitted assigns. Neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be transferred or assigned (by
operation of law or otherwise) by either of the parties hereto without the prior
written consent of the other party.
SECTION 8.4 EXPENSES OF TRANSACTION; TAXES. Except as set forth in
Section 8.12, each party shall bear its own costs and expenses in connection
with this Agreement and the transactions contemplated hereby. Purchaser shall
pay all applicable sales, use, excise, transfer, documentary and any other
similar taxes arising out of the purchase and sale of the Assets.
SECTION 8.5 WAIVER; CONSENT. This Agreement may not be changed,
amended, terminated, augmented, rescinded, or discharged (other than by
performance), in whole or in part, except by a writing executed by the parties
hereto, and no waiver of any of the provisions or conditions of this Agreement
or any of the rights of a party hereto shall be effective or binding unless such
waiver shall be in writing and signed by the party claimed to have given or
consented thereto. Except to the extent that a party hereto may have otherwise
agreed in writing, no waiver by that party of any condition of this Agreement or
breach by the other party of any of its obligations or representations hereunder
or thereunder shall be deemed to be a waiver of any other condition or
subsequent or prior breach of the same or any other obligation or representation
by the other party, nor shall any forbearance by the first party to seek a
remedy for any noncompliance or breach by the other party be deemed to be a
waiver by the first party of its rights and remedies with respect to such
noncompliance or breach.
SECTION 8.6 COUNTERPARTS. This Agreement may be executed
simultaneously in multiple counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
SECTION 8.7 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from
23.
<PAGE>
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
SECTION 8.8 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No
provisions of this Agreement are intended, nor will be interpreted, to provide
or create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, stockholder, partner or employee of any party
hereto or any other person or entity unless specifically provided otherwise
herein, and, except as so provided, all provisions hereof will be personal
solely between the parties to this Agreement.
SECTION 8.9 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or to protect the
rights obtained hereunder each party shall bear its own costs and expenses.
SECTION 8.10 COOPERATION AND RECORDS RETENTION. Seller and Purchaser
shall (i) each provide the other with such assistance as may reasonably be
requested by them in connection with the preparation of any Tax Returns, or in
connection with any audit or other examination by any taxing authority or any
judicial or administrative proceedings relating to liability for Taxes, (ii)
each retain and provide the other, with any records or other information which
may be relevant to any such Tax Return, audit or examination, proceeding or
determination, and (iii) each provide the other with any final determination of
any such audit or examination, proceeding or determination that affects any
amount required to be shown on any Tax Return of the other for any period.
Without limiting the generality of the foregoing, Seller and Purchaser shall use
reasonable efforts to retain, until the applicable statute of limitations
(including any extensions) have expired, copies of all Tax Returns, supporting
work schedules and other records or information which may be relevant to such
Tax Returns for all tax periods or portions thereof ending before or including
the Time of Closing and shall not destroy or otherwise dispose of any such
records without first providing the other party with a reasonable opportunity to
review and copy the same. Purchaser shall keep the original copies of the
records at its facilities in California and elsewhere, if applicable, and, at
Seller's expense, shall provide copies of the Records to Seller upon Seller's
request.
SECTION 8.11 TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time, but not later
than the Time of Closing:
(a) By mutual consent of the respective Boards of Directors of
Purchaser and Seller; or
(b) By the Board of Directors of Purchaser (i) if, on or after
September 29, 1995 any of the conditions provided for in Section 7.1 of this
Agreement shall not have been met or shall not have been waived in writing by
Purchaser prior to such date or (ii) the Board of Directors of Purchaser
determines in the exercise of its reasonable
24.
<PAGE>
judgment that the pendency of any lawsuit or the institution or threat of any
governmental or administrative action, investigation or inquiry which questions
the validity or the legality of the transactions contemplated hereby or which
seeks to prevent, restrain, change or obtain damages in respect of such
transactions, makes it inadvisable to consummate the transactions contemplated
hereby, notwithstanding that such lawsuit, action, investigation or inquiry may
be deemed to be without merit; or
(c) By the Board of Directors of Seller (i) if, on or after September
29, 1995, any of the conditions provided for in Section 7.2 of this Agreement
shall not have been met or shall not have been waived in writing by the Seller
prior to such date, or (ii) the Board of Directors of Purchaser determines in
the exercise of its reasonable judgment that the pendency of any lawsuit or the
institution or threat of any governmental or administrative action,
investigation or inquiry which questions the validity or the legality of the
transactions contemplated hereby or which seeks to prevent, restrain, change or
obtain damages in respect of such transactions, makes it inadvisable to
consummate the transactions contemplated hereby, notwithstanding that such
lawsuit, action, investigation or inquiry may be deemed to be without merit; or
(d) In the event of termination and abandonment by the Board of
Directors of Purchaser or by the Board of Directors of Seller, or both, pursuant
to Section 8.11 hereof, written notice thereof shall forthwith be given to the
other party and this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned without further action by Purchaser or Seller. If
this Agreement is terminated as provided herein:
(i) Each party will redeliver all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to the party furnishing the same;
(ii) No such termination shall effect the obligations
under Section 8.12 hereof which shall survive termination of this
Agreement; and
(iii) All parties hereto shall bear their own costs
associated with this Agreement and all transactions described herein and
the parties hereto shall have no further obligation or liability to the
other parties except as stated in this Section 8.11.
SECTION 8.12 EXPENSE REIMBURSEMENT; (a) In the event that this
Agreement is terminated by Purchaser (so long as Purchaser has not willfully
breached any material provision of this Agreement) pursuant to Section
8.11(b)(1) and either (i) prior to such termination, Seller has willfully or
knowingly breached any of the representations, warranties or covenants contained
in this Agreement or (ii) this Agreement is terminated because of Seller's
willful failure to satisfy a condition to
25.
<PAGE>
closing reasonably within its control, then Seller shall reimburse Purchaser (by
wire transfer or immediately available federal funds to an account designated by
Purchaser for such purpose) for all expenses incurred by Purchaser in connection
with the negotiation, execution and delivery of this Agreement and the
transactions contemplated hereby.
(b) In the event that this Agreement is terminated by Seller (so long as
Seller has not willfully breached any material provision of this Agreement)
pursuant to Section 8.11(c)(1) and either (i) prior to such termination,
Purchaser has willfully or knowingly breached any of the representations,
warranties or covenants contained in this Agreement or (ii) this Agreement is
terminated because of Purchaser's willful failure to satisfy a condition to
closing reasonably within its control, then Purchaser shall reimburse Seller (by
wire transfer or immediately available federal funds to an account designated by
Seller for such purpose) for all expenses incurred by Seller in connection with
the negotiation, execution and delivery of this Agreement and the transactions
contemplated hereby.
SECTION 8.13 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
26.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
VISTA MEDICAL TECHNOLOGIES, INC.
a California corporation
By: /s/ John Lyon
----------------------------
Name: John Lyon
---------------------------
Title: President
---------------------------
Address: 2752 Loker Avenue West
Carlsbad, CA 92008
AMERICAN SURGICAL TECHNOLOGIES
CORPORATION
a Delaware corporation
By: /s/ Richard D. Fitzpatrick
----------------------------
Name: Richard D. Fitzpatrick
---------------------------
Title: CFO
---------------------------
Address: 300 Billerica Road
Chelmsford, MA 01824
27.
<PAGE>
Schedule 1.1(a)
RELATED PROPERTY
AST NONINVENTORY ITEMS
as of July 10, 1995
TEST EQUIPMENT
Linseis LPD 1211 12 Channel Chart Recorder
SONY UP 5200MD Video Color Printer
Panasonic WJ-300C Video DA (4 of them)
Biotek 170 Digital Safety Analyzer
Tektronix J16 Digital Photometer
Intravision 8430 Light Source
Fiberoptic Tech DLV-150 Light Source
Philips PM5515 Color TV Pattern Generator
Branson 8200 Ultrasonic Cleaner
Dayton 9K628 Vacuum Pump
Tektronix 2246A Oscilloscope
600 Mbyte Hard Drive with documentation
Rabbit Light Table
Houston Instruments DMP-60 DL Plotter
Elgar 3001 Power Source
MISCELLANEOUS FIXTURES
1 Rolling Shelf Cart
9 Gray Shelving Units
1 5 Drawer Drafting File (full of documentation)
1 Lap Trainer
1 9 port Lap Trainer
4 "Calzone" shipping trunks
14 Plastic Foam Lined Trunks
1 Rolling "Arthro" Cart
2 Stationary "Arthro" Cart
3D Scope Marketing Panels
Documentation boxes
<PAGE>
Schedule 1.1(b)
INVENTORY
<PAGE>
AST Inventory Items
July 10, 1995
CAMERA SYSTEMS
We catalogued all of the primary subassemblies and assessed their readiness for
release. Our assessments of the state of the subassemblies is based strictly on
the test sheets and AST reports that we found. We did no evaluation of our own.
We then matched the subassemblies and came up with a tally of the integrated
systems. The list from this process is included here.
We rated the combined systems as follows:
- - Level A (qty. 6 units) just need to be tested.
- - Level B (qty. 5 units) are only in need of final test and alignment.
- - Level C (qty. 8 units) have a stated problem that we should either be able
to live with or optimize out of the systems with a little work and some
testing.
- - Level D (qty. 3 units) parts need an undetermined amount of labor to debug,
update and test.
A safe conservative estimate for salable units is 11. With added labor, we
should be able to make 19. With undetermined labor, 22 units total could be
salvaged.
A chart of the systems inventory is included herein.
MONITORS AND 3D BEZELS
There were 11 or 12 20" monitors with bezels. There were also 41 17" monitors
with bezels. These tallies were based on matched sets of the monitors and
bezels. There were also several orphan bezels and monitors.
EYEWEAR
We found about 140 pairs of the preferred eyewear used to view the 3D monitors.
There were approximately 1200 of the low cost plastic glasses.
SYSTEM CARTS
There were no complete cart systems needed to install the systems found at the
site.
<PAGE>
ASTINV.WK4
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
UNIT BY LAST ICU SPU SCOPE
- ------------------------------------------------------------------------------------------------------------------------------------
QUALITY LEVEL S/N LIS REPARABLE PROBLEM S/N LIS REPARABLE PROBLEM S/N LIS REPARABLE PROBLEM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 A 1043 1042 x 1069 x
- ------------------------------------------------------------------------------------------------------------------------------------
2 A 1044 x 1041 x 1060 x
- ------------------------------------------------------------------------------------------------------------------------------------
3 A 1039 x 1040 x 1058 x
- ------------------------------------------------------------------------------------------------------------------------------------
4 A 1037 x 1036 x 1036 x
- ------------------------------------------------------------------------------------------------------------------------------------
5 A 1036 1034 x 1017 x
- ------------------------------------------------------------------------------------------------------------------------------------
6 A 1035 x 1028 x 1014 x
- ------------------------------------------------------------------------------------------------------------------------------------
7 B 1033 x 1024 x 1038 x test
- ------------------------------------------------------------------------------------------------------------------------------------
8 B 1032 x 1023 x 1065 x test
- ------------------------------------------------------------------------------------------------------------------------------------
9 B 1031 x 1022 x 1043 x test
- ------------------------------------------------------------------------------------------------------------------------------------
10 B 1030 x 1015 x 1042 x test
- ------------------------------------------------------------------------------------------------------------------------------------
11 B 1027 x 1014 x 1041 x test
- ------------------------------------------------------------------------------------------------------------------------------------
12 C 1017 x 1013 x 1059 x replace FOA
- ------------------------------------------------------------------------------------------------------------------------------------
13 C 1013 x 1010 x 1047 x replace FOA
- ------------------------------------------------------------------------------------------------------------------------------------
14 C 1005 x 1006 x 1031 x replace FOA
- ------------------------------------------------------------------------------------------------------------------------------------
15 C 1004 x 1008 x 1019 x replace FOA
- ------------------------------------------------------------------------------------------------------------------------------------
16 C 1003 x 1001 x 1016 x replace FOA
- ------------------------------------------------------------------------------------------------------------------------------------
17 C 1002 x 1046 x test 1001 x replace FOA
- ------------------------------------------------------------------------------------------------------------------------------------
18 C 1042 x test 1037 x test 1070 x replace CCD's
- ------------------------------------------------------------------------------------------------------------------------------------
19 C 1025 x test 1021 x test 1003 x add lens 12/13
- ------------------------------------------------------------------------------------------------------------------------------------
20 D 1014 x Add L/S, CCU 1018 x test 1058 x Missing lens old
CCD
- ------------------------------------------------------------------------------------------------------------------------------------
21 D 1021 x Add L/S 1009 x Inst PS 1054 x Damaged
- ------------------------------------------------------------------------------------------------------------------------------------
22 D 2 Proto 1047 x Inst FG. Sync 1050 x Damaged
- ------------------------------------------------------------------------------------------------------------------------------------
23 ? 1 Proto 1044 x Inst FG 30R
- ------------------------------------------------------------------------------------------------------------------------------------
24 ? 1018 x noisy Low Chroma 1025 x Inst FG 80F x
- ------------------------------------------------------------------------------------------------------------------------------------
25 No Scope 1008 noisy 1048 x Stripped
- ------------------------------------------------------------------------------------------------------------------------------------
26 No Scope 1022 x noisy 1027 x Stripped
- ------------------------------------------------------------------------------------------------------------------------------------
27 No Scope 1023 Needs Eval 1002 x Old
- ------------------------------------------------------------------------------------------------------------------------------------
28 No Scope 1001 Needs Eval 1035 x Damaged
- ------------------------------------------------------------------------------------------------------------------------------------
Extra Parts
for above: 10 base cams, 12 L/B, 6CCU's 6 FG's, 1PS 3-6 CCD subs, 6 FOA's 4 lens 12/13's 7
cables
</TABLE>
<PAGE>
AST Inventory at Liebmann Optical Co.
As of July 25, 95
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
P/N Qty Unit Price % of Cost to
Completed completion complete
- --------------------------------------------------------------------------------
0086 280 @$95.-- 60% @$38.--
- --------------------------------------------------------------------------------
0087 365 @$262.-- 50% @$131.--
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Schedule 1.1(c)
CONTRACTS
- - License and Development Agreement dated as of December 18, 1991 among Harry
R. McKinley, McKinley Optics, Inc. and American Surgical Technologies
Corporation, as amended.
- - International Distribution Agreement date as of September 20, 1994 between
American Surgical Technologies Corporation and AMCO, Inc., a Japanese
corporation.
- - Non-Competition, non-Disclosure and Patent and Inventions Assignment
Agreement dated as of December 18, 1991 among Harry R. McKinley, McKinley
Optics, Inc. and American Surgical Technologies Corporation.
<PAGE>
Schedule 1.1(d)
PERMITS
- - FDA 510(k) Approval of 3D Scope
- - Compliance by (i) Image Controller, Model 3010 (ii) Signal Processor, Model
3020 (iii) Display, Model 3040 and (iv) Isolation Transformer, Model 3050
with UL 544
- - CSA (Canadian Approval)
30.
<PAGE>
Schedule 1.1(e)
PROPRIETARY RIGHTS
- 3D Scope-Registered Trademark-
- Stereolaparascope-TM-
- American Surgical Technology Corporation-TM-
<PAGE>
Schedule 1.1(j)
OTHER ASSETS
- FDA 510(k) Approval
- CSA (Canadian Approval)
- UL 544 Approval
<PAGE>
Schedule 1.2
EXCLUDED ASSETS
All office furniture, office equipment, computers, cash, cash equivalents,
accounts receivable and the Tektronix Agreement.
<PAGE>
Schedule 4.1(d)
RETURNS
None.
<PAGE>
Schedule 4.1(k)
NON-PROPRIETARY RIGHTS OF SELLER
None.
<PAGE>
Schedule 4.1(m)
LIENS
Claim under Minolta lease for $3,000.
<PAGE>
Schedule 4.1(n)
LITIGATION
Harry McKinley has demanded $32,500 in design fees.
<PAGE>
Schedule 4.1(q)
CUSTOMERS OF SELLER
<PAGE>
AMERICAN SURGICAL TECHNOLOGIES CORPORATION
SYSTEM SALES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
CUSTOMER P.O. DATE INVOICE DATE DESCRIPTION SALE PRICE CLASS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Madison Community Hospital 1/27/93 3/8/93 One System w/two 17" displays $69,260 Hospital
- -------------------------------------------------------------------------------------------------------------------------------
Baptist Hospital of Miami 9/29/93 10/22/93 Three Systems w/one 17" display per 100,000 Hospital
system
- -------------------------------------------------------------------------------------------------------------------------------
Sigmacon, LTD. 3/1/94 3/25/94 One System w/two 20" displays, one 74,172 Distributor
remote system & video equip.
- -------------------------------------------------------------------------------------------------------------------------------
Medwin Co. LTD 5/31/94 6/2/94 One system w/two 17" displays 33,075 Distributor
- -------------------------------------------------------------------------------------------------------------------------------
AAMCO 5/11/94 5/19/94 Two Systems w/two 17" displays per 75,408 Distributor
system
- -------------------------------------------------------------------------------------------------------------------------------
China N. Industries Beijing 5/30/94 6/6/94 One system w/two 17" displays 35,663 Distributor
- -------------------------------------------------------------------------------------------------------------------------------
Kaiser Foundation Hospitals 7/26/94 9/1/94 One system w/two 20" displays 44,400 Hospital
- -------------------------------------------------------------------------------------------------------------------------------
AAMCO 9/27/94 10/21/94 One system w/two 20" displays 41,786 Distributor
- -------------------------------------------------------------------------------------------------------------------------------
Medwin Co. LTD 10/29/94 11/29/94 One system w/no display 26,325 Distributor
- -------------------------------------------------------------------------------------------------------------------------------
St. Lukes Roosevelt 12/19/94 1/13/95 Two systems w/two 20" displays per 102,440 Hospital
system
- -------------------------------------------------------------------------------------------------------------------------------
SRI International 1/6/95 1/10/95 One signal processor 12,625 Distributor
- -------------------------------------------------------------------------------------------------------------------------------
AAMCO 1/17/95 1/25/95 One 2D camera w/one 35mm coupler & 5,003 Distributor
one 28mm coupler
- -------------------------------------------------------------------------------------------------------------------------------
Medical Data International 2/1/95 2/6/95 One system with one 17" display, one 26,400 Distributor
signal processor, one image controller
and 12mm stereo-Laparscope
- -------------------------------------------------------------------------------------------------------------------------------
SRI International 3/6/95 3/6/95 Two frame grabber boards, one sync 2,043 Distributor
board and one video graphic cable
- -------------------------------------------------------------------------------------------------------------------------------
Reveo 2/23/95 2/23/95 One image controller, one 12mm 12,000 Distributor
3DSCOPE, one fiber light guide and
stereoEyewear
- -------------------------------------------------------------------------------------------------------------------------------
Total Sales $660,600
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
VISTA MEDICAL TECHNOLOGIES, INC.,
AND
PROMEDICA DISTRIBUTION, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
1. PURCHASE AND CONSIDERATION.............................................. 1
1.1 Purchase and Sale.................................................. 1
1.2 Assets Not to be transferred....................................... 2
1.3 Non-Assignment of Certain Assets................................... 2
1.4 Assumption of Liabilities.......................................... 2
1.5 Consideration...................................................... 3
1.6 Restrictions on Resale............................................. 3
1.7 Instruments of Transfer............................................ 3
1.8 Sales Taxes........................................................ 3
2. CLOSING................................................................. 3
2.1 The Closing........................................................ 3
2.2 Actions at the Closing............................................. 3
3. REPRESENTATIONS AND WARRANTIES OF SELLER................................ 4
3.1 Organization....................................................... 4
3.2 Authority.......................................................... 4
3.3 Effect of Agreement................................................ 4
3.4 Title to Assets.................................................... 5
3.5 Agreements......................................................... 5
3.6 Accounts Receivable................................................ 5
3.7 Litigation......................................................... 5
3.8 Compliance with Laws............................................... 5
3.9 Customer Lists..................................................... 5
3.10 Inventory.......................................................... 5
3.11 Brokers or Finders................................................. 5
3.12 Third Party Consents............................................... 6
3.13 Representations Complete........................................... 6
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER............................. 6
4.1 Organization....................................................... 6
4.2 Authority.......................................................... 6
4.3 Inventory.......................................................... 6
4.4 Business Plan...................................................... 6
4.5 Brokers or Finders................................................. 7
5. COVENANTS OF SELLER..................................................... 7
5.1 Access; Retention of Records....................................... 7
5.2 Compliance with Legal Requirements................................. 7
5.3 Effectiveness of Transaction....................................... 7
-i-
<PAGE>
5.4 State Tax Certificate.............................................. 7
5.5 Tax Returns........................................................ 7
6. COVENANTS OF PURCHASER.................................................. 8
6.1 Compliance with Legal Requirements................................. 8
7. ADDITIONAL AGREEMENTS................................................... 8
7.1 Bulk Sales......................................................... 8
7.2 State Tax Certificate.............................................. 8
7.3 Expenses........................................................... 8
7.4 Public Disclosure.................................................. 8
7.5 Additional Documents and Further Assurance......................... 8
7.6 Tax-Free Reorganization............................................ 8
7.7 Collection of Accounts Receivable.................................. 11
8. INDEMNIFICATION......................................................... 11
8.1 Indemnification.................................................... 11
8.2 Non-Exclusivity of Remedy.......................................... 12
8.3 Survival........................................................... 12
9. MISCELLANEOUS PROVISIONS................................................ 12
9.1 Assignment, Successors and Assigns................................. 12
9.2 Notices............................................................ 13
9.3 Alterations and Waivers............................................ 13
9.4 Governing Law; Validity, Forum, Laws and Construction.............. 13
9.5 Severability....................................................... 13
9.6 No Third-Party Beneficiaries....................................... 14
9.7 Integration and Entire Agreement................................... 14
9.8 Counterpart and Headings........................................... 14
9.9 Specific Performance............................................... 14
9.10 Advice of Legal Counsel............................................ 14
Exhibit A Investors' Rights Agreement
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") is dated as of July 26, 1996, by
and between Vista Medical Technologies, Inc., a California corporation (the
"Purchaser"), ProMedica Distribution, Inc., a California corporation (the
"Seller") and, solely for purposes of Sections 7.6 and 7.7 of this Agreement,
Ellen Palo and Judie Vivian, the shareholders of Seller (individually, a
"Shareholder" and collectively, the "Shareholders").
RECITALS:
A. Seller is engaged in the distribution of certain cardiovascular
products.
B. Purchaser desires to purchase from Seller and Seller desires to sell
to Purchaser, on the terms and subject to the conditions of this Agreement,
certain of the assets of Seller as set forth hereunder.
C. Seller and Purchaser intend that the transactions contemplated hereby
be a "reorganization" as defined by Section 358(a)(1)(C) of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations, agreements herein
contained, the parties agree as follows:
1. PURCHASE AND CONSIDERATION.
1.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, Seller agrees to transfer, convey, assign and deliver to Purchaser on
the Closing Date (as hereinafter defined), and Purchaser agrees to buy from
Seller, free and clear of all encumbrances (except as permitted under this
Agreement), all the assets and properties, tangible and intangible, real,
personal or mixed, owned or leased by Seller, of and pertaining to or used by
Seller, wherever located, whether known or unknown, and whether or not on the
books and records of Seller (the "Assets"), including by way of example but not
of limitation the following:
1.1.1 all of Seller's right, title and interest under (a) (i) that
certain Distribution Agreement between Seller and Peters, a French corporation,
dated November 10, 1992 and (ii) that certain U.S.A. Distribution Agreement
between Seller and Delacroix-Chevalier, Inc. dated September 1, 1991
(collectively, the "Distribution Agreements") and (b) (i) those certain sales
representative agreements pursuant to which the Inventory (as defined below) has
been sold in the past and (ii) that certain Sales Management Consultant
Agreement between Seller and Nancy More dated April 1, 1993 (collectively, the
"Sales Agreements");
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1.1.2 all inventories, parts, supplies and products, and all of
Seller's rights to market, license and sell all products marketed, licensed or
sold by Seller under the Distribution Agreements, including, without limitation,
the Seller's rights as sole agent under the United States Food and Drug
Administration clearance to market such products in the United States (the
"Inventory");
1.1.3 all of Seller's claims against any parties relating to items
included in the Assets, including, without limitation, unliquidated rights under
manufacturer's and vendors' warranties or guarantees, but only to the extent
such claims do not relate to any liabilities retained by Seller and not assumed
by Purchaser;
1.1.4 all of Seller's transferable books and records, including,
without limitation, all customer and supplier lists, all advertising materials
and marketing plans, and manuals and other materials of Seller used in employee
and management training with respect to the Distribution Agreements or the Sales
Agreements; and
1.1.5 accounts receivable in the amount of $84,017.
1.2 ASSETS NOT TO BE TRANSFERRED. Seller shall retain and Purchaser shall
not acquire any other assets or properties of Seller (the "Excluded Assets").
1.3 NON-ASSIGNMENT OF CERTAIN ASSETS. Notwithstanding anything to the
contrary in this Agreement, to the extent that the assignment hereunder of any
of the Assets requires the consent of any other party (or in the event that any
of the same shall be nonassignable), neither this Agreement nor any action taken
pursuant to its provisions shall constitute an assignment or an agreement to
assign if such assignment or attempted assignment would constitute a breach
thereof or result in the loss or diminution thereof; provided, however, that in
each such case, Seller shall use its best efforts to obtain the consent of such
other party to an assignment to Purchaser. If such consent is not obtained by
the Closing Date, Seller shall cooperate with Purchaser in any arrangement
designed for Purchaser to perform Seller's obligations with respect to such
Asset after the Closing Date and for Purchaser to receive the benefits under any
such Asset after the Closing Date.
1.4 ASSUMPTION OF LIABILITIES. Subject to the terms and conditions
contained herein, on the Closing Date, Purchaser shall assume and agree
thereafter to pay, perform and discharge all liabilities and obligations of
Seller (a) under the Distribution Agreements and the Sales Agreements arising
from activities undertaken by Purchaser thereunder following the Closing and (b)
Seller's trade payables existing as of the date hereof in the maximum amount of
$84,017 (collectively, the "Assumed Liabilities"). Except for the Assumed
Liabilities, Purchaser shall not assume or have any responsibility for any other
liability, obligation or commitment of any nature, whether now or hereafter
existing, of Seller, and Seller shall pay all such liabilities, obligations or
commitments which are not Assumed Liabilities, including, without limitation,
liabilities or obligations arising out of inventory on Purchaser's books at
Closing or liabilities and obligations for payments to sales representatives
pursuant to the Sales Agreements or otherwise for sales made prior to
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Closing. Purchaser's assumption of such liabilities and obligations of Seller
is intended to inure solely to the benefit of Seller, and notwithstanding
anything herein to the contrary, such assumption is not intended and shall not
be construed to give any third parties any greater or additional benefits than
they would have but for Purchaser's said assumption.
1.5 CONSIDERATION. Purchaser shall pay the purchase price (the "Purchase
Price") to Seller as follows: (a) the issuance of Forty-Six Thousand (46,000)
shares of Purchaser's Series B Preferred Stock (the "Shares"); and (b) the
assumption of those obligations and liabilities of Sellers to be assumed by
Purchaser pursuant to Section 1.4 hereof.
1.6 RESTRICTIONS ON RESALE. The Shares will be subject to the following
restrictions against transfer by Seller and any persons receiving them upon
liquidation of Seller: (a) any restrictions imposed by applicable federal and
state securities laws; and (b) certificates representing the Shares will bear
legends describing the applicable restrictions on transferability referred to in
this Section 1.6, including the following legend:
"The securities represented by this certificate are subject to the terms
and conditions of an Asset Purchase Agreement, dated as of July 26, 1996,
which includes certain restrictions on the sale of the securities. Copies
of the agreement may be obtained upon written request to the Secretary of
Vista Medical Technologies, Inc.."
1.7 INSTRUMENTS OF TRANSFER. The sale, assignment, transfer, conveyance
and delivery of the Assets shall be made by such bills of sale and other
recordable instruments of assignment, transfer and conveyance as Purchaser shall
reasonably request.
1.8 SALES TAXES. Seller shall pay and promptly discharge when due the
entire amount of any and all sales and use tax ("Sales Tax") imposed or levied
by reason of the sale of the Assets to Purchaser. The parties shall cooperate
with each other to the extent reasonably requested and legally permitted to
minimize any such Sales Tax.
2. CLOSING.
2.1 THE CLOSING. The transactions contemplated by this Agreement shall be
consummated (the "Closing") at the offices of Brobeck, Phleger & Harrison LLP,
550 West C Street, Suite 1200, San Diego, California 92101, at 10:00 a.m., local
time, on July 26, 1996, or on such other date as the parties shall mutually
agree (the "Closing Date").
2.2 ACTIONS AT THE CLOSING. At the Closing (or at such later date as
Seller and Purchaser agree): (a) Purchaser shall provide to Seller (or Seller's
designees) a stock certificate(s) in the name of the Seller (or its designees)
representing the Shares; (b) Purchaser and Seller (or its designees) shall have
executed and delivered the Amended and Restated Investors' Rights Agreement (the
"Rights Agreement") substantially in the form of EXHIBIT A hereto; and (c)
Seller will deliver to the Purchaser all bills of sale, endorsements,
assignments and other instruments as Purchaser shall reasonably request or as
necessary or appropriate to sell, convey, assign, transfer and deliver to
Purchaser good title, free and clear
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of all liens or encumbrances to all the Assets (except as otherwise disclosed in
this Agreement or any schedule or exhibit hereto) and to evidence the due
execution, delivery and performance of the Agreement and satisfaction of the
conditions to the obligations of the Purchaser hereunder.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants
to Purchaser as follows:
3.1 ORGANIZATION. Seller is a corporation duly organized and validly
existing under the laws of the State of California. Seller has all requisite
corporate power and authority to, and is entitled to, carry on its business as
now conducted and to own or lease its properties as and in the places where such
business is now conducted and such properties are now owned, leased or operated.
Seller is qualified to do business in all foreign jurisdictions in which it is
required to be so qualified, except where the failure so to be qualified would
not have a material adverse effect on the business or assets of Seller.
3.2 AUTHORITY. Seller has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby have been duly
authorized by all requisite corporate action of Seller. The execution, delivery
and performance of this Agreement by Seller has been approved in accordance with
the corporate laws of the State of California by the holders of all of Seller's
outstanding capital stock. This Agreement has been duly executed and delivered
by and constitutes the valid and binding obligation, enforceable in accordance
with its terms, of Seller.
3.3 EFFECT OF AGREEMENT. The execution and delivery this Agreement by
Seller does not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, result in a
breach of, constitute a default (with or without notice or lapse of time, or
both) under or violation of, or result in the creation of any lien, charge or
encumbrance pursuant to, any provision of the Articles of Incorporation or
Bylaws of Seller, any law or regulation of any governmental authority, foreign
or domestic, or any provision of any agreement, instrument, understanding,
order, judgment or decree to which Seller is a party or by which Seller or any
of its properties or assets is bound or affected, nor will it give to any other
person or entity any interests or rights of any kind, including rights of
termination, acceleration, or cancellation, in or with respect to any of the
Assets, respectively. No consent of any person not a party to this Agreement
and no consent of any governmental authority is required to be obtained on the
part of Seller to permit the consummation of the transactions contemplated by
this Agreement (including without limitation the transfer to Purchaser of all
right, title and interest in and to the Assets, free and clear of any mortgages,
liens, pledges, encumbrances, claims, conditions or restrictions of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent or
otherwise).
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3.4 TITLE TO ASSETS. Seller has good and marketable title to all of the
Assets, all of the Assets are free and clear of restrictions on or conditions to
transfer or assignment, and at the closing, Seller will sell, convey, assign,
transfer and deliver to Purchaser good title to all of the Assets, free and
clear of any mortgages, liens, pledges, encumbrances, claims, conditions and
restrictions of any nature whatsoever, direct or indirect, whether accrued,
absolute, contingent or otherwise.
3.5 AGREEMENTS. Seller has provided to Purchaser or its counsel copies of
all Distribution Agreements and Sales Agreements. As to the best of Seller's
knowledge, each of the other parties to such agreements or bound thereby has in
all material respects performed all the obligations required to be performed by
it to date thereunder. Seller does not know of, and Seller has not received
notice of the intention of any party to terminate any such agreement. Each such
agreement is valid, binding and enforceable in accordance with its terms
(subject to any applicable bankruptcy, insolvency or similar laws affecting
generally the enforcement of creditors' rights, and rules of law governing
injunctive relief, specific performance and other equitable remedies) and is in
full force and effect with no material default or dispute or basis therefor
existing with respect to Seller's performance and, to the best of Seller's
knowledge, other parties' performance thereunder.
3.6 ACCOUNTS RECEIVABLE. All of the accounts receivable included in the
Assets have arisen in the normal course of business, represent bona fide
indebtedness incurred by the applicable account debtors in the stated amounts
reflected on the books of Seller, subject to collection, and are subject, on the
date hereof, to no prior assignment, lien, set off or security interest.
3.7 LITIGATION. There is no action, suit, proceeding or investigation in
progress or pending before any court or governmental agency, and there is no
threat thereof against or relating to the Assets, nor, to the best of Seller's
knowledge, is there any basis for any such claim, suit or other proceeding which
might adversely affect the Assets.
3.8 COMPLIANCE WITH LAWS. Seller has materially complied with, is not in
material violation of, and has not received any notices of violation with
respect to, any foreign, federal, state or local statute, law or regulation with
respect to the Assets.
3.9 CUSTOMER LISTS. Seller has provided to Purchaser a complete and
correct description of its customer and mailing lists. Seller has the right to
use, free and clear of any claims or rights of others, all of such customer and
mailing lists.
3.10 INVENTORY. The Inventory has a book value of at least Ninety Thousand
Dollars ($90,000) at Closing.
3.11 BROKERS OR FINDERS. Seller is not obligated, directly or indirectly,
to any person for brokerage or finders' fees, agents' commissions or any similar
charges in connection with this Agreement.
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3.12 THIRD PARTY CONSENTS. No third party consents are required for the
assignment of any Distribution Agreements or any Sales Agreements hereunder.
Purchaser acknowledges that the Sales Agreements generally are terminable
without cause by giving not less than ninety (90) days' prior written notice.
3.13 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Seller herein, nor any statement made in any schedule or certificate
furnished pursuant to this Agreement, when read in their entirety, contains or
will contain any untrue statement of a material fact at the Closing Date, or
omits or will omit to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading. There is no fact known to Seller or any of its
management which adversely affects the ability of Seller to carry out the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Seller as follows:
4.1 ORGANIZATION. Purchaser is a corporation duly organized and validly
existing under the laws of the State of California. Purchaser has all requisite
corporate power and authority to, and is entitled to, carry on its business as
now conducted and to own or lease its properties as and in the places where such
business is now conducted and such properties are now owned, leased or operated.
4.2 AUTHORITY. Purchaser has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby have been duly
authorized by all requisite corporate action of Purchaser. This Agreement has
been duly executed and delivered by and constitutes the valid and binding
obligation, enforceable in accordance with its terms, of Purchaser.
4.3 INVENTORY. Purchaser is acquiring the Inventory for resale in the
ordinary course of business.
4.4 BUSINESS PLAN. The Business Plan dated May 1996 previously delivered
to Seller (the "Business Plan") was prepared in good faith by the Company and
does not, to the best of the Company's knowledge after reasonable investigation,
contain any untrue statement of a material fact nor does it omit to state a
material fact necessary to make the statements therein not misleading, except
that with respect to projections and expressions of opinion or predictions
contained in the Business Plan, the Company represents only that such
projections and expressions of opinion and predictions were made in good faith
and that the Company believes there is a reasonable basis therefor.
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4.5 BROKERS OR FINDERS. Purchaser is not obligated directly or indirectly
to any person for brokerage or finders' fee, agents' commissions or similar
charges in connection with this Agreement.
5. COVENANTS OF SELLER. Seller covenants and agrees as follows:
5.1 ACCESS; RETENTION OF RECORDS. Seller shall make immediately available
to and allow Purchaser and its authorized agents and accountants access to
Seller's records with respect to the Assets and cause Seller's employees to
cooperate with Purchaser in an examination of the Assets.
5.2 COMPLIANCE WITH LEGAL REQUIREMENTS. Seller will take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed on it with respect to the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to Purchaser in
connection with any such requirements. Seller will take all reasonable actions
necessary to obtain (and will cooperate with Purchaser in obtaining) any
consent, approval, order or authorization of, or any registration, declaration
or filing with, any governmental entity, domestic or foreign, or other person,
required to be obtained or made by Seller or by Purchaser in connection with the
taking of any action contemplated by this Agreement.
5.3 EFFECTIVENESS OF TRANSACTION. Subject to the terms and conditions of
this Agreement, Seller shall use its best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary and/or proper or
advisable under applicable laws and regulations to make effective the
transactions contemplated by this Agreement. Seller will execute and deliver,
or cause to be executed and delivered, such additional or further bills of sale,
endorsements, assignments, consents and other instruments as Purchaser may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement and to put Purchaser in possession of the Assets
acquired hereunder.
5.4 STATE TAX CERTIFICATE. Within ten (10) business days of the date of
this Agreement, Seller shall file or cause to be filed properly completed
applications or other appropriate forms of request with California's State Board
of Equalization to obtain a certificate of receipt of payment of all sales and
use taxes as authorized in and pursuant to California Revenue and Taxation Code
Sections 6811 through and including 6814 (the "Certificate of Sales Tax
Payment").
5.5 TAX RETURNS. Seller shall be responsible for and pay when due all of
Seller's taxes attributable to or levied or imposed upon the Assets relating or
pertaining to the period (or that portion of any period) ending on or prior to
the Closing Date. Seller shall continue to timely file within the time period
for filing, or any extension granted with respect thereto, all of Seller's tax
returns required to be filed in connection with the Assets or Seller's business
and any portion of any such tax returns connected therewith shall be true and
correct and completed in accordance with applicable laws. If, however, any
returns relate to Seller's taxes and to taxes payable by Purchaser, such
returns, at Purchaser's
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discretion, shall be prepared and filed by Purchaser and taxes shown to be due
thereon shall be paid by Seller and Purchaser in accordance with the terms of
this Agreement. Seller shall timely provide to Purchaser all information,
documents and signatures and consents necessary for Purchaser to properly
prepare and file the returns described in the preceding sentence.
6. COVENANTS OF PURCHASER. Purchaser covenants and agrees as follows:
6.1 COMPLIANCE WITH LEGAL REQUIREMENTS. Purchaser will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to Seller in
connection with any such requirements. Purchaser will take all reasonable
actions necessary to obtain (and will cooperate with Seller in obtaining) any
consent, approval, order or authorization of, or any registration, declaration
or filing with, any governmental entity, domestic or foreign, or other person,
required to be obtained or made by Purchaser or by Seller in connection with the
taking of any action contemplated by this Agreement.
7. ADDITIONAL AGREEMENTS.
7.1 BULK SALES. Seller hereby indemnifies and holds Purchaser and its
affiliates harmless from any liability arising under any applicable bulk sales
or any similar laws and from any claims which may be revealed by compliance with
such laws.
7.2 STATE TAX CERTIFICATE. Seller hereby indemnifies and holds Purchaser
and its affiliates harmless from any liability arising under any applicable
sales and use tax laws and from any taxes or claims which may be due in order to
comply with such laws.
7.3 EXPENSES. Purchaser and Seller shall bear their respective expenses
incident to this Agreement and the transactions contemplated hereby.
7.4 PUBLIC DISCLOSURE. Unless otherwise required by law, any public
disclosure of the subject matter of this Agreement by any party hereto shall be
approved by all parties prior to release, provided that such approval shall not
be unnecessarily withhold or delayed.
7.5 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCE. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
7.6 TAX-FREE REORGANIZATION. Purchaser and Seller intend that the
transactions contemplated under this Agreement (the "Transactions") qualify as a
tax-free reorganization within the meaning of Section 368(a)(1)(C) of the Code;
PROVIDED, HOWEVER, that no party hereunder makes any representations or
warranties that such Transactions so qualify. Purchase and Seller agree not to
take a position on a Return or before any governmental
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authority that is inconsistent with the tax treatment described in this Section
7.6 unless required by a final and binding determination or resolution by a
governmental authority with appropriate jurisdiction. In furtherance of the
intent to qualify the Transactions as a tax-free reorganization, Purchaser
represents and covenants to Seller and Seller represents and covenants to
Purchaser as follows:
(a) Representations and Covenants of Purchaser:
(i) Purchaser's principal reasons for participating in the
Transactions are BONA FIDE business purposes not related to taxes.
(ii) Purchaser has no plan or intention to reacquire from the
Shareholders any Shares to be issued pursuant to the Transactions.
(iii) Except for transfers described in Section 368(a)(2)(C) of
the Code, Purchaser will not, directly or indirectly, sell or otherwise dispose
of the assets acquired from Seller pursuant to a plan or intent existing at the
time of the Transactions, except for (a) assets disposed of in the ordinary
course of business, or (b) assets disposed of where the proceeds therefrom will
be used in connection with the distribution and/or marketing of cardiovascular
products, Seller's historic business activity.
(b) Representations and Covenants of Seller:
(i) Pursuant to the terms of this Agreement, Purchaser will
acquire substantially all of the assets of Seller. Specifically, at least
ninety percent (90%) of the fair market value of the net assets and at least
seventy percent (70%) of the fair market value of the gross assets held by
Seller immediately prior to the Transactions will be acquired by Purchaser in
the Transactions. For the purpose of determining the percentage of Seller's net
and gross assets held by Seller immediately prior to the Transactions, the
following assets will be treated as property held by Seller immediately prior to
the Transactions: (a) assets disposed of by Seller prior to the Transactions and
in contemplation thereof (including, without limitation, any asset disposed of
by Seller, other than in the ordinary course of business, pursuant to a plan or
intent existing during the period beginning with the commencement of
negotiations (whether formal or informal) with Purchaser regarding the
Transactions and ending at the closing of the Transactions (the "Pre-Exchange
Period")); (b) assets used by Seller to pay expenses or liabilities incurred in
connection with the Transactions; and (c) assets used to make distribution,
redemption or other payments in respect of shares of Seller's stock or rights to
acquire such stock (including payments treated as such for tax purposes) that
are made in contemplation of the Transactions or that are related thereto.
(ii) Other than in the ordinary course of business, Seller has
made no transfer of any of its assets (including any distribution of assets with
respect to, or in redemption of, stock) (a) in contemplation of the Transactions
or (b) during the Pre-Exchange Period.
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(iii) For purposes of Treasury Regulation Section 1.368-1(d),
Seller operates or is deemed to operate at least one significant historic
business line and/or owns or is deemed to own a significant portion of its
historic business assets. Pursuant to the Transactions, Seller will transfer at
least one significant historic business line and/or a significant portion of its
historic business assets to Purchaser.
(iv) Seller's principal reasons for participating in the
Transactions are BONA FIDE business purposes not related to taxes.
(v) Seller has no Knowledge of, and believes that there does not
exist, any plan or intention on the part of shareholders (or any shareholder) of
Seller to engage in a sale, exchange, transfer, distribution, pledge (other than
pledges in connection with BONA FIDE loan transactions), disposition or any
other transaction which would result in a reduction in the risk of ownership or
a direct or indirect disposition (a "Sale") of Shares to be received in the plan
of liquidation pursuant to the Transactions that would reduce the ownership of
all Seller shareholders of such Shares to a number of shares having an aggregate
fair market value, as of the closing of the Transactions, of less than fifty
percent (50%) of the aggregate fair market value, of Seller stock outstanding
immediately prior to the consummation of the Transactions.
(vi) Seller intends that no consideration be paid or received
(directly or indirectly, actually or constructively) for the Assets being
transferred to Purchaser other than shares of Purchaser voting stock.
(vii) Seller will pay separately its own expenses relating to the
Transactions.
(viii) Seller has adopted a plan of complete liquidation pursuant
to which Seller will liquidate and distribute the Shares received in the
Transactions to the Shareholders as soon as reasonably possible after the
Transactions and in no event later than twelve (12) months after the
Transactions.
(c) Representations and Covenants of the Shareholders:
(i) Each Shareholder does not have any plan or intention to
engage in a sale, exchange, transfer, distribution, pledge (other than pledges
in connection with BONA FIDE loan transactions), disposition or any other
transaction which would result in a reduction in the risk of ownership or a
direct or indirect disposition of the Shares to be received in the plan of
liquidation pursuant to the Transactions that would reduce such Shareholder's
ownership of such Shares to a number of shares having an aggregate fair market
value, as of the closing of the Transactions, of less than seventy percent (70%)
of the aggregate fair market value of Seller stock owned by the such Shareholder
immediately prior to the consummation of the Transactions and each Shareholder
has no knowledge of, and believes that there does not exist, any plan or
intention on the part of shareholders (or any shareholder) of Seller to engage
in a sale, exchange, transfer, distribution, pledge (other than pledges in
connection
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with BONA FIDE loan transactions), disposition or any other transaction which
would result in a reduction in the risk of ownership or a direct or indirect
disposition (a "Sale") of Shares to be received in the plan of liquidation
pursuant to the Transactions that would reduce the ownership of all Shareholders
of such stock to a number of shares having an aggregate fair market value, as of
the closing of the Transactions, of less than fifty percent (50%) of the
aggregate fair market value, of Seller stock outstanding immediately prior to
the consummation of the Transactions.
7.7 COLLECTION OF ACCOUNTS RECEIVABLE. Each of the shareholders, jointly
and severally, hereby guarantees that the accounts receivable included in the
Assetes transferred hereunder shall be collected and paid to Purchaser within
sixty (60) days of Closing.
8. INDEMNIFICATION.
8.1 INDEMNIFICATION.
8.1.1 Seller agrees to indemnify and hold Purchaser and its
affiliates harmless against all claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses of investigation (hereafter individually a "Loss" and collectively
"Losses") incurred by Purchaser or any of its affiliates (a) as a result of any
inaccuracy of a representation or breach of any warranty contained herein or in
any schedule, exhibit or other document delivered pursuant hereto by Seller or
any failure by Seller to perform or comply with any covenant contained herein or
in any schedule, exhibit or other document delivered pursuant hereto, or
resulting from or relating to any claim or action by any third party questioning
the validity of or otherwise seeking to rescind the transfer hereunder by Seller
to Purchaser of all right, title and interest in and to the Assets, (b) relating
to or resulting from any liabilities, obligations or commitments of, and all
claims against, Seller, or against or involving any of the Assets, arising from
or based upon any condition, event or action existing on or occurring before the
Closing Date, except to the extent specifically assumed by Purchaser as an
Assumed Liability, and (c) the failure of the parties hereto to comply with (i)
the "bulk sales" or "bulk transfer" laws or (ii) sales and use laws of any
jurisdiction in connection with the transactions contemplated hereby.
8.1.2 Purchaser agrees to indemnify and hold Seller harmless
against all Losses incurred by Seller as a result of any inaccuracy of a
representation or breach of any warranty, or any failure by Purchaser to perform
or comply with any covenant, contained herein or in any other document delivered
pursuant hereto or resulting from or relating to third party claims based on
Purchaser's use or operation of the Assets following the Closing Date.
8.1.3 Each party agrees to give the other written notice of any
event or assertion of which it has knowledge concerning any liability as to
which it may request indemnification hereunder. Each party will cooperate with
the other in determining the validity of any such claim or assertion. In each
case, the indemnifying party shall have the right to defend any such third-party
suits, claims or proceedings with counsel satisfactory to
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the indemnified party. Each party agrees not to settle or compromise any such
third-party suit, claim or proceeding without the prior written consent of the
other, which consent shall not be unreasonably withheld. Upon obtaining
knowledge of the institution of any action, proceeding or other event which
could give rise to a claim of indemnity pursuant to this Section 8, the party
seeking indemnification shall promptly give written notice to the other party(s)
hereof. If such claim or demand relates to a claim or demand asserted by a
third party, the indemnifying party shall have the right at its expense to
employ counsel to defend such claim or demand and the indemnified party shall
have the right, but not the obligation, to participate in the defense of any
such claim or demand. So long as the indemnifying party is defending such claim
or demand in good faith, the indemnified party will not settle such claim or
demand without the indemnifying party's consent, which consent shall not be
unreasonably withheld. The indemnified party shall make available to the
indemnifying party all records and other materials reasonably required by it in
contesting a claim or demand asserted by a third party against the indemnified
party and shall cooperate in the defense thereof.
8.1.4 The indemnification obligations of the respective parties
under this Section 8 shall terminate on the first anniversary of the Closing
Date, but shall not terminate as to any Loss (or a potential claim by an
appropriate party) asserted in good faith prior to such date; PROVIDED, HOWEVER,
any claim for indemnification with respect to any Tax related matter shall
terminate upon the expiration of all applicable statutes of limitation.
8.2 NON-EXCLUSIVITY OF REMEDY. The indemnification provisions contained
in this Section 8 shall not be deemed to be the exclusive remedy or exclusive
means to obtain relief, as the case may be, of any party hereto, and the
provisions of this Section 8 shall not prejudice any other rights or remedies
that may be available to any party at law, in equity or otherwise.
8.3 SURVIVAL. Representations and warranties made hereunder in Sections 3
and 4 shall terminate on the first anniversary of the Closing Date, PROVIDED,
that in the event a claim for indemnification pursuant to Section 8 hereof, or
any other claim is asserted, based on a claim of misrepresentation or breach of
warranty set forth in Sections 3 or 4 hereof prior to the first anniversary date
of the Closing Date, such representations and warranties shall survive until the
resolution of such claim.
9. MISCELLANEOUS PROVISIONS.
9.1 ASSIGNMENT, SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Purchaser may assign its rights and obligations under
this agreement to any party without the consent of Seller, provided that the
assignee assumes Purchaser's liabilities and obligations under this Agreement.
Except as set forth in this Agreement, Seller may not assign its rights and
obligations hereunder.
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<PAGE>
9.2 NOTICES. All notices which are required or may be given pursuant to
the terms of this Agreement shall be in writing and shall be delivered
personally or by registered or certified mail, postage prepaid, or sent by
overnight delivery service as follows:
If to Purchaser: VISTA MEDICAL TECHNOLOGIES, INC.
5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
Attention: President
with a copy to: BROBECK, PHLEGER & HARRISON LLP
550 West C Street, Suite 1200
San Diego, CA 92101
Attn: Craig S. Andrews, Esq.
If to Seller: PROMEDICA DISTRIBUTION, INC.
620 Newport Center Drive, Suite 575
Newport Beach, CA 92660
Attention: Chief Executive Officer
Any of the addresses or addressees set forth above may be changed from time to
time by written notice from the party requesting the change.
Such notices and other communications shall for all purposes of this
Agreement be treated as being effective immediately if delivered personally, or
three (3) days after mailing by certified or registered mail, return receipt
requested, first class postage prepaid, or on (1) day after deposit for delivery
by an overnight delivery service.
9.3 ALTERATIONS AND WAIVERS. The waiver, amendment or modification of any
provision of this Agreement or any right, power or remedy hereunder, whether by
agreement of the parties or by custom, course of dealing or trade practice,
shall not be effective unless in writing and signed by the party against whom
enforcement of such waiver, amendment or modification is sought. No failure or
delay by either party in exercising any right, power or remedy with respect to
any of the provisions of this Agreement shall operate as a waiver of such
provisions with respect to such occurrences.
9.4 GOVERNING LAW; VALIDITY, FORUM, LAWS AND CONSTRUCTION. This Agreement
shall be construed, governed and enforced in accordance with the laws of the
State of California.
9.5 SEVERABILITY. In the event any provision of this Agreement or the
application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their
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best efforts to replace the provision that is contrary to law with a legal one
approximating to the extent possible the original intent of the parties.
9.6 NO THIRD-PARTY BENEFICIARIES. Nothing contained in this Agreement
shall be construed to give any person other than Purchaser and Seller (or its
designees under Section 2.2) any legal or equitable right, remedy or claim under
or with respect to this Agreement.
9.7 INTEGRATION AND ENTIRE AGREEMENT. This Agreement, the Exhibits,
Schedules, the Non-Disclosure Agreement dated June 20, 1995 and other documents
referred to herein set forth the entire understanding between the parties and
supersede all previous and contemporaneous written or oral negotiations,
commitments, understandings and agreements relating to the subject matter hereof
and merge all prior and contemporaneous discussions between the parties. No
party shall be bound by any definition, condition, representation, warranty,
covenant or provision other than as contained herein.
9.8 COUNTERPART AND HEADINGS. For the convenience of the parties, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together constitute one and the same
instrument. All headings and captions are inserted for convenience of reference
only and shall not affect meaning or interpretation.
9.9 SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages
would be an inadequate remedy for any breach of the provisions of this Agreement
and agree that the obligations of the parties hereunder shall be specifically
enforceable.
9.10 ADVICE OF LEGAL COUNSEL. Each party acknowledges and represents that,
in executing this Agreement, it has had the opportunity to seek advice as to its
legal rights from legal counsel and that the person signing on its behalf has
read and understood all of the terms and provisions of this Agreement. Further,
each party has reviewed this Agreement, which may not be construed against any
party by reason of its preparation or word processing.
[Remainder of This Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed, or caused to have executed
by an authorized officer, this Agreement on the date first above written.
PURCHASER: VISTA MEDICAL TECHNOLOGIES, INC.
a California corporation
By:/s/ John Lyon
------------------------------------
John Lyon
President
SELLER: PROMEDICA DISTRIBUTION, INC.
a California corporation
By:/s/ Ellen Palo
------------------------------------
Ellen Palo
------------------------------------
President
Solely with respect
to Sections 7.6 and 7.7
hereof
SHAREHOLDERS: /s/ Ellen Palo
------------------------------------
Ellen Palo
/s/ Judie Vivian
------------------------------------
Judie Vivian
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
INVESTORS' RIGHTS AGREEMENT
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
July 12, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS................. 1
1.1 Restrictions on Transferability.................................... 1
1.2 Certain Definitions................................................ 2
1.3 Restrictive Legend(s).............................................. 3
1.4 Notice of Proposed Transfers....................................... 3
1.5 Demand Registration Rights......................................... 4
1.6 Company Registration............................................... 6
1.7 Form S-3 Registration Rights....................................... 7
1.8 Expenses of Registration........................................... 8
1.9 Registration Procedures............................................ 8
1.10 Indemnification.................................................... 9
1.11 Information by Holder.............................................. 11
1.12 Rule 144 Reporting................................................. 11
1.13 Transfer of Registration Rights.................................... 12
1.14 Termination of Registration Rights................................. 12
1.15 "Market Stand Off" Agreement....................................... 13
SECTION 2. AFFIRMATIVE COVENANTS OF THE COMPANY AND SHAREHOLDERS......... 13
2.1 Financial Information.............................................. 13
2.2 Assignment of Rights to Financial Information...................... 14
2.3 Inspection Rights.................................................. 14
2.4 Attendance at Board Meetings....................................... 15
2.5 Termination of Covenants........................................... 15
2.6 Confidential Information, etc...................................... 15
SECTION 3. RIGHTS OF FIRST REFUSAL....................................... 16
3.1 Right of First Refusal on Company Issuances........................ 16
SECTION 4. MISCELLANEOUS................................................. 17
4.1 Governing Law...................................................... 17
4.2 Successors and Assigns............................................. 17
4.3 Entire Agreement................................................... 17
4.4 Notice............................................................. 18
4.5 Counterparts....................................................... 18
4.6 Severability....................................................... 18
4.7 Separability....................................................... 18
4.8 Approval of Amendments and Waivers................................. 18
4.9 Amendment of Prior Agreement....................................... 19
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "AGREEMENT") is
made as of the 12th day of July, 1996, by and between Vista Medical
Technologies, Inc., a California corporation (the "Company"), and the
Shareholders listed on Schedule A hereto, each of which is herein referred to as
a "Shareholder."
RECITALS
WHEREAS, the Company and certain of the Shareholders (the "SERIES A
SHAREHOLDERS") are parties to a certain Investors Rights Agreement dated as of
July 27, 1995, as amended on September 15, 1995 (the "PRIOR AGREEMENT"),
pursuant to which the Company has agreed to the extent possible to grant to the
Series A Shareholders certain rights to cause the Company to register shares of
Common Stock issuable to the Series A Shareholders upon conversion of the
Company's Series A-1 Preferred Stock and Series A-3 Preferred Stock (the "SERIES
A PREFERRED") in the event the Company grants such rights to other shareholders,
and certain other matters as set forth therein;
WHEREAS, the Company and certain of the Shareholders (the "SERIES B
SHAREHOLDERS") are parties to the Series B Preferred Stock Purchase Agreement of
even date herewith (the "SERIES B AGREEMENT"); and
WHEREAS, in order to induce the Company to enter into the Series B
Agreement and to induce the Series B Shareholders to purchase shares of the
Company's Series B Preferred Stock (the "SERIES B PREFERRED") pursuant to the
Series B Agreement, the Shareholders and the Company hereby agree that this
Agreement shall amend and restate the Prior Agreement so that this Agreement
shall govern the obligations of the Company to register the resale of shares of
Common Stock issuable to the Shareholders upon conversion of their shares of the
Company's Series A Preferred and/or Series B Preferred, and certain other
matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
SECTION 1.
RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
1.1 RESTRICTIONS ON TRANSFERABILITY. Neither the Series A Preferred or
the Series B Preferred nor the Registrable Securities (as defined below) shall
be transferable except upon the conditions specified in this Agreement, which
conditions are intended to insure compliance with the provisions of the
Securities Act (as defined below), or upon such other terms as are in the
opinion of counsel to the Company satisfactory to comply with the
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<PAGE>
provisions of the Securities Act. Except for transfers made pursuant to Rule
144 of the Securities Act, the Shareholders will cause any proposed transferee
of Series A Preferred, Series B Preferred or Registrable Securities held by any
Shareholder to agree to take and hold such securities subject to the provisions
and upon the conditions specified in this Agreement and it will be a condition
precedent to the effectiveness of any such transfer that the Company shall have
secured a written agreement in form and substance satisfactory to the Company to
that effect, if so requested by the Company,
1.2 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"FORM S-3" shall mean Form S-3 under the Securities Act (as defined below)
as in effect on the date of this Agreement, or any substantially similar,
equivalent or successor form under the Securities Act.
"HOLDER" shall mean each holder of Registrable Securities.
"REGISTRABLE SECURITIES" means (i) the Common Stock issuable or issued upon
conversion of the Series A Preferred, (ii) the Common Stock issuable or issued
upon conversion of the Series B Preferred and (iii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the shares referenced
in (i) and (ii) above, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his rights under this
Section 1 are not assigned.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with Sections 1.5, 1.6 and 1.7 hereof other than Selling Expenses,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of Company counsel, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company required
to bear the legend set forth in Section 1.3 hereof or a legend substantially
similar thereto and all shares of Common Stock outstanding on the date of this
Agreement.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the applicable sale.
1.3 RESTRICTIVE LEGEND(S).
(a) Each certificate representing the shares of Series A Preferred, Series
B Preferred and Registrable Securities shall (unless otherwise permitted by the
provisions of Section 1.4 below) be stamped or otherwise imprinted with a legend
in the following form (in addition to any legend required under applicable
California or other state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION.
(b) Each certificate representing shares of Registrable Securities into
which shares of the Series A Preferred and/or Series B Preferred are converted
also shall be stamped or otherwise imprinted with any legend required by the
Bylaws of the Company (in addition to any legend required under applicable
California or other state securities laws).
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing the Restricted Securities, by acceptance thereof, agrees to comply
in all respects with the provisions of this Section 1.4. Prior to any proposed
transfer of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall be
accompanied (except in transactions in compliance with Rule 144) by either (i) a
written opinion of legal counsel which shall be reasonably satisfactory to the
Company addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission, a copy of any
holder's request (together with all supplements or amendments thereto) to which
shall have been provided to the Company, at or prior to the time of first
delivery to the Commission's staff, to the effect that the transfer of such
securities without registration will not result in a recommendation by such
staff that action be taken with respect thereto, whereupon the
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<PAGE>
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Each certificate evidencing the Restricted
Securities transferred as provided for above shall bear the appropriate
restrictive legend set forth in Section 1.3 above, except that such certificate
shall not bear such restrictive legend if, in the opinion of counsel for the
Company or counsel for such holder, such legend is not required in order to
establish compliance with any provisions of the Securities Act.
Notwithstanding the provisions above, no such opinion of counsel or "no
action letter" shall be necessary for a transfer by a Shareholder which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner ("PARTNERS"), if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if he were an original
Shareholder hereunder.
1.5 DEMAND REGISTRATION RIGHTS.
(a) Commencing on July 12, 1999, if the Company shall receive a written
request (specifying that it is being made pursuant to this Section 1.5) from the
Holders of at least forty percent (40%) of the Registrable Securities that the
Company file a registration statement or similar document under the Securities
Act covering the registration of Registrable Securities the expected aggregate
offering price to the public of which is at least $7,500,000, then the Company
shall promptly notify all other Holders of such request and shall use its best
efforts to cause all Registrable Securities that such Holders have requested,
within fifteen (15) days after receipt of such written notice, to be registered
in accordance with this Section 1.5 to be registered under the Securities Act.
The Holders making the written request pursuant to this Section 1.5 shall be
referred to hereinafter as the "INITIATING HOLDERS".
Notwithstanding the foregoing, (i) the Company shall not be obligated to
effect a registration pursuant to this Section 1.5 during the period starting
with the date one hundred twenty (120) days prior to the Company's estimated
date of filing of, and ending on a date one hundred eighty (180) days following
the effective date of, a registration statement pertaining to an underwritten
public offering of the Company's securities, provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; and (ii)
if the Company shall furnish to such Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company or its shareholders
for a registration statement to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed six (6) months; provided, however, that the
Company shall not obtain such a deferral more than once in any 12-month period.
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The Company shall be obligated to effect not more than two (2)
registrations pursuant to this Section 1.5 for which holders of Registrable
Securities are the Initiating Holders.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their demand by means of an underwriting, they shall so
advise the Company as part of their demand made pursuant to this Section 1.5,
and the Company shall include such information in the notice referred to in
Section 1.5(a). In such event, the right of any Holder to registration pursuant
to this Section 1.5 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.
The Company shall, together with all Holders proposing to distribute their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by the Company and
reasonably satisfactory to a majority of interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.5, if the underwriter
shall advise the Company in writing that marketing factors (including, without
limitation, an adverse effect on the per share offering price) require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities that would otherwise be registered
and underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated pro rata among such Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The Registrable Securities so withdrawn shall also
be withdrawn from registration. If by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 1.5.
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account (or for
the account of other securityholders) in such registration if the underwriter so
agrees and if the number of Registrable Securities that would otherwise have
been included in such registration and underwriting will not thereby be limited.
1.6 COMPANY REGISTRATION.
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(a) If, at any time or from time to time, the Company shall determine to
register any of its securities, either for its own account or the account of a
securityholder or holders exercising their respective demand registration
rights, other than a registration relating solely to employee benefit plans on
Form S-8 or similar forms which may be promulgated in the future or a
registration on Form S-4 or similar forms which may be promulgated in the future
relating solely to a Securities and Exchange Commission Rule 145 or similar
transaction the Company will (i) promptly give to each Holder written notice
thereof and (ii) include in such registration (and any related qualification
under Blue Sky laws or other compliance), and in any underwriting involved
therein, all Registrable Securities of such Holders as specified in a written
request or requests made within fifteen (15) days after receipt of such written
notice from the Company.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
indicate in the notice given pursuant to Section 1.6(a). In such event the right
of any Holder to registration pursuant to this Section 1.6 shall be conditioned
upon such Holder's agreeing to participate in such underwriting and to the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other Holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company or by other holders exercising any
demand registration rights. Notwithstanding any other provision of this Section
1.6, if the underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the underwriter may exclude some or
all Registrable Securities or other securities from such registration and
underwriting (hereinafter an "UNDERWRITER CUTBACK"); provided, however, that if
such underwriting relates to any registration statement other than a
registration statement being filed with respect to the first registration
statement filed by the Company covering an underwritten offering of any of its
securities to the general public ("INITIAL PUBLIC OFFERING") in which no
secondary shares are included, then (i) in no event shall the aggregate number
of shares of Registrable Securities included in such underwriting be reduced
below thirty (30%) of the total number of shares proposed to be included in such
underwriting. In the event of an Underwriter Cutback, the Company shall so
advise all Holders and the other holders distributing their securities through
such underwriting, and the number of Registrable Securities and other securities
that may be included in the registration and underwriting shall be allocated
among all holders thereof (other than those holders who are exercising their
demand registration rights) on the basis that the holders who are not Holders
shall be cut back before any cutback of Holders. If the limitation determined
by the underwriter requires an Underwriter Cutback, such Underwriter Cutback
shall be in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
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1.7 FORM S-3 REGISTRATION RIGHTS. After the Initial Public Offering, the
Company shall use its best efforts to qualify for registration on Form S-3, and
to that end the Company shall use its best efforts to comply with the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), within twelve (12) months following the effective date of the first
registration of any securities of the Company for an underwritten registered
public offering. After the Company has qualified for the use of Form S-3, and
subject to the provisions of Section 1. 14, each Holder shall have the right to
request registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of such shares by each such Holder), subject only
to the following limitations:
(a) The Company shall not be obligated to cause a registration on Form S-3
to become effective prior to one hundred eighty (180) days following the
effective date of a Company initiated registration (other than a registration
effected solely to qualify an employee benefit plan or to effect a business
combination pursuant to Rule 145);
(b) The Company shall not be required to effect a registration pursuant to
this Section 1.7 unless the Holder or Holders requesting such a registration
propose to dispose of shares of Registrable Securities having an aggregate
disposition price (before deduction of underwriting discounts and expenses of
sale) of at least $500,000;
(c) The Company shall not be required to effect a registration pursuant to
this Section 1.7 if the Company shall furnish to the requesting 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 or its shareholders for the registration statement to
be filed at the date filing would be required, in which case the Company shall
have an additional period of not more than one hundred twenty (120) days within
which to file such registration statement; provided however, that the Company
shall not use this right more than once in any 12-month period;
(d) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding one hundred twenty
(120) days from the effective date thereof;
(e) The Company shall not be obligated to cause a registration on Form S-3
if in the prior six-month period the Company has caused a registration on Form
S-3 to become effective; and
(f) The Company shall be obligated to effect not more than two
registrations per year pursuant to this Section 1.7 for which holders of
Registrable Securities request such registration.
The Company shall give notice to all Holders of the receipt of a request
for registration pursuant to this Section 1.7 and shall use its best efforts to
cause all Registrable Securities that such Holders have requested, within
fifteen (15) days after receipt of such
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<PAGE>
written notice, be registered in accordance with this Section 1.7 to be
registered under the Securities Act. Subject to the foregoing, the Company will
use its best efforts to effect promptly any registration pursuant to this
Section 1.7. The provisions of Section 1.5(b) shall apply to any registration
effected pursuant to this Section 1.7
1.8 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.5, 1.6 and 1.7 (exclusive of Selling Expenses but inclusive of the
reasonable fees and expenses of one special counsel to the selling Holders)
shall be borne by the Company. Notwithstanding anything to the contrary herein,
the Company shall not be required to pay for any expenses of any registration
proceeding under Section 1.5 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to have been registered, unless such Holders agree to forfeit their
right to a demand registration pursuant to Section 1.5 (in which event such
right shall be forfeited by all Holders). In the absence of such an agreement
to forfeit, the Holders of Registrable Securities to have been registered shall
bear all such expenses pro rata on the basis of the Registrable Securities to
have been registered. Notwithstanding the foregoing, however, if at the time of
the 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, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said expenses
and shall retain their rights pursuant to Section 1.5.
1.9 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Keep such registration, qualification or compliance effective for a
period of one hundred twenty (120) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs;
(b) Prepare and file with the Commission 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;
(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
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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; and
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 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.
Notwithstanding any provision to the contrary in this Agreement, the
Company shall not be required in connection with any registration pursuant to
Sections 1.5, 1.6 or 1.7 to qualify shares in any state or jurisdiction which
requires the Company to qualify to do business or to file a general consent to
service of process.
1.10 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will promptly reimburse each such Holder, each of its
officers and directors and partners, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred (as and when incurred) in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
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information furnished to the Company by an instrument duly executed by such
Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers and directors and partners and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof) including any of the foregoing incurred in
settlement of any litigation commenced or threatened, arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification, or compliance,
and will promptly reimburse the Company, such Holders, such directors,
officer's, partners, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred (as and when incurred) in connection with
investigation, preparing or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by an instrument
duty executed by such Holder and stated to be specifically for use therein,
provided, however, that the obligations of each such Holder hereunder shall be
limited to an amount equal to the proceeds to each such Holder of Registrable
Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 1.10 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense, and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 1 unless such failure resulted in actual
detriment to the Indemnifying Party. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include
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as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party a release from all liability in respect of such claim or
litigation.
(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. 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) 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 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 1.
1.12 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Use its best efforts to make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act at
all times after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public;
(b) Use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Exchange Act at any time after it has become subject to such reporting
requirements,
(c) So long as a Shareholder owns any Restricted Securities, to furnish to
the Shareholder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the
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effective date of the first registration statement filed by the Company for an
offering of its securities to the general public) and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual report of the Company, and such
other reports and documents of the Company as a Shareholder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
a Shareholder to sell any such securities without registration.
1.13 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted under Sections 1.5, 1.6 and 1.7 may be assigned or
otherwise conveyed to a transferee or assignee of Registrable Securities, who
shall be considered a "Holder," and the transferred shares shall be considered
"Registrable Securities," for purposes of this Section 1, provided that (i) said
transferee acquires (or, together with affiliates (as defined under the
Securities Act) ("AFFILIATES") of said transferee, after the acquisition then
beneficially owns) at least 250,000 shares of the Registrable Securities
(including shares of Series A Preferred and Series B Preferred prior to
conversion into Registrable Securities) and (ii) the Company is given written
notice by such Holder at the time of or within a reasonable time (but not more
than thirty (30) days) after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned, subject to said transferee's agreement
to be bound by and comply with the provisions of this Section 1.
1.14 TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
pursuant to this Section 1 shall terminate (i) upon the seventh anniversary of
the effective date of the first registration statement filed by the Company
covering the Initial Public Offering or (ii) if earlier, as to any individual
Holder, at such time after the Company's Initial Public Offering as all
Registrable Securities (including shares of Series A Preferred and Series B
Preferred prior to conversion into Registrable Securities) held by such Holder
can be sold within any three-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144 (including
Rule 144(k)) promulgated thereunder.
1.15 "MARKET STAND OFF" AGREEMENT. Each Holder hereby agrees that, during
the period of duration specified by the Company and an underwriter of common
stock or other securities of the Company, following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; PROVIDED, HOWEVER, that:
(a) such agreement shall not exceed 180 days for the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
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(b) such agreement shall not exceed 90 days for any subsequent
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(c) all executive officers and directors of the Company and all
other persons with registration rights under this Agreement enter into similar
agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Notwithstanding the
foregoing, the obligations described in this Section 1.15 shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a SEC Rule 145 transaction on Form S-14 or Form S-15 or similar forms which
may be promulgated in the future.
SECTION 2.
AFFIRMATIVE COVENANTS OF THE COMPANY AND SHAREHOLDERS
2.1 FINANCIAL INFORMATION. Subject to Section 2.3, the Company will
furnish the following reports to the Shareholders for so long as the
Shareholders are holders of any Series A Preferred, Series B Preferred or
Registrable Securities:
(a) As soon as practicable after the end of each fiscal year, and in any
event within 90 days thereafter, audited consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and surplus and consolidated statements of
changes in financial position of the Company and its subsidiaries, if any, for
such year, prepared in accordance with generally accepted accounting principles
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of recognized national standing selected by the Company;
(b) Each month, an unaudited consolidated balance sheet of the Company and
its subsidiaries, if any, and consolidated statements of income and consolidated
statements of changes in financial condition of the Company and its subsidiaries
for such period, all in reasonable detail and signed, subject to changes
resulting from year-end audit adjustments, by the principal financial or
accounting officer of the Company;
(c) An annual operating budget for each coming year, delivered on or
before January 1 of each year; and
(d) Such other information relating to the financial condition, business,
prospects or corporate affairs of the Company as the investor may from time to
time request, provided,
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however, that the Company shall not be obligated to provide information which it
deems proprietary.
2.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights granted
pursuant to Section 2.1 may be assigned by the Shareholders (or by any permitted
transferee of any such rights) so long as (i) the Company is given notice of any
such assignment within a reasonable time after the date the same is effected,
(ii) the transferee shall have acquired (or, together with such transferee's
Affiliates, after the acquisition shall then beneficially own) at least 250,000
shares of Registrable Securities (including shares Series A Preferred and Series
B Preferred prior to conversion into Registrable Securities) in a private
transaction and (iii) the transferee is not engaged in a business that is
competitive with the Company.
2.3 INSPECTION RIGHTS.
(a) The Company will permit any Investor, so long as such Investor (or its
representative) owns at least 200,000 Shares, or such number of shares of Common
Stock issued upon conversion of 200,000 or more Shares, or any combination
thereof (as presently constituted and subject to subsequent adjustment for stock
splits, stock dividends, reverse stock splits, recapitalizations and the like)
(a "SIGNIFICANT HOLDER") (or a representative of any Significant Holder) to
visit and inspect any of the properties of the Company, including its books of
account and other records (and make copies thereof and take extracts therefrom),
and to discuss its affairs, finances and accounts with the Company's officers
and its independent public accountants, all at such reasonable times and as
often as any such person may reasonably request.
(b) The provisions of Section 2.2 and this Section 2.3 shall not be in
limitation of any rights which any Holder or Significant Holder may have with
respect to the books and records of the Company and its subsidiaries, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
2.4 ATTENDANCE AT BOARD MEETINGS. So long as Kaiser Aerospace &
Electronics ("Kaiser") owns at least an aggregate of 1,000,000 shares of Series
A Preferred, and so long as Kaiser does not have a representative on the Board
of Directors of the Company, Kaiser shall receive from the Company notices of
all meetings of the Board of Directors, including without limitation telephonic
meetings, and Kaiser shall receive, with such limitations provided herein, any
materials distributed for such meeting, and may send one representative to such
meetings, PROVIDED, HOWEVER, that the Company may require as a condition
precedent that such representative proposing to attend any meeting of the Board
of Directors shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so received during such
meetings and may require that such representative sign a confidentiality
agreement with the Company; and, PROVIDED, FURTHER, that the Company reserves
the right not to provide information and to exclude such representative from any
meeting or portion thereof if attendance at such meeting by such representative
or dissemination of any information at such meeting to such representative
would, in the good
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faith judgment of the Board of Directors, result in disclosure of trade secrets
to such representative, would compromise or adversely affect the attorney-client
privilege between the Company and its counsel, or would, in the good faith
judgment of the Board of Directors, result in a conflict of interest situation.
If such representative in his or her good faith judgment believes that an item
to be discussed by the Board of Directors would result in any conflict of
interest, such representative shall promptly bring such conflict to the
attention of the Chairman of the Board. In no event shall any provision of this
paragraph waive any obligation of confidentiality to the Company owed by any
such representative or Kaiser.
2.5 TERMINATION OF COVENANTS. The covenants set forth in Section 2.1,
Section 2.3 and Section 2.4 shall terminate and be of no further force or effect
after the closing date of the Initial Public Offering.
2.6 CONFIDENTIAL INFORMATION, ETC. Each Shareholder agrees that all
information received by it pursuant to this Section 2, and any other information
relating to the Company's technology, processes or formulas that is disclosed by
the Company to any Shareholder in writing and is marked "Confidential," shall be
considered confidential information. Each Shareholder further agrees that it
shall hold all such confidential information in confidence and shall not
disclose any such confidential information to any third party other than its
counsel or accountants nor shall such Shareholder use such confidential
information for any purpose other than evaluation of such Shareholder's
investment in the Company; provided, however, that the foregoing obligation to
hold in confidence and not to disclose confidential information shall not apply
to any such information that (a) was known to the public prior to disclosure by
the Company, (b) becomes known to the public through no fault of such
Shareholder, (c) is disclosed to such Shareholder on a non-confidential basis by
a third party having a legal right to make such disclosure or (d) is
independently developed by such Shareholder.
SECTION 3.
RIGHTS OF FIRST REFUSAL
3.1 RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES.
(a) The Company hereby grants to each Shareholder the right of first
refusal to purchase its Pro Rata Share (defined below) of all (or any part) of
New Securities (defined below) that the Company may from time to time propose to
sell and issue. Such Shareholder's "PRO RATA SHARE," for purposes of this
Section 3, is the ratio of the number of shares of Common Stock (assuming
conversion of all shares of Series A Preferred and Series B Preferred) then held
by such Shareholder to the total number of shares of Common Stock then
outstanding (assuming conversion of all shares of Series A Preferred and Series
B Preferred). This right of first refusal shall be subject to the following
provisions:
(b) "NEW SECURITIES" shall mean any Common Stock or Preferred Stock of the
Company, whether now authorized or not, and rights, options, or warrants to
purchase said
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Common Stock or Preferred Stock, and securities of any type whatsoever that are,
or may become, convertible into or exchangeable for said Common Stock or
Preferred Stock; provided, however, that "NEW SECURITIES" does not include (i)
securities issuable upon conversion of or with respect to Series A Preferred
Stock, Series B Preferred Stock or any future series of preferred stock; (ii)
shares of the Company's Common Stock (or related options) issued to officers,
directors, employees of and/or consultants to the Company pursuant to plans or
agreements as approved by the Company's Board of Directors; (iii) shares of the
Company's Common Stock or Preferred Stock issued in connection with any stock
split, stock dividend, or recapitalization by the Company; (iv) securities
issued in connection with any equipment leasing, technology licensing, corporate
partnering, strategic alliance, acquisition, merger, purchase of assets or
similar transaction as approved by the Company's Board of Directors; and (v)
shares of the Company's Common Stock issued or issuable as a result of any
antidilution adjustment provided for in the Company's Articles of Incorporation
as in effect at the time of such issuance.
(c) In the event that the Company proposes to undertake an issuance of New
Securities, it shall give each Shareholder written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Shareholder shall have
twenty (20) business days from the date of receipt of any such notice to agree
to purchase some or all of his Pro Rata Share of such New Securities for the
price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased. Each Shareholder shall have a right of over-allotment such that if
any Shareholder fails to exercise his right hereunder to purchase his Pro Rata
Share of New Securities, the other Shareholders may purchase the non-purchasing
Shareholder's portion on a pro rata basis, within fifteen (15) business days
from the date such non-purchasing Shareholder fails to exercise his right
hereunder to purchase his Pro Rata Share of New Securities.
(d) In the event that the Shareholders fail to exercise in full the right
of first refusal within said twenty (20) plus fifteen (15) business day period,
the Company shall have one hundred twenty (120) days thereafter to sell (or
enter into an agreement pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within one hundred twenty (120) days from
the date of said agreement) the New Securities respecting which the
Shareholders' rights were not exercised, at a price and upon general terms no
more favorable to the purchasers thereof than specified in the Company's notice.
In the event the Company has not sold the New Securities within said one hundred
twenty (120) day period (or sold and issued New Securities in accordance with
the foregoing within one hundred twenty (120) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Shareholders in the manner
provided above.
(e) The right of first refusal granted under this Section 3. 1 shall not
apply to and shall expire upon the closing of the Company's Initial Public
Offering.
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(f) The rights granted pursuant to this Section 3.1 may be assigned by the
Shareholders (or by any permitted transferee of any such rights) so long as (i)
the Company is given notice of any such assignment within a reasonable time
after the date the same is effected and (ii) the transferee shall have acquired
(or, together with such transferee's Affiliates, after the acquisition shall
then beneficially own) at least 250,000 shares of Registrable Securities
(including shares of Series A Preferred and Series B Preferred prior to
conversion into Registrable Securities) in a private transaction.
SECTION 4.
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California by California residents.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
4.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
4.4 NOTICES. ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to the Shareholders, to such Shareholders'
addresses set forth on the Schedule of Shareholders or to such other address as
such Shareholders shall have furnished to the Company in writing, (b) if to any
other holder of Registrable Securities, at such address as such holder shall
have furnished the Company in writing, or (c) if to the Company, to its address
set forth above and addressed to the attention of the President or at such other
addresses as the Company shall have furnished to the Shareholders. All notices
and other communications pursuant to the provisions of this Section 4.4 shall be
deemed delivered when mailed or sent by facsimile.
4.5 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
4.6 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
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4.7 SEPARABILITY. Any invalidity, illegality, or limitation of the
enforceability with respect to any Shareholder of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Shareholder's domicile or otherwise, shall in no way affect
or impair the validity, legality, or enforceability of this Agreement with
respect to other Shareholder.
4.8 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may be
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of (i) the Company and (ii) the holders
of at least a majority of the then outstanding shares of Registrable Securities,
excluding from the determination of such a majority in clause (ii) (both in
determining the total number of such shares outstanding and the number of such
shares consenting or not consenting) all shares previously disposed of by such
holders pursuant to one or more registration statements under the Securities Act
or pursuant to Rule 144. Any amendment, termination or waiver effected in
accordance with this section shall be binding upon the Shareholders, each of
their transferees and the Company. Each Shareholder acknowledges that by the
operation of this Section the holders of a majority of the outstanding
Registrable Securities as aforesaid may have the right and power to diminish or
eliminate all rights of such Shareholders under this Agreement.
4.9 AMENDMENT OF PRIOR AGREEMENT. This Agreement constitutes an amendment
of the Prior Agreement and is cast in the form of an amendment and restatement
solely for the ease of the parties hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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The foregoing Restated Investors' Rights Agreement is hereby executed as of
the date first above written.
THE COMPANY:
VISTA MEDICAL TECHNOLOGIES, INC.
By:
-------------------------------------
Title:
-----------------------------------
Address: 5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
THE SHAREHOLDERS:
FOSTER CITY PARTNERS
By:
-------------------------------------
Title:
-----------------------------------
Address: 950 Tower Lane, Ste. 800
Foster City, CA 94404
ONE LIBERTY FUND III, L.P.
By:
-------------------------------------
Title:
-----------------------------------
Address: 1 Liberty Square, 2nd Floor
Boston, MA 02109
GILDE INTERNATIONAL, B.V.
By:
-------------------------------------
Title:
-----------------------------------
Address: 1 Liberty Square, 2nd Floor
Boston, MA 02109
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
B.U.N.P.
By:
-------------------------------------
Title:
-----------------------------------
Address: c/o Community Technology Fund
Boston University Ventures
147 Bay State Road
Boston, MA 02215
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
By:
-------------------------------------
Title:
-----------------------------------
Address: One Palmer Square, Ste. 515
Princeton, NJ 08542
BIOTECHNOLOGY INVESTMENTS
LIMITED
By: Old Court Limited
By:
-------------------------------------
Title:
-----------------------------------
Address: St. Julian's Court
St. Peter Port
Guernsey, Channel Islands
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
D.P. III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.
By:
-------------------------------------
Title:
-----------------------------------
Address: One Palmer Square, Ste. 515
Princeton, NJ 08542
SBIC PARTNERS, L.P.
By: Forrest Binkley & Brown L.P.,
General Partner
By: Forrest Binkley & Brown Venture
Co.,
General Partner
By:
-------------------------------------
Title:
-----------------------------------
By: SL-SBIC Partners, L.P.,
General Partner
By: FW-SBIC, Inc.,
General Partner
By:
-------------------------------------
Title:
-----------------------------------
Address: 201 Main Street, Suite 2302
Fort Worth, TX 76102
KOICHIRO HIRO
-------------------------------------
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
Address: c/o Oktas
134 Flanders Road
Westborough, MA 01581
DELAWARE CHARTER GUARANTEE &
TRUST TTEE FBO NANCY M. BRIEFS
-------------------------------------
By: Dick Blakely
-------------------------------------
Title: Agent c/o Smith Barney
-----------------------------------
Address: 3000 Sand Hill Road 3-190
Menlo Park, CA 94025
With copy to:
c/o Oktas
134 Flanders Road
Westborough, MA 01581
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ALBERT STARR, M.D.
-------------------------------------
Address:
--------------------------------
NATIONAL CITY BANK AS CUSTODIAN CARDIAC
SURGICAL FBO DR. WILLIAM F. NORTHRUP, IV
By:
-------------------------------------
Title:
-----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
GUARANTEE & TRUST CO., TRUSTEE FBO GIACOMO A.
DELARIA, M.D.
-------------------------------------
By:
-------------------------------------
Title:
-----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
MEREDITH L. SCOTT, M.D.
------------------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
SELECTED MEDICAL ENTERPRISES
------------------------------------------
By:
-------------------------------------
Title:
-----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
PROMEDICA INTERNATIONAL, INC.
------------------------------------------
By:
-------------------------------------
Title:
-----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
A-1
<PAGE>
EXHIBIT A
SCHEDULE OF SHAREHOLDERS
Shareholders
------------
FOSTER CITY PARTNERS
950 Tower Lane, Ste. 800
Foster City, CA 94404
Attention: Dr. H.J. Smead
ONE LIBERTY FUND III
1 Liberty Square, 2nd Floor
Boston, MA 02109
Attention: Dan Holland
GILDE INTERNATIONAL B.V.
1 Liberty Square, 2nd Floor
Boston, MA 02109
Attention: Dan Holland
B. U. N. P.
c/o Community Technology Fund
Boston University Ventures
147 Bay State Road
Boston, MA 02215
Attention: John E. Bagalay, Jr.
DOMAIN PARTNERS III, L.P.
One Palmer Square. Ste. 515
Princeton. NJ 08542
Attention: James C. Blair. Ph.D.
BIOTECHNOLOGY INVESTMENTS LIMITED
St. Julian's Court
St. Peter Pon
Guernsey. Channel Islands
with copy to:
c/o Domain Associates
One Palmer Square, Ste. 515
Princeton, NJ 08542
Attention: James C. Blair. Ph.D.
DP III ASSOCIATES, L.P.
A-1
<PAGE>
One Palmer Square, Ste. 515
Princeton, NJ 08542
Attention: James C. Blair, Ph.D
SBIC PARTNERS. L.P.
201 Main Street, Suite 2302
Fort Worth, TX 76102
Attention: Nick Binkley
KOICHIRO HORI
c/o Oktas
134 Flanders Road
Westborough, MA 01581
DELAWARE CHARTER GUARANTEE &
TRUST TTEE FBO NANCY M. BRIEFS
3000 Sand Hill Road 3-190
Menlo Park, CA 94025
Attention: Dick Blakeley
with copy to:
c/o Oktas
134 Flanders Road
Westborough, MA 01581
Attention: Nancy Briefs
PIONEER CAPITAL CORPORATION
60 State Street
Boston, MA 02109
ACCEL III, L.P.
1 Palmer Square, Ste. 515
Princeton, NJ 08542
ACCEL JAPAN, L.P.
1 Palmer Square, Ste. 515
Princeton, NJ 08542
ACCEL '91
1 Palmer Square, Ste. 515
Princeton, NJ 08542
OAK INVESTMENT PARTNERS V, L.P.
1 Gorham Island
A-2
<PAGE>
Westport, CT 06880
OAK V AFFILIATES FUND, L.P.
1 Gorham Island
Westport, CT 06880
CRAIG ANDREWS
3543 Garrison Street
San Diego, CA 92106
JOHN DENNISTON
16338 Via del Alba
Rancho Santa Fe, CA 92067
FAYE HUNTER RUSSELL TRUST
U/A DTD 7-11-88
P. O. Box 1759
La Jolla, CA 92038
ALBERT STARR, M.D.
9155 S. W. Barnes Road, Suite 240
Portland, OR 97225
NATIONAL CITY BANK AS CUSTODIAN
CARDIAC SURGICAL FBO DR. WILLIAM F.
NORTHRUP, IV
651 Nicollet Mall, FAC-4
Minneapolis, MN 55402
GUARANTEE & TRUST CO., TRUSTEE
FBO GIACOMO A. DELARIA, M.D.
P. O. Box 9755
Rancho Santa Fe, CA 92067
MEREDITH L. SCOTT, M.D.
1615 Barcelona Way
Winter Park, FL 32789
SELECTED MEDICAL ENTERPRISES
1017 Mary Lan
Lomira, WI 53048
PROMEDICA INTERNATIONAL, INC.
620 Newport Center Drive, #575
Newport Beach, CA 92660
A-3
<PAGE>
EXHIBIT 10.4
VISTA MEDICAL TECHNOLOGIES, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
---------------------
July 12, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Stock......................................... 1
1.1 Sale and Issuance of Series B Preferred Stock...................... 1
1.2 First and Subsequent Closings...................................... 1
2. Representations and Warranties of the Company...................... 2
2.1 Organization, Good Standing and Qualification...................... 2
2.2 Capitalization and Voting Rights................................... 2
2.3 Subsidiaries....................................................... 3
2.4 Authorization...................................................... 3
2.5 Valid Issuance of Preferred and Common Stock....................... 3
2.6 Governmental Consents.............................................. 4
2.7 Litigation......................................................... 4
2.8 Proprietary Information Agreements................................. 4
2.9 Patents and Trademarks............................................. 5
2.10 Compliance with Other Instruments.................................. 5
2.11 Agreements; Action................................................. 6
2.12 Related-Party Transactions......................................... 6
2.13 Permits............................................................ 6
2.14 Environmental and Safety Laws...................................... 7
2.15 Registration Rights................................................ 7
2.16 Title to Property and Assets....................................... 7
2.17 Financial Statements............................................... 7
2.18 Changes............................................................ 8
2.19 Employee Benefit Plans............................................. 9
2.20 Insurance.......................................................... 9
2.21 Real Property Holding Company...................................... 9
2.22 Tax Returns, Payments and Elections................................ 9
2.23 Minute Books....................................................... 10
2.24 Disclosure......................................................... 10
2.25 Labor Agreements and Actions....................................... 10
2.26 Manufacturing and Marketing Rights................................. 10
2.27 Finder or Broker................................................... 10
2.28 Customer Complaints................................................ 11
3. Representations and Warranties of the Investor.......................... 11
3.1 Authorization...................................................... 11
3.2 Purchase Entirely for Own Account.................................. 11
3.3 Disclosure of Information.......................................... 11
3.4 Investment Experience.............................................. 11
3.5 Accredited Investor................................................ 12
i.
<PAGE>
3.6 Restricted Securities.............................................. 12
3.7 Further Limitations on Disposition................................. 12
3.8 Legends............................................................ 12
4. California Commissioner of Corporations................................. 13
4.1 Corporate Securities Law........................................... 13
5. Conditions of Investor's Obligations at Closing......................... 13
5.1 Representations and Warranties..................................... 13
5.2 Performance........................................................ 13
5.3 Compliance Certificate............................................. 13
5.4 Qualifications..................................................... 13
5.5 Proceedings and Documents.......................................... 14
5.7 Restated Investors' Rights Agreement............................... 14
6. Conditions of the Company's Obligations at Closing...................... 14
6.1 Representations and Warranties..................................... 14
6.2 Payment of Purchase Price.......................................... 14
6.3 Qualifications..................................................... 14
7. Miscellaneous........................................................... 15
7.1 Survival of Warranties............................................. 15
7.2 Successors and Assigns............................................. 15
7.3 Governing Law...................................................... 15
7.4 Counterparts....................................................... 15
7.5 Titles and Subtitles............................................... 15
7.6 Notices............................................................ 15
7.7 Finder's Fee....................................................... 16
7.8 Legal Fees......................................................... 16
7.9 Expenses........................................................... 16
7.10 Amendments and Waivers............................................. 16
7.11 Severability....................................................... 16
7.12 Entire Agreement................................................... 16
ii.
<PAGE>
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT is made as of the 12th day
of July, 1996, by and between Vista Medical Technologies, Inc., a California
corporation (the "Company"), and the investors listed on SCHEDULE A hereto, each
of which is herein referred to as an "Investor" and collectively referred to as
the "Investors."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES B PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of California on or before the First Closing (as defined below), Amended and
Restated Articles of Incorporation in substantially the form attached hereto as
EXHIBIT A (the "Restated Articles").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally, to purchase at the First Closing pursuant to
Section 1.2, and the Company agrees to sell and issue to each Investor at the
First Closing pursuant to Section 1.2, that number of shares of the Company's
Series B Preferred Stock set forth opposite each Investor's name on SCHEDULE A
hereto for the purchase price of $4.00 per share.
(c) Subject to the terms and conditions of this Agreement, each
Subsequent Investor (as defined below) agrees, severally, to purchase at the
applicable Subsequent Closing pursuant to Section 1.3, and the Company agrees to
sell and issue to each Subsequent Investor at the applicable Subsequent Closing
pursuant to Section 1.3, that number of shares of the Company's Series B
Preferred Stock mutually agreed upon by the Company and such Subsequent Investor
for the purchase price of $4.00 per share.
1.2 FIRST AND SUBSEQUENT CLOSINGS.
(a) The purchase and sale of the Series B Preferred Stock shall
take place at the offices of Brobeck, Phleger & Harrison LLP, 550 West "C"
Street, Suite 1200, San Diego, California at 11:00 A.M., on July 12, 1996, or at
such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series B Preferred Stock sold pursuant
hereto mutually agree upon orally or in writing (which time and place are
designated as the "First Closing").
(b) The Company may sell up to the balance of the authorized
number of shares of Series B Preferred Stock not sold at the Closing to such
purchasers
<PAGE>
as it shall select (the "Subsequent Investors"), at a price not less than $4.00
per share, at one or more closings (the "Subsequent Closings"), provided the
agreement or agreements for sale are executed not later than December 31, 1996.
If more than one such Subsequent Closing shall occur, the Subsequent Closings
shall be identified in numerical order beginning with the "Second Closing." Any
such Subsequent Investor shall become a party to this Agreement and that certain
Amended and Restated Investors' Rights Agreement to be executed in connection
with the entering into of this Agreement, in substantially the form attached
hereto as EXHIBIT B (the "Rights Agreement") and shall have the rights and
obligations hereunder and thereunder. No further consent shall be required of
the Investors to allow such purchaser to become a party to this Agreement and/or
the Rights Agreement. As used herein, the terms "Closing" and "Closings" shall
refer individually, and collectively, to the First and the Subsequent Closings,
as applicable.
(c) At each Closing, the Company shall deliver to each Investor
a certificate representing the shares of Series B Preferred Stock that such
Investor is purchasing against payment of the purchase price therefor by check,
wire transfer, cancellation of indebtedness or such other form of payment as
shall be mutually agreed upon by such Investor and the Company. In the event
that payment by an Investor is made, in whole or in part, by cancellation of
indebtedness, then such Investor shall surrender to the Company for cancellation
at such Closing any evidence of such indebtedness or shall execute an instrument
of cancellation in form and substance reasonably acceptable to the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor or Subsequent Investor, as applicable,
that, except as set forth on a Schedule of Exceptions furnished each Investor or
a Supplemental Schedule of Exceptions furnished to each Subsequent Investor,
which exceptions shall be deemed to be representations and warranties as if made
hereunder:
2.1 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 California and has all requisite corporate power and authority
to carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 18,000,000 shares of Preferred Stock
(the "Preferred Stock"), 8,300,000 shares of which have been designated
Series A-1 Preferred Stock, and 8,094,340 of which are issued and outstanding,
500,000 shares of which have been designated Series A-3, and 154,581 of which
are issued and outstanding, and 3,100,000 shares of which have been designated
Series B Preferred Stock, up to 3,000,000
2.
<PAGE>
of which will be sold pursuant to this Agreement. The rights, privileges and
preferences of the Series B Preferred Stock will be as stated in the Restated
Articles.
(ii) COMMON STOCK. 25,000,000 shares of common stock
("Common Stock"), of which 701,000 shares are issued and outstanding.
(iii) Except for (A) the conversion privileges of the
Series A-1 Preferred Stock, (B) the conversion privileges of the Series A-3
Preferred Stock, (C) the conversion privileges of the Series B Preferred Stock
to be issued under this Agreement, (D) the rights provided in Section 3.1 of the
Rights Agreements and (E) the 2,687,481 shares of Common Stock reserved for
issuance pursuant to the Company's 1995 Stock Option Plan (the "Plan"), of which
options to purchase 1,986,947 shares have been granted under the Plan, there are
not outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock. The Company is not a party or
subject to any agreement or understanding, and, to the Company's knowledge,
there is no agreement or understanding between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security or by a director of the Company.
2.3 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association or
other business entity. The Company is not an equity owner in any joint venture,
partnership or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the Rights Agreement and any other
agreement to which the Company is a party, the execution and delivery of which
is contemplated hereby (the "Ancillary Agreements"), the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance (or reservation for issuance) and delivery of the Series B Preferred
Stock being sold hereunder and the Common Stock issuable upon conversion of the
Series B Preferred Stock has been taken or will be taken prior to the Closing,
and this Agreement, the Rights Agreement and any Ancillary Agreements constitute
valid and legally binding obligations of the Company, enforceable in accordance
with their respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
(a) The Series B Preferred Stock which is being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof
3.
<PAGE>
for the consideration expressed herein, will be duly and validly issued, fully
paid and nonassessable and, based in part upon the representations of the
Investors in this Agreement, will be issued in compliance with all applicable
federal and state securities laws. The Common Stock issuable upon conversion of
the Series B Preferred Stock purchased under this Agreement has been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Restated Articles, shall be duly and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable securities laws, as
presently in effect, of the United States and each of the states whose
securities laws govern the issuance of any of the Series B Preferred Stock
hereunder.
(b) The outstanding shares of Series A-1 Preferred Stock, Series
A-3 Preferred Stock and Common Stock are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in compliance with all
applicable federal and state securities laws.
2.6 GOVERNMENTAL CONSENTS. To the best of the Company's knowledge
and belief, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state,
local or provincial governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for the filing pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder, which filing will be effected within fifteen (15) days of the sale
of the Series B Preferred Stock hereunder.
2.7 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, the Rights Agreement or any Ancillary
Agreements, or the right of the Company to enter into any of them, or to
consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse changes
in the assets, financial condition, or business of the Company. The foregoing
includes, without limitation, actions pending or threatened (or any basis
therefor known to the Company) involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
2.8 PROPRIETARY INFORMATION AGREEMENTS. Each employee, officer and
consultant of the Company has executed a Proprietary Information Agreement in
the Company's standard form. The Company, after reasonable investigation, is
not aware that any of its employees, officers or consultant are in violation
thereof, and the Company will use its best efforts to prevent any such
violation.
4.
<PAGE>
2.9 PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted as described in the
Business Plan without any conflict with or infringement of the rights of others.
The Schedule of Exceptions contains a complete list of patents and pending
patent applications of the Company. There are no outstanding options, licenses,
or agreements of any kind relating to the foregoing, nor is the Company bound by
or a party to any options, licenses, or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person or
entity. The Company is not aware that any of its employees or consultants are
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement or subject to any judgment, decree or order of
any court or administrative agreement that would interfere with the use of his,
her, or its best efforts to promote the best interests of the Company or that
would conflict with the Company's business as it is proposed to be conducted.
The Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. Neither the execution
nor delivery of this Agreement, the Investor Rights Agreement, any Ancillary
Agreements, nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business as proposed, will, to the
best of the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees or consultants is now
obligated. The Company does not believe that it is or will be necessary to
utilize any inventions of any of its employees or consultants (or persons it
currently intends to hire) made prior to their employment by the Company.
2.10 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provisions of its Restated Articles of Incorporation
or Bylaws or of any instrument, judgment, order, writ, decree or contract to
which it is a party or by which it is bound or, to its knowledge, of any
provision of federal or state statute, rule or regulation applicable to the
Company. The execution, delivery and performance of this Agreement, the
Restated Investors' Rights Agreement or any Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby will not result
in any such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of
any material permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
5.
<PAGE>
2.11 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and any
Ancillary Agreements, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates
or any affiliate thereof.
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or by which it is bound which may involve (i) obligations (contingent
or otherwise) of, or payments to the Company in excess of, $25,000, or (ii) the
license of any patent, copyright, trade secret, or other proprietary right to or
from the Company, or (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's products or services or
(iv) indemnification by the Company with respect to infringements of proprietary
rights.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $25,000 or, in the case of
indebtedness and/or liabilities individually less than $25,000, in excess of
$100,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
2.12 RELATED-PARTY TRANSACTIONS. Except as set forth on the Schedule
of Exceptions, no shareholder, employee, officer, or director of the Company or
member of his or her immediate family, is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them. To best of the Company's knowledge, none of such persons has any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation that competes with the Company, except that employees,
officers, or directors of the Company and members of their immediate families
may own less than one percent (1%) of the outstanding stock in publicly traded
companies that may compete with the Company. No member of the immediate family
of any officer or director of the Company is directly or indirectly interested
in any material contract with the Company.
2.13 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties,
6.
<PAGE>
prospects, or financial condition of the Company and believes it can obtain,
without undue burden or expense, any similar authority for the conduct of its
business as planned to be conducted. The Company is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority.
2.14 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation
of any applicable statute, law, or regulation relating to the environment or
occupational health and safety; and to the best of the Company's knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
2.15 REGISTRATION RIGHTS. Except as provided in the Investor Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.16 TITLE TO PROPERTY AND ASSETS. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
2.17 FINANCIAL STATEMENTS. The Company has made available to each
Investor its audited financial statements (balance sheet and profit and loss
statement, statement of shareholders' equity and statement of changes in
financial position) for the fiscal year ended December 31, 1995 and its
unaudited financial statements (balance sheet and profit and loss statement
including notes) for the three-month period ended March 31, 1996 (the "Financial
Statements"). The Financial Statements are complete and correct in all material
respects and accurately set out and describe the financial condition and
operating results of the Company as of the dates, and for the periods, indicated
therein, subject to normal year-end audit adjustments. The Financial Statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") except for footnotes required by GAAP. Except as set forth in the
Financial Statements, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to March 31, 1996 which in the aggregate do not exceed $25,000 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company. Except as disclosed in the Financial Statements, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
7.
<PAGE>
2.18 CHANGES. Since March 31, 1996 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business which have not
been, in the aggregate, materially adverse.
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, prospects or business of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a material
debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, prospects or business of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(e) any change or amendment to a material contract or arrangement by
which the Company or any of its assets or properties is bound or subject;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(g) any resignation or termination of employment of any key officer
or consultant of the Company; and the Company, to the best of its knowledge,
does not know of the impending resignation or termination of employment of any
such officer or consultant;
(h) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(i) any loans or guarantees made by the Company to or for the benefit
of its employees, officers, directors or consultants, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(j) any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the Company;
8.
<PAGE>
(k) any material change in any compensation arrangement or agreement
with any employee or consultant;
(l) to the best of the Company's knowledge, any other event or
condition of any character which might materially and adversely affect the
assets, properties, financial condition, prospects or business of the Company
(as such business is presently conducted and as it is proposed to be conducted);
(m) any agreement or commitment by the Company to do any of the
things described in this Section 2.18; or
(n) receipt of notice that there has been a material order
cancellation by any major customer of the Company.
2.19 EMPLOYEE BENEFIT PLANS. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.20 INSURANCE. The Company maintains in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount to
allow it to replace any of its properties that might be damaged or destroyed.
The Company has in full force and effect products liability and errors and
omissions insurance in amounts customary for similarly situated companies.
2.21 REAL PROPERTY HOLDING COMPANY. The Company is not a real
property holding company within the meaning of Internal Revenue Code Section
897.
2.22 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed any
and all tax returns and reports as required by law. These returns and reports,
if any, are true and correct in all material respects. The Company has paid all
taxes and other assessments due, except those contested by it in good faith that
are listed in the Schedule of Exceptions. The provision for taxes of the
Company as shown in the Financial Statements are adequate for taxes due or
accrued as of the date thereof. The Company has not elected pursuant to the
Internal Revenue Code of 1986, as amended (the "Code"), to be treated as a
Subchapter S corporation or a collapsible corporation pursuant to Section
1362(a) or Section 341(f) of the Code, nor has it made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation or amortization) that would have a material effect on
the Company, its financial condition, its prospects, its business as presently
conducted or proposed to be conducted or any of its properties or material
assets. The Company has never had any tax deficiency proposed or assessed
against it and has not executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge. None of the
Company's federal income tax returns, if any, and none of its state income or
franchise tax or sales or use tax returns, if any, has ever been audited by
governmental authorities. Since March 31, 1996 the Company has made adequate
provisions on its books of account for all taxes, assessments and governmental
9.
<PAGE>
charges with respect to its business, properties and operations for such period.
The Company has withheld or collected from each payment made to each of its
employees, the amount of all taxes (including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes) required to be withheld or collected therefrom, and has paid the
same to the proper tax receiving officers or authorized depositaries.
2.23 MINUTE BOOKS. The copy of the minute books of the Company
provided to the special counsel of the Investors contains a complete summary of
all meetings of directors and shareholders and all actions by written consent in
lieu of a meeting by directors or shareholders since the time of incorporation
and reflect all transactions referred to in such minutes accurately in all
material respects.
2.24 DISCLOSURE. The Company has fully provided each Investor with
all the information which such Investor has requested for deciding whether to
purchase the Series B Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Rights Agreement and any Ancillary Agreements, nor
any other statements or certificates made or delivered in connection herewith or
therewith contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not misleading.
2.25 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the best of the
Company's knowledge, has sought to represent any of the employees,
representatives or agents of the Company. There is no strike or other labor
dispute involving the Company pending, or to the best of the Company's
knowledge, threatened, that could have a material adverse effect on the assets,
properties, financial condition, operating results, or business of the Company
(as such business is presently conducted and as it is proposed to be conducted),
nor is the Company aware of any labor organization activity involving its
employees. The Company is not aware that any officer, consultant or key
employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each officer,
consultant and employee of the Company is terminable at the will of the Company.
2.26 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive rights to develop, manufacture, assemble, distribute and sell its
products.
2.27 FINDER OR BROKER. The Company is not obligated to pay any
brokerage commissions, finder's fees or other similar compensation to any
finder, broker,
10.
<PAGE>
intermediary or any similar person in connection with the transactions
contemplated herein. The Company will indemnify Investors and hold Investors
harmless from any liability or expense arising from any claim for brokerage
commissions, finder's fees or other similar compensation based upon any
agreement, arrangement or understanding made by or on behalf of the Company.
2.28 CUSTOMER COMPLAINTS. The Company has received no customer
complaints, concerning alleged defects in its products or the design thereof
that, if true, would have a material adverse effect on the assets, financial
condition or business of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. Each Investor or
Subsequent Investor, as applicable, hereby represents and warrants that:
3.1 AUTHORIZATION. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series B Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such 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 such Investor has no present intention of selling,
granting any participation in or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant any participation to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has
full power and authority to enter into this Agreement.
3.3 DISCLOSURE OF INFORMATION. It believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Series B Preferred Stock. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series B Preferred
Stock. The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
3.4 INVESTMENT EXPERIENCE. Each Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series B
Preferred Stock. If other than an individual, Investor also represents it has
not been organized for the purpose of acquiring the Series B Preferred Stock.
11.
<PAGE>
3.5 ACCREDITED INVESTOR. Each Investor is an "accredited investor"
within the meaning of Securities Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.6 RESTRICTED SECURITIES. It understands that the shares of
Series B Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act of 1933, as amended (the "Act"),
only in certain limited circumstances. In this connection, each Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series B Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and Section 7, provided and to the extent such sections are then
applicable, and the Rights Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b)(i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such partner or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
3.8 LEGENDS. It is understood that the certificates evidencing the
Series B Preferred Stock (and the Common Stock issuable upon conversion thereof)
may bear one or all of the following legends:
12.
<PAGE>
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) Any legend required by the laws of any State.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor or Subsequent Investor under subsection 1.1(b) or (c) of this
Agreement are subject to the fulfillment of each of the following conditions on
or before the Closing with respect to such Investors' or Subsequent Investors'
purchase of Series B Preferred Stock, the waiver of which shall not be effective
against any Investor who does not consent in writing thereto, PROVIDED, HOWEVER,
that the fulfillment of the condition listed in subsection 5.6 is NOT required
for any Subsequent Closing:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
applicable Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the applicable
Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor or Subsequent Investor at the applicable Closing a
certificate certifying that the conditions specified in Sections 5.1 and 5.2
have been fulfilled.
5.4 QUALIFICATIONS. The Commissioner of Corporations of the State of
California and the Blue Sky authorities of any other State applicable shall have
issued a
13.
<PAGE>
permit qualifying the offer and sale of the Series B Preferred Stock and the
underlying Common Stock to the Investors or Subsequent Investors pursuant to
this Agreement, or such offer and sale shall be exempt from such qualification.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the applicable Closing and
all documents incident thereto (including satisfactory results of due diligence
review of the Company) shall be reasonably satisfactory in form and substance to
Investors and Subsequent Investors, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5.6 OPINION OF COMPANY COUNSEL. Each Investor shall have received
from Brobeck, Phleger & Harrison LLP, counsel for the Company, an opinion, dated
as of the Closing, in substantially a form mutually agreed upon by the Company
and the Investors.
5.7 RESTATED INVESTORS' RIGHTS AGREEMENT. The Investor or Subsequent
Investor, as applicable, and holders of a majority of the outstanding shares of
the Company's Series A-1 Preferred Stock and Series A-3 Preferred Stock, voting
together as a single class, on an as-converted basis, shall have entered into
the Rights Agreement.
5.8 MINIMUM INVESTMENT. The Investors must purchase at least
1,250,000 shares of Series B Preferred Stock at the First Closing.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor or Subsequent Investor under this Agreement are
subject to the fulfillment of each of the following conditions on or before the
Closing with respect to such Investors' or Subsequent Investors' purchase of
Series B Preferred Stock by that Investor or Subsequent Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor or Subsequent Investor contained in Section 3 shall
be true on and as of the applicable Closing with the same effect as though such
representations and warranties had been made on and as of the applicable
Closing.
6.2 PAYMENT OF PURCHASE PRICE. The Investor shall have delivered the
purchase price specified in Section 1.2 or Section 1.3, as applicable.
6.3 QUALIFICATIONS. The Commissioner of Corporations of the State of
California and the Blue Sky authorities, of any other State applicable shall
have issued a permit qualifying the offer and sale to the Investors and
Subsequent Investors of the Series B Preferred Stock and the Common Stock
issuable upon the conversion thereof or such offer and sale shall be exempt from
such qualification.
6.4 MINIMUM INVESTMENT. The Investors must purchase at least
1,250,000 shares of Series B Preferred Stock at the First Closing.
14.
<PAGE>
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
7.2 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 shares of Series B Preferred Stock sold hereunder 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 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.
7.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.4 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. It is expressly
contemplated by the parties that the purchase and sale of the shares Series B
Preferred Stock hereunder may include one or more subsequent closings at which
the purchasing Investor(s) will execute and deliver counterparts to this
Agreement, pay the respective purchase price for the shares of Series B
Preferred Stock so purchased and receive such shares of Series B Preferred Stock
all as provided herein.
7.5 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.
7.6 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to an Investor, to such Investor's address set
forth on the signature pages hereto or to such other address as such Investor
shall have furnished to the Company in writing or (b) if to the Company, to its
address set forth above and addressed to the attention of the President or at
such other addresses as the Company shall have furnished to the Investors. All
notices and other communications pursuant to the provisions of this Section 7.6
shall be deemed delivered when mailed or sent by facsimile.
15.
<PAGE>
7.7 FINDER'S FEE. Each party represents that it neither is nor will
be obligated for any finder's fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
7.8 LEGAL FEES. The Company hereby agrees to pay legal fees and
expenses for one special counsel for the Investors in an aggregate amount of up
to $10,000. Except as set forth above, each party to this Agreement shall bear
its own expenses and legal fees incurred by it with respect o this Agreement and
all related transactions outside of or in excess of these covered costs.
7.9 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement or the Restated Articles, 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.
7.10 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
a majority of the Common Stock issued or issuable upon conversion of the
Series B Preferred Stock. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any securities purchased
under this Agreement at the time outstanding (including securities into which
such securities are convertible), each future holder of all such securities, and
the Company; provided, however, that no condition set forth in Section 5 hereof
may be waived with respect to any Investor who does not consent thereto.
7.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.12 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
16.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
VISTA MEDICAL TECHNOLOGIES, INC., a California
corporation
By: /s/ John Lyon
------------------------------
John Lyon, President
Address: 5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
Attn: John Lyon
INVESTORS:
FOSTER CITY PARTNERS
By:/s/ H. J. Smead
------------------------------------------
Title: General Partner
---------------------------------------
Address: 950 Tower Lane, Ste. 800
Foster City, CA 94404
ONE LIBERTY FUND III, L.P.
By Its General Partner One Liberty Partners III,
L.P.
By:/s/ D. J. Holland
------------------------------------------
Title: as Attorney in Fact
---------------------------------------
Address: 1 Liberty Square, 2nd Floor
Boston, MA 02109
GILDE INTERNATIONAL, B.V.
By:/s/ D. J. Holland
------------------------------------------
Title: as Attorney in Fact
---------------------------------------
Address: 1 Liberty Square, 2nd Floor
Boston, MA 02109
[SIGNATURE PAGE TO SERIES B
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
B.U.N.P.
By:/s/ John E. Bagalay, Jr.
------------------------------------------
Title:Managing Partner
---------------------------------------
Address: c/o Community Technology Fund
Boston University Ventures
147 Bay State Road
Boston, MA 02215
Attn: John E. Bagalay, Jr.
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
By:/s/ Kathleen K. Schoemaker
------------------------------------------
Title:General partner
---------------------------------------
Address: One Palmer Square, Ste. 515
Princeton, NJ 08542
With copy to: BIOTECHNOLOGY INVESTMENTS
LIMITED
c/o Domain Associates
One Palmer Square, Ste. 515 By: Old Court Limited
Princeton, NJ 08542
Attn: James C. Blair, Ph.D. By:/s/ Kathleen K. Schoemaker
-------------------------------------
Title:Attorney - In - Fact
----------------------------------
Address: St. Julian's Court
St. Peter Port
Guernsey, Channel Islands
D.P. III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.
By:/s/ Kathleen K. Schoemaker
------------------------------------------
Title:General partner
---------------------------------------
Address: One Palmer Square, Ste. 515
Princeton, NJ 08542
[SIGNATURE PAGE TO SERIES B
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SBIC PARTNERS, L.P.
By: Forrest Binkley & Brown L.P.,
General Partner
By: Forrest Binkley & Brown Venture Co.,
General Partner
By: /s/ Nicholas B. Binkley
--------------------------------
Nicholas B. Binkley
Office of the President
By: SL-SBIC Partners, L.P.,
General Partner
By: FW-SBIC, Inc.,
General Partner
By: /s/ Peter Sterling
--------------------------------
Peter Sterling
Chairman
Address: 201 Main Street, Suite 2302
Fort Worth Texas, Texas 76102
KOICHIRO HIRO
/s/ Koichiro Hiro
---------------------------------------------
Address: c/o Oktas
134 Flanders Road
Westborough, MA 01581
[SIGNATURE PAGE TO SERIES B
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
DELAWARE CHARTER GUARANTEE &
TRUST TTEE FBO NANCY M. BRIEFS
/s/ Dick Blakeley
---------------------------------------------
By: Dick Blakeley
------------------------------------------
Title: Agent c/o Smith Barney
---------------------------------------
Address: 3000 Sand Hill Road 3-190
Menlo Park, CA 94025
With copy to:
c/o Oktas
134 Flanders Road
Westborough, MA 01581
[SIGNATURE PAGE TO SERIES B
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Number Cancellation of Total
Investor of Shares Indebtedness(1) Cash Investment
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST CLOSING
Foster City Partners 276,807 -0- $1,107,228.00 $1,107,228.00
One Liberty Fund III, L.P. 115,385 93,452.64 368,084.00 461,536.64
Gilde International, B.V. 1,165 -0- 4,660.00 4,660.00
B.U.N.P. 36,844 28,350.14 119,024.00 147,374.14
Domain Partners III, L.P. 315,305 255,652.32 1,005,564.00 1,261,216.32
Old Court Limited 163,170 132,300.12 520,376.00 652,676.12
D.P. III Associates, L.P. 11,036 8,947.81 35,196.00 44,143.81
SBIC Partners, L.P. 291,375 236,444.35 929,052.00 1,165,496.35
Koichiro Hori 8,244 32,984.55 -0- 32,984.55
Nancy Briefs 50,000 -0- 200,000.00 200,000.00
------------ ----------- ------------- -------------
FIRST CLOSING TOTALS: 1,269,331.00 $788,130.93 $4,289,184.00 $5,077,315.93
------------ ----------- ------------- -------------
------------ ----------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
Number Cancellation of Total
Investor of Shares Indebtedness(1) Cash Invvestment
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SECOND CLOSING
Craig Andrews 5,000 -0- $20,000.00 $20,000.00
John Denniston 2,500 -0- 10,000.00 10,000.00
Faye Hunter Russell Trust
U/A Dtd 7-11-88 2,500 -0- 10,000.00 10,000.00
------------ ----------- ------------- -------------
SECOND CLOSING TOTALS: 10,000 -0- 40,000.00 40,000.00
------------ ----------- ------------- -------------
------------ ----------- ------------- -------------
TOTALS: 1,279,331.00 $788,130.93 $4,329,184.00 $5,117,315.93
------------ ----------- ------------- -------------
------------ ----------- ------------- -------------
</TABLE>
(1) The bridge notes provide that the principal plus all accrued but unpaid
interest due under such notes may be converted, at the Company's sole
option, into that number of fully paid and nonassessable shares of Series B
Preferred Stock as is equal to such amount divided by $4.00 (the per share
purchase price of the Series B Preferred Stock), with any fraction of a
share rounded up to the next whole share. As a result, (a) the amounts
shown in the "Cancellation of Indebtedness" column reflect the actual
aggregate principal and accrued interest as of the Closing, (b) the amounts
shown in the "Cash" column reflect the amounts due to purchase the
additional whole number of shares and (c) the amounts shown in the "Total
Investment" column reflect the actual amounts paid for the shares of Series
B Preferred Stock purchased.
<PAGE>
EXHIBIT A
RESTATED ARTICLES
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
VISTA MEDICAL TECHNOLOGIES, INC.
The undersigned, John Lyon and Larry Osterink, hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of Vista Medical Technologies, Inc., a California corporation.
TWO: The articles of incorporation of this corporation are amended and
restated to read as follows:
I.
The name of the corporation is Vista Medical Technologies, Inc.
II.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
A. CLASSES OF STOCK. This corporation is authorized to issue two (2)
classes of shares, to be designated "Common" and "Preferred" and referred to
herein as the "Common Shares" or the "Preferred Shares" respectively. The total
number of Common Shares the corporation is authorized to issue is twenty-five
million (25,000,000). The par value is $0.01 per share. The total number of
Preferred Shares the corporation is authorized to issue is eighteen million
(18,000,000). The par value is $0.01 per share.
The board of directors of the corporation may divide the Preferred
Shares into any number of series. The board of directors shall fix the
designation and number of shares of each such series. The board of directors
may determine and alter the rights, preferences, privileges and restrictions
granted to and imposed upon any wholly unissued series of the Preferred Shares.
The board of directors (within the limits and restrictions of any resolution
adopted by it, originally fixing the number of shares of any series) may
increase or decrease the number of shares of any such series
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after the issue of shares of that series, but not below the number of then
outstanding shares of such series.
B. RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF THE SERIES A-1
PREFERRED STOCK, SERIES A-3 PREFERRED STOCK AND SERIES B PREFERRED STOCK.
1. DESIGNATION OF SERIES A-1 PREFERRED STOCK, SERIES A-3 PREFERRED
STOCK AND SERIES B PREFERRED STOCK. Eight Million Three Hundred Thousand
(8,300,000) shares of Preferred Stock are designated Series A-1 Preferred Stock
(the "Series A-1 Preferred") with the rights, preferences and privileges
specified herein. Five Hundred Thousand (500,000) shares of Preferred Stock are
designated Series A-3 Preferred Stock (the "Series A-3 Preferred") with the
rights, preferences and privileges specified herein. Three Million One Hundred
Thousand (3,100,000) shares of Preferred Stock are designated Series B Preferred
Stock (the "Series B Preferred") with the rights, preferences and privileges
specified herein. As used in this Article III, Section B., the term "Series A
Preferred" shall refer to the Series A-1 Preferred and the Series A-3 Preferred.
As used in this Article III, Section B., the term "Preferred Stock" shall refer
to the Series A-1 Preferred, the Series A-3 Preferred and the Series B
Preferred.
2. DIVIDEND RIGHTS OF PREFERRED STOCK. The holders of the then
outstanding shares of Preferred Stock shall be entitled to receive dividends pro
rata, in preference to any dividend on the Common Stock of this corporation
("Common"), at the rate of eight percent (8%) of the Original Purchase Price per
share (as defined below) per annum, whenever funds are legally available and
when and as declared by the Board of Directors. The dividends shall be
non-cumulative. The original purchase price of the Series A Preferred shall be
$1.325 per share (the "Series A Original Purchase Price"). The original
purchase price of the Series B Preferred shall be $4.00 per share (the "Series B
Original Purchase Price"). As used in this Section 2, the term "Original
Purchase Price" shall refer to the Series A Original Purchase Price or the
Series B Original Purchase Price, as the case may be.
3. LIQUIDATION PREFERENCE.
a. In the event of any liquidation event, either voluntary or
involuntary, the holders of the Preferred Stock shall be entitled to receive pro
rata, prior and in preference to any distribution of any of the assets or
surplus funds of the corporation to the holders of the Common by reason of their
ownership thereof, with respect to the Series B Preferred, the sum of (i) $4.00
per share for each share of Series B Preferred then held by them and (ii) an
amount equal to all declared but unpaid dividends on the Series B Preferred then
held by them, and, with respect to the Series A Preferred, the sum of (i) $1.325
per share for each share of Series A Preferred then held by them and (ii) an
amount equal to all declared but unpaid dividends on the Series A Preferred then
held by them. If, upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Preferred
Stock in proportion to the preferential amount each such holder would have been
entitled to receive pursuant to this Section 3 if such distribution had been
sufficient to permit the full payment of such preferential amount.
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b. After payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled pursuant to Section
3.a. above, the holders of the Common and Preferred Stock shall be entitled to
receive the remaining assets of the corporation in proportion to the shares of
Common Stock then held by them and the shares of Common Stock which they have
the right to acquire upon conversion of Preferred Stock until such time as the
distributions made to the holders of the Preferred Stock (taken together with
all payments made pursuant to Section 3.a. above) equal, with respect to the
Series A Preferred, $3.975 per share for each share of Series A Preferred then
held by them and, with respect to the Series B Preferred, $12.00 per share for
each share of Series B Preferred then held by them. If, upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then the entire remaining assets and
funds of the corporation legally available for distribution after payment has
been made to the holders of the Preferred Stock of the full amounts to which
they shall be entitled pursuant to Section 3.a. above shall be distributed
ratably among the holders of the Common and Preferred Stock in proportion to the
preferential amount each such holder would have been entitled to receive
pursuant to this Section 3 if such distribution had been sufficient to permit
the full payment of the preferential amounts under this Section 3.b. to the
holders of the Preferred Stock.
c. After payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled pursuant to Sections
3.a. and 3.b. above, the holders of the Common shall be entitled to receive all
remaining assets of the corporation in proportion to the shares of Common Stock
then held by them.
d. For purposes of this Section 3, a liquidation, dissolution
or winding up of the corporation shall be deemed to be occasioned by, or to
include, the corporation's sale of all or substantially all of its assets or the
acquisition of this corporation by another entity by means of merger or
consolidation resulting in the exchange of the outstanding shares of this
corporation for securities or consideration issued, or caused to be issued, by
the acquiring corporation or its subsidiary in which the shareholders of the
corporation are holders of less than 50% of voting power of the surviving
corporation.
e. Each holder of any outstanding shares of Preferred Stock
shall be deemed to have consented, for purposes of Sections 502, 503 and 506 of
the California Corporations Code, to distributions made by the corporation in
connection with the repurchase of shares of Common issued to or held by
employees, directors or consultants of or to the corporation or any of its
subsidiaries upon termination of their employment or services pursuant to
agreements providing for the right of such repurchase between the corporation
and such persons.
4. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
a. OPTIONAL AND AUTOMATIC CONVERSION. Each share of Preferred
Stock shall be convertible at the option of the holder thereof, without payment
of additional consideration, at any time after the date of issuance of such
share, at the office of the corporation or any transfer agent for the Preferred
Stock, into such number of fully paid and nonassessable shares of Common as is
determined by dividing, with respect to the Series A Preferred, $1.325 or, with
respect to the Series B
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Preferred, $4.00 by the Conversion Price, determined as hereinafter provided, in
effect at the time of conversion. The price at which shares of Common shall be
deliverable upon conversion of the Series A-1 Preferred (the "Series A-1
Conversion Price") shall initially be $1.325 per share of Common. The price at
which shares of Common shall be deliverable upon conversion of the Series A-3
Preferred (the "Series A-3 Conversion Price") shall initially be $1.325 per
share of Common. The price at which shares of Common shall be deliverable upon
conversion of the Series B Preferred (the "Series B Conversion Price") shall
initially be $4.00 per share of Common. As used in this Section 4., the term
"Conversion Price" shall refer to the Series A-1 Conversion Price, the
Series A-3 Conversion Price or the Series B Conversion Price, as the case may
be. The initial Series A-1 Conversion Price, Series A-3 Conversion Price and
Series B Conversion Price shall be subject to adjustment as hereinafter
provided.
Each share of Preferred Stock shall automatically be converted into shares
of Common at the then effective Conversion Price in the event of either (i) the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), covering the offer and sale of Common (whether for the account of
the corporation or for the account of one or more shareholders of the
corporation) of the corporation to the public in which the aggregate gross cash
proceeds to the corporation (prior to underwriters' discounts and expenses) are
equal to or exceed $15,000,000 and the public offering price is equal to or
exceeds $5.00 per share of Common (as adjusted for any stock dividends,
combinations or splits with respect to such shares) (a "Qualified Public
Offering") or (ii) the written consent of holders of more than fifty percent
(50%) of the then outstanding shares of Preferred Stock voting together as a
single class (a "Qualifying Consent"). In the event of the automatic conversion
of the Preferred Stock upon a Qualified Public Offering, the conversion of
Preferred Stock shall be deemed to have occurred immediately prior to the
closing of such Qualified Public Offering. In the event of the automatic
conversion of the shares of Preferred Stock upon a Qualifying Consent, the
conversion of Preferred Stock shall be deemed to have occurred on the date
specified in such Qualifying Consent.
b. MECHANICS OF CONVERSION. No fractional shares of Common
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the corporation shall
pay cash equal to such fraction multiplied by the then effective Conversion
Price. Before any holder of Preferred Stock shall be entitled to convert the
same into full shares of Common, it shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the corporation or of any
transfer agent for the Preferred Stock, and shall give written notice to the
corporation at such office that it elects to convert the same (except that no
such written notice of election to convert shall be necessary in the event of an
automatic conversion pursuant to Section 4.a.). The corporation shall, as soon
as practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock a certificate or certificates, registered in such names as
specified by the holder, for the number of shares of Common to which he shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common, and any declared and unpaid dividends on the converted Preferred Stock.
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 Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common on such date (except that in the
event of an automatic conversion (i) upon a Qualified Public Offering pursuant
to Section 4.a. such conversion shall be deemed to have been made immediately
prior to the closing of the Qualified Public
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Offering and (ii) upon a Qualifying Consent pursuant to Section 4.a. such
conversion shall be deemed to have been made on the date specified in such
Qualifying Consent). If the conversion is in connection with an underwritten
offering of securities registered pursuant to the Act, the conversion may, at
the option of any holder tendering Preferred Stock for conversion, be
conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common issuable upon such conversion of the Preferred Stock shall not be deemed
to have converted such Preferred Stock until immediately prior to the closing of
such sale of securities.
c. ADJUSTMENTS TO SERIES A-1 CONVERSION PRICE, SERIES A-3
CONVERSION PRICE AND SERIES B CONVERSION PRICE FOR DILUTIVE ISSUES.
(1) SPECIAL DEFINITIONS. For purposes of this Section 4.c.
and Section 5, the following definitions shall apply:
(a) "OPTION" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common or Convertible
Securities.
(b) "ORIGINAL ISSUE DATE" shall mean, with respect to
the Series A-1 Preferred, the date on which a share of Series A-1 Preferred was
first issued, and with respect to the Series A-3 Preferred, the date on which a
share of Series A-3 Preferred was first issued, and with respect to the Series B
Preferred, the date on which a share of Series B Preferred was first issued.
(c) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares (other than Common and Preferred Stock) or other
securities directly or indirectly convertible into or exchangeable for Common.
(d) "ADDITIONAL SHARES OF COMMON" shall mean all
shares of Common issued (or, pursuant to Section 4.c.(3), deemed to be issued)
by the corporation after the Original Issue Date, other than shares of Common
issued or issuable:
i) upon conversion of shares of Preferred
Stock authorized herein;
ii) to officers, directors or employees of,
or consultants to, the corporation pursuant to any plan or agreement approved by
the Board of Directors;
iii) as a dividend or distribution on the
Preferred Stock or any event for which adjustment is made pursuant to Sections
4.d. or 4.e. hereof;
iv) in connection with equipment leasing or
bank financing transactions, provided such shares are issued for other than
primarily equity financing purposes;
v) pursuant to transactions involving
technology licensing, research or development activities or the distribution or
manufacture of the corporation's products,
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provided that each of the forgoing transactions is for other than primarily
equity financing purposes; or
vi) by way of dividend or other distribution
on shares excluded from the definition of Additional Shares of Common by the
foregoing clauses i) through v) or this clause vi) or on shares of Common so
excluded.
(2) NO ADJUSTMENT OF SERIES A-1 CONVERSION PRICE,
SERIES A-3 CONVERSION PRICE OR SERIES B CONVERSION PRICE. No adjustment in the
Series A-1 Conversion Price, Series A-3 Conversion Price or Series B Conversion
Price shall be made in respect of the issuance of Additional Shares of Common
unless the consideration per share for an Additional Share of Common issued or
deemed to be issued by the corporation is less than the Series A-1 Conversion
Price, Series A-3 Conversion Price or Series B Conversion Price, respectively,
in effect on the date of, and immediately prior to, the issue of such Additional
Share.
(3) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES
OF COMMON -- OPTIONS AND CONVERTIBLE SECURITIES. In the event the corporation
at any time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that in any such case in which Additional
Shares of Common are deemed to be issued:
(a) no further adjustment in the Series A-1 Conversion
Price, Series A-3 Conversion Price or Series B Conversion Price shall be made
upon the subsequent issue of Convertible Securities or shares of Common upon the
exercise of such Options or conversion or exchange of such Convertible
Securities;
(b) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the corporation, or decreases in the number of shares
of Common issuable, upon the exercise, conversion or exchange thereof, the
Series A-1 Conversion Price, Series A-3 Conversion Price and Series B Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
(c) no readjustment pursuant to clause (b) above shall
have the effect of increasing the Series A-1 Conversion Price, Series A-3
Conversion Price or Series B Conversion Price to an amount which exceeds the
lower of (i) such Series A-1 Conversion Price, Series A-3 Conversion Price or
Series B Conversion Price, respectively, on the original adjustment date with
respect to such deemed issuance of Additional Shares of Common, or (ii) such
Series A-1
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Conversion Price, Series A-3 Conversion Price or Series B Conversion Price,
respectively, that would have resulted from any issuance of Additional Shares of
Common between such original adjustment date and such readjustment date; and
(d) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any decrease in the
consideration payable to the corporation upon the exercise, conversion or
exchange thereof, the Series A-1 Conversion Price, Series A-3 Conversion Price
and Series B Conversion Price computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such decrease becoming effective, be
recomputed to reflect such decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities.
(4) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON. In the event this corporation shall issue
Additional Shares of Common (including Additional Shares of Common deemed to be
issued pursuant to Section 4.c.(3)) without consideration or for a consideration
per share less than the Series A-1 Conversion Price, Series A-3 Conversion Price
or Series B Conversion Price in effect on the date of and immediately prior to
such issue, then and in such event, such Series A-1 Conversion Price, Series A-3
Conversion Price or Series B Conversion Price, respectively, shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Series A-1 Conversion Price, Series A-3
Conversion Price or Series B Conversion Price, respectively, by a fraction, the
numerator of which shall be the number of shares of Common outstanding
immediately prior to such issue plus the number of shares of Common which the
aggregate consideration received by the corporation for the total number of
Additional Shares of Common so issued would purchase at such Series A-1
Conversion Price, Series A-3 Conversion Price or Series B Conversion Price,
respectively, in effect immediately prior to such issue; and the denominator of
which shall be the number of shares of Common outstanding immediately prior to
such issue plus the number of such Additional Shares of Common so issued; and
provided further that, for the purposes of this Section 4.c.(4): (i) no shares
of Common issued or issuable upon conversion of Preferred Stock shall be deemed
to be outstanding and all such shares shall be excluded from such calculation,
(ii) all shares of Common issuable upon conversion of outstanding Options and
Convertible Securities (excluding outstanding Preferred Stock) shall be deemed
to be outstanding and all such shares shall be included in such calculation, and
(iii) except as provided in the foregoing clauses (i) and (ii) above,
immediately after any Additional Shares of Common are deemed issued pursuant to
Section 4.c.(3), such Additional Shares of Common shall be deemed to be
outstanding. The Series A-1 Conversion Price, Series A-3 Conversion Price and
Series B Conversion Price shall not be increased except as set forth in Section
4.c.(3)(b) and in Section 4.d.
(5) DETERMINATION OF CONSIDERATION. For purposes of this
Section 4.c., the consideration received by the corporation for the issue of any
Additional Shares of Common shall be computed as follows:
(a) CASH AND PROPERTY. Such consideration shall:
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i) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
ii) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
iii) in the event Additional Shares of Common
are issued together with other shares or securities or other assets of the
corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses i) and ii) above, as
reasonably determined in good faith by the Board of Directors.
(b) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the corporation for Additional Shares of
Common deemed to have been issued pursuant to Section 4.c.(3), relating to
Options and Convertible Securities, shall be determined by dividing:
i) the total amount, if any, received or
receivable by the corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
ii) the maximum number of shares of Common
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
d. ADJUSTMENT FOR STOCK SPLITS, DIVIDENDS AND COMBINATIONS. If
the corporation shall at any time or from time to time effect a subdivision of
the outstanding Common, or shall issue a dividend of Common on its outstanding
Common, the Series A-1 Conversion Price, Series A-3 Conversion Price and
Series B Conversion Price then in effect immediately before that subdivision or
dividend shall be proportionately decreased, and conversely, if the corporation
shall combine the outstanding shares of Common, the Series A-1 Conversion Price,
Series A-3 Conversion Price and Series B Conversion Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section 4.d. shall become effective at the close of
business on the date the subdivision or combination becomes effective or on the
date on which the dividend is declared.
e. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the corporation at any time or from time to time shall make or issue, or
fix a record date for the determination of holders of Common entitled to receive
a dividend or other distribution payable in securities of the corporation other
than shares of Common, then and in each such event provision shall
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be made so that the holders of Series A-1 Preferred, Series A-3 Preferred and
Series B Preferred shall receive upon conversion thereof, in addition to the
number of shares of Common receivable thereupon, the amount of securities of the
corporation that they would have received had their Series A-1 Preferred, Series
A-3 Preferred and Series B Preferred been converted into Common on the date of
such event, giving effect to all adjustments called for with respect to such
securities during the period from the date of such event to and including the
conversion date.
f. ADJUSTMENT FOR MERGER OR REORGANIZATION. In case of any
consolidation or merger of the corporation with or into another corporation or
the conveyance of all or substantially all of the assets of the corporation to
another corporation (other than a consolidation, merger or conveyance provided
for elsewhere in this Section 4 or Section 3), provisions shall be made so that
holders of shares of Series A-1 Preferred, Series A-3 Preferred and Series B
Preferred shall thereafter be convertible into the number of shares of stock or
other securities or property to which a holder of the number of shares of Common
of the corporation deliverable upon conversion of such Series A-1 Preferred,
Series A-3 Preferred and Series B Preferred would have been entitled upon such
consolidation, merger or conveyance; and, in any case, appropriate adjustment
(as reasonably determined in good faith by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to the rights
and interest thereafter of the holders of the Series A-1 Preferred, Series A-3
Preferred and Series B Preferred, to the end that the provisions set forth
herein (including provisions with respect to changes in and other adjustments of
the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A-1 Preferred, Series A-3
Preferred and Series B Preferred.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If the Common issuable upon the conversion of the Series A-1 Preferred,
Series A-3 Preferred and Series B Preferred shall be changed into the same or
different number of shares of any class or series of stock, whether by capital
reorganization, reclassification or otherwise (other than as set forth above in
this Section 4), then and in each such event the holder of each share of Series
A-1 Preferred, Series A-3 Preferred and Series B Preferred shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such reorganization,
reclassification or other change by holders of the number of shares of Common
into which such shares of Series A-1 Preferred, Series A-3 Preferred and Series
B Preferred might have been converted immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as provided
herein.
h. NO IMPAIRMENT. The corporation will not, by amendment of
this Amended and Restated Articles of Incorporation or through any
reorganization, 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 the Series A-1 Preferred, Preferred, Series
A-3 Preferred and Series B Preferred against impairment.
i. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series A-1 Conversion Price, Series A-3
Conversion Price or Series B Conversion
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Price pursuant to this Section 4, the corporation at its expense shall promptly
compute such adjustments or readjustments in accordance with the terms hereof
and furnish to each holder of any 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 Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Series A-1 Conversion Price, Series A-3
Conversion Price or Series B Conversion Price at the time in effect, and
(iii) the number of shares of Common and the amount, if any, of other property
which at the time would be received upon the conversion of such holder's shares.
j. 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 which is the same as cash dividends paid in
previous quarters) or other distribution, the corporation shall mail to each
holder of 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 or distribution. Each such written notice
shall be given by first class mail, postage prepaid, addressed to the holders of
Preferred Stock at the address for each such holder as shown on the books of
this corporation.
k. COMMON STOCK RESERVED. The corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common,
solely for the purpose of effecting the conversion of the shares of Preferred
Stock, such number of shares of Common as shall from time to time be sufficient
to effect the conversion of all outstanding shares of Preferred Stock, and if at
any time the number of authorized but unissued shares of Common shall not be
sufficient to effect the conversion of all then outstanding shares of Preferred
Stock, the corporation shall take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common to such number of shares as shall be sufficient for such purpose.
5. VOTING RIGHTS. Each holder of shares of Series A-1 Preferred
shall be entitled to the number of votes equal to the number of shares of Common
into which such shares of Series A-1 Preferred could be converted on the record
date for the vote or the date of the solicitation of any written consent of
shareholders and shall have voting rights and powers equal to the voting rights
and powers of the Common. The Series A-3 Preferred shall be non-voting
Preferred, except as otherwise required by law. Each holder of shares of Series
B Preferred shall be entitled to the number of votes equal to the number of
shares of Common into which such shares of Series B Preferred could be converted
on the record date for the vote or the date of the solicitation of any written
consent of shareholders and shall have voting rights and powers equal to the
voting rights and powers of the Common. Each holder of Common shall be entitled
to one vote per share of Common held by such holder. The holder of each share
of Series A-1 Preferred and Series B Preferred shall be entitled to notice of
any shareholders' meeting in accordance with the Bylaws of the corporation and
shall vote with holders of the Common upon all matters submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote and except as provided in Section 6 below. Fractional votes by the holders
of Series A-1 Preferred and Series B Preferred shall not, however, be permitted
and any fractional voting rights resulting from the above formula shall be
rounded to the nearest whole number.
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6. RESTRICTIONS AND LIMITS.
a. So long as fifty percent (50%) or more of the originally
issued shares of Series A-1 Preferred and Series B Preferred shall be
outstanding, the corporation shall not, without first obtaining the affirmative
vote or written consent of the holders of not less than sixty-six and two-thirds
percent (66-2/3%) of the then outstanding shares of Series A-1 Preferred and
Series B Preferred, voting as a class:
(1) amend or repeal any provision of, or add any provision
to, the corporation's Amended and Restated Articles of Incorporation or Bylaws
if such action would adversely alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of the
Series A-1 Preferred or Series B Preferred;
(2) create any new series or class of stock having any
rights, preferences or privileges senior to or on a parity with any such rights,
preferences or privileges of the Series A-1 Preferred or Series B Preferred;
(3) increase or decrease the authorized number of shares of
Series A Preferred, Series B Preferred or Preferred;
(4) pay any dividend on, or redeem, repurchase or otherwise
acquire any shares of, the Common or Preferred (other than (i) any repurchases
of shares of Common held by an employee of the corporation upon termination of
employment, and (ii) as approved by the Board of Directors);
(5) merge into or consolidate with any other corporation or
entity (other than any transaction in which the corporation's shareholders own a
majority of the securities of the surviving corporation) or sell all or
substantially all of the assets of the corporation;
(6) amend, or take any action intended to circumvent, the
provisions of this Section 6.
7. STATUS OF CONVERTED STOCK. In the event any shares of Preferred
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be cancelled and shall not be issuable by the corporation. The Articles
of Incorporation of this corporation shall be appropriately amended to effect
the corresponding reduction in the corporation's authorized capital stock.
8. RESIDUAL RIGHTS. All rights accruing to the outstanding shares
of the corporation not otherwise expressly provided for in this Amended and
Restated Articles of Incorporation shall be vested in the Common.
-11-
<PAGE>
IV.
A. DIRECTOR LIABILITY. The liability of the directors of this
corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
B. INDEMNIFICATION. This corporation is authorized to provide
indemnification of agents (as defined in Section 317 of the California
Corporations Code) for breach of duty to the corporation and its shareholders
through bylaw provisions or through agreements with agents, or both, in excess
of the indemnification otherwise permitted by Section 317 of the California
Corporations Code, subject to the limits on such excess indemnification set
forth in Section 204 of the California Corporations Code.
-12-
<PAGE>
C. EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of the
provisions of this Article shall not adversely affect the rights under this
Article in effect at the time of the alleged occurrence of any act or omission
to act giving rise to liability or indemnification.
* * * * *
THREE: The foregoing amendment and restatement of articles of
incorporation has been duly approved by the board of directors.
FOUR: The foregoing amendment and restatement of the articles of
incorporation has been duly approved by the required vote of shareholders in
accordance with Section 902 of the Corporations Code. The total number of
outstanding shares of the corporation is 701,000 shares of Common Stock,
8,094,340 shares of Series A-1 Preferred Stock, no outstanding shares of Series
A-2 Preferred Stock, 154,581 shares of Series A-3 Preferred Stock and no
outstanding shares of Series A-4 Preferred Stock. The number of shares voting
in favor of the amendment equaled or exceeded the vote required, such required
vote being (a) a majority of the outstanding shares of Common Stock and Series
A-1 Preferred Stock (voting together on an as-converted basis), (b) 66 2/3% of
the outstanding shares of Series A-1 Preferred Stock, (c) a majority of the
outstanding shares of Common Stock and (d) a majority of the outstanding shares
of Series A-1 Preferred Stock and Series A-3 Preferred Stock (voting together as
a class). The holders of Series A-3 are not entitled to vote, except as
required by law.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this certificate on
July 2, 1996.
----------------------------------------
John Lyon, President
----------------------------------------
Larry Osterink, Secretary
The undersigned certify under penalty of perjury that they have read
the foregoing Amended and Restated Articles of Incorporation and know the
contents thereof, and that the statements therein are true.
Executed at San Diego, California, on July 2, 1996.
----------------------------------------
John Lyon
----------------------------------------
Larry Osterink
<PAGE>
EXHIBIT B
RESTATED INVESTORS' RIGHTS AGREEMENT
B-1
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
July 12, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.................. 1
1.1 Restrictions on Transferability............................... 1
1.2 Certain Definitions........................................... 2
1.3 Restrictive Legend(s)......................................... 3
1.4 Notice of Proposed Transfers.................................. 3
1.5 Demand Registration Rights.................................... 4
1.6 Company Registration.......................................... 6
1.7 Form S-3 Registration Rights.................................. 7
1.8 Expenses of Registration...................................... 8
1.9 Registration Procedures....................................... 8
1.10 Indemnification............................................... 9
1.11 Information by Holder......................................... 11
1.12 Rule 144 Reporting............................................ 11
1.13 Transfer of Registration Rights............................... 12
1.14 Termination of Registration Rights............................ 12
1.15 "Market Stand Off" Agreement.................................. 13
SECTION 2. AFFIRMATIVE COVENANTS OF THE COMPANY AND SHAREHOLDERS.......... 13
2.1 Financial Information......................................... 13
2.2 Assignment of Rights to Financial Information................. 14
2.3 Inspection Rights............................................. 14
2.4 Attendance at Board Meetings.................................. 15
2.5 Termination of Covenants...................................... 15
2.6 Confidential Information, etc................................. 15
SECTION 3. RIGHTS OF FIRST REFUSAL........................................ 16
3.1 Right of First Refusal on Company Issuances................... 16
SECTION 4. MISCELLANEOUS.................................................. 17
4.1 Governing Law................................................. 17
4.2 Successors and Assigns........................................ 17
4.3 Entire Agreement.............................................. 17
4.4 Notice........................................................ 18
4.5 Counterparts.................................................. 18
4.6 Severability.................................................. 18
4.7 Separability.................................................. 18
4.8 Approval of Amendments and Waivers............................ 18
4.9 Amendment of Prior Agreement.................................. 19
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "AGREEMENT") is
made as of the 12th day of July, 1996, by and between Vista Medical
Technologies, Inc., a California corporation (the "Company"), and the
Shareholders listed on Schedule A hereto, each of which is herein referred to as
a "Shareholder."
RECITALS
WHEREAS, the Company and certain of the Shareholders (the "SERIES A
SHAREHOLDERS") are parties to a certain Investors Rights Agreement dated as of
July 27, 1995, as amended on September 15, 1995 (the "PRIOR AGREEMENT"),
pursuant to which the Company has agreed to the extent possible to grant to the
Series A Shareholders certain rights to cause the Company to register shares of
Common Stock issuable to the Series A Shareholders upon conversion of the
Company's Series A-1 Preferred Stock and Series A-3 Preferred Stock (the "SERIES
A PREFERRED") in the event the Company grants such rights to other shareholders,
and certain other matters as set forth therein;
WHEREAS, the Company and certain of the Shareholders (the "SERIES B
SHAREHOLDERS") are parties to the Series B Preferred Stock Purchase Agreement of
even date herewith (the "SERIES B AGREEMENT"); and
WHEREAS, in order to induce the Company to enter into the Series B
Agreement and to induce the Series B Shareholders to purchase shares of the
Company's Series B Preferred Stock (the "SERIES B PREFERRED") pursuant to the
Series B Agreement, the Shareholders and the Company hereby agree that this
Agreement shall amend and restate the Prior Agreement so that this Agreement
shall govern the obligations of the Company to register the resale of shares of
Common Stock issuable to the Shareholders upon conversion of their shares of the
Company's Series A Preferred and/or Series B Preferred, and certain other
matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
SECTION 1.
RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
1.1 RESTRICTIONS ON TRANSFERABILITY. Neither the Series A Preferred or
the Series B Preferred nor the Registrable Securities (as defined below) shall
be transferable except upon the conditions specified in this Agreement, which
conditions are intended to insure compliance with the provisions of the
Securities Act (as defined below), or upon such other terms as are in the
opinion of counsel to the Company satisfactory to comply with the provisions of
the Securities Act. Except for transfers made pursuant to Rule 144 of the
Securities Act, the Shareholders will cause any proposed transferee of Series A
Preferred, Series B Preferred or Registrable Securities held by any Shareholder
to agree to take and hold such securities subject to the provisions and upon the
conditions specified in this Agreement and it will be a condition precedent to
the effectiveness of any such transfer that the
1
<PAGE>
Company shall have secured a written agreement in form and substance
satisfactory to the Company to that effect, if so requested by the Company,
1.2 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"FORM S-3" shall mean Form S-3 under the Securities Act (as defined below)
as in effect on the date of this Agreement, or any substantially similar,
equivalent or successor form under the Securities Act.
"HOLDER" shall mean each holder of Registrable Securities.
"REGISTRABLE SECURITIES" means (i) the Common Stock issuable or issued upon
conversion of the Series A Preferred, (ii) the Common Stock issuable or issued
upon conversion of the Series B Preferred and (iii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the shares referenced
in (i) and (ii) above, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his rights under this
Section 1 are not assigned.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with Sections 1.5, 1.6 and 1.7 hereof other than Selling Expenses,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of Company counsel, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company required
to bear the legend set forth in Section 1.3 hereof or a legend substantially
similar thereto and all shares of Common Stock outstanding on the date of this
Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the applicable sale.
1.3 RESTRICTIVE LEGEND(S).
2
<PAGE>
(a) Each certificate representing the shares of Series A Preferred, Series
B Preferred and Registrable Securities shall (unless otherwise permitted by the
provisions of Section 1.4 below) be stamped or otherwise imprinted with a legend
in the following form (in addition to any legend required under applicable
California or other state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION.
(b) Each certificate representing shares of Registrable Securities into
which shares of the Series A Preferred and/or Series B Preferred are converted
also shall be stamped or otherwise imprinted with any legend required by the
Bylaws of the Company (in addition to any legend required under applicable
California or other state securities laws).
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing the Restricted Securities, by acceptance thereof, agrees to comply
in all respects with the provisions of this Section 1.4. Prior to any proposed
transfer of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall be
accompanied (except in transactions in compliance with Rule 144) by either (i) a
written opinion of legal counsel which shall be reasonably satisfactory to the
Company addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission, a copy of any
holder's request (together with all supplements or amendments thereto) to which
shall have been provided to the Company, at or prior to the time of first
delivery to the Commission's staff, to the effect that the transfer of such
securities without registration will not result in a recommendation by such
staff that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
provided for above shall bear the appropriate restrictive legend set forth in
Section 1.3 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for the Company or counsel for such holder,
such legend is not required in order to establish compliance with any provisions
of the Securities Act.
Notwithstanding the provisions above, no such opinion of counsel or "no
action letter" shall be necessary for a transfer by a Shareholder which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner ("PARTNERS"), if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if he were an original
Shareholder hereunder.
1.5 DEMAND REGISTRATION RIGHTS.
3
<PAGE>
(a) Commencing on July 12, 1999, if the Company shall receive a written
request (specifying that it is being made pursuant to this Section 1.5) from the
Holders of at least forty percent (40%) of the Registrable Securities that the
Company file a registration statement or similar document under the Securities
Act covering the registration of Registrable Securities the expected aggregate
offering price to the public of which is at least $7,500,000, then the Company
shall promptly notify all other Holders of such request and shall use its best
efforts to cause all Registrable Securities that such Holders have requested,
within fifteen (15) days after receipt of such written notice, to be registered
in accordance with this Section 1.5 to be registered under the Securities Act.
The Holders making the written request pursuant to this Section 1.5 shall be
referred to hereinafter as the "INITIATING HOLDERS".
Notwithstanding the foregoing, (i) the Company shall not be obligated to
effect a registration pursuant to this Section 1.5 during the period starting
with the date one hundred twenty (120) days prior to the Company's estimated
date of filing of, and ending on a date one hundred eighty (180) days following
the effective date of, a registration statement pertaining to an underwritten
public offering of the Company's securities, provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; and (ii)
if the Company shall furnish to such Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company or its shareholders
for a registration statement to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed six (6) months; provided, however, that the
Company shall not obtain such a deferral more than once in any 12-month period.
The Company shall be obligated to effect not more than two (2)
registrations pursuant to this Section 1.5 for which holders of Registrable
Securities are the Initiating Holders.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their demand by means of an underwriting, they shall so
advise the Company as part of their demand made pursuant to this Section 1.5,
and the Company shall include such information in the notice referred to in
Section 1.5(a). In such event, the right of any Holder to registration pursuant
to this Section 1.5 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.
The Company shall, together with all Holders proposing to distribute their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by the Company and
reasonably satisfactory to a majority of interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.5, if the underwriter
shall advise the Company in writing that marketing factors (including, without
limitation, an adverse effect on the per share offering price) require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities that would otherwise be registered
and underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated pro rata among such Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
4
<PAGE>
If any Holder disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The Registrable Securities so withdrawn shall also
be withdrawn from registration. If by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 1.5.
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account (or for
the account of other securityholders) in such registration if the underwriter so
agrees and if the number of Registrable Securities that would otherwise have
been included in such registration and underwriting will not thereby be limited.
1.6 COMPANY REGISTRATION.
(a) If, at any time or from time to time, the Company shall determine to
register any of its securities, either for its own account or the account of a
securityholder or holders exercising their respective demand registration
rights, other than a registration relating solely to employee benefit plans on
Form S-8 or similar forms which may be promulgated in the future or a
registration on Form S-4 or similar forms which may be promulgated in the future
relating solely to a Securities and Exchange Commission Rule 145 or similar
transaction the Company will (i) promptly give to each Holder written notice
thereof and (ii) include in such registration (and any related qualification
under Blue Sky laws or other compliance), and in any underwriting involved
therein, all Registrable Securities of such Holders as specified in a written
request or requests made within fifteen (15) days after receipt of such written
notice from the Company.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
indicate in the notice given pursuant to Section 1.6(a). In such event the right
of any Holder to registration pursuant to this Section 1.6 shall be conditioned
upon such Holder's agreeing to participate in such underwriting and to the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other Holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company or by other holders exercising any
demand registration rights. Notwithstanding any other provision of this Section
1.6, if the underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the underwriter may exclude some or
all Registrable Securities or other securities from such registration and
underwriting (hereinafter an "UNDERWRITER CUTBACK"); provided, however, that if
such underwriting relates to any registration statement other than a
registration statement being filed with respect to the first registration
statement filed by the Company covering an underwritten offering of any of its
securities to the general public ("INITIAL PUBLIC OFFERING") in which no
secondary shares are included, then (i) in no event shall the aggregate number
of shares of Registrable Securities included in such underwriting be reduced
below thirty (30%) of the total number of shares proposed to be included in such
underwriting. In the event of an Underwriter Cutback, the Company shall so
advise all Holders and the other holders distributing their securities through
such underwriting, and the number of Registrable Securities and other securities
that may be included in the
5
<PAGE>
registration and underwriting shall be allocated among all holders thereof
(other than those holders who are exercising their demand registration rights)
on the basis that the holders who are not Holders shall be cut back before any
cutback of Holders. If the limitation determined by the underwriter requires an
Underwriter Cutback, such Underwriter Cutback shall be in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
1.7 FORM S-3 REGISTRATION RIGHTS. After the Initial Public Offering, the
Company shall use its best efforts to qualify for registration on Form S-3, and
to that end the Company shall use its best efforts to comply with the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), within twelve (12) months following the effective date of the first
registration of any securities of the Company for an underwritten registered
public offering. After the Company has qualified for the use of Form S-3, and
subject to the provisions of Section 1.14, each Holder shall have the right to
request registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of such shares by each such Holder), subject only
to the following limitations:
(a) The Company shall not be obligated to cause a registration on Form S-3
to become effective prior to one hundred eighty (180) days following the
effective date of a Company initiated registration (other than a registration
effected solely to qualify an employee benefit plan or to effect a business
combination pursuant to Rule 145);
(b) The Company shall not be required to effect a registration pursuant to
this Section 1.7 unless the Holder or Holders requesting such a registration
propose to dispose of shares of Registrable Securities having an aggregate
disposition price (before deduction of underwriting discounts and expenses of
sale) of at least $500,000;
(c) The Company shall not be required to effect a registration pursuant to
this Section 1.7 if the Company shall furnish to the requesting 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 or its shareholders for the registration statement to
be filed at the date filing would be required, in which case the Company shall
have an additional period of not more than one hundred twenty (120) days within
which to file such registration statement; provided however, that the Company
shall not use this right more than once in any 12-month period;
(d) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding one hundred twenty
(120) days from the effective date thereof;
(e) The Company shall not be obligated to cause a registration on Form S-3
if in the prior six-month period the Company has caused a registration on Form
S-3 to become effective; and
(f) The Company shall be obligated to effect not more than two
registrations per year pursuant to this Section 1.7 for which holders of
Registrable Securities request such registration.
6
<PAGE>
The Company shall give notice to all Holders of the receipt of a request
for registration pursuant to this Section 1.7 and shall use its best efforts to
cause all Registrable Securities that such Holders have requested, within
fifteen (15) days after receipt of such written notice, be registered in
accordance with this Section 1.7 to be registered under the Securities Act.
Subject to the foregoing, the Company will use its best efforts to effect
promptly any registration pursuant to this Section 1.7. The provisions of
Section 1.5(b) shall apply to any registration effected pursuant to this Section
1.7
1.8 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.5, 1.6 and 1.7 (exclusive of Selling Expenses but inclusive of the
reasonable fees and expenses of one special counsel to the selling Holders)
shall be borne by the Company. Notwithstanding anything to the contrary herein,
the Company shall not be required to pay for any expenses of any registration
proceeding under Section 1.5 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to have been registered, unless such Holders agree to forfeit their
right to a demand registration pursuant to Section 1.5 (in which event such
right shall be forfeited by all Holders). In the absence of such an agreement
to forfeit, the Holders of Registrable Securities to have been registered shall
bear all such expenses pro rata on the basis of the Registrable Securities to
have been registered. Notwithstanding the foregoing, however, if at the time of
the 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, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said expenses
and shall retain their rights pursuant to Section 1.5.
1.9 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Keep such registration, qualification or compliance effective for a
period of one hundred twenty (120) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs;
(b) Prepare and file with the Commission 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;
(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;
7
<PAGE>
(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; and
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 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.
Notwithstanding any provision to the contrary in this Agreement, the
Company shall not be required in connection with any registration pursuant to
Sections 1.5, 1.6 or 1.7 to qualify shares in any state or jurisdiction which
requires the Company to qualify to do business or to file a general consent to
service of process.
1.10 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will promptly reimburse each such Holder, each of its
officers and directors and partners, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred (as and when incurred) in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers and
8
<PAGE>
directors and partners and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof) including any of
the foregoing incurred in settlement of any litigation commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any amendment or supplement thereto,
incident to any such registration, qualification or compliance or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification, or compliance, and will promptly reimburse the Company, such
Holders, such directors, officer's, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred (as and when
incurred) in connection with investigation, preparing or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
the Company by an instrument duty executed by such Holder and stated to be
specifically for use therein, provided, however, that the obligations of each
such Holder hereunder shall be limited to an amount equal to the proceeds to
each such Holder of Registrable Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 1.10 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense, and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 1 unless such failure resulted in actual
detriment to the Indemnifying Party. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party a release from all liability in respect of
such claim or litigation.
(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. 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
9
<PAGE>
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
(e) 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 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 1.
1.12 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Use its best efforts to make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act at
all times after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public;
(b) Use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Exchange Act at any time after it has become subject to such reporting
requirements,
(c) So long as a Shareholder owns any Restricted Securities, to furnish to
the Shareholder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public) and of
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent annual report of the
Company, and such other reports and documents of the Company as a Shareholder
may reasonably request in availing itself of any rule or regulation of the
Commission allowing a Shareholder to sell any such securities without
registration.
1.13 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted under Sections 1.5, 1.6 and 1.7 may be assigned or
otherwise conveyed to a transferee or assignee of Registrable Securities, who
shall be considered a "Holder," and the transferred shares shall be considered
"Registrable Securities," for purposes of this Section 1, provided that (i) said
transferee acquires (or, together with affiliates (as defined under the
Securities Act) ("AFFILIATES") of said transferee, after the acquisition then
beneficially owns) at least 250,000 shares of the Registrable Securities
(including shares of Series A Preferred and Series B Preferred prior to
conversion into Registrable Securities) and (ii) the Company is given written
notice by such Holder at the time of or within a reasonable time (but not more
than thirty (30) days) after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
10
<PAGE>
registration rights are being assigned, subject to said transferee's agreement
to be bound by and comply with the provisions of this Section 1.
1.14 TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
pursuant to this Section 1 shall terminate (i) upon the seventh anniversary of
the effective date of the first registration statement filed by the Company
covering the Initial Public Offering or (ii) if earlier, as to any individual
Holder, at such time after the Company's Initial Public Offering as all
Registrable Securities (including shares of Series A Preferred and Series B
Preferred prior to conversion into Registrable Securities) held by such Holder
can be sold within any three-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144 (including
Rule 144(k)) promulgated thereunder.
1.15 "MARKET STAND OFF" AGREEMENT. Each Holder hereby agrees that, during
the period of duration specified by the Company and an underwriter of common
stock or other securities of the Company, following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; PROVIDED, HOWEVER, that:
(a) such agreement shall not exceed 180 days for the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) such agreement shall not exceed 90 days for any subsequent
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(c) all executive officers and directors of the Company and all
other persons with registration rights under this Agreement enter into similar
agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Notwithstanding the
foregoing, the obligations described in this Section 1.15 shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a SEC Rule 145 transaction on Form S-14 or Form S-15 or similar forms which
may be promulgated in the future.
SECTION 2.
AFFIRMATIVE COVENANTS OF THE COMPANY AND SHAREHOLDERS
2.1 FINANCIAL INFORMATION. Subject to Section 2.3, the Company will
furnish the following reports to the Shareholders for so long as the
Shareholders are holders of any Series A Preferred, Series B Preferred or
Registrable Securities:
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(a) As soon as practicable after the end of each fiscal year, and in any
event within 90 days thereafter, audited consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and surplus and consolidated statements of
changes in financial position of the Company and its subsidiaries, if any, for
such year, prepared in accordance with generally accepted accounting principles
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of recognized national standing selected by the Company;
(b) Each month, an unaudited consolidated balance sheet of the Company and
its subsidiaries, if any, and consolidated statements of income and consolidated
statements of changes in financial condition of the Company and its subsidiaries
for such period, all in reasonable detail and signed, subject to changes
resulting from year-end audit adjustments, by the principal financial or
accounting officer of the Company;
(c) An annual operating budget for each coming year, delivered on or
before January 1 of each year; and
(d) Such other information relating to the financial condition, business,
prospects or corporate affairs of the Company as the investor may from time to
time request, provided, however, that the Company shall not be obligated to
provide information which it deems proprietary.
2.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights granted
pursuant to Section 2.1 may be assigned by the Shareholders (or by any permitted
transferee of any such rights) so long as (i) the Company is given notice of any
such assignment within a reasonable time after the date the same is effected,
(ii) the transferee shall have acquired (or, together with such transferee's
Affiliates, after the acquisition shall then beneficially own) at least 250,000
shares of Registrable Securities (including shares Series A Preferred and Series
B Preferred prior to conversion into Registrable Securities) in a private
transaction and (iii) the transferee is not engaged in a business that is
competitive with the Company.
2.3 INSPECTION RIGHTS.
(a) The Company will permit any Investor, so long as such Investor (or its
representative) owns at least 200,000 Shares, or such number of shares of Common
Stock issued upon conversion of 200,000 or more Shares, or any combination
thereof (as presently constituted and subject to subsequent adjustment for stock
splits, stock dividends, reverse stock splits, recapitalizations and the like)
(a "SIGNIFICANT HOLDER") (or a representative of any Significant Holder) to
visit and inspect any of the properties of the Company, including its books of
account and other records (and make copies thereof and take extracts therefrom),
and to discuss its affairs, finances and accounts with the Company's officers
and its independent public accountants, all at such reasonable times and as
often as any such person may reasonably request.
(b) The provisions of Section 2.2 and this Section 2.3 shall not be in
limitation of any rights which any Holder or Significant Holder may have with
respect to the books and records of the Company and its subsidiaries, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
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<PAGE>
2.4 ATTENDANCE AT BOARD MEETINGS. So long as Kaiser Aerospace &
Electronics ("Kaiser") owns at least an aggregate of 1,000,000 shares of Series
A Preferred, and so long as Kaiser does not have a representative on the Board
of Directors of the Company, Kaiser shall receive from the Company notices of
all meetings of the Board of Directors, including without limitation telephonic
meetings, and Kaiser shall receive, with such limitations provided herein, any
materials distributed for such meeting, and may send one representative to such
meetings, PROVIDED, HOWEVER, that the Company may require as a condition
precedent that such representative proposing to attend any meeting of the Board
of Directors shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so received during such
meetings and may require that such representative sign a confidentiality
agreement with the Company; and, PROVIDED, FURTHER, that the Company reserves
the right not to provide information and to exclude such representative from any
meeting or portion thereof if attendance at such meeting by such representative
or dissemination of any information at such meeting to such representative
would, in the good faith judgment of the Board of Directors, result in
disclosure of trade secrets to such representative, would compromise or
adversely affect the attorney-client privilege between the Company and its
counsel, or would, in the good faith judgment of the Board of Directors, result
in a conflict of interest situation. If such representative in his or her good
faith judgment believes that an item to be discussed by the Board of Directors
would result in any conflict of interest, such representative shall promptly
bring such conflict to the attention of the Chairman of the Board. In no event
shall any provision of this paragraph waive any obligation of confidentiality to
the Company owed by any such representative or Kaiser.
2.5 TERMINATION OF COVENANTS. The covenants set forth in Section 2.1,
Section 2.3 and Section 2.4 shall terminate and be of no further force or effect
after the closing date of the Initial Public Offering.
2.6 CONFIDENTIAL INFORMATION, ETC. Each Shareholder agrees that all
information received by it pursuant to this Section 2, and any other information
relating to the Company's technology, processes or formulas that is disclosed by
the Company to any Shareholder in writing and is marked "Confidential," shall be
considered confidential information. Each Shareholder further agrees that it
shall hold all such confidential information in confidence and shall not
disclose any such confidential information to any third party other than its
counsel or accountants nor shall such Shareholder use such confidential
information for any purpose other than evaluation of such Shareholder's
investment in the Company; provided, however, that the foregoing obligation to
hold in confidence and not to disclose confidential information shall not apply
to any such information that (a) was known to the public prior to disclosure by
the Company, (b) becomes known to the public through no fault of such
Shareholder, (c) is disclosed to such Shareholder on a non-confidential basis by
a third party having a legal right to make such disclosure or (d) is
independently developed by such Shareholder.
SECTION 3.
RIGHTS OF FIRST REFUSAL
3.1 RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES.
(a) The Company hereby grants to each Shareholder the right of first
refusal to purchase its Pro Rata Share (defined below) of all (or any part) of
New Securities (defined below) that the Company may from time to time propose to
sell and issue. Such Shareholder's "PRO RATA SHARE," for purposes
13
<PAGE>
of this Section 3, is the ratio of the number of shares of Common Stock
(assuming conversion of all shares of Series A Preferred and Series B Preferred)
then held by such Shareholder to the total number of shares of Common Stock then
outstanding (assuming conversion of all shares of Series A Preferred and Series
B Preferred). This right of first refusal shall be subject to the following
provisions:
(b) "NEW SECURITIES" shall mean any Common Stock or Preferred Stock of the
Company, whether now authorized or not, and rights, options, or warrants to
purchase said Common Stock or Preferred Stock, and securities of any type
whatsoever that are, or may become, convertible into or exchangeable for said
Common Stock or Preferred Stock; provided, however, that "NEW SECURITIES" does
not include (i) securities issuable upon conversion of or with respect to Series
A Preferred Stock, Series B Preferred Stock or any future series of preferred
stock; (ii) shares of the Company's Common Stock (or related options) issued to
officers, directors, employees of and/or consultants to the Company pursuant to
plans or agreements as approved by the Company's Board of Directors; (iii)
shares of the Company's Common Stock or Preferred Stock issued in connection
with any stock split, stock dividend, or recapitalization by the Company; (iv)
securities issued in connection with any equipment leasing, technology
licensing, corporate partnering, strategic alliance, acquisition, merger,
purchase of assets or similar transaction as approved by the Company's Board of
Directors; and (v) shares of the Company's Common Stock issued or issuable as a
result of any antidilution adjustment provided for in the Company's Articles of
Incorporation as in effect at the time of such issuance.
(c) In the event that the Company proposes to undertake an issuance of New
Securities, it shall give each Shareholder written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Shareholder shall have
twenty (20) business days from the date of receipt of any such notice to agree
to purchase some or all of his Pro Rata Share of such New Securities for the
price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased. Each Shareholder shall have a right of over-allotment such that if
any Shareholder fails to exercise his right hereunder to purchase his Pro Rata
Share of New Securities, the other Shareholders may purchase the non-purchasing
Shareholder's portion on a pro rata basis, within fifteen (15) business days
from the date such non-purchasing Shareholder fails to exercise his right
hereunder to purchase his Pro Rata Share of New Securities.
(d) In the event that the Shareholders fail to exercise in full the right
of first refusal within said twenty (20) plus fifteen (15) business day period,
the Company shall have one hundred twenty (120) days thereafter to sell (or
enter into an agreement pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within one hundred twenty (120) days from
the date of said agreement) the New Securities respecting which the
Shareholders' rights were not exercised, at a price and upon general terms no
more favorable to the purchasers thereof than specified in the Company's notice.
In the event the Company has not sold the New Securities within said one hundred
twenty (120) day period (or sold and issued New Securities in accordance with
the foregoing within one hundred twenty (120) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Shareholders in the manner
provided above.
(e) The right of first refusal granted under this Section 3. 1 shall not
apply to and shall expire upon the closing of the Company's Initial Public
Offering.
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<PAGE>
(f) The rights granted pursuant to this Section 3.1 may be assigned by the
Shareholders (or by any permitted transferee of any such rights) so long as (i)
the Company is given notice of any such assignment within a reasonable time
after the date the same is effected and (ii) the transferee shall have acquired
(or, together with such transferee's Affiliates, after the acquisition shall
then beneficially own) at least 250,000 shares of Registrable Securities
(including shares of Series A Preferred and Series B Preferred prior to
conversion into Registrable Securities) in a private transaction.
SECTION 4.
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California by California residents.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
4.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
4.4 NOTICES. ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to the Shareholders, to such Shareholders'
addresses set forth on the Schedule of Shareholders or to such other address as
such Shareholders shall have furnished to the Company in writing, (b) if to any
other holder of Registrable Securities, at such address as such holder shall
have furnished the Company in writing, or (c) if to the Company, to its address
set forth above and addressed to the attention of the President or at such other
addresses as the Company shall have furnished to the Shareholders. All notices
and other communications pursuant to the provisions of this Section 4.4 shall be
deemed delivered when mailed or sent by facsimile.
4.5 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
4.6 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
4.7 SEPARABILITY. Any invalidity, illegality, or limitation of the
enforceability with respect to any Shareholder of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Shareholder's domicile or otherwise, shall in no way affect
or impair the validity, legality, or enforceability of this Agreement with
respect to other Shareholder.
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<PAGE>
4.8 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may be
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of (i) the Company and (ii) the holders
of at least a majority of the then outstanding shares of Registrable Securities,
excluding from the determination of such a majority in clause (ii) (both in
determining the total number of such shares outstanding and the number of such
shares consenting or not consenting) all shares previously disposed of by such
holders pursuant to one or more registration statements under the Securities Act
or pursuant to Rule 144. Any amendment, termination or waiver effected in
accordance with this section shall be binding upon the Shareholders, each of
their transferees and the Company. Each Shareholder acknowledges that by the
operation of this Section the holders of a majority of the outstanding
Registrable Securities as aforesaid may have the right and power to diminish or
eliminate all rights of such Shareholders under this Agreement.
4.9 AMENDMENT OF PRIOR AGREEMENT. This Agreement constitutes an amendment
of the Prior Agreement and is cast in the form of an amendment and restatement
solely for the ease of the parties hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
The foregoing Restated Investors' Rights Agreement is hereby executed as of
the date first above written.
THE COMPANY:
VISTA MEDICAL TECHNOLOGIES, INC.
By:
--------------------------------------------
Title:
-------------------------------------------
Address: 5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
THE SHAREHOLDERS:
FOSTER CITY PARTNERS
By:
--------------------------------------------
Title:
-------------------------------------------
Address: 950 Tower Lane, Ste. 800
Foster City, CA 94404
ONE LIBERTY FUND III, L.P.
By:
--------------------------------------------
Title:
-------------------------------------------
Address: 1 Liberty Square, 2nd Floor
Boston, MA 02109
GILDE INTERNATIONAL, B.V.
By:
--------------------------------------------
Title:
-------------------------------------------
Address: 1 Liberty Square, 2nd Floor
Boston, MA 02109
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
B.U.N.P.
By:
--------------------------------------------
Title:
-------------------------------------------
Address: c/o Community Technology Fund
Boston University Ventures
147 Bay State Road
Boston, MA 02215
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
By:
--------------------------------------------
Title:
-------------------------------------------
Address: One Palmer Square, Ste. 515
Princeton, NJ 08542
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
By:
--------------------------------------------
Title:
-------------------------------------------
Address: St. Julian's Court
St. Peter Port
Guernsey, Channel Islands
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
D.P. III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.
By:
--------------------------------------------
Title:
-------------------------------------------
Address: One Palmer Square, Ste. 515
Princeton, NJ 08542
SBIC PARTNERS, L.P.
By: Forrest Binkley & Brown L.P.,
General Partner
By: Forrest Binkley & Brown Venture Co.,
General Partner
By:
--------------------------------------------
Title:
-------------------------------------------
By: SL-SBIC Partners, L.P.,
General Partner
By: FW-SBIC, Inc.,
General Partner
By:
--------------------------------------------
Title:
-------------------------------------------
Address: 201 Main Street, Suite 2302
Fort Worth, TX 76102
KOICHIRO HIRO
-------------------------------------------------
Address: c/o Oktas
134 Flanders Road
Westborough, MA 01581
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
DELAWARE CHARTER GUARANTEE &
TRUST TTEE FBO NANCY M. BRIEFS
-------------------------------------------------
By: Dick Blakely
----------------------------------------------
Title: Agent c/o Smith Barney
-------------------------------------------
Address: 3000 Sand Hill Road 3-190
Menlo Park, CA 94025
With copy to:
c/o Oktas
134 Flanders Road
Westborough, MA 01581
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
ALBERT STARR, M.D.
-------------------------------------------------
Address:
---------------------------------------
---------------------------------------
---------------------------------------
NATIONAL CITY BANK AS CUSTODIAN CARDIAC SURGICAL
FBO DR. WILLIAM F. NORTHRUP, IV
-------------------------------------------------
By:
----------------------------------------------
Title:
-------------------------------------------
Address:
---------------------------------------
---------------------------------------
---------------------------------------
GUARANTEE & TRUST CO., TRUSTEE FBO GIACOMO A.
DELARIA, M.D.
-------------------------------------------------
By:
----------------------------------------------
Title:
-------------------------------------------
Address:
---------------------------------------
---------------------------------------
---------------------------------------
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
MEREDITH L. SCOTT, M.D.
-------------------------------------------------
Address:
---------------------------------------
---------------------------------------
---------------------------------------
SELECTED MEDICAL ENTERPRISES
-------------------------------------------------
By:
----------------------------------------------
Title:
-------------------------------------------
Address:
---------------------------------------
---------------------------------------
---------------------------------------
PROMEDICA INTERNATIONAL, INC.
-------------------------------------------------
By:
----------------------------------------------
Title:
-------------------------------------------
Address:
---------------------------------------
---------------------------------------
---------------------------------------
<PAGE>
EXHIBIT A
SCHEDULE OF SHAREHOLDERS
SHAREHOLDERS
FOSTER CITY PARTNERS
950 Tower Lane, Ste. 800
Foster City, CA 94404
Attention: Dr. H.J. Smead
ONE LIBERTY FUND III
1 Liberty Square, 2nd Floor
Boston, MA 02109
Attention: Dan Holland
GILDE INTERNATIONAL B.V.
1 Liberty Square, 2nd Floor
Boston, MA 02109
Attention: Dan Holland
B. U. N. P.
c/o Community Technology Fund
Boston University Ventures
147 Bay State Road
Boston, MA 02215
Attention: John E. Bagalay, Jr.
DOMAIN PARTNERS III, L.P.
One Palmer Square. Ste. 515
Princeton. NJ 08542
Attention: James C. Blair. Ph.D.
BIOTECHNOLOGY INVESTMENTS LIMITED
St. Julian's Court
St. Peter Pon
Guernsey. Channel Islands
with copy to:
c/o Domain Associates
One Palmer Square, Ste. 515
Princeton, NJ 08542
Attention: James C. Blair. Ph.D.
DP III ASSOCIATES, L.P.
One Palmer Square, Ste. 515
Princeton, NJ 08542
<PAGE>
Attention: James C. Blair, Ph.D
SBIC PARTNERS. L.P.
201 Main Street, Suite 2302
Fort Worth, TX 76102
Attention: Nick Binkley
KOICHIRO HORI
c/o Oktas
134 Flanders Road
Westborough, MA 01581
DELAWARE CHARTER GUARANTEE &
TRUST TTEE FBO NANCY M. BRIEFS
3000 Sand Hill Road 3-190
Menlo Park, CA 94025
Attention: Dick Blakeley
with copy to:
c/o Oktas
134 Flanders Road
Westborough, MA 01581
Attention: Nancy Briefs
PIONEER CAPITAL CORPORATION
60 State Street
Boston, MA 02109
ACCEL III, L.P.
1 Palmer Square, Ste. 515
Princeton, NJ 08542
ACCEL JAPAN, L.P.
1 Palmer Square, Ste. 515
Princeton, NJ 08542
ACCEL '91
1 Palmer Square, Ste. 515
Princeton, NJ 08542
OAK INVESTMENT PARTNERS V, L.P.
1 Gorham Island
Westport, CT 06880
OAK V AFFILIATES FUND, L.P.
1 Gorham Island
<PAGE>
Westport, CT 06880
CRAIG ANDREWS
3543 Garrison Street
San Diego, CA 92106
JOHN DENNISTON
16338 Via del Alba
Rancho Santa Fe, CA 92067
FAYE HUNTER RUSSELL TRUST
U/A DTD 7-11-88
P. O. Box 1759
La Jolla, CA 92038
ALBERT STARR, M.D.
9155 S. W. Barnes Road, Suite 240
Portland, OR 97225
NATIONAL CITY BANK AS CUSTODIAN
CARDIAC SURGICAL FBO DR. WILLIAM F.
NORTHRUP, IV
651 Nicollet Mall, FAC-4
Minneapolis, MN 55402
GUARANTEE & TRUST CO., TRUSTEE
FBO GIACOMO A. DELARIA, M.D.
P. O. Box 9755
Rancho Santa Fe, CA 92067
MEREDITH L. SCOTT, M.D.
1615 Barcelona Way
Winter Park, FL 32789
SELECTED MEDICAL ENTERPRISES
1017 Mary Lan
Lomira, WI 53048
PROMEDICA INTERNATIONAL, INC.
620 Newport Center Drive, #575
Newport Beach, CA 92660
<PAGE>
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
THIS SCHEDULE OF EXCEPTIONS IS MADE AND GIVEN PURSUANT TO ARTICLE 2 OF THE
SERIES B PREFERRED STOCK PURCHASE AGREEMENT (THE "AGREEMENT"). THE SECTION
NUMBERS IN THIS SCHEDULE OF EXCEPTIONS CORRESPOND TO THE SECTION NUMBERS IN THE
AGREEMENT; HOWEVER, ANY INFORMATION DISCLOSED HEREIN UNDER ANY SECTION NUMBER
SHALL BE DEEMED TO BE DISCLOSED AND INCORPORATED INTO ANY OTHER SECTION NUMBER
UNDER THE AGREEMENT WHERE SUCH DISCLOSURE WOULD OTHERWISE BE APPROPRIATE. ANY
TERMS DEFINED IN THE AGREEMENT SHALL HAVE THE SAME MEANING WHEN USED IN THIS
SCHEDULE OF EXCEPTIONS AS WHEN USED IN THE AGREEMENT UNLESS THE CONTEXT
OTHERWISE REQUIRES.
NOTHING HEREIN CONSTITUTES AN ADMISSION OF ANY LIABILITY OR OBLIGATION ON
THE PART OF THE COMPANY NOR AN ADMISSION AGAINST THE COMPANY'S INTEREST. THE
INCLUSION OF ANY SCHEDULE HEREIN OR ANY EXHIBIT HERETO SHOULD NOT BE INTERPRETED
AS INDICATING THAT THE COMPANY HAS DETERMINED THAT SUCH AN AGREEMENT OR OTHER
MATTER IS NECESSARILY MATERIAL TO THE COMPANY. THE INVESTORS ACKNOWLEDGE THAT
CERTAIN INFORMATION CONTAINED IN THESE SCHEDULES MAY CONSTITUTE MATERIAL
CONFIDENTIAL INFORMATION RELATING TO THE COMPANY WHICH MAY NOT BE USED FOR ANY
PURPOSE OTHER THAN THAT CONTEMPLATED IN THE AGREEMENT.
SCHEDULE 2.2
CAPITALIZATION AND VOTING RIGHTS
Reference is made to a certain term sheet containing proposed
terms for Vista Cardio Thoracic Endosurgery, a division of the Company, to
acquire from ProMedica Distribution exclusive U.S. distribution rights for
Peters Laboratories Sutures Lines and Delacroix-Chevalier Surgical Instruments
in consideration for 46,000 shares of the Company's Series B Preferred Stock.
SCHEDULE 2.3
SUBSIDIARIES
The Company owns all outstanding shares of Oktas, Inc., a Massachusetts
corporation. Oktas, Inc. ("Oktas") is a holder of approximately thirty-five
percent (35%) of the partnership interest of Oktas, a General Partnership
("Oktas G.P."). The Company is the holder of the remaining partnership interest
in Oktas G.P.
Reference is made to a certain term sheet containing terms for a license
agreement between Gynecare, Inc. and the Company, pursuant to which the Company
would receive equity in Gynecare, Inc.
<PAGE>
SCHEDULE 2.6
GOVERNMENTAL CONSENTS
In connection with the sale of Series B Preferred Stock pursuant to the
Agreement, the Company is required to and will file a Form U-2 Notice with the
State of Massachusetts and intends to file a Form D Notice pursuant to the
Securites Act of 1933.
SCHEDULE 2.9
PATENTS AND TRADEMARKS
The Company owns the following United States patents:
Patent No. 5,536,234 entitled "Optical Surgical Device" (granted July 16,
1996);
Patent No. 5,349,941 entitled "Cleanable Endoscope" (granted September 27,
1994); and
Patent No. 5,317,485 entitled "Connector And Method For Coupling An End Of
A Light-Transmitting Conduit" (granted May 31, 1994).
The Company or Oktas has filed the following patent applications with the
U.S. Patent and Trademark Office:
AST-001C2 entitled "Medical Video Endoscope System," Ser. No. 08/227,675
(filed April 14, 1994);
AST-001PC2 entitled "Medical Video Endoscope System," Ser. No.
PCT/US94/06673 (filed June 14, 1994);
AST-001C3 entitled "Medical Video Endoscope System," Ser. No. 08/324,006
(filed October 14, 1994) (Notice of Abandonment issued February 2, 1996);
HORI-101AX entitled "Electronic Endoscope," Ser. No. 08/067,140 (filed May
25, 1993) (Notice of Abandonment issued January 22, 1996);
HORI-101AXCON entitled "Electronic Endoscope," Ser. No. 08/286,543 (filed
December 28, 1995);
HORI-101DX entitled "Endoscope Having Parasitic Light Elements," Ser. No.
08/286,543 (filed August 5, 1994);
HORI-101XX entitled "Electronic Endoscope," Ser. No. 07/967,996 (filed
October 28, 1992);
HORI-101FX entitled "Electronic Endoscope," Ser. No. 08/400,503 (filed
March 7, 1995);
OKTA-1 entitled "Electronic Endoscope With Zoom Lens System," Ser. No.
08/319,886 (filed October 7, 1994);
OKTA-1 PCT entitled "Electronic Endoscope With Zoom Lens System," Ser. No.
PCT/US95/13352 (filed October 6, 1995, Notice of Allowance granted June 21,
1996);
OKTA-2 entitled "Asymmetric Stereo-Optic Endoscope," Ser. No. 08/475,364
(filed June 7, 1995);
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<PAGE>
OKTA-3 entitled "A Device For Carrying Two Units In End To End Disposition
And For Moving One Of The Units Alongside The Other Of The Units," Ser. No.
08/628,448 (filed April 5, 1996);
OKTA-5 entitled "Fog-Free Endoscope," Ser. No. 08/546,271 (filed October
20, 1995); and
OKTA-6 entitled "Electronic Endoscope With Position Display," Ser. No.
08/545,927 (filed October 20, 1995).
The Company is preparing the following patent applications:
OKTA-4 entitled "A Device For Carrying Two Units In End To End Disposition
And For Moving One Of The Units Alongside The Other Of the Units"; and
OKTA-7 entitled "An Endoscope Apparatus (Irrigation Means)."
The Company or Oktas has filed the following patent applications outside of
the United States:
AST-001PC2 entitled "Medical Video Endoscope System," Ser. No. 94919483
(filed June 14, 1994 in Europe); and
AST-PC2 entitled "Medical Video Endoscope System," Ser. No. 502165/95
(filed June 14, 1994 in Japan).
The Company was granted the following foreign filing license:
Entitled "Optical Surgical Device," which is a continuation of Patent
5,536,234 entitled "Optical Female Urethroscope."
The Company owns the following trademarks, which were acquired pursuant to
the AST Agreement (as defined herein):
3D Scope-Registered Trademark-
Stereolaparoscope-TM-
American Surgical Technology Corporation-TM-
The Company licenses the trademark Aspiroscope-TM- pursuant to the Newman
License Agreement (as defined below). The Aspiroscope-TM- trademark is owned by
Newman Medical, Inc.
Reference is made to a certain Asset Purchase Agreement between the Company
and AST dated September 15, 1995 (the "AST Agreement").
Reference is made to a certain License and Development Agreement dated as
of December 18, 1991 among Harry R. McKinley, McKinley Optics, Inc. and AST, as
amended on June 28, 1994, which was assigned to the Company pursuant to the AST
Agreement.
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<PAGE>
Reference is made to a certain Agreement to Amend License and Development
Agreement dated September 15, 1995 between Harry R. McKinley and the Company.
Reference is made to a certain International Distribution Agreement dated
as of September 20, 1994 between AST and AMCO, Inc., which was assigned to the
Company pursuant to the AST Agreement.
Reference is made to a certain Non-Competition, Non-Disclosure and Patent
and Inventions Assignment Agreement dated as of December 18, 1991 among Harry R.
McKinley, McKinley Optics, Inc. and AST, which was assigned to the Company
pursuant to the AST Agreement.
Reference is made to a certain Non-Exclusive License Agreement between the
Company and Fujinon, Inc. ("Fuji") dated June 25, 1996 (the "Fujinon
Agreement"), pursuant to which Fuji granted the Company certain manufacturing
and distribution rights to products which contain patented Fuji technology in
the United States.
Reference is made to a certain License Agreement between Allen Newman and
the Company dated September 2, 1994 (the "Newman License Agreement"), pursuant
to which Mr. Newman granted the Company an exclusive license to use and
sublicense rights to certain technology. The Company is currently in
discussions with a potential licensee to exclusively license certain rights
under the Newman license agreement.
Reference is made to a certain License Agreement between the Company and
Kaiser Aerospace and Electronics Corporation ("Kaiser"), dated July ___, 1995
(the "Kaiser Agreement") pursuant to which Kaiser granted the Company an
exclusive, perpetual, worldwide license for the optical collimating apparatus
(cholesteric optics for use in head mounted displays) in all applications in or
relating to medicine.
The Company is currently in negotiations with a number of potential
licensors and licensees relating to the granting of license rights to its or the
other party's technologies.
Reference is made to a certain Memorandum of Understanding (Revised
January 1996) between Pilling Weck and the Company providing for continuing
cooperation between the parties and pursuant to which the Company maintains an
ongoing business relationship with Pilling Weck.
Reference is made to a certain Technology Alliance (as defined below).
See Schedule 2.11(b).
SCHEDULE 2.11
AGREEMENTS; ACTION
(a) Reference is made to the Notes. See Schedule 2.12 below.
Reference is made to the Newman License Agreement. See Schedules 2.9
and 2.12.
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<PAGE>
Reference is made to the Kaiser Agreement. See Schedule 2.9 above.
In connection with the purchase of an aggregate of 622,500 shares of
Common Stock of the Company pursuant to the exercise of stock options, the
Company holds Promissory Notes (the "Promissory Notes") in the aggregate amount
of $93,375 to be paid by certain officers and consultants of the Company.
The Company has entered into a form of indemnification agreement with
each of its current directors.
(b) Reference is made to Schedules 2.9 and 2.11(a) above.
Reference is made to the Notes. See Schedule 2.12 below.
Reference is made to the Oktas Lease. See Schedule 2.16 below.
Reference is made to an informal OEM arrangement with Linvatec,
pursuant to which Linvatec purchases products from the Company.
Reference is made to certain Standard Sublease dated January 23, 1996
between Quintiles Pacific, Inc. and the Company.
Reference is made to an informal arrangement pursuant to which Pilling
Weck acts as an exclusive distributor of certain of the Company's products in
the United States and certain international markets.
Reference is made to a certain Memorandum of Understanding (Revised
January 1996) between Pilling Weck and the Company providing for continuing
cooperation between the parties.
Reference is made to an informal arrangement with Dr. Hiroshi Moriyama
pursuant to which the Company may distribute with its products certain
specifically designed hand instruments developed by Dr. Moriyama.
Reference is made to a certain Consulting Agreement between Harry R.
McKinley and the Company dated September 15, 1995.
Reference is made to a form of Professional Services agreement entered
into with Steve Sullivan for $80,000 over a nine-month period.
Reference is made to a form of Consulting Agreement entered into with
the following individuals or entities:
4.9.1 A & G Medical, European consultant, currently active, at
$10,000 per month. Hans Steinmann is a third party beneficiary to this
Consulting Agreement.
-8-
<PAGE>
4.9.2 David Matsuura, product design services, currently active at
$4,950 per month on a month to month basis.
Reference is made to a form of Clinical Advisory Board and Consulting
Agreement entered into with Dr. Benetti at $5,000 per month.
Reference is made to certain Purchase Orders, for an aggregate amount
of approximately $318,160 placed with the following entities, copies of which
were provided to Investors' counsel:
1. Explorent Surgical Instruments, GMBH;
2. W.L. Gore & Associates;
3. Precision Interconnect; and
4. Arthur Woodsbury.
Reference is made to an informal retainer agreement with ProMedica
International for $3,000 per month.
Reference is made to a certain partnership agreement between the
Company and Oktas, Inc. dated July 26, 1993 (the "Partnership Agreement".
Reference is made to a certain Standby Letter of Credit ("Standby
Letter of Credit") in the amount of $150,000, cash collateralized at $165,000,
which permits the Company to buy certain components directly from Matsushita
Electric Industrial Co., Ltd. ("Matsushita"), a Japanese corporation. This
Standby Letter of Credit will expire in August. However, the Company intends to
renew the Standby Letter of Credit through August, 1997.
Reference is made to an informal arrangement between the Company and
Matsushita pursuant to which Matsushita supplies the Company with certain
products.
Reference is made to a certain proposed development agreement between
Asahi Optical Co. Ltd. and the Company.
Reference is made to a certain term sheet containing proposed terms
for Vista Cardio Thoracic Endosurgery, a division of the Company, to acquire
from ProMedica Distribution exclusive U.S. distribution rights for Peters
Laboratories Sutures Lines and Delacroix-Chevalier Surgical Instruments in
consideration for 46,000 shares of the Company's Series B Preferred Stock.
Reference is made to a certain Memorandum of Understanding regarding
Technology Alliance between the Company, Cogent Light and Henke Sass Wolf dated
May 3, 1995 (the "Technology Alliance").
Reference is made to a certain Technology Strategic Alliance with
Kaiser Electro-Optics.
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<PAGE>
(c) Reference is made to Schedules 2.9 and 2.11(b) above and Schedule 2.12
below.
SCHEDULE 2.12
RELATED-PARTY TRANSACTIONS
The Company is indebted to certain venture capital funds affiliated with
directors pursuant to certain Convertible Demand Promissory Notes executed in
May and June of 1996 (the "Notes"). All accrued interest and outstanding
principal due under the Notes will be converted into shares of Series B
Preferred Stock in connection with the Closing, except interest and principal
owing to Kaiser Aerospace and Electronics which will be paid in full from the
proceeds of the offering.
Venture capital funds affiliated with certain directors participated in the
Company's prior Series A-1 financing and will participate in the Series B
Preferred Stock financing. Such directors may engage in the development and
financing of other companies and/or research projects which may be developing,
or may in the future develop, products which may compete directly, or
indirectly, with the products intended to be developed by the Company.
Pursuant to the License Agreement with Allen Newman, Mr. Newman currently
is indebted to the Company in the amount of $37,500, as an advance payment
against royalties due under the License Agreement.
Reference is made to the Promissory Notes. See 2.11(a).
SCHEDULE 2.16
TITLE TO PROPERTY AND ASSETS
Reference is made to a certain Lease of 134 Flanders Road, Westborough,
Massachusetts, dated April 14, 1994, as amended by a certain First Amendment to
Lease dated March 29, 1996 (the "Oktas Lease"). The Oktas Lease of facilities
used by the Company is between Oktas G.P. and Robert F. Tambone, as Trustee of
MAT Realty Trust, u/d/t dated June 4, 1986.
SCHEDULE 2.17
FINANCIAL STATEMENTS
Reference is made to the Notes. See Schedule 2.12.
Reference is made to the Standby Letter of Credit. See Schedule 2.11(b).
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<PAGE>
See Partnership Agreement regarding credit facility between the Company and
Oktas G.P.
SCHEDULE 2.18
CHANGES
(a) Reference is made to the Notes. See Schedule 2.12 above.
(f) Reference is made to the Fujinon Agreement. See Schedule 2.9 above.
(i) Reference is made to the Promissory Notes. See Schedule 2.11 above.
(k) On May 21, 1996, the Company granted to certain employees options to
purchase shares of Common Stock, in an aggregate amount of 898,000 shares,
pursuant to its 1995 Stock Option Plan.
SCHEDULE 2.19
EMPLOYEE BENEFIT PLANS
The Company has standard fringe benefit plans in the ordinary course of
business, including, but not limited to, medical plans and vacation policies.
The Company has a 401(k) Plan. The Company is not currently matching
employee contributions to its 401(k) Plan.
SCHEDULE 2.23
MINUTE BOOKS
The Company provided special counsel to the Investors with (i) minutes of
all meetings of the Board of Directors subsequent to the issuance and sale by
the Company of its Series A-1 Preferred Stock and (ii) draft minutes of the June
20, 1996 Board of Directors meeting.
SCHEDULE 2.24
DISCLOSURE
This Schedule of Exceptions supplements the Company's businnes plan, which
was previously distributed to certain of the Investors.
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<PAGE>
SCHEDULE 2.26
MANUFACTURING AND MARKETING RIGHTS
Reference is made to Schedules 2.9 and 2.11 above.
Reference is made to a certain agreement between Kaiser Electro-Optics,
Inc. and the Company dated July 21, 1995, pursuant to which Kaiser
Electro-Optics, Inc. has certain rights to manufacture optical sub-assembly and
head mounted electronics for the Company.
Reference is made to a certain Distributorship Agreement between the
Company and Oktas G.P. dated July 26, 1993.
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<PAGE>
EXHIBIT 10.5
VISTA MEDICAL TECHNOLOGIES, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
---------------------
November 27, 1996
<PAGE>
TABLE OF CONTENTS
Page
1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Series C Preferred Stock. . . . . . . . . . . 1
1.2 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . 1
2.1 Organization, Good Standing and Qualification. . . . . . . . . . . 2
2.2 Capitalization and Voting Rights . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Valid Issuance of Preferred and Common Stock . . . . . . . . . . . 3
2.6 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 Proprietary Information Agreements . . . . . . . . . . . . . . . . 4
2.9 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Compliance with Other Instruments. . . . . . . . . . . . . . . . . 5
2.11 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . 5
2.12 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . 6
2.13 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . 7
2.15 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 7
2.16 Title to Property and Assets . . . . . . . . . . . . . . . . . . . 7
2.17 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . 9
2.20 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.21 Real Property Holding Company. . . . . . . . . . . . . . . . . . . 9
2.22 Tax Returns, Payments and Elections. . . . . . . . . . . . . . . . 9
2.23 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.25 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . 10
2.26 Manufacturing and Marketing Rights . . . . . . . . . . . . . . . . 11
2.27 Finder or Broker . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.28 Customer Complaints. . . . . . . . . . . . . . . . . . . . . . . . 11
2.29 Warranties; Product Liability. . . . . . . . . . . . . . . . . . . 11
2.30 Relations with Suppliers . . . . . . . . . . . . . . . . . . . . . 11
3. Representations and Warranties of the Investor. . . . . . . . . . . . . 12
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . . . 12
3.3 Disclosure of Information. . . . . . . . . . . . . . . . . . . . . 12
i
<PAGE>
3.4 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . 12
3.6 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . 12
3.7 Further Limitations on Disposition . . . . . . . . . . . . . . . . 13
3.8 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. Conditions of Investor's Obligations at Closing . . . . . . . . . . . . 13
4.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 13
4.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . 14
4.4 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5 Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . 14
4.6 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . 14
4.7 Amended and Restated Investors' Rights Agreement . . . . . . . . . 14
4.8 Supplemental Rights Agreement. . . . . . . . . . . . . . . . . . . 14
4.9 Sales Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Conditions of the Company's Obligations at Closing. . . . . . . . . . . 14
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . 14
5.2 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . 15
5.3 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 Amended and Restated Investors' Rights Agreement . . . . . . . . . 15
5.5 Supplemental Rights Agreement. . . . . . . . . . . . . . . . . . . 15
5.6 Sales Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.7 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.8 Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.10 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 16
6.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exhibit A - Amended and Restated Certificate of Incorporation
ii.
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT is made as of the 27th day
of November, 1996, by and between Vista Medical Technologies, Inc., a Delaware
corporation (the "Company"), and Medtronic Asset Management, Inc., a Minnesota
corporation (the "Investor") which is a wholly-owned subsidiary of Medtronic,
Inc. ("Medtronic").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES C PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of Delaware on or before the Closing (as defined below), the Amended and
Restated Certificate of Incorporation in substantially the form attached hereto
as EXHIBIT A (the "Restated Certificate").
(b) Subject to the terms and conditions of this Agreement, the
Investor agrees to purchase at the Closing pursuant to Section 1.2, and the
Company agrees to sell and issue to the Investor at the Closing pursuant to
Section 1.2, 2,000,000 shares of the Company's Series C Preferred Stock for the
purchase price of $5.00 per share.
1.2 THE CLOSING.
(a) The purchase and sale of the Series C Preferred Stock shall
take place at the offices of Brobeck, Phleger & Harrison LLP, 550 West "C"
Street, Suite 1200, San Diego, California or by telecopy exchange of signature
pages (with originals to follow via overnight delivery) at 11:00 a.m., on
November 27, 1996, or at such other time and place as the Company and the
Investor hereto mutually agree upon orally or in writing (which time and place
are designated as the "Closing").
(b) At the Closing, the Company shall deliver to the Investor a
certificate representing the shares of Series C Preferred Stock that the
Investor is purchasing against payment of the purchase price therefor by check
or wire transfer.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that, except as set forth on a Schedule
of Exceptions furnished to the Investor, which exceptions shall be deemed to be
representations and warranties as if made hereunder:
<PAGE>
2.1 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 Delaware and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 18,000,000 shares of Preferred Stock (the
"Preferred Stock"), 8,300,000 shares of which have been designated Series A-1
Preferred Stock, and 8,094,340 of which are issued and outstanding, 500,000
shares of which have been designated Series A-3, and 154,581 of which are issued
and outstanding, 3,100,000 shares of which have been designated Series B
Preferred Stock, and 1,325,331 of which are issued and outstanding, and
2,000,000 shares of which have been designated Series C Preferred Stock, up to
all of which will be sold pursuant to this Agreement. The rights, privileges
and preferences of the Series C Preferred Stock will be as stated in the
Restated Certificate.
(ii) COMMON STOCK. 25,000,000 shares of common stock ("Common
Stock"), of which 712,250 shares are issued and outstanding.
(iii) Except for (A) the conversion privileges of the
Series A-1 Preferred Stock, Series A-3 Preferred Stock and Series B Preferred
Stock, (B) the conversion privileges of the Series C Preferred Stock to be
issued under this Agreement, (C) the rights provided in Section 3.1 of that
certain Amended and Restated Investors' Rights Agreement dated the date hereof
between the Company and the parties listed on Schedule A thereto (the "Rights
Agreement"), (D) the rights provided in that certain Supplemental Rights
Agreement dated the date hereof between the Company and Medtronic (the
"Supplemental Rights Agreement") and (E) the 2,687,481 shares of Common Stock
reserved for issuance pursuant to the Company's 1995 Stock Option Plan (the
"Plan"), of which options to purchase 2,202,701 shares have been granted under
the Plan, there are not outstanding any options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from the Company of any shares of its capital stock. The Company is not a party
or subject to any agreement or understanding, and, to the Company's knowledge,
there is no agreement or understanding between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security or by a director of the Company.
2.3 SUBSIDIARIES. Except as set forth in the Schedule of Exceptions,
the Company does not presently own or control, directly or indirectly, any
interest in any other corporation, association or other business entity, and the
Company is not an equity owner in any joint venture, partnership or similar
arrangement.
2.
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Each of the Company's subsidiaries listed in the Schedule of
Exceptions (a "Subsidiary" or the "Subsidiaries") is duly organized and existing
under the laws of its jurisdiction of organization and is in good standing under
such laws. Each of the Company's Subsidiaries is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so to
qualify would have a material adverse effect on the Company's business or
properties.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its Subsidiaries, officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the Rights Agreement,
the Supplemental Rights Agreement and that certain Sales Agreement dated the
date hereof between the Company and Medtronic (the "Sales Agreement") and any
other agreement to which the Company is a party, the execution and delivery of
which is contemplated hereby (the "Ancillary Agreements"), the performance of
all obligations of the Company hereunder and thereunder and the authorization,
issuance (or reservation for issuance) and delivery of the Series C Preferred
Stock being sold hereunder and the Common Stock issuable upon conversion of the
Series C Preferred Stock has been taken or will be taken prior to the Closing,
and this Agreement, the Rights Agreement, the Supplemental Rights Agreement, the
Sales Agreement and any Ancillary Agreements constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Rights Agreement may be limited by applicable federal or state securities
laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
(a) The Series C Preferred Stock which is being purchased by the
Investor 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, based in part upon the representations of the
Investor in this Agreement, will be issued in compliance with all applicable
federal and state securities laws. The Common Stock issuable upon conversion of
the Series C Preferred Stock purchased under this Agreement has been duly and
validly reserved for issuance and, upon issuance in accordance with the terms of
the Restated Certificate, shall be duly and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable securities laws, as
presently in effect, of the United States and each of the states whose
securities laws govern the issuance of any of the Series C Preferred Stock
hereunder.
(b) The outstanding shares of Series A-1 Preferred Stock, Series
A-3 Preferred Stock, Series B Preferred Stock and Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable, and were issued in
compliance with all applicable federal and state securities laws.
3.
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2.6 GOVERNMENTAL CONSENTS. To the best of the Company's knowledge
and belief, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state,
local or provincial governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for the filing pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder, which filing will be effected within fifteen (15) days of the sale
of the Series C Preferred Stock hereunder.
2.7 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company or any
Subsidiary which questions the validity of this Agreement, the Rights Agreement,
the Supplemental Rights Agreement, the Sales Agreement or any Ancillary
Agreements, or the right of the Company to enter into any of them, or to
consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse changes
in the assets, financial condition, or business of the Company or any
Subsidiary. The foregoing includes, without limitation, actions pending or
threatened (or any basis therefor known to the Company or any Subsidiary)
involving the prior employment of any of the Company's or any Subsidiaries'
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
Neither the Company nor any Subsidiary is a party or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company or any Subsidiary currently pending or which the
Company or any Subsidiary intends to initiate.
2.8 PROPRIETARY INFORMATION AGREEMENTS. Each employee, officer and
consultant of the Company and any Subsidiary has executed a Proprietary
Information Agreement in the Company's standard form. The Company, after
reasonable investigation, is not aware that any of its or any Subsidiaries'
employees, officers or consultants are in violation thereof, and the Company
will use its best efforts to prevent any such violation.
2.9 PATENTS AND TRADEMARKS. The Company and each Subsidiary has
sufficient title and ownership of all patents, trademarks, service marks, trade
names, copyrights, trade secrets, information, proprietary rights and processes
necessary for its respective business as now conducted and as proposed to be
conducted without any conflict with or infringement of the rights of others.
The Schedule of Exceptions contains a complete list of patents and pending
patent applications of the Company or any Subsidiary. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
the Company or any Subsidiary bound by or a party to any options, licenses, or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity. Neither the Company nor any
Subsidiary is aware that any of its employees or consultants are obligated under
any
4.
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contract (including licenses, covenants or commitments of any nature) or other
agreement or subject to any judgment, decree or order of any court or
administrative agreement that would interfere with the use of his, her, or its
best efforts to promote the best interests of the Company or such Subsidiary or
that would conflict with the Company's or such Subsidiary's business as it is
proposed to be conducted. Neither the Company nor any Subsidiary has received
any communications alleging that the Company or such Subsidiary has violated or,
by conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. Neither the execution nor
delivery of this Agreement, the Rights Agreement, the Supplemental Rights
Agreement, the Sales Agreement or any Ancillary Agreements, nor the carrying on
of the Company's or any Subsidiary's business by the employees of the Company
and any Subsidiary, nor the conduct of the Company's or any Subsidiary's
business as proposed, will, to the best of the Company's or such Subsidiary's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees or consultants is now obligated.
Neither the Company nor any Subsidiary believes that it is or will be necessary
to utilize any inventions of any of its employees or consultants (or persons it
currently intends to hire) made prior to their employment by the Company or such
Subsidiary.
2.10 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor any
Subsidiary is in violation or default of any provisions of its Restated
Certificate or Bylaws or other governing instruments or of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound or, to its knowledge, of any provision of federal or state statute,
rule or regulation applicable to the Company or such Subsidiary. The execution,
delivery and performance of this Agreement, the Rights Agreement, the
Supplemental Rights Agreement, the Sales Agreement or any Ancillary Agreements
and the consummation of the transactions contemplated hereby and thereby will
not result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event which results in the creation of any lien, charge or encumbrance upon any
assets of the Company or any Subsidiary or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization or approval applicable to the Company or any Subsidiary, its
business or operations or any of its assets or properties.
2.11 AGREEMENTS; ACTION.
(a) There are no agreements, understandings or proposed transactions
between the Company or any Subsidiary and any of its officers, directors,
affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
or any Subsidiary is a party or by which it is bound which may involve
(i) obligations
5.
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(contingent or otherwise) of, or payments from the Company or such Subsidiary in
excess of, $25,000, or (ii) the license of any patent, copyright, trade secret,
or other proprietary right to or from the Company or such Subsidiary, from
(iii) provisions restricting or affecting the development, manufacture or
distribution of the Company's or such Subsidiary's products or services or
(iv) indemnification by the Company or such Subsidiary with respect to
infringements of proprietary rights.
(c) Neither the Company nor any Subsidiary has (other than to the
Company or another Subsidiary) (i) declared or paid any dividends, or authorized
or made any distribution upon or with respect to any class or series of its
capital stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities individually in excess of $25,000 or, in the case of indebtedness
and/or liabilities individually less than $25,000, in excess of $100,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
2.12 RELATED-PARTY TRANSACTIONS. Except as set forth on the Schedule
of Exceptions, no stockholder, employee, officer, or director of the Company or
any Subsidiary or member of his or her immediate family, is indebted to the
Company or any Subsidiary, nor is the Company or any Subsidiary indebted (or
committed to make loans or extend or guarantee credit) to any of them. To the
best of the Company's and its Subsidiaries' knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship,
or any firm or corporation that competes with the Company, except that
employees, officers, or directors of the Company and any Subsidiary and members
of their immediate families may own less than one percent (1%) of the
outstanding stock in publicly traded companies that may compete with the
Company. No member of the immediate family of any officer or director of the
Company or any Subsidiary is directly or indirectly interested in any material
contract with the Company.
2.13 PERMITS. The Company and its Subsidiaries have all franchises,
permits, licenses and any similar authority necessary for the conduct of the
Company's business as now being conducted by them, the lack of which could
materially and adversely affect the business, properties, prospects or financial
condition of the Company and the Company and each Subsidiary believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted. The Company and its Subsidiaries
are not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
6.
<PAGE>
2.14 ENVIRONMENTAL AND SAFETY LAWS. Neither the Company nor any
Subsidiary is in violation of any applicable statute, law, or regulation
relating to the environment or occupational health and safety; and to the best
of the Company's and its Subsidiaries' knowledge, no material expenditures are
or will be required in order to comply with any such existing statute, law or
regulation.
2.15 REGISTRATION RIGHTS. Except as provided in the Rights Agreement,
the Company has not granted or agreed to grant any registration rights,
including piggyback rights, to any person or entity.
2.16 TITLE TO PROPERTY AND ASSETS. The Company and each Subsidiary
owns its property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's or such
Subsidiary's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company and each Subsidiary is in compliance
with such leases and, to the best of its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
2.17 FINANCIAL STATEMENTS. The Company has made available to the
Investor its audited consolidated financial statements (balance sheet and profit
and loss statement, statement of stockholders' equity and statement of changes
in financial position) for the fiscal year ended December 31, 1995 and its
unaudited consolidated financial statements (balance sheet and profit and loss
statement including notes) for the ten-month period ended October 26, 1996 (the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and accurately set out and describe the consolidated
financial condition and consolidated operating results of the Company and its
Subsidiaries as of the dates, and for the periods, indicated therein, subject,
with respect to its unaudited financial statements, to normal year-end audit
adjustments. The Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") except, with respect to its
unaudited financial statements, for footnotes required by GAAP. Except as set
forth in the Financial Statements, neither the Company nor any Subsidiary has
any liabilities, contingent or otherwise, other than (i) liabilities incurred in
the ordinary course of business subsequent to October 26, 1996 which in the
aggregate do not exceed $25,000 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the consolidated financial condition or operating results of the
Company and its Subsidiaries. Except as disclosed in the Financial Statements,
neither the Company nor any Subsidiary is a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation (other than indebtedness
of another Subsidiary or the Company). The Company and each Subsidiary
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
7.
<PAGE>
2.18 CHANGES. Since December 31, 1995 (or as expressly set forth in
the October 26, 1996 unaudited financial statements, and except for transactions
between the Company and a Subsidiary or between Subsidiaries of the Company)
there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company or any Subsidiary from that reflected in the
Financial Statements, except changes in the ordinary course of business which
have not been, in the aggregate, materially adverse.
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, prospects or business of the Company or any Subsidiary (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company or any Subsidiary of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company or any Subsidiary, except in the
ordinary course of business and which is not material to the assets, properties,
financial condition, prospects or business of the Company or any Subsidiary (as
such business is presently conducted and as it is proposed to be conducted);
(e) any change or amendment to a material contract or arrangement by
which the Company or any Subsidiary or any of its assets or properties is bound
or subject;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(g) any resignation or termination of employment of any key officer
or consultant of the Company or any Subsidiary; and neither the Company nor any
Subsidiary, knows of the impending resignation or termination of employment of
any such officer or consultant;
(h) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company or any Subsidiary, with respect to any of its
material properties or assets, except liens for taxes not yet due or payable;
(i) any loans or guarantees made by the Company or any Subsidiary to
or for the benefit of its employees, officers, directors or consultants, or any
members of their immediate families, other than travel advances and other
advances made in the ordinary course of its business;
8.
<PAGE>
(j) any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the Company;
(k) any material change in any compensation arrangement or agreement
with any employee or consultant;
(l) to the best of the Company's and its Subsidiaries' knowledge, any
other event or condition of any character which might materially and adversely
affect the assets, properties, financial condition, prospects or business of the
Company or any Subsidiary (as such business is presently conducted and as it is
proposed to be conducted);
(m) any agreement or commitment by the Company or any Subsidiary to
do any of the things described in this Section 2.18; or
(n) receipt of notice that there has been a material order
cancellation by any major customer of the Company or any Subsidiary.
2.19 EMPLOYEE BENEFIT PLANS. Neither the Company nor any Subsidiary
has any Employee Benefit Plan as defined in the Employee Retirement Income
Security Act of 1974 (referred to herein as a "Benefit Plan"), except for those
Benefit Plans of the Company or any Subsidiary listed in the Schedule of
Exceptions (a "Company Benefit Plan"). To the Company's knowledge, no person
has engaged in any act or omission which could reasonably be expected to subject
the Company or any Subsidiary to any material tax, penalty or liability. Full
payment or adequate provisions for reserves have been made of all amounts
required under applicable law with respect to all Company Benefit Plans. The
IRS has issued favorable determination letters, or applications for favorable
determination letters have been timely submitted and no unfavorable
determination letters have been received, with respect to all Company Benefit
Plans that are intended to be qualified under Section 401(a) of the Code.
2.20 INSURANCE. The Company maintains in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount to
allow it to replace any of its properties that might be damaged or destroyed.
The Company has in full force and effect products liability and errors and
omissions insurance in amounts customary for similarly situated companies.
2.21 REAL PROPERTY HOLDING COMPANY. Neither the Company nor any
Subsidiary is a real property holding company within the meaning of Internal
Revenue Code Section 897.
2.22 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company and its
Subsidiaries have filed any and all tax returns and reports as required by law.
These returns and reports, if any, are true and correct in all material
respects. The Company and its Subsidiaries have paid all taxes and other
assessments due, except those contested
9.
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by it in good faith that are listed in the Schedule of Exceptions. The
provision for taxes of the Company as shown in the Financial Statements is
adequate for taxes due or accrued as of the date thereof. Neither the Company
nor any Subsidiary has elected pursuant to the Internal Revenue Code of 1986, as
amended (the "Code"), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Code, nor have they made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation or
amortization) that would have a material effect on the Company or any
Subsidiary, their financial condition, their prospects, their business as
presently conducted or proposed to be conducted or any of their properties or
material assets. Neither the Company nor any Subsidiary has ever had any tax
deficiency proposed or assessed against it and has not executed any waiver of
any statute of limitations on the assessment or collection of any tax or
governmental charge. None of the Company's or any Subsidiary's federal income
tax returns, if any, and none of their state income or franchise tax or sales or
use tax returns, if any, has ever been audited by governmental authorities.
Since October 26, 1996 the Company has made adequate provisions on its books of
account for all taxes, assessments and governmental charges with respect to its
business, properties and operations for such period. The Company and any
Subsidiary has withheld or collected from each payment made to each of its
employees, the amount of all taxes (including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes) required to be withheld or collected therefrom, and has paid the
same to the proper tax receiving officers or authorized depositaries.
2.23 MINUTE BOOKS. The copy of the minute books of the Company
provided to the Investor contains a complete summary of all meetings of
directors and stockholders and all actions by written consent in lieu of a
meeting by directors or stockholders since the time of incorporation and reflect
all transactions referred to in such minutes accurately in all material
respects.
2.24 DISCLOSURE. The Company has fully provided the Investor with all
the information which the Investor has requested for deciding whether to
purchase the Series C Preferred Stock and all information which the Company
believes is reasonably necessary to enable the Investor to make such decision.
Neither this Agreement, the Rights Agreement, the Supplemental Rights Agreement,
the Sales Agreement and any Ancillary Agreements, nor any other statements or
certificates made or delivered in connection herewith or therewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
2.25 LABOR AGREEMENTS AND ACTIONS. Neither the Company nor any
Subsidiary is bound by or subject to (and none of its assets or properties is
bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the best of the Company's or such Subsidiary's knowledge, has sought to
represent any of the employees, representatives or agents of the Company or any
Subsidiary. There is no strike or other labor dispute involving the Company or
any Subsidiary pending, or to the best of the
10.
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Company's or such Subsidiary's knowledge, threatened, that could have a material
adverse effect on the assets, properties, financial condition, operating
results, or business of the Company or any Subsidiary (as such business is
presently conducted and as it is proposed to be conducted), nor is the Company
or any Subsidiary aware of any labor organization activity involving its or any
Subsidiaries' employees. Neither the Company nor any Subsidiary is aware that
any officer, consultant or key employee, or that any group of key employees,
intends to terminate their employment with the Company or any Subsidiary, nor
does the Company or any Subsidiary have a present intention to terminate the
employment of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer, consultant
and employee of the Company or any Subsidiary is terminable at the will of the
Company.
2.26 MANUFACTURING AND MARKETING RIGHTS. Neither the Company nor any
Subsidiary has granted rights to manufacture, produce, assemble, license, market
or sell its products to any other person and is not bound by any agreement that
affects the Company's or any Subsidiary's exclusive rights to develop,
manufacture, assemble, distribute and sell its products.
2.27 FINDER OR BROKER. The Company is not obligated to pay any
brokerage commissions, finder's fees or other similar compensation to any
finder, broker, intermediary or any similar person in connection with the
transactions contemplated herein. The Company will indemnify the Investor and
hold the Investor harmless from any liability or expense arising from any claim
for brokerage commissions, finder's fees or other similar compensation based
upon any agreement, arrangement or understanding made by or on behalf of the
Company.
2.28 CUSTOMER COMPLAINTS. Neither the Company nor any Subsidiary has
received any customer complaints concerning alleged defects in its products or
the design thereof that, if true, would have a material adverse effect on the
assets, financial condition or business of the Company or such Subsidiary.
2.29 WARRANTIES; PRODUCT LIABILITY. All products manufactured or
sold, and all services provided, by the Company or any Subsidiary have complied,
and are in compliance, in all material respects with all contractual
requirements, warranties, covenants and specifications applicable thereto. The
terms of the Company's and each Subsidiary's product and service warranties and
product return, discount, demo sales and credit policies have been provided to
the Investor. Neither the Company nor any Subsidiary has ever incurred any
uninsured or insured product liability (including product recalls). Neither the
Company nor any Subsidiary has ever received a claim based upon alleged product
liability, and, to the Company's knowledge, no basis for any such claim exists.
2.30 RELATIONS WITH SUPPLIERS. No material current supplier of the
Company or any Subsidiary has cancelled any contract or order for provision of,
and, to the knowledge of the Company, there has been no threat by any such
supplier not to
11.
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provide, raw materials, products, supplies, or services to the businesses of the
Company or any Subsidiary.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor hereby
represents and warrants that:
3.1 AUTHORIZATION. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
the Investor in reliance upon the Investor's representation to the Company,
which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Series C Preferred Stock to be received by the Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for the 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 the Investor has no present intention of selling,
granting any participation in or otherwise distributing the same. By executing
this Agreement, the Investor further represents that the Investor does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant any participation to such person or to any third person, with
respect to any of the Securities. The Investor represents that it has full
power and authority to enter into this Agreement.
3.3 DISCLOSURE OF INFORMATION. The Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series C Preferred Stock. The Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series C Preferred
Stock. The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investor to rely thereon.
3.4 INVESTMENT EXPERIENCE. The Investor is an investor in securities
of companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Series C Preferred Stock. The
Investor also represents it has not been organized for the purpose of acquiring
the Series C Preferred Stock.
3.5 ACCREDITED INVESTOR. The Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.6 RESTRICTED SECURITIES. The Investor understands that the shares
of Series C Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act of
12.
<PAGE>
1933, as amended (the "Act"), only in certain limited circumstances. In this
connection, the Investor represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and Section 6, provided and to the extent such sections are then
applicable, the Rights Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b)(i) The Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, the Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
3.8 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) Any legend required by the laws of any State.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
the Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment of each of the following conditions on or before the Closing with
respect to the Investor's purchase of Series C Preferred Stock.
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
13.
<PAGE>
4.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Investor at the Closing a certificate certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 QUALIFICATIONS. The Commissioner of Corporations of the State of
California and the Blue Sky authorities of any other State applicable shall have
issued a permit qualifying the offer and sale of the Series C Preferred Stock
and the underlying Common Stock to the Investor pursuant to this Agreement, or
such offer and sale shall be exempt from such qualification.
4.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto (including satisfactory results of due diligence
review of the Company) shall be reasonably satisfactory in form and substance to
the Investor, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request.
4.6 OPINION OF COMPANY COUNSEL. The Investor shall have received
from Brobeck, Phleger & Harrison LLP, counsel for the Company, an opinion, dated
as of the Closing, in substantially a form mutually agreed upon by the Company
and the Investor.
4.7 AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT. The Company
shall have entered into the Rights Agreement.
4.8 SUPPLEMENTAL RIGHTS AGREEMENT. The Company shall have entered
into the Supplemental Rights Agreement.
4.9 SALES AGREEMENT. The Company shall have entered the Sales
Agreement.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment of each of the following conditions on or before the Closing with
respect to the purchase of Series C Preferred Stock by the Investor.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
14.
<PAGE>
5.2 PAYMENT OF PURCHASE PRICE. The Investor shall have delivered the
purchase price specified in Section 1.2.
5.3 QUALIFICATIONS. The Commissioner of Corporations of the State of
California and the Blue Sky authorities, of any other State applicable shall
have issued a permit qualifying the offer and sale to the Investor the Series C
Preferred Stock and the Common Stock issuable upon the conversion thereof or
such offer and sale shall be exempt from such qualification.
5.4 AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT. The Investor
shall have entered into the Rights Agreement.
5.5 SUPPLEMENTAL RIGHTS AGREEMENT. Medtronic shall have entered into
the Supplemental Rights Agreement.
5.6 SALES AGREEMENT. Medtronic shall have entered the Sales
Agreement.
6. MISCELLANEOUS.
6.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and the Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor or the Company.
6.2 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 shares of Series C Preferred Stock sold hereunder 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 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.
6.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents entered into and to be performed entirely within Delaware.
6.4 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.
6.5 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.
15.
<PAGE>
6.6 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to the Investor, to the address set forth on the
signature page hereto or to such other address as the Investor shall have
furnished to the Company in writing or (b) if to the Company, to its address set
forth on the signature page hereto and addressed to the attention of the
President or at such other addresses as the Company shall have furnished to the
Investor. All notices and other communications pursuant to the provisions of
this Section 6.6 shall be deemed delivered when mailed or sent by facsimile.
6.7 FINDER'S FEE. Each party represents that it neither is nor will
be obligated for any finder's fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless the Investor from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
6.8 LEGAL FEES. Each party to this Agreement shall bear its own
expenses and legal fees incurred by it with respect to this Agreement and all
related transactions outside of or in excess of these covered costs.
6.9 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement or the Restated Certificate,
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.
6.10 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 Investor.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities are
convertible), each future holder of all such securities and the Company.
6.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
16.
<PAGE>
6.12 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
17.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
VISTA MEDICAL TECHNOLOGIES, INC., a Delaware
corporation
By: /s/ John Lyon
------------------------------------
John Lyon, President
Address: 5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
INVESTOR:
MEDTRONIC ASSET MANAGEMENT, INC.
By:/s/ Michael D. Ellwein
--------------------------------------
Name: Michael D. Ellwein
-----------------------------------
Title:Vice President
-----------------------------------
Address: 7000 Central Avenue NE
Minneapolis, MN 55432
[SIGNATURE PAGE TO SERIES C
PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
A-1
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VISTA MEDICAL TECHNOLOGIES, INC.
The undersigned, John Lyon and Robert DeVaere, hereby certify that:
ONE: The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on October 31, 1996.
TWO: The Certificate of Incorporation of this corporation is amended and
restated to read as follows:
ARTICLE I.
The name of the corporation (hereinafter called "Corporation") is Vista
Medical Technologies, Inc.
ARTICLE II.
The address of the registered office of the Corporation in the State of
Delaware is 30 Old Rudnick Lane, City of Dover, County of Kent 19901, and the
name of the registered agent of the Corporation in the State of Delaware at such
address is CorpAmerica, Inc.
ARTICLE III.
The purpose of this Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV.
A. CLASSES OF STOCK. This Corporation is authorized to issue two (2)
classes of shares, to be designated "Common" and "Preferred" and referred to
herein as the "Common Shares" or the "Preferred Shares" respectively. The total
number of Common Shares the Corporation is authorized to issue is twenty-five
million (25,000,000). The par value is $0.01 per share. The total number of
Preferred Shares the Corporation is authorized to issue is eighteen million
(18,000,000). The par value is $0.01 per share.
The Board of Directors of the Corporation may divide the Preferred
Shares into any number of series. The Board of Directors shall fix the
designation and number of
<PAGE>
shares of each such series. The Board of Directors may determine and alter the
rights, preferences, privileges and restrictions granted to and imposed upon any
wholly unissued series of the Preferred Shares. The Board of Directors (within
the limits and restrictions of any resolution adopted by it, originally fixing
the number of shares of any series) may increase or decrease the number of
shares of any such series after the issue of shares of that series, but not
below the number of then outstanding shares of such series.
B. RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF THE SERIES A-1
PREFERRED STOCK, SERIES A-3 PREFERRED STOCK, SERIES B PREFERRED STOCK AND SERIES
C PREFERRED STOCK.
1. DESIGNATION OF SERIES A-1 PREFERRED STOCK, SERIES A-3 PREFERRED
STOCK, SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK. Eight Million
Three Hundred Thousand (8,300,000) shares of Preferred Stock are designated
Series A-1 Preferred Stock (the "Series A-1 Preferred") with the rights,
preferences and privileges specified herein. Five Hundred Thousand (500,000)
shares of Preferred Stock are designated Series A-3 Preferred Stock (the "Series
A-3 Preferred") with the rights, preferences and privileges specified herein.
Three Million One Hundred Thousand (3,100,000) shares of Preferred Stock are
designated Series B Preferred Stock (the "Series B Preferred") with the rights,
preferences and privileges specified herein. Two Million (2,000,000) shares of
Preferred Stock are designated Series C Preferred Stock (the "Series C
Preferred") with the rights, preferences and privileges specified herein. As
used in this Article IV, Section B., the term "Series A Preferred" shall refer
to the Series A-1 Preferred and the Series A-3 Preferred. As used in this
Article IV, Section B., the term "Preferred Stock" shall refer to the Series A-1
Preferred, the Series A-3 Preferred, the Series B Preferred and the Series C
Preferred.
2. DIVIDEND RIGHTS OF PREFERRED STOCK. The holders of the then
outstanding shares of Preferred Stock shall be entitled to receive dividends pro
rata, in preference to any dividend on the Common Stock of this Corporation
("Common"), at the rate of eight percent (8%) of the Original Purchase Price per
share (as defined below) per annum, whenever funds are legally available and
when and as declared by the Board of Directors. The dividends shall be non-
cumulative. The original purchase price of the Series A Preferred shall be
$1.325 per share (the "Series A Original Purchase Price"). The original
purchase price of the Series B Preferred shall be $4.00 per share (the "Series B
Original Purchase Price"). The original purchase price of the Series C
Preferred shall be $5.00 per share (the "Series C Original Purchase Price"). As
used in this Section 2, the term "Original Purchase Price" shall refer to the
Series A Original Purchase Price, the Series B Original Purchase Price or the
Series C Original Purchase Price, as the case may be.
3. LIQUIDATION PREFERENCE.
a. In the event of any liquidation event, either voluntary or
involuntary, the holders of the Preferred Stock shall be entitled to receive pro
rata, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common by reason of their
ownership thereof, with respect to the Series C Preferred, the sum of (i) $5.00
per share for each share of Series C Preferred then
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<PAGE>
held by them and (ii) an amount equal to all declared but unpaid dividends on
the Series C Preferred then held by them, with respect to the Series B
Preferred, the sum of (i) $4.00 per share for each share of Series B Preferred
then held by them and (ii) an amount equal to all declared but unpaid dividends
on the Series B Preferred then held by them, and, with respect to the Series A
Preferred, the sum of (i) $1.325 per share for each share of Series A Preferred
then held by them and (ii) an amount equal to all declared but unpaid dividends
on the Series A Preferred then held by them. If, upon the occurrence of such
event, the assets and funds thus distributed among the holders of the Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Preferred Stock in proportion to the preferential
amount each such holder would have been entitled to receive pursuant to this
Section 3 if such distribution had been sufficient to permit the full payment of
such preferential amount.
b. After payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled pursuant to Section
3.a. above, the holders of the Common and Preferred Stock shall be entitled to
receive the remaining assets of the Corporation in proportion to the shares of
Common Stock then held by them and the shares of Common Stock which they have
the right to acquire upon conversion of Preferred Stock until such time as the
distributions made to the holders of the Preferred Stock (taken together with
all payments made pursuant to Section 3.a. above) equal, with respect to the
Series A Preferred, $3.975 per share for each share of Series A Preferred then
held by them, with respect to the Series B Preferred, $12.00 per share for each
share of Series B Preferred then held by them and, with respect to the Series C
Preferred, $15.00 per share for each share of Series C Preferred then held by
them. If, upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire remaining assets and funds of the Corporation legally available
for distribution after payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled pursuant to Section
3.a. above shall be distributed ratably among the holders of the Common and
Preferred Stock in proportion to the preferential amount each such holder would
have been entitled to receive pursuant to this Section 3 if such distribution
had been sufficient to permit the full payment of the preferential amounts under
this Section 3.b. to the holders of the Preferred Stock.
c. After payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled pursuant to Sections
3.a. and 3.b. above, the holders of the Common shall be entitled to receive all
remaining assets of the Corporation in proportion to the shares of Common Stock
then held by them.
d. For purposes of this Section 3, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, or to
include, the Corporation's sale of all or substantially all of its assets or the
acquisition of this Corporation by another entity by means of merger or
consolidation resulting in the exchange of the outstanding shares of this
Corporation for securities or consideration issued, or caused
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<PAGE>
to be issued, by the acquiring Corporation or its subsidiary in which the
stockholders of the Corporation are holders of less than 50% of voting power of
the surviving corporation.
4. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
a. OPTIONAL AND AUTOMATIC CONVERSION. Each share of Preferred
Stock shall be convertible at the option of the holder thereof, without payment
of additional consideration, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for the Preferred
Stock, into such number of fully paid and nonassessable shares of Common as is
determined by dividing, with respect to the Series A Preferred, $1.325, with
respect to the Series B Preferred, $4.00, or, with respect to the Series C
Preferred, $5.00 by the Conversion Price, determined as hereinafter provided, in
effect at the time of conversion. The price at which shares of Common shall be
deliverable upon conversion of the Series A-1 Preferred (the "Series A-1
Conversion Price") shall initially be $1.325 per share of Common. The price at
which shares of Common shall be deliverable upon conversion of the Series A-3
Preferred (the "Series A-3 Conversion Price") shall initially be $1.325 per
share of Common. The price at which shares of Common shall be deliverable upon
conversion of the Series B Preferred (the "Series B Conversion Price") shall
initially be $4.00 per share of Common. The price at which shares of Common
shall be deliverable upon conversion of the Series C Preferred (the "Series C
Conversion Price") shall initially be $5.00 per share of Common. As used in
this Section 4., the term "Conversion Price" shall refer to the Series A-1
Conversion Price, the Series A-3 Conversion Price, the Series B Conversion Price
or the Series C Conversion Price, as the case may be. The initial Series A-1
Conversion Price, Series A-3 Conversion Price, Series B Conversion Price and
Series C Conversion Price shall be subject to adjustment as hereinafter
provided.
Each share of Preferred Stock shall automatically be converted into shares
of Common at the then effective Conversion Price in the event of either (i) the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), covering the offer and sale of Common (whether for the account of
the Corporation or for the account of one or more stockholders of the
Corporation) of the Corporation to the public in which the aggregate gross cash
proceeds to the Corporation (prior to underwriters' discounts and expenses) are
equal to or exceed $15,000,000 and the public offering price is equal to or
exceeds $5.00 per share of Common (as adjusted for any stock dividends,
combinations or splits with respect to such shares) (a "Qualified Public
Offering") or (ii) the written consent of holders of more than fifty percent
(50%) of the then outstanding shares of Preferred Stock voting together as a
single class (a "Qualifying Consent"). In the event of the automatic conversion
of the Preferred Stock upon a Qualified Public Offering, the conversion of
Preferred Stock shall be deemed to have occurred immediately prior to the
closing of such Qualified Public Offering. In the event of the automatic
conversion of the shares of Preferred Stock upon a Qualifying Consent, the
conversion of Preferred Stock shall be deemed to have occurred on the date
specified in such Qualifying Consent.
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<PAGE>
b. MECHANICS OF CONVERSION. No fractional shares of Common
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
pay cash equal to such fraction multiplied by the then effective Conversion
Price. Before any holder of Preferred Stock shall be entitled to convert the
same into full shares of Common, it shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Preferred Stock, and shall give written notice to the
Corporation at such office that it elects to convert the same (except that no
such written notice of election to convert shall be necessary in the event of an
automatic conversion pursuant to Section 4.a.). The Corporation shall, as soon
as practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock a certificate or certificates, registered in such names as
specified by the holder, for the number of shares of Common to which he shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common, and any declared and unpaid dividends on the converted Preferred Stock.
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 Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common on such date (except that in the
event of an automatic conversion (i) upon a Qualified Public Offering pursuant
to Section 4.a. such conversion shall be deemed to have been made immediately
prior to the closing of the Qualified Public Offering and (ii) upon a Qualifying
Consent pursuant to Section 4.a. such conversion shall be deemed to have been
made on the date specified in such Qualifying Consent). If the conversion is in
connection with an underwritten offering of securities registered pursuant to
the Act, the conversion may, at the option of any holder tendering Preferred
Stock for conversion, be conditioned upon the closing with the underwriter of
the sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common issuable upon such conversion of the Preferred
Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.
c. ADJUSTMENTS TO SERIES A-1 CONVERSION PRICE, SERIES A-3
CONVERSION PRICE, SERIES B CONVERSION PRICE AND SERIES C CONVERSION PRICE FOR
DILUTIVE ISSUES.
(1) SPECIAL DEFINITIONS. For purposes of this Section 4.c.
and Section 5, the following definitions shall apply:
(a) "OPTION" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common or Convertible
Securities.
(b) "ORIGINAL ISSUE DATE" shall mean, with respect to
the Series A-1 Preferred, the date on which a share of Series A-1 Preferred was
first issued, and with respect to the Series A-3 Preferred, the date on which a
share of Series A-3 Preferred was first issued, with respect to the Series B
Preferred, the date on which a share
-5-
<PAGE>
of Series B Preferred was first issued and with respect to the Series C
Preferred, the date on which a share of Series C Preferred was first issued.
(c) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares (other than Common and Preferred Stock) or other
securities directly or indirectly convertible into or exchangeable for Common.
(d) "ADDITIONAL SHARES OF COMMON" shall mean all
shares of Common issued (or, pursuant to Section 4.c.(3), deemed to be issued)
by the Corporation after the Original Issue Date, other than shares of Common
issued or issuable:
i) upon conversion of shares of Preferred Stock
authorized herein;
ii) to officers, directors or employees of, or
consultants to, the Corporation pursuant to any plan or agreement approved by
the Board of Directors;
iii) as a dividend or distribution on the
Preferred Stock or any event for which adjustment is made pursuant to Sections
4.d. or 4.e. hereof;
iv) in connection with equipment leasing or bank
financing transactions, provided such shares are issued for other than primarily
equity financing purposes;
v) pursuant to transactions involving technology
licensing, research or development activities or the distribution or manufacture
of the Corporation's products, provided that each of the forgoing transactions
is for other than primarily equity financing purposes; or
vi) by way of dividend or other distribution on
shares excluded from the definition of Additional Shares of Common by the
foregoing clauses i) through v) or this clause vi) or on shares of Common so
excluded.
(2) NO ADJUSTMENT OF SERIES A-1 CONVERSION PRICE,
SERIES A-3 CONVERSION PRICE, SERIES B CONVERSION PRICE OR SERIES C CONVERSION
PRICE. No adjustment in the Series A-1 Conversion Price, Series A-3 Conversion
Price, Series B Conversion Price or Series C Conversion Price shall be made in
respect of the issuance of Additional Shares of Common unless the consideration
per share for an Additional Share of Common issued or deemed to be issued by the
Corporation is less than the Series A-1 Conversion Price, Series A-3 Conversion
Price, Series B Conversion Price or Series C Conversion Price, respectively, in
effect on the date of, and immediately prior to, the issue of such Additional
Shares.
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<PAGE>
(3) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES
OF COMMON -- OPTIONS AND CONVERTIBLE SECURITIES. In the event the Corporation
at any time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that in any such case in which Additional
Shares of Common are deemed to be issued:
(a) no further adjustment in the Series A-1 Conversion
Price, Series A-3 Conversion Price, Series B Conversion Price or Series C
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common upon the exercise of such Options or conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decreases in the number of shares
of Common issuable, upon the exercise, conversion or exchange thereof, the
Series A-1 Conversion Price, Series A-3 Conversion Price, Series B Conversion
Price and Series C Conversion Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(c) no readjustment pursuant to clause (b) above shall
have the effect of increasing the Series A-1 Conversion Price, Series A-3
Conversion Price, Series B Conversion Price or Series C Conversion Price to an
amount which exceeds the lower of (i) such Series A-1 Conversion Price,
Series A-3 Conversion Price, Series B Conversion Price or Series C Conversion
Price, respectively, on the original adjustment date with respect to such deemed
issuance of Additional Shares of Common, or (ii) such Series A-1 Conversion
Price, Series A-3 Conversion Price, Series B Conversion Price or Series C
Conversion Price, respectively, that would have resulted from any issuance of
Additional Shares of Common between such original adjustment date and such
readjustment date; and
(d) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any decrease in the
consideration payable to the Corporation upon the exercise, conversion or
exchange thereof, the Series A-1 Conversion Price, Series A-3 Conversion Price,
Series B Conversion Price and Series C Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
decrease becoming effective, be recomputed to reflect such decrease insofar
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as it affects such Options or the rights of conversion or exchange under such
Convertible Securities.
(4) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON. In the event this Corporation shall issue
Additional Shares of Common (including Additional Shares of Common deemed to be
issued pursuant to Section 4.c.(3)) without consideration or for a consideration
per share less than the Series A-1 Conversion Price, Series A-3 Conversion
Price, Series B Conversion Price or Series C Conversion Price in effect on the
date of and immediately prior to such issue, then and in such event, such Series
A-1 Conversion Price, Series A-3 Conversion Price, Series B Conversion Price or
Series C Conversion Price, respectively, shall be reduced, concurrently with
such issue, to a price (calculated to the nearest cent) determined by
multiplying such Series A-1 Conversion Price, Series A-3 Conversion Price,
Series B Conversion Price or Series C Conversion Price, respectively, by a
fraction, the numerator of which shall be the number of shares of Common
outstanding immediately prior to such issue plus the number of shares of Common
which the aggregate consideration received by the Corporation for the total
number of Additional Shares of Common so issued would purchase at such Series A-
1 Conversion Price, Series A-3 Conversion Price, Series B Conversion Price or
Series C Conversion Price, respectively, in effect immediately prior to such
issue; and the denominator of which shall be the number of shares of Common
outstanding immediately prior to such issue plus the number of such Additional
Shares of Common so issued; and provided further that, for the purposes of this
Section 4.c.(4): (i) no shares of Common issued or issuable upon conversion of
Preferred Stock shall be deemed to be outstanding and all such shares shall be
excluded from such calculation, (ii) all shares of Common issuable upon
conversion of outstanding Options and Convertible Securities (excluding
outstanding Preferred Stock) shall be deemed to be outstanding and all such
shares shall be included in such calculation, and (iii) except as provided in
the foregoing clauses (i) and (ii) above, immediately after any Additional
Shares of Common are deemed issued pursuant to Section 4.c.(3), such Additional
Shares of Common shall be deemed to be outstanding. The Series A-1 Conversion
Price, Series A-3 Conversion Price, Series B Conversion Price and Series C
Conversion Price shall not be increased except as set forth in Section
4.c.(3)(b) and in Section 4.d.
(5) DETERMINATION OF CONSIDERATION. For purposes of this
Section 4.c., the consideration received by the Corporation for the issue of any
Additional Shares of Common shall be computed as follows:
(a) CASH AND PROPERTY. Such consideration shall:
i) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
ii) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
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iii) in the event Additional Shares of Common are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses i) and ii) above, as
reasonably determined in good faith by the Board of Directors.
(b) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common deemed to have been issued pursuant to Section 4.c.(3), relating to
Options and Convertible Securities, shall be determined by dividing:
i) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
ii) the maximum number of shares of Common (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
d. ADJUSTMENT FOR STOCK SPLITS, DIVIDENDS AND COMBINATIONS. If
the Corporation shall at any time or from time to time effect a subdivision of
the outstanding Common, or shall issue a dividend of Common on its outstanding
Common, the Series A-1 Conversion Price, Series A-3 Conversion Price, Series B
Conversion Price and Series C Conversion Price then in effect immediately before
that subdivision or dividend shall be proportionately decreased, and conversely,
if the Corporation shall combine the outstanding shares of Common, the Series A-
1 Conversion Price, Series A-3 Conversion Price, Series B Conversion Price and
Series C Conversion Price then in effect immediately before the combination
shall be proportionately increased. Any adjustment under this Section 4.d.
shall become effective at the close of business on the date the subdivision or
combination becomes effective or on the date on which the dividend is declared.
e. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time shall make or issue, or
fix a record date for the determination of holders of Common entitled to receive
a dividend or other distribution payable in securities of the Corporation other
than shares of Common, then, and in each such event, provision shall be made so
that the holders of Series A-1 Preferred, Series A-3 Preferred, Series B
Preferred and Series C Preferred shall receive upon conversion thereof, in
addition to the number of shares of Common receivable thereupon, the amount of
securities of the Corporation that they would have received had their Series A-1
Preferred, Series A-3 Preferred, Series B Preferred and Series C Preferred been
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converted into Common on the date of such event, giving effect to all
adjustments called for with respect to such securities during the period from
the date of such event to and including the conversion date.
f. ADJUSTMENT FOR MERGER OR REORGANIZATION. In case of any
consolidation or merger of the Corporation with or into another corporation or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation (other than a consolidation, merger or conveyance provided
for elsewhere in this Section 4 or Section 3), provisions shall be made so that
holders of shares of Series A-1 Preferred, Series A-3 Preferred, Series B
Preferred and Series C Preferred shall thereafter be convertible into the number
of shares of stock or other securities or property to which a holder of the
number of shares of Common of the Corporation deliverable upon conversion of
such Series A-1 Preferred, Series A-3 Preferred, Series B Preferred and Series C
Preferred would have been entitled upon such consolidation, merger or
conveyance; and, in any case, appropriate adjustment (as reasonably determined
in good faith by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interest thereafter
of the holders of the Series A-1 Preferred, Series A-3 Preferred, Series B
Preferred and Series C Preferred, to the end that the provisions set forth
herein (including provisions with respect to changes in and other adjustments of
the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A-1 Preferred, Series A-3
Preferred, Series B Preferred and Series C Preferred.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If the Common issuable upon the conversion of the Series A-1 Preferred,
Series A-3 Preferred, Series B Preferred and Series C Preferred shall be changed
into the same or different number of shares of any class or series of stock,
whether by capital reorganization, reclassification or otherwise (other than as
set forth above in this Section 4), then and in each such event the holder of
each share of Series A-1 Preferred, Series A-3 Preferred, Series B Preferred and
Series C Preferred shall have the right thereafter to convert such share into
the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change by holders
of the number of shares of Common into which such shares of Series A-1
Preferred, Series A-3 Preferred, Series B Preferred and Series C Preferred might
have been converted immediately prior to such reorganization, reclassification
or change, all subject to further adjustment as provided herein.
h. NO IMPAIRMENT. The Corporation will not, by amendment of
this Amended and Restated Certificate of Incorporation or through any
reorganization, 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 the Series A-1 Preferred, Preferred, Series
A-3 Preferred, Series B Preferred and Series C Preferred against impairment.
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i. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Series A-1 Conversion Price, Series A-3
Conversion Price, Series B Conversion Price or Series C Conversion Price
pursuant to this Section 4, the Corporation at its expense shall promptly
compute such adjustments or readjustments in accordance with the terms hereof
and furnish to each holder of any 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 Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Series A-1 Conversion Price, Series A-3
Conversion Price, Series B Conversion Price or Series C Conversion Price at the
time in effect, and (iii) the number of shares of Common and the amount, if any,
of other property which at the time would be received upon the conversion of
such holder's shares.
j. 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 which is the same as cash dividends paid in
previous quarters) or other distribution, the Corporation shall mail to each
holder of 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 or distribution. Each such written notice
shall be given by first class mail, postage prepaid, addressed to the holders of
Preferred Stock at the address for each such holder as shown on the books of
this Corporation.
k. COMMON STOCK RESERVED. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common,
solely for the purpose of effecting the conversion of the shares of Preferred
Stock, such number of shares of Common as shall from time to time be sufficient
to effect the conversion of all outstanding shares of Preferred Stock, and if at
any time the number of authorized but unissued shares of Common shall not be
sufficient to effect the conversion of all then outstanding shares of Preferred
Stock, the Corporation shall take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but unissued shares of
Common to such number of shares as shall be sufficient for such purpose.
5. VOTING RIGHTS. Each holder of shares of Series A-1 Preferred
shall be entitled to the number of votes equal to the number of shares of Common
into which such shares of Series A-1 Preferred could be converted on the record
date for the vote or the date of the solicitation of any written consent of
stockholders and shall have voting rights and powers equal to the voting rights
and powers of the Common. The Series A-3 Preferred shall be non-voting
Preferred, except as otherwise required by law. Each holder of shares of Series
B Preferred shall be entitled to the number of votes equal to the number of
shares of Common into which such shares of Series B Preferred could be converted
on the record date for the vote or the date of the solicitation of any written
consent of stockholders and shall have voting rights and powers equal to the
voting rights and powers of the Common. Each holder of shares of Series C
Preferred shall be entitled to the number of votes equal to the number of shares
of Common into which such shares of Series C Preferred could be
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converted on the record date for the vote or the date of the solicitation of any
written consent of stockholders and shall have voting rights and powers equal to
the voting rights and powers of the Common. Each holder of Common shall be
entitled to one vote per share of Common held by such holder. The holder of
each share of Series A-1 Preferred, Series B Preferred and Series C Preferred
shall be entitled to notice of any stockholders' meeting in accordance with the
Bylaws of the Corporation and shall vote with holders of the Common upon all
matters submitted to a vote of stockholders, except those matters required by
law to be submitted to a class vote and except as provided in Section 6 below.
Fractional votes by the holders of Series A-1 Preferred, Series B Preferred and
Series C Preferred shall not, however, be permitted and any fractional voting
rights resulting from the above formula shall be rounded to the nearest whole
number.
6. RESTRICTIONS AND LIMITS.
a. So long as fifty percent (50%) or more of the originally
issued shares of Series A-1 Preferred, Series B Preferred and Series C Preferred
shall be outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than sixty-six
and two-thirds percent (66-2/3%) of the then outstanding shares of Series A-1
Preferred, Series B Preferred and Series C Preferred, voting as a class:
(1) amend or repeal any provision of, or add any provision
to, the Corporation's Amended and Restated Certificate of Incorporation or
Bylaws if such action would adversely alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of the
Series A-1 Preferred, Series B Preferred or Series C Preferred;
(2) create any new series or class of stock having any
rights, preferences or privileges senior to or on a parity with any such rights,
preferences or privileges of the Series A-1 Preferred, Series B Preferred or
Series C Preferred;
(3) increase or decrease the authorized number of shares of
Series A Preferred, Series B Preferred, Series C Preferred or Preferred;
(4) pay any dividend on, or redeem, repurchase or otherwise
acquire any shares of, the Common or Preferred (other than (i) any repurchases
of shares of Common held by an employee of the Corporation upon termination of
employment, and (ii) as approved by the Board of Directors);
(5) merge into or consolidate with any other corporation or
entity (other than any transaction in which the Corporation's stockholders own a
majority of the securities of the surviving corporation) or sell all or
substantially all of the assets of the Corporation;
(6) amend, or take any action intended to circumvent, the
provisions of this Section 6.
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7. STATUS OF CONVERTED STOCK. In the event any shares of Preferred
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be cancelled and shall not be issuable by the Corporation. The
Certificate of Incorporation of this Corporation shall be appropriately amended
to effect the corresponding reduction in the Corporation's authorized capital
stock.
8. RESIDUAL RIGHTS. All rights accruing to the outstanding shares
of the Corporation not otherwise expressly provided for in this Amended and
Restated Certificate of Incorporation shall be vested in the Common.
9. REPURCHASE OF SHARES. In connection with repurchases by this
Corporation of its Common Stock pursuant to agreements with certain of the
holders thereof approved by this Corporation's Board of Directors, each holder
of Preferred Stock shall be deemed to have waived the application, in whole or
in part, of any provisions of the Delaware General Corporation Law or any
applicable law of any other state which might limit or prevent or prohibit such
repurchases.
ARTICLE V.
A. EXCULPATION.
1. CALIFORNIA. The liability of each and every director of this
Corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
2. DELAWARE. A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
3. CONSISTENCY. In the event of any inconsistency between Sections
1 and 2 of this subsection A, the controlling Section, as to any particular
issue with regard to any particular matter, shall be the one which provides to
the director in question the greatest protection from liability.
B. INDEMNIFICATION.
1. CALIFORNIA. This Corporation is authorized to indemnify the
directors and officers of this Corporation to the fullest extent permissible
under California law. Moreover, this Corporation is authorized to provide
indemnification of (and advancement
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of expenses to) agents (as defined in Section 317 of the California Corporations
Code) through bylaw provisions, agreements with agents, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 317 of the California Corporations
Code, subject only to applicable limits set forth in Section 204 of the
California Corporations Code, with respect to actions for breach of duty to the
Corporation and its stockholders.
2. DELAWARE. To the extent permitted by applicable law, this
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
3. CONSISTENCY. In the event of any inconsistency between Sections
1 and 2 of this subsection B, the controlling Section, as to any particular
issue with regard to any particular matter, shall be the one which authorizes
for the benefit of the agent or other person in question the provision of the
fullest, promptest, most certain or otherwise most favorable indemnification
and/or advancement.
C. EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of any
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI.
The Corporation shall have perpetual existence.
ARTICLE VII.
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the Corporation.
ARTICLE VIII.
Elections of directors need not be by written ballot except and to the
extent provided in the bylaws of the Corporation.
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ARTICLE IX.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
* * * * *
THREE: The foregoing Amendment and Restatement of Certificate of
Incorporation has been duly approved by the Board of Directors.
FOUR: The foregoing amendment and restatement of the Certificate of
Incorporation has been duly approved by the required vote of stockholders in
accordance with Section 242 of the Delaware General Corporation Law. The total
number of outstanding shares of the Corporation is 712,250 shares of Common
Stock, 8,094,340 shares of Series A-1 Preferred Stock, 154,581 shares of Series
A-3 Preferred Stock and 1,325,331 shares of Series B Preferred Stock. The
number of shares voting in favor of the amendment equaled or exceeded the vote
required, such required vote being (a) a majority of the outstanding shares of
Common Stock, Series A-1 Preferred Stock and Series B Preferred Stock (voting
together on an as-converted basis), (b) a majority of the outstanding shares of
Series A-1 Preferred Stock and Series B Preferred Stock (voting together as a
class) and (c) 66 2/3% of the outstanding shares of Series A-1 Preferred Stock
and Series B Preferred Stock (voting together as a class). The holders of
Series A-3 are not entitled to vote, except as required by law.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this certificate on
November 25, 1996.
-------------------------------------------
John Lyon, President
-------------------------------------------
Robert De Vaere, Assistant Secretary
The undersigned certify under penalty of perjury that they have read
the foregoing Amended and Restated Certificate of Incorporation and know the
contents thereof, and that the statements therein are true.
Executed at San Diego, California, on November 25, 1996.
-------------------------------------------
John Lyon
-------------------------------------------
Robert De Vaere
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SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
THIS SCHEDULE OF EXCEPTIONS IS MADE AND GIVEN PURSUANT TO ARTICLE 2 OF THE
SERIES C PREFERRED STOCK PURCHASE AGREEMENT (THE "AGREEMENT"). THE SECTION
NUMBERS IN THIS SCHEDULE OF EXCEPTIONS CORRESPOND TO THE SECTION NUMBERS IN THE
AGREEMENT; HOWEVER, ANY INFORMATION DISCLOSED HEREIN UNDER ANY SECTION NUMBER
SHALL BE DEEMED TO BE DISCLOSED AND INCORPORATED INTO ANY OTHER SECTION NUMBER
UNDER THE AGREEMENT TO WHICH THE APPLICABILITY OF SUCH DISCLOSURE IS REASONABLY
APPARENT. ANY TERMS DEFINED IN THE AGREEMENT SHALL HAVE THE SAME MEANING WHEN
USED IN THIS SCHEDULE OF EXCEPTIONS AS WHEN USED IN THE AGREEMENT UNLESS THE
CONTEXT OTHERWISE REQUIRES.
NOTHING HEREIN CONSTITUTES AN ADMISSION OF ANY LIABILITY OR OBLIGATION ON
THE PART OF THE COMPANY NOR AN ADMISSION AGAINST THE COMPANY'S INTEREST. THE
INCLUSION OF ANY SCHEDULE HEREIN OR ANY EXHIBIT HERETO SHOULD NOT BE INTERPRETED
AS INDICATING THAT THE COMPANY HAS DETERMINED THAT SUCH AN AGREEMENT OR OTHER
MATTER IS NECESSARILY MATERIAL TO THE COMPANY. THE INVESTOR ACKNOWLEDGES THAT
CERTAIN INFORMATION CONTAINED IN THESE SCHEDULES MAY CONSTITUTE MATERIAL
CONFIDENTIAL INFORMATION RELATING TO THE COMPANY WHICH MAY NOT BE USED FOR ANY
PURPOSE OTHER THAN THAT CONTEMPLATED IN THE AGREEMENT.
SCHEDULE 2.1
ORGANIZATION, GOOD STANDING AND QUALIFICATION
The Company has qualified or applied to qualify to do business in
Massachusetts and California. The Company also owns equipment used for
evaluation and demonstration purposes in several other states and countries, in
which states the failure to qualify to do business would not have a material
adverse effect on the Company's business or properties.
SCHEDULE 2.3
SUBSIDIARIES
Oktas, Inc., a Massachusetts corporation ("Oktas"), is a wholly-owned
subsidiary of the Company. Oktas is a holder of approximately thirty-five
percent (35%) of the partnership interest of Oktas, a General Partnership
("Oktas G.P."). The Company is the holder of the remaining partnership interest
in Oktas G.P. Oktas G.P. shall also be deemed to be a Subsidiary of the Company
for purposes of the Agreement.
Oktas intends to adopt a plan of dissolution which distributes all of its
assets to its sole shareholder, which is the Company. Having only one partner,
Oktas G.P. will dissolve and become part of the Company as a matter of law.
The Company is in discussions with UroHealth Systems, Inc.
("UroHealth") and may license certain proprietary rights of the Company for
gynecology products to UroHealth in exchange for a cash payment, royalty
payments and equity.
<PAGE>
SCHEDULE 2.9
PATENTS AND TRADEMARKS
The Company owns the following United States patents:
Patent No. 5,536,234 entitled "Optical Surgical Device" (granted July 16,
1996);
Patent No. 5,349,941 entitled "Cleanable Endoscope" (granted September 27,
1994);
Patent No. 5,317,485 entitled "Connector And Method For Coupling An End Of
A Light-Transmitting Conduit" (granted May 31, 1994); and
Patent No. 5,538,497 entitled "Endoscope Having Parasitic Light Elements,"
(granted July 23, 1996).
The Company or Oktas has filed the following patent applications with the
U.S. Patent and Trademark Office (the "PTO"):
AST-001C2 entitled "Medical Video Endoscope System," Ser. No. 08/227,675
(filed April 14, 1994, to be abandoned regarding CIP case filed);
AST-001PC2 entitled "Medical Video Endoscope System," Ser. No.
PCT/US94/06673 (filed June 14, 1994);
AST-001C3 entitled "Medical Video Endoscope System," Ser. No. 08/324,006
(filed October 14, 1994) (Notice of Abandonment issued February 2, 1996);
HORI-101AX entitled "Electronic Endoscope," Ser. No. 08/067,140 (filed May
25, 1993) (Notice of Abandonment issued January 22, 1996);
HORI-101AXCON entitled "Electronic Endoscope," Ser. No. 08/581,307 (filed
December 28, 1995);
HORI-101XX entitled "Electronic Endoscope," Ser. No. 07/967,996 (filed
October 28, 1992);
HORI-101FX entitled "Electronic Endoscope," Ser. No. 08/400,503 (filed
March 7, 1995);
OKTA-1 entitled "Electronic Endoscope With Zoom Lens System," Ser. No.
08/319,886 (filed October 7, 1994);
OKTA-1 PCT entitled "Electronic Endoscope With Zoom Lens System," Ser. No.
PCT/US95/13352 (filed October 6, 1995);
OKTA-2 entitled "Asymmetric Stereo-Optic Endoscope," Ser. No. 08/475,364
(filed June 7, 1995);
OKTA-2 PCT entitled "Asymmetric Stereo-Optic Endoscope," Ser. No.
PCT/US96/07735 (filed May 28, 1996);
OKTA-3 entitled "A Device For Carrying Two Units In End To End Disposition
And For Moving One Of The Units Alongside The Other Of The Units," Ser. No.
08/628,448 (filed April 5, 1996);
OKTA-5 entitled "Fog-Free Endoscope," Ser. No. 08/546,271 (filed October
20, 1995);
OKTA-5 PCT entitled "Fog-Free Endoscope," Ser. No. PCT/US96/16377 (filed
October 15, 1996);
OKTA-6 entitled "Electronic Endoscope With Position Display," Ser. No.
08/545,927 (filed October 20, 1995);
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OKTA-6 PCT entitled "Electronic Endoscope With Position Display," Ser. No.
PCT/US96/16353 (filed October 15, 1996); and
OKTA-10 entitled "Video Endoscopes," Ser. No. 08/722,742 (filed October 10,
1996).
The Company is preparing the following patent applications:
AST-001 CIP3 (continuation of AST-001C2) entitled "Medical Video Endoscope
System;"
OKTA-4 entitled "A Device For Carrying Two Units In End To End Disposition
And For Moving One Of The Units Alongside The Other Of the Units;"
OKTA-5 DIV (division of OKTA-5) entitled "Fog-Free Endoscope;"
OKTA-7 entitled "An Endoscope Apparatus (Irrigation Means);"
OKTA-8 entitled "A Rib Retractor And Accessory Support Assembly;" and
OKTA-9 entitled "An Endoscope Wherein Electrical Components Are
Electrically Isolated From Patient-Engaging Components."
The Company or Oktas has filed the following patent applications outside of
the United States:
AST-001PC2 entitled "Medical Video Endoscope System," Ser. No. 94919483
(filed June 14, 1994 in Europe); and
AST-PC2 entitled "Medical Video Endoscope System," Ser. No. 502165/95
(filed June 14, 1994 in Japan).
OKTA-1 PCT entitled "Electronic Endoscope With Zoom Lens System," Ser. No.
95937499.2 (filed October 6, 1995 in Europe);
OKTA-1 PCT entitled "Electronic Endoscope With Zoom Lens System," Ser. No.
2177283 (filed October 6, 1995 in Canada); and
OKTA-1 PCT entitled "Electronic Endoscope With Zoom Lens System," Ser. No.
512737/96 (filed October 6, 1995 in Japan).
The Company was granted the following foreign filing license:
Entitled "Optical Surgical Device With Scraping Tool," which is a
continuation of Patent 5,536,234 entitled "Optical Female Urethroscope."
The Company owns the following trademarks, which were acquired pursuant to
the AST Agreement (as defined herein):
3D Scope-Registered Trademark-
Stereolaparoscope-TM-
American Surgical Technology Corporation-TM-
The Company has filed the following trademark applications with the PTO:
Cardiocamera-TM-
Cardiozoom-TM-
Infomatix-TM-
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Vista-TM-
Design of Cone-TM-
Vista & Design-TM-
Cardioview-TM-
Vista Cardiothoracic Endosurgery-TM-
MIM-TM-
The Company licenses the trademark Aspiroscope-TM- pursuant to the Newman
License Agreement (as defined below). The Aspiroscope-TM- trademark is owned by
Newman Medical, Inc.
Reference is made to a certain Asset Purchase Agreement between the Company
and AST dated September 15, 1995 (the "AST Agreement").
Reference is made to a certain License and Development Agreement dated as
of December 18, 1991 among Harry R. McKinley, McKinley Optics, Inc. and AST, as
amended on June 28, 1994, which was assigned to the Company pursuant to the AST
Agreement.
Reference is made to a certain Agreement to Amend License and Development
Agreement dated September 15, 1995 between Harry R. McKinley and the Company.
Reference is made to a certain International Distribution Agreement dated
as of September 20, 1994 between AST and AMCO, Inc., which was assigned to the
Company pursuant to the AST Agreement.
Reference is made to a certain Non-Competition, Non-Disclosure and Patent
and Inventions Assignment Agreement dated as of December 18, 1991 among Harry R.
McKinley, McKinley Optics, Inc. and AST, which was assigned to the Company
pursuant to the AST Agreement.
Reference is made to a certain Non-Exclusive License Agreement between the
Company, Fuji Film Co. and Fuji Photo Optical Co. (collectively "Fuji") dated
June 25, 1996 (the "Fuji Agreement"), pursuant to which Fuji granted the Company
certain manufacturing and distribution rights to products which contain patented
Fuji technology in the United States.
Reference is made to a certain License Agreement between Allen Newman and
the Company dated September 2, 1994 (the "Newman License Agreement"), pursuant
to which Mr. Newman granted the Company an exclusive license to use and
sublicense rights to certain technology.
Reference is made to a certain License Agreement between the Company and
Kaiser Aerospace and Electronics Corporation ("Kaiser"), dated July, 1995 (the
"Kaiser Agreement") pursuant to which Kaiser granted the Company an exclusive,
perpetual, worldwide license for the optical collimating apparatus (cholesteric
optics for use in head mounted displays) in all applications in or relating to
medicine.
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<PAGE>
Reference is made to a certain Technology Alliance (as defined below). See
Schedule 2.11(b).
The Company is not in default of any of the material terms of the above
listed license agreements.
SCHEDULE 2.11
AGREEMENTS; ACTION
(a) Oktas intends to adopt a plan of dissolution which distributes all of
its assets to its sole shareholder, which is the Company. Having only one
partner, Oktas G.P. will dissolve and become part of the Company as a matter of
law.
Reference is made to the Newman License Agreement. See Schedules 2.9
and 2.12.
Reference is made to the Kaiser Agreement. See Schedule 2.9 above.
In connection with the purchase of an aggregate of 622,500 shares of
Common Stock of the Company pursuant to the exercise of stock options, the
Company holds Promissory Notes (the "Promissory Notes") in the aggregate amount
of $93,375 to be paid by certain officers and consultants of the Company.
The Company has entered into a form of indemnification agreement with
each of its current directors.
Reference is made to a Certificate of Ownership and Merger dated
November 4, 1996, pursuant to which Vista Medical Technologies, Inc., a
California corporation
("Vista--California"), merged with and into the Company, its wholly-owned
subsidiary.
(b) Reference is made to Schedules 2.9 and 2.11(a) above.
Reference is made to the Oktas Lease. See Schedule 2.16 below.
The Company is in discussions with UroHealth and may license certain
proprietary rights of the Company for gynecology products to UroHealth in
exchange for a cash payment, royalty payments and equity.
Reference is made to an informal OEM arrangement with Linvatec,
pursuant to which Linvatec places purchase orders with the Company for
orthopedic products in the U.S. only.
Reference is made to certain Standard Sublease dated January 23, 1996
between Quintiles Pacific, Inc. and the Company.
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<PAGE>
Reference is made to an informal arrangement pursuant to which Pilling
Weck acts as an exclusive distributor of certain of the Company's products in
the United States in the field of laparoscopy and ENT. This arrangement is
being reviewed by the Company and may be terminated.
Reference is made to a certain Memorandum of Understanding (Revised
January 1996) between Pilling Weck and the Company providing for continuing
cooperation between the parties.
Reference is made to an informal arrangement with Dr. Hiroshi Moriyama
pursuant to which the Company may distribute with its products certain
specifically designed hand instruments developed by Dr. Moriyama.
Reference is made to a certain Consulting Agreement (the form of which
has been provided to Investor) between Harry R. McKinley and the Company dated
September 15, 1995.
Reference is made to a form of Professional Services agreement entered
into with Steve Sullivan for $80,000 over a nine-month period.
Reference is made to a form of Consulting Agreement entered into with
the following individuals or entities:
1. A & G Medical, European consultant, currently active, at $10,000
per month. Hans Steinmann is a third party beneficiary to this
Consulting Agreement;
2. David Matsuura, product design services, currently active at
$4,950 per month on a month to month basis;
3. Nova Microsystems, currently active, at $2,400 per week;
4. Dale Osborn, currently active, on an hourly basis;
5. Dr. Payne, currently active, at $2,000 per month;
6. Promedica International, Inc., currently active, at $3,000 per
month; and
7. Debbie Iampietro, currently active, on an hourly basis.
Reference is made to a consulting agreement (the form of which has
been provided to Investor) between the Company and V. Montegrande & Co.,
currently active, at $3,500 per month.
Reference is made to a form of Professional Services Agreement
(Clinical Advisory Board) (the form of which has been provided to Investor)
entered into with the following individuals:
1. Dr. Benetti at $5,000 per month; and
2. Dr. Shennib at $2,000 per month.
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<PAGE>
Reference is made to certain Purchase Orders, for an aggregate amount
of approximately $1,652,150 placed with the following entities, copies of which
were provided to Investor:
1. Lithographix for $45,000;
2. Angelo Marketing for $45,000;
3. Kaiser Electro-Optics for $722,000;
4. Wilkerson Group for $100,000;
5. W.L. Gore for $96,300;
6. Precision Interconnect for $79,000;
7. Patton Design for $75,500;
8. Liebman Optical for $41,575;
9. Lake Manufacturing for $28,900;
10. BEI Medical Systems for $73,875; and
11. Cogent Light Technologies for $95,500 and $250,000.
Reference is made to a certain partnership agreement between the
Company and Oktas, Inc. dated July 26, 1993 (the "Partnership Agreement").
Reference is made to a certain Standby Letter of Credit ("Standby
Letter of Credit") in the amount of $150,000, cash collateralized at $165,000,
which permits the Company to buy certain components directly from Matsushita
Electric Industrial Co., Ltd. ("Matsushita"), a Japanese corporation. This
Standby Letter of Credit will expire in August, 1997.
Reference is made to a certain Distributor Agreement dated July 15,
1996 between the Company and Peters.
Reference is made to a certain U.S.A. and Canada Distribution
Agreement dated July 11, 1996 between the Company and Delacroix-Chevalier
Surgical Instruments.
Reference is made to an informal arrangement between the Company and
Matsushita pursuant to which Matsushita supplies the Company with certain
products.
Reference is made to a certain Memorandum of Understanding regarding
Technology Alliance between the Company and Cogent Light dated March 27, 1995
(the "Technology Alliance").
Reference is made to a certain Memorandum of Understanding regarding
Technology Alliance between the Company, Cogent Light and Henke Sass Wolf dated
May 3, 1995. This agreement is currently non-operating in that the course of
action and technology development conceived by the agreement have been
abandoned.
Reference is made to a certain Technology Strategic Alliance:
Memorandum of Understanding dated July 19, 1996 with Kaiser Electro-Optics.
(c) Reference is made to Schedules 2.9 and 2.11(b) above and Schedule 2.12
below.
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<PAGE>
SCHEDULE 2.12
RELATED-PARTY TRANSACTIONS
Reference is made to a Certificate of Ownership and Merger dated November
4, 1996, pursuant to which Vista--California merged with and into the Company,
its wholly-owned subsidiary.
Venture capital funds affiliated with certain directors participated in the
Company's prior Series A-1 and Series B Preferred Stock financings. Such
directors may engage in the development and financing of other companies and/or
research projects which may be developing, or may in the future develop,
products which may compete directly, or indirectly, with the products intended
to be developed by the Company.
Pursuant to the License Agreement with Allen Newman, Mr. Newman currently
is indebted to the Company in the amount of $37,500, as an advance payment
against royalties due under the License Agreement.
SCHEDULE 2.16
TITLE TO PROPERTY AND ASSETS
Reference is made to a certain Lease of 134 Flanders Road, Westborough,
Massachusetts, dated April 14, 1994, as amended by a certain First Amendment to
Lease dated March 29, 1996 and a certain Second Amendment to Lease dated October
22, 1996 (the "Oktas Lease"). The Oktas Lease of facilities used by the Company
is between Oktas G.P. and Robert F. Tambone, as Trustee of MAT Realty Trust,
u/d/t dated June 4, 1986.
SCHEDULE 2.17
FINANCIAL STATEMENTS
Reference is made to the Standby Letter of Credit. See Schedule 2.11(b).
See Partnership Agreement regarding credit facility between the Company and
Oktas G.P.
SCHEDULE 2.18
CHANGES
(f) Reference is made to the Fuji Agreement. See Schedule 2.9 above.
Reference is made to a Certificate of Ownership and Merger dated
November 4, 1996, pursuant to which Vista--California merged with and into the
Company, its wholly-
-8-
<PAGE>
owned subsidiary (the "Merger"). Pursuant to the terms of the Merger, the
Company assumed all obligations and liabilities of Vista--California. The
Company intends to obtain all necessary consents to assignment required as a
result of the Merger.
(i) Reference is made to the Promissory Notes. See Schedule 2.11 above.
(k) On October 22, 1996, the Company granted to certain employees options
to purchase shares of Common Stock, in an aggregate amount of 116,500 shares,
pursuant to its 1995 Stock Option Plan.
SCHEDULE 2.19
EMPLOYEE BENEFIT PLANS
The Company has standard fringe benefit plans in the ordinary course of
business, including, but not limited to, medical plans and vacation policies.
The Company has a 401(k) Plan. The Company is not currently matching
employee contributions to its 401(k) Plan.
SCHEDULE 2.26
MANUFACTURING AND MARKETING RIGHTS
Reference is made to Schedules 2.9 and 2.11 above.
Reference is made to a Manufacturing Supply Agreement between Kaiser
Electro-Optics, Inc. and the Company dated July 21, 1995, pursuant to which
Kaiser Electro-Optics, Inc. has certain rights to manufacture optical sub-
assembly and head mounted electronics for the Company.
Reference is made to a certain Distributorship Agreement between the
Company and Oktas G.P. dated July 26, 1993.
Reference is made to a certain Distributor Agreement dated July 15, 1996
between the Company and Peters.
Reference is made to a certain U.S.A. and Canada Distribution Agreement
dated July 11, 1996 between the Company and Delacroix-Chevalier Surgical
Instruments.
Reference is made to a certain International Distribution Agreement dated
as of September 20, 1994 between AST and AMCO, Inc., which was assigned to the
Company pursuant to the AST Agreement.
Reference is made to a form of Sales Representative Agreement (the form of
which has been provided to Investor) entered into with the following individuals
or entities:
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<PAGE>
1. Farrell Medical;
2. C. Poisson Enterprises, Inc.;
3. Mountain States Medical, Inc.;
4. Selected Medical Enterprises, Inc.;
5. Don Valente;
6. Affiliated Medical Research, Inc.;
7. Meadowbrook Medical Technologies, Inc.;
8. Med Team, Inc.;
9. Northeastern Medical;
10. New England Medical Equipment;
11. Corthomed, Inc.;
12. Weber Associates, Inc.;
13. Cardio Medics;
14. IDA, Inc.;
15. Jo Scheid;
16. Kimberly Walsh;
17. RTM Enterprises; and
18. Biolife, Inc.
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<PAGE>
EXHIBIT 10.6
THE TRANSFER OF THIS WARRANT IS SUBJECT TO
RESTRICTIONS CONTAINED HEREIN. THIS WARRANT
HAS BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF THE HOLDER THAT IT HAS BEEN
ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TOWARD THE RESALE OR OTHER DISTRIBUTION
THEREOF. NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS.
VISTA MEDICAL TECHNOLOGIES, INC.
Common Stock Purchase Warrant
To Purchase February 22, 1997
133,333 Shares of Common Stock of
Vista Medical Technologies, Inc.
THIS CERTIFIES that, for value received, Heartport, Inc., a Delaware
corporation, or its permitted and registered assigns (the "Holder"), is entitled
to subscribe for and purchase from Vista Medical Technologies, Inc., a Delaware
corporation (hereinafter called the "Corporation"), up to 133,333 shares (up to
100,000 shares after the Corporation's 4 for 3 reverse stock split effective
approximately February 25, 1997 (the "Reverse Split") and subject to further
adjustment as hereinafter provided) of fully paid and non-assessable Common
Stock of the Corporation (the "Common Stock"), subject to the provisions and
upon the terms and conditions hereinafter set forth at the per share price equal
to the price per share of such Common Stock offered to the public in the
Corporation's initial public offering of equity securities (such price as from
time to time to be adjusted as provided herein is called the "Warrant Price" but
the Warrant Price will not be adjusted for the Reverse Split), at or prior to
5:00 p.m. Pacific time on March 31, 2001 (the "Exercise Period"). However, this
Warrant shall not be exercisable until the earlier of (i) the closing of the
Company's initial public offering, provided that if such initial public offering
is not consummated prior to June 30, 1997, this Warrant may be exercised at any
time after June 30, 1997 at a Warrant Price (subject to adjustment as provided
herein) of $5.00 per share ($6.67 after the Reverse Split); or (ii) immediately
prior to the closing of an acquisition of all or substantially all of the
Company's outstanding stock or assets by an unrelated entity, by merger or
otherwise, provided that if such closing occurs prior to the closing of the
Company's initial public offering, the Warrant Price (subject to adjustment as
provided herein) shall be $5.00 per share ($6.67 after the Reverse Split).
This Warrant and any Warrant subsequently issued upon exchange or transfer
hereof are hereinafter collectively called the "Warrant."
Section 1. EXERCISE OF WARRANT. Subject to the provisions of the first
paragraph of this Warrant, the rights represented by this Warrant may be
exercised by the Holder,
<PAGE>
in whole or in part (but not as to fractional shares) at any time or from time
to time during the Exercise Period by the completion of the purchase form
attached hereto and by the surrender of this Warrant (properly endorsed) at the
office of the Corporation as it may designate by notice in writing to the Holder
hereof at the address of the Holder appearing on the books of the Corporation,
and by payment to the Corporation of the Warrant Price in cash or by certified
or official bank check, or alternatively in accordance with Section 2 below, for
each share being purchased. In the event of any exercise of the rights
represented by this Warrant, a certificate or certificates for the shares of
Common Stock so purchased, registered in the name of the Holder, or its nominee
or other party designated in the purchase form by the Holder hereof, shall be
delivered to the Holder within thirty (30) business days after the date in which
the rights represented by this Warrant shall have been so exercised; and, unless
this Warrant has expired or has been exercised in full, a new Warrant
representing the number of shares (except a remaining fractional share), if any,
with respect to which this Warrant shall not then have been exercised shall also
be issued to the Holder within such time. The person in whose name any
certificate for shares of Common Stock is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which this Warrant was surrendered and payment of the
Warrant Price, except that, if the date of such surrender and payment is a date
on which the stock transfer books of the Corporation are closed, such person
shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are open.
No fractional shares shall be issued upon exercise of this Warrant and no
payment or adjustment shall be made upon any exercise on account of any cash
dividends on the Common Stock issued upon such exercise. If any fractional
interest in a share of Common Stock would, except for the provision of this
Section 1, be delivered upon such exercise, the Corporation, in lieu of delivery
of a fractional share thereof, shall pay to the Holder an amount in cash equal
to the current market price of such fractional share as determined in good faith
by the Board of Directors of the Corporation (the "Board").
Section 2. NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting the rights
of the Holder under the terms of this Warrant, the Holder shall have the right
to convert this Warrant or any portion thereof (the "Conversion Right") into
shares of Common Stock as provided in this Section 2 at any time or from time to
time during the Exercise Period. Upon exercise of the Conversion Right with
respect to a particular number of shares subject to the Warrant (the "Converted
Warrant Shares"), the Corporation shall deliver to the Holder (without payment
by the Holder of any exercise price or any cash or other consideration) that
number of shares of fully paid and nonassessable Common Stock computed using the
following formula:
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<PAGE>
X = Y (A - B)
---------
A
Where X = the number of shares of Common Stock to be delivered to the
holder
Y = the number of Converted Warrant Shares
A = the fair market value of one share of the Corporation's
Common Stock on the Conversion Date (as defined below)
B = the per share exercise price of the Warrant (as adjusted to
the Conversion Date)
The Conversion Right may only be exercised with respect to a whole number of
shares subject to the Warrant. No fractional shares shall be issuable upon
exercise of the Conversion Right, and if the number of shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Corporation shall pay to the Holder an amount in cash equal to the
fair market value of the resulting fractional share on the Conversion Date (as
defined below). Shares issued pursuant to the Conversion Right shall be treated
as if they were issued upon the exercise of the Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be exercised by the
Holder by the surrender of the Warrant at the principal office of the
Corporation together with a written statement specifying that the Holder thereby
intends to exercise the Conversion Right and indicating the total number of
shares under the Warrant that the Holder is exercising through the Conversion
Right. Such conversion shall be effective upon receipt by the Corporation of
the Warrant together with the aforesaid written statement, or on such later date
as is specified therein (the "Conversion Date"). Certificates for the shares
issuable upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to the Warrant, shall be
issued as of the Conversion Date and shall be delivered to the Holder promptly
following the Conversion Date.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of this Section
2, fair market value of a share of Common Stock on the Conversion Date shall
mean:
(i) If traded on a stock exchange, the fair market value of the
Common Stock shall be deemed to be the average of the closing selling prices of
the Common Stock on the stock exchange determined by the Board to be the primary
market for the Common Stock over the ten (10) trading day period (or such
shorter period immediately following the closing of an initial public offering)
ending on the date prior to the Conversion Date, as such prices are officially
quoted in the composite tape of transactions on such exchange;
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<PAGE>
(ii) If traded over-the-counter, the fair market value of the
Common Stock shall be deemed to be the average of the closing bid prices (or, if
such information is available, the closing selling prices) of the Common Stock
over the ten (10) trading day period (or such shorter period immediately
following the closing of an initial public offering) ending on the date prior to
the Conversion Date, as such prices are reported by the National Association of
Securities Dealers through its NASDAQ system or any successor system; and
(iii) If there is no public market for the Common Stock, then the
fair market value shall be determined by mutual agreement of the holder of the
Warrant and the Corporation, and if the Holder and the Corporation are unable to
so agree, by a valuation consultant or an investment banking firm of national
reputation selected by the Corporation and reasonably acceptable to the holder
of the Warrant.
Section 3. STOCK SPLITS, CONSOLIDATION, MERGER AND SALE. In the event
that before the issuance of the shares of Common Stock into which this Warrant
may be exercised the outstanding shares of Common Stock of the Corporation shall
be split, combined or consolidated, by dividend, reclassification or otherwise,
into a greater or lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation and the number of
shares purchasable under this Warrant shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately adjusted. If there
shall be effected any consolidation or merger of the Corporation with another
corporation, or a sale of all or substantially all of the Corporation's assets
to another corporation, and if the holders of Common Stock shall be entitled
pursuant to the terms of any such transaction to receive stock, securities or
assets with respect to or in exchange for Common Stock, then, as a condition of
such consolidation, merger or sale, lawful and adequate provisions shall be made
whereby the Holder of this Warrant shall thereafter have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon the exercise
of such Warrant, such shares of stock, securities or assets as may be issuable
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 Common Stock immediately
theretofore so receivable had such 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 Holder to the end that the provisions hereof
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise of this
Warrant.
(a) STOCK TO BE RESERVED. The Corporation will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issue upon the exercise of this Warrant as herein provided, such number of
shares of Common Stock as shall then be issuable upon the exercise of this
Warrant. The Corporation shall from time to time in accordance with applicable
law increase the authorized amount of its Common Stock if at any time the number
of shares of Common Stock remaining
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<PAGE>
unissued and available for issuance shall not be sufficient to permit exercise
of this Warrant. The Corporation covenants that all shares of Common Stock
which shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirements of any national securities exchange
upon which shares of capital stock of the Corporation may be listed.
(b) ISSUE TAX. The issuance of certificates for shares of Common
Stock upon exercise of this Warrant shall be made without charge to the Holder
of this Warrant for any issuance tax in respect thereof provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the Holder of this Warrant.
(c) CLOSING OF BOOKS. The Corporation will at no time close its
transfer books against the transfer of the shares of Common Stock issued or
issuable upon the exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant.
Section 4. NOTICES OF RECORD DATES. In the event of:
(a) 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 or other distribution (other than cash
dividends out of earned surplus), or 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, or
(b) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation or
any transfer of all or substantially all the assets of the Corporation to or
consolidation or merger of the Corporation with or into any other corporation,
or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation,
then and in each such event the Corporation will give notice to the Holder of
this Warrant specifying (i) the date on which any such record is to be taken for
the purpose of such dividend, distribution or right and stating the amount and
character of such dividend, distribution or right, and (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock will be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up.
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<PAGE>
Such notice shall be given at least ten (10) days and not more than ninety (90)
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") or to a favorable vote of stockholders, if either is required.
Section 5. NO STOCKHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a stockholder
of the Corporation. No provision hereof, in the absence of affirmative action
by the Holder hereof to purchase shares of Common Stock, and no mere enumeration
hereon of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Warrant Price or as a stockholder of the
Corporation, whether such liability is asserted by the Corporation or by
creditors of the Corporation.
Section 6. REPRESENTATIONS OF HOLDER.
The Holder hereby represents and acknowledges to the Corporation that:
(a) this Warrant, the Common Stock issuable upon exercise of this
Warrant and any securities issued with respect to any of them by way of a stock
dividend or stock split or in connection with a recapitalization, merger,
consolidation or other reorganization will be "restricted securities" as such
term is used in the rules and regulations under the Securities Act and that such
securities have not been and may not be registered under the Securities Act or
any state securities law, and that such securities must be held indefinitely
unless registration is effected or transfer can be made pursuant to appropriate
exemptions;
(b) the Holder has read, and fully understands, the terms of this
Warrant set forth on its face and the attachments hereto, including the
restrictions on transfer contained herein;
(c) the Holder has either a pre-existing personal or business
relationship with the Corporation or one of its officers, directors or
controlling persons;
(d) the Holder is purchasing for investment for its own account and
not with a view to or for sale in connection with any distribution of this
Warrant or the Common Stock of the Corporation issuable upon exercise of this
Warrant and it has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws; provided that nothing contained herein will prevent Holder from
transferring such securities in compliance with the terms of this Warrant and
the applicable federal and state securities laws;
(e) the Holder is an "accredited investor" within the meaning of
paragraph (a) of Rule 501 of Regulation D promulgated by the Securities and
Exchange Commission and an "excluded purchaser" within the meaning of Section
25102(f) of the California Corporate Securities Law of 1968; and
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<PAGE>
(f) the Corporation may affix the following legend (in addition to any
other legend(s), if any, required by applicable state corporate and/or
securities laws) to certificates for shares of Common Stock (or other
securities) issued upon exercise of this Warrant ("Warrant Shares"):
"These securities have not been registered under the
Securities Act of 1933, or any state securities laws. They
may not be sold, offered for sale, pledged or hypothecated
in the absence of a registration statement in effect with
respect to the securities under all applicable federal and
state securities laws or an opinion of counsel satisfactory
to the Corporation that such registration is not required or
unless sold pursuant to Rule 144 of such Act."
Section 7. NOTICE OF PROPOSED TRANSFERS. This Warrant may not be
transferred, in whole or in part, until December 31, 1999; provided, however,
that this Warrant may be transferred in whole to any successor to substantially
all of the business of the original Holder. The Holder of this Warrant, by
acceptance hereof, agrees to comply in all respects with the provisions of this
Section 7. Prior to any proposed transfer of this Warrant or any Warrant
Shares, unless (i) pursuant to and in compliance with Rule 144 or (ii) there is
in effect a registration statement under the Securities Act covering the
proposed transfer, the Holder of such securities shall give written notice to
the Corporation of such Holder's intention to effect such transfer. Each such
notice shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied by either (i) a written opinion of
legal counsel who shall be reasonably satisfactory to the Corporation addressed
to the Corporation and reasonably satisfactory in form and substance to the
Corporation's counsel, to the effect that the proposed transfer of the Warrant
and/or Warrant Shares may be effected without registration under the Securities
Act, or (ii) a "no action" letter from the U.S. Securities and Exchange
Commission (the "Commission") to the effect that the transfer of such securities
without registration will not result in a recommendation by the staff of the
Commission that enforcement action be taken with respect thereto, whereupon the
Holder of such securities shall be entitled to transfer such securities in
accordance with the terms of the notice delivered by the Holder to the
Corporation. Each new certificate evidencing the Warrant and/or Warrant Shares
so transferred shall bear the appropriate restrictive legends set forth in
Section 6(f) above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for the Corporation, such legend is not
required in order to establish or assist in compliance with any provisions of
the Securities Act or any applicable state securities laws.
Section 8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated or destroyed, the Corporation may, on such terms as
to indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed. Any such new Warrant shall constitute an original
contractual obligation of the Corporation,
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<PAGE>
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall
be at any time enforceable by anyone.
Section 9. PRESENTMENT. Prior to due presentment of this Warrant together
with a completed assignment form attached hereto for registration of transfer,
the Corporation may deem and treat the Holder as the absolute owner of the
Warrant, notwithstanding any notation of ownership or other writing thereon, for
the purpose of any exercise thereof and for all other purposes, and the
Corporation shall not be affected by any notice to the contrary.
Section 10. NOTICE. Notice or demand pursuant to this Warrant shall be
sufficiently given or made, if sent by first-class mail, postage prepaid,
addressed, if to the Holder of this Warrant, to the Holder at its last known
address as it shall appear in the records of the Corporation, and if to the
Corporation, at 5451 Avenida Encinas, Suite A, Carlsbad, California 92008,
Attention: Secretary. The Corporation may alter the address to which
communications are to be sent by giving notice of such change of address in
conformity with the provisions of this Section 10 for the giving of notice.
Section 11. GOVERNING LAW. The validity, interpretation and performance
of this Warrant shall be governed by the laws of the State of California without
regard to principles of conflicts of laws.
Section 12. SUCCESSORS, ASSIGNS. Subject to the restrictions on transfer
by Holder set forth in Section 7 hereof, all the terms and provisions of the
Warrant shall be binding upon and inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.
Section 13. AMENDMENT. This Warrant may be modified, amended or
terminated by a writing signed by the Corporation and the Holder.
Section 14. SEVERABILITY. Should any part but not the whole of this
Warrant for any reason be declared invalid, such decision shall not affect the
validity of any remaining portion, which remaining portion shall remain in force
and effect as if this Warrant had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Warrant without including
therein any such part which may, for any reason, be hereafter declared invalid.
Section 15. INVESTOR RIGHTS. The Company agrees to amend its Amended
and Restated Investors' Rights Agreement dated November 27, 1996 (the
"Investors' Rights Agreement") to include the Converted Warrant Shares within
the definition of Registrable Securities in such agreement.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be duly
executed and delivered on and as of the day and year first above written by one
of its officers thereunto duly authorized.
VISTA MEDICAL TECHNOLOGIES, INC.
a Delaware corporation
By: /s/ John R. Lyon
------------------------------
John R. Lyon, President
The undersigned Holder agrees and accepts this Warrant and
acknowledges that it has read and confirms each of the representations
contained in Section 6.
HEARTPORT, INC., a Delaware corporation
By: /s/ illegible
------------------------------
Its: C.E.O.
------------------------------
Address: 200 Chesapeake Drive
Redwood City, CA 94063
[SIGNATURE PAGE TO COMMON STOCK PURCHASE WARRANT]
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<PAGE>
PURCHASE FORM
(To be executed by the Warrant Holder if he desires to exercise the Warrant in
whole or in part)
To: VISTA MEDICAL TECHNOLOGIES, INC.
The undersigned, whose tax identification number is _________________,
hereby irrevocably elects the right of purchase represented by the within
Warrant for, and to purchase thereunder, _______________________________________
_________________________ shares of Common Stock provided for therein and
tenders payment herewith to the order of
VISTA MEDICAL TECHNOLOGIES, INC.
in the amount of
$...............
The undersigned requests that certificates for such shares be issued as follows:
Name: .........................................................
Address: ......................................................
Deliver to: ...................................................
Address: ......................................................
and, if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant for the balance remaining of the shares purchasable under the
within Warrant be registered in the name of, and delivered to, the undersigned
at the address stated below
Address: .............................
Dated: __________________, _____
Signature................... (Signature must
conform in all respects to the name of the
Warrant Holder as specified on the face of
the Warrant, without alteration, enlargement
or any change whatsoever)
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ASSIGNMENT
(To be executed by the Warrant Holder if it desires to effect a transfer of the
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ____________________________________________________ whose Social
Security or other tax identification number is............................
[residing/located] at ...................... the attached Warrant, and
appoints............................. residing at
................................................................
................................................................
the undersigned's attorney-in-fact to transfer said Warrant on the books of the
Corporation, with full power of substitution in the premises.
Dated: _________________, ______.
In the presence of:
____________________________ ...................................
(Signature must conform in all respects to the
name of the Warrant Holder as specified on the
face of the Warrant, without alteration,
enlargement or any change whatsoever).
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EXHIBIT 10.7
INTERNATIONAL DISTRIBUTION AGREEMENT
THIS INTERNATIONAL DISTRIBUTION AGREEMENT (the "Agreement"), effective this 20th
day of September, 1994, is entered into by and between AMERICAN SURGICAL
TECHNOLOGIES CORPORATION, a Delaware corporation with a principal place of
business located at 300 Billerica Road, Chelmsford, Massachusetts 01824, U.S.A.,
hereinafter referred to as "ASTC" and
* * *
hereinafter referred to as "DISTRIBUTOR".
WHEREBY ASTC desires to appoint DISTRIBUTOR to promote, sell, distribute, and
service ASTC products in and within the Territory (as defined hereinafter) in
accordance with the terms and conditions stated herein; and
WHEREBY DISTRIBUTOR represents that it has the capability and resources to
promote, sell, distribute, and service ASTC products in and within the * * *
(hereinafter referred to as "the Territory"), to fulfill the needs and
requirements of customers for ASTC products in such Territory;
NOW THEREFORE, IN CONSIDERATION OF THE FOREGOING, it is mutually agreed by and
between the parties as follows:
1. EXCLUSIVE RIGHTS: ASTC hereby grants to DISTRIBUTOR the exclusive right to
purchase from ASTC those products set forth in Exhibit "B" annexed hereto
(" * * * "),
for the sole purpose of reselling such products in the Territory to
hospitals, clinics, physicians, and other medical and surgical entities,
institutions, and personnel (the "Medical Market"). ASTC appoints
DISTRIBUTOR as its exclusive representative to promote, sell, distribute,
and service ASTC Products only in the Territory and only to the Medical
Market. The Distributor shall have no right to promote, sell, or
distribute ASTC Products directly or indirectly, in any other Territory or
to any person or entity other than the Medical Market. For purposes of
this Agreement, the meaning of the term "sell" shall also include "lease"
or "rent".
2. TERMS AND CONDITIONS: DISTRIBUTOR hereby accepts the said appointment and
agrees to the conditions set forth herein and in accordance with the
Standard Terms and Conditions for International Distribution Agreements
annexed hereto as Exhibit "A" and incorporated herein by reference and made
a part hereof.
* * * Confidential Treatment Requested
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3. AVAILABILITY: ASTC shall make available for purchase by DISTRIBUTOR
sufficient quantities of ASTC Products to meet DISTRIBUTOR's reasonable
needs and requirements in order to fulfill the terms and conditions of this
Agreement.
4. INITIAL ORDER: Upon execution of this Agreement, and as a condition
precedent to the validity hereof, DISTRIBUTOR shall submit a Purchase Order
(as defined in Paragraph 9 to ASTC for an Initial Order of ASTC Products at
the prices set forth on Exhibit "B" annexed hereto except that the first
unit ordered will reflect a * * *% discount, units * * * will reflect a
* * *% discount, and all future orders will reflect a * * *% as shown on
Exhibit B. The said Initial Order is set forth as Exhibit "C" annexed
hereto.
5. ANNUAL PURCHASE COMMITMENT:
5.1. DISTRIBUTOR and ASTC agree the quantity of ASTC Products to be
purchased by DISTRIBUTOR will total * * * in year one, * * *
in year two and * * * in year three, year one commences with
grant of government registration. The products to be purchased are
the products listed in Exhibit B inclusive of any new products and
accessories to be added to Exhibit B hereafter.
5.2. No later than thirty (30) days following the last day of any
subsequent year of the term of this Agreement, if the term of this
Agreement shall have been extended in accordance with the terms of
this Agreement) DISTRIBUTOR and ASTC shall mutually agree in
writing on the Annual Purchase Commitment for the following year.
Failure to do so will result in a probationary ninety (90) day
period. Upon expiration of the probationary period, DISTRIBUTOR's
rights hereunder shall terminate, unless prior to the expiration of
said probationary period, ASTC notifies DISTRIBUTOR in writing that
DISTRIBUTOR's rights hereunder shall continue according to the
terms and conditions hereof.
5.3. Failure on the part of the DISTRIBUTOR in any consecutive two (2)
quarters in any given year of this Agreement, to purchase an
aggregate total of * * * of the Annual Purchase
Commitment shall result in a sixty (60) day probationary period,
which probationary period shall be followed by immediate
termination of DISTRIBUTOR's rights hereunder, unless prior to the
expiration of said probationary period, ASTC notifies DISTRIBUTOR
in writing that DISTRIBUTOR'S rights hereunder shall continue
according to terms and conditions hereof.
* * * Confidential Treatment Requested
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5.4. Any failure by the DISTRIBUTOR to meet its Annual Purchase
Commitment resulting from delayed delivery by ASTC of the ASTC
Products covered by this Agreement shall be documented at the time
of any such delay. Such failure shall not constitute a breach of
this Agreement so long as the quantity of ASTC Products subject to
such delay would, had DISTRIBUTOR been able to purchase such ASTC
Products during such period of delay, been equivalent to the
quantity of ASTC Products necessary to meet the Annual Purchase
Commitment for the relevant period.
6. MARKET DEVELOPMENT AND INFORMATION:
6.1. DISTRIBUTOR agrees to use its best efforts to develop a market for
ASTC Products and to enhance ASTC's image in the market place as a
provider of quality products. At the beginning of each calendar
year, DISTRIBUTOR shall provide to ASTC its business plan for the
coming year for the sale and promotion of ASTC Products in the
Territory, and ASTC and DISTRIBUTOR shall mutually agree in writing
on the sales promotion activities and performance criteria to be
met by DISTRIBUTOR for that calendar year.
6.2. DISTRIBUTOR shall annually provide ASTC a written analysis of the
market within the Territory, including total market size, market
share data and competitive activities, including, if reasonably
available to DISTRIBUTOR, information concerning competitors'
products, prices, and marketing programs and strategies, sales
reports, an account of its ASTC Products inventory, its key
accounts, and such other information as may be reasonably obtained
by DISTRIBUTOR relating to ASTC Products and competitors' products
so as to enable ASTC to assist DISTRIBUTOR in fully developing the
market demand for ASTC products and in developing appropriate
marketing and business plans for the mutual advantage of
DISTRIBUTOR and ASTC.
7. NEW PRODUCTS:
7.1. If ASTC in its sole discretion, decides to make a new product
available for sale * * * and in the
Territory (such new product being defined as product not listed on
Exhibit "B" annexed hereto), ASTC shall discuss with DISTRIBUTOR
the addition of such new product to this Agreement.
7.2. ASTC will grant DISTRIBUTOR right of first refusal if ASTC decides
to add new product(s) to this Agreement. If DISTRIBUTOR decides
that it does not want to add new product(s) to this Agreement, then
ASTC shall have the right to have the said new product distributed
by another representative within the Territory.
* * * Confidential Treatment Requested
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8. PRICES:
8.1. Prices to DISTRIBUTOR shall be in United States dollars and shall
be, initially, the prices set forth on Exhibit "B" annexed hereto
along with additional discounts as described in Section 4. Changes
in price may be made by ASTC, subject to ninety (90) days written
notice in advance to DISTRIBUTOR. Within such ninety day period,
DISTRIBUTOR may place reasonable orders for purchase of ASTC
Products, but ASTC explicitly retains the right to reasonably limit
the quantity of such orders.
8.2. All prices are calculated for delivery FOB ASTC's plant, currently
located in Chelmsford, Massachusetts, U.S.A. Customs duties and
charges, if any, shall be borne by DISTRIBUTOR. Any export
licenses in the United States shall be obtained and paid for by
ASTC. All other import or export licenses, approvals or both shall
be obtained by DISTRIBUTOR at its cost. Prices to DISTRIBUTOR do
not include any federal, state or local taxes that may be
applicable to the ASTC Products. When ASTC has the legal
obligation to collect such taxes, the appropriate amount shall be
added to DISTRIBUTOR's invoice and paid by DISTRIBUTOR unless
DISTRIBUTOR provides ASTC with a valid tax exemption certificate
authorized by the appropriate taxing authority.
9. PURCHASES:
9.1. Pursuant to this Agreement the DISTRIBUTOR shall submit purchase
orders for the ASTC Products ("Purchase Order"). Such Purchase
Orders shall be subject to the Standard Terms and Conditions for
International Distribution as set forth in Exhibit "A" annexed
hereto.
9.2. ASTC shall have the right to modify its Standard Terms and
Conditions for International Distribution upon mutual written
agreement between ASTC and DISTRIBUTOR, following which all future
Purchase Orders will be subject to such modified Terms and
Conditions.
9.3. DISTRIBUTOR may cancel without charge any outstanding Purchase
Order within seven (7) days of receipt of such Purchase Order by
ASTC, but only by written (or FAX) notice of cancellation, orders
canceled after the seven day period without sufficient reason are
subject to penalties mutually agreed to by ASTC and DISTRIBUTOR.
10. PAYMENT: Full payment to ASTC of DISTRIBUTOR's purchase price (including
any freight, taxes, or other applicable costs) shall be made in the United
States in United States dollars 60 days after shipment of order.
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11. TERM OF AGREEMENT:
11.1. Except as otherwise provided in this Section 11, this Agreement
shall have an initial terms of * * * from the effective
date hereof and automatically renew for one year periods unless
terminated by 90 days written notice before expiration of each term
by either party.
12. CANCELLATION AND TERMINATION:
12.1. This Agreement may be canceled by either party for any reason upon
ninety (90) days prior written notice to the other party.
12.2. Either party shall have the right to terminate this Agreement
immediately for just cause should either party breach any provision
of for this Agreement, including any of the following:
12.2.1. failure by DISTRIBUTOR to make payment for ASTC
Products purchased in accordance with ASTC's
established policy for this Agreement;
12.2.2. failure to establish and maintain a sales and service
organization of sufficient size to adequately and
effectively sell, service, and support ASTC Products in
the Territory;
12.2.3. failure to honor warranties;
12.2.4. failure to maintain adequate books and records with
respect to the names and addresses of customers, and
the sale and distribution of ASTC Products;
12.2.5. failure to comply with local law applicable in the
Territory, including by way of explanation but not
limitation, compliance with any local currency
restrictions or restrictions on payment of local
commissions to sales representatives;
12.2.6. violation of any of the obligations of DISTRIBUTOR with
respect to ASTC's patents, trademarks, copyrights,
labeling, products registrations, interest, know how,
trade names or ASTC's proprietary information;
12.2.7. violation of the commitments of DISTRIBUTOR with
respect to approvals and compliance with laws and
regulations or violation of the prohibition against
assignment contained within;
12.2.8. any event, action or failure that constitutes cause for
termination under applicable law; or
* * * Confidential Treatment Requested
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12.2.9. any change of ownership of DISTRIBUTOR that in the sole
determination of ASTC is in any way detrimental or
prejudicial to the interests of ASTC.
12.3. DISTRIBUTOR shall have twenty (20) days after written notice
specifying a breach of this Agreement to cure such breach. If,
under the circumstances then current, it would appear that any
breach is final, or cannot be cured, ASTC may terminate the
Agreement immediately for cause by giving notice to this effect.
12.4. Either ASTC or DISTRIBUTOR may terminate this Agreement in the
event that the other is dissolved, becomes insolvent, files a
petition in bankruptcy, or is declared bankrupt, or makes an
assignment for benefit of creditors, or there is reasonable
evidence indicating the possibility of such filing or assignment
during the term this Agreement is in effect. Termination under
this provision shall be effective twenty (20) days following
written notice to that effect.
12.5. DISTRIBUTOR may terminate this Agreement immediately for just cause
should ASTC breach any provision of this Agreement, provided that
any such termination shall not take effect if ASTC has cured such
breach within twenty (20) days following written notice of
DISTRIBUTOR's intention to terminate on account of such breach.
12.6. Upon termination of this Agreement for whatever reason, any claims
for money owed that either party may have against other party under
this Agreement shall immediately become due, whatever the nature of
such claims.
12.7. Both DISTRIBUTOR and ASTC shall be entitled to cancel all Purchase
Orders which are outstanding at the time of notice of termination,
so long as products have not been delivered to DISTRIBUTOR pursuant
to such Purchase Orders. Provided however, that subject to payment
in advance to ASTC, DISTRIBUTOR shall be entitled to receive ASTC
Products necessary to fulfill valid and binding Purchase Orders
accepted by DISTRIBUTOR prior to notification of termination of
this Agreement. Prior to filling orders for such products ASTC
shall be entitled to request and receive documentary evidence of
all such outstanding Purchase Orders and an accounting of
DISTRIBUTOR's then current inventory of ASTC Products.
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12.8.
12.8.1. Upon termination of this Agreement DISTRIBUTOR shall
refrain from use of any signs, equipment, advertising
matter, or material which refer to or are related to
ASTC and from acts and omissions that indicate or
suggest a relationship with ASTC. DISTRIBUTOR shall
promptly return to ASTC all ASTC property, promotional
material and proprietary information.
12.8.2. Upon termination of the Agreement DISTRIBUTOR shall not
be entitled to any termination compensation,
consequential damages, indemnity, or other payment for
goodwill, lost profits, costs of re-establishment or
replacement of the business, or any other expenses, or
for loss of rights relating to the business established
by DISTRIBUTOR or rights relating to terminating to
this Agreement.
12.8.3. DISTRIBUTOR recognizes that prices charged by ASTC to
DISTRIBUTOR allow DISTRIBUTOR to obtain a reasonable
return for its entire services and profit on resale,
including costs of establishing and maintaining its
organization. DISTRIBUTOR expressly acknowledges any
rights to such indemnity afforded to it by law or
custom, and to the extent permissible under applicable
law, expressly and completely waives all its rights to
such indemnity benefits, if any.
12.8.4. DISTRIBUTOR agrees to indemnify and hold ASTC harmless
from all losses, damages, amounts, costs, and expenses
incurred by ASTC as a result of claims or actions
brought by employees, agents, or representatives of
DISTRIBUTOR for any severance pay, compensations,
disability payment or social security payment or
compensation.
12.9. Upon any termination of this Agreement, ASTC shall buy back any
unsold inventory that DISTRIBUTOR, will have at the time
termination per the following schedule:
Products unused and less than * * * after shipment - * * *
of buying cost.
Products used and less than * * * after shipment - * * *
of buyer cost.
* * * Confidential Treatment Requested
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Products use and between * * * and * * * years after
shipment - * * * of buying cost.
12.10. The aggregate amount to be paid to be paid to DISTRIBUTOR under the
preceding subparagraph 12.9 may be offset by ASTC against any
claims it has against DISTRIBUTOR, including claims for payment of
goods supplied under this Agreement.
12.11. At the time of termination, ASTC shall take responsibility for all
transactions relative to ASTC products including service of
products.
13. SUB-DISTRIBUTORS: Nothing herein shall prohibit DISTRIBUTOR from
appointing one or more sub-distributors within the Territory, provided
however, that with respect to each such sub-distributor:
13.1. such appointment or appointments (including the sub-Territory to be
assigned to any such sub-distributor) shall be consented to in
writing by ASTC.
13.2. such sub-distributor shall purchase ASTC products only from
DISTRIBUTOR and not from ASTC;
13.3. such sub-distributor shall not sell any ASTC products outside its
sub-Territory;
13.4. such sub-distributor shall enter into and execute a sub-
distribution agreement with DISTRIBUTOR (in form and content
acceptable to ASTC) by the terms of which the sub-distributor
agrees to be bound by all the terms of this Agreement; and
13.5. such sub-distributor shall agree in writing that nothing in this
paragraph 13 shall be deemed to create the relationship of
principal and agent, master and servant, partner, joint venturer,
or any similar relationship between ASTC and any such sub-
distributor.
14. NOTICES:
14.1. All notices given under this Agreement and the provisions contained
herein shall be sent by first class registered airmail, postage
prepaid and return receipt requested, by Federal Express, or by
Telecopier, or Facsimile as directed below:
* * *
* * * Confidential Treatment Requested
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* * *
when directed to DISTRIBUTOR, and to:
American Surgical Technologies Corporation
Attn: Vice President Sales
300 Billerica Road
Chelmsford, MA 01824 U.S.A.
Phone: (508) 250-0150
Fax: (508) 250-1664
when directed by ASTC.
14.2. Notices shall be considered delivered when mailed or sent by
Telecopier or Facsimile in accordance with the provisions of
subparagraph 14.1 above subject to proof of receipt by Telecopier
or Facsimile confirmation or by mail receipt.
Executed this 20th day of September, 1994 by and on behalf of
DISTRIBUTOR
By: /s/ * * * , DULY AUTHORIZED
------------------------------
Title: President
------------------------------
Executed this 20th days of September, 1994 by and on behalf of
AMERICAN SURGICAL TECHNOLOGIES CORPORATION
By: /s/ Kenneth G. Hayes, Jr. , DULY AUTHORIZED
------------------------------
Title: President
------------------------------
* * * Confidential Treatment Requested
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EXHIBIT A
Standard Terms and Conditions
for
INTERNATIONAL DISTRIBUTION AGREEMENT
by and between
AMERICAN SURGICAL TECHNOLOGIES CORPORATION
and
AMCO, Inc., DISTRIBUTOR
1. INCORPORATION OF TERMS AND CONDITIONS: These Standard Terms and Conditions
are incorporated into and are a part of the International Distribution
Agreement by and between AMERICAN SURGICAL TECHNOLOGIES CORPORATION
("ASTC") and the above named DISTRIBUTOR ("the Agreement"). Unless
otherwise noted hereinafter, all definitions and defined terms appearing in
the aforesaid Agreement shall bear the same meanings as such definition and
defined terms bear in the aforesaid Agreement whenever such definitions and
defined terms shall appear hereinafter.
2. DILIGENCE AND CONFLICTS OF INTEREST: DISTRIBUTOR shall exercise due
diligence and its best efforts in promoting and selling ASTC Products
within the Territory. DISTRIBUTOR shall promote the products of other
companies only if such promotion will not prejudice ASTC business interests
or create a conflict of interest in handling ASTC's confidential or
proprietary information.
3. CAPABILITY TO PERFORM: DISTRIBUTOR shall maintain the financial capability
to perform the Distribution Agreement and shall, at its own expense,
establish and maintain a sales, marketing and distribution, and service
organization, and employ personnel in sufficient number of adequately and
effectively sell ASTC Products in the Territory, including the appointment
of a Product Manager who shall be responsible for the sale and promotion of
ASTC products, as well as for training of DISTRIBUTOR's sales
representatives in the sale and promotion of ASTC Products.
4. BOOKS AND RECORDS: Not applicable
5. TRAINING:
5.1. DISTRIBUTOR shall provide in-service training for personnel of
customers acquiring ASTC Products and shall provide necessary user
education for such personnel. ASTC shall provide DISTRIBUTOR with
marketing and technical information concerning the ASTC Products as
well as reasonable quantities of brochures, instructional
materials, advertising literature, and other product data, provided
that all such material will be printed in the English language.
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EXHIBIT A
5.2. Upon mutual agreement, DISTRIBUTOR shall participate in training
programs offered by ASTC by sending its sale, service, and support
personnel, as applicable, to such training sessions for such
personnel as ASTC may from time to time make available at
reasonable intervals. Such training sessions shall be conducted in
the English language at locations to be designed by ASTC.
DISTRIBUTOR shall bear all costs associated with the travel to and
attendance of its personnel at such training sessions. Should it
be required that ASTC conduct training sessions specifically for
the benefit of DISTRIBUTOR within the Territory, all costs
therefore shall be borne by DISTRIBUTOR, including the reasonable
costs of travel to and attendance at such special training sessions
by ASTC personnel.
6. REPUTATION: Both ASTC and DISTRIBUTOR understand, acknowledge and agree
that the continued maintenance of an image of excellence and a reputation
for high level, ethical marketing of ASTC Products is essential to the
continued success of both parties. DISTRIBUTOR agrees that its sales,
marketing, distribution, or advertising will not reflect unfavorably on, or
dilute in any way, such image of excellence and reputation for high level
ethical marketing. DISTRIBUTOR agrees that it shall not do anything,
directly, or impair the current image or to lower the prestige or quality
of ASTC Products, or to impair the reputation of ASTC.
7. DELIVERY, TITLE, RISK OF LOSS, AND RETURNS:
7.1. Firm Purchase Orders are to be placed by DISTRIBUTOR at least
ninety (90) days prior to the required delivery date. Forecasts of
anticipated requirements of ASTC Products for each successive six-
month period shall be supplied by DISTRIBUTOR semi-annually at
least thirty (30) days prior to the end of each six (6) month
period. Products shall be shipped at DISTRIBUTOR's expense in such
manner as ASTC shall deem appropriate or as otherwise directed.
Title and risk of loss for ASTC Products shall remain with ASTC
until delivery, FOB Chelmsford, Massachusetts, at which point title
and risk of loss shall shift to DISTRIBUTOR. DISTRIBUTOR shall
obtain insurance sufficient to cover the value of each shipment or
shall instruct ASTC to obtain such insurance and to bill
DISTRIBUTOR therefor.
7.2. DISTRIBUTOR shall inspect all ASTC Products promptly upon receipt
thereof and may reject any ASTC Product that fails in any material
way to meet the specifications set forth in ASTC's current brochure
for such ASTC Product. Any ASTC Product not properly rejected
within forty-five (45) days of receipt of such ASTC Product by
DISTRIBUTOR (the "Rejection Period") shall be deemed accepted.
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EXHIBIT A
7.3. To reject an ASTC Product, DISTRIBUTOR shall, within the Rejection
Period, notify ASTC in writing of its rejection and in sufficient
detail, the reasons for such rejection, and request a Return Goods
Authorization ("RGA") number. ASTC shall provide the RGA number to
DISTRIBUTOR within seven (7) days of receipt of the request unless,
in ASTC's reasonable determination, return of the ASTC Products is
inappropriate or unnecessary; the grounds for which shall be
provided in writing to DISTRIBUTOR within such seven day period.
7.4. Within seven (7) days of receipt of the RGA number DISTRIBUTOR
shall ship to ASTC the rejected products, freight prepaid, in its
original shipping carton with the RGA number displayed on the
outside of the carton. ASTC reserves the right to refuse to accept
any rejected products that do not bear an RGA number on the outside
of the carton. As promptly as possible but no later than forty
five (45) working days after receipt of properly rejected products
ASTC shall at its sole option and expense either repair or replace
the rejected ASTC Products. ASTC shall pay the shipping charges
back to DISTRIBUTOR for properly rejected products; otherwise
DISTRIBUTOR shall be responsible for the shipping charges.
7.5. Subsequent to the Rejection Period, DISTRIBUTOR may not return any
ASTC Product to ASTC for any reason without ASTC's prior written
consent. For any ASTC product for which such consent has been
given, ASTC shall levy a return charge amounting to twenty percent
(20%) of DISTRIBUTOR'S purchase price for such ASTC Product, and
shall credit the balance of the purchase price to DISTRIBUTOR's
account within forty five (45) days upon receipt of such returned
ASTC Product. DISTRIBUTOR shall be responsible for all shipping
charges.
8. WARRANTY:
8.1. DISTRIBUTOR shall pass on to its customers ASTC's standard Limited
Warranty as set forth here, including the limitations set forth in
subsections 8.2 and 8.3 immediately below.
* * * products are warranted for a period of one year
from the date of shipment, with exceptions as noted, to be free
from defects in material and workmanship. A three (3) month
warranty exists for the Light Guide, video peripherals and
Replacement Lamp. No warranty
* * * Confidential Treatment Requested
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EXHIBIT A
exists for Stereo Eyewear. The Warranty is limited to the repair
or replacement of the product, at the discretion American Surgical
Technology Corporation, without charge when returned to the
appropriate service facility.
American Surgical Technologies Corporation warrants that the
equipment is fit for the purposes and indications described in the
labeling when used in accordance with the directions for use.
Unless the equipment is used in accordance with such instructions
this warranty is void and of no effect. NO OTHER EXPRESSED OR
IMPLIED WARRANTY EXISTS, INCLUDING ANY WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE. THE COMPANY WILL NOT BE
LIABLE FOR PROXIMATE, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
This warranty does not cover abnormal wear and tear or damage
caused by misuse modifications, recalibrations, abuse or service by
other than an authorized Company representative.
8.2. EXCEPT FOR THE EXPRESS WARRANTY SET FORTH ABOVE, ASTC GRANTS NO
OTHER WARRANTIES, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE
REGARDING THE ASTC PRODUCTS, THEIR FITNESS FOR ANY PURPOSE, THEIR
QUALITY, THEIR MERCHANTABILITY OR OTHERWISE.
8.3. ASTC LIABILITY UNDER THE AFORESAID WARRANTY SHALL BE LIMITED TO A
REFUND OF THE CUSTOMER'S PURCHASE PRICE. IN NO EVENT SHALL ASTC BE
LIABLE FOR THE COST OF PROCUREMENT OF SUBSTANTIVE GOODS BY THE
CUSTOMER OR FOR ANY SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES
FOR BREACH OF WARRANTY.
8.4. NOTWITHSTANDING ANY OF THE ABOVE PROVISIONS, ASTC SHALL BE
RESPONSIBLE FOR CLAIMS OF THIRD PARTIES OR DAMAGES ALLEGED TO BE
SUFFERED BY REASON OF THEIR USE OF PRODUCTS, PROVIDED THE DAMAGES
ARE NOT DUE TO ANY DEFAULT, NEGLIGENCE, MISREPRESENTATION, OR ANY
ACT OR MISSION OF DISTRIBUTOR PROVIDED THAT DISTRIBUTOR HAS GIVEN
ASTC PROMPT NOTICE OF ANY SUCH CLAIM.
9. REPAIR AND REPORTING OF PRODUCT MALFUNCTION:
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<PAGE>
EXHIBIT A
9.1. DISTRIBUTOR shall
9.1.1. establish and maintain to the satisfaction of ASTC the
facility and capability within its own organization, or
9.1.2. shall by contract have constant and ready access to such
facility and capability outside its own organization, to the
satisfaction of ASTC, to undertake and perform reasonably
foreseeable repairs and service with respect to ASTC
Products, including attendance by DISTRIBUTOR's own
personnel, or the appropriate personnel of DISTRIBUTOR's
contract service and repair organization at applicable
training sessions as set forth in Paragraph 5.2 above.
9.2. During the term of this Agreement, DISTRIBUTOR shall promptly
perform or cause to be performed all necessary repair and service
with respect to any ASTC Product, including any repair or service
during the Warranty period applicable to such ASTC Product, unless
ASTC expressly directs that such Warranty repair or service shall
be performed by ASTC. The reasonable cost of Warranty repair and
service made or performed by or on behalf of DISTRIBUTOR shall be
borne by ASTC. DISTRIBUTOR shall
9.2.1. promptly notify ASTC of each instance of Warranty repair or
service prior to undertaking such repair or service, and
9.2.2. with respect to all repairs and service, use its best
efforts to conform with ASTC's published Service Policies,
copies of which shall be furnished to DISTRIBUTOR, as the
same shall be promulgated by ASTC from time to time.
9.3. DISTRIBUTOR shall promptly report to ASTC in writing any complaint
with respect to, or malfunction of any ASTC Product within or
without the Warranty period.
9.4. In accordance with the requirements and regulations established by
the United States Food and Drug Administration, to which
requirements and regulations ASTC is bound in all respects,
DISTRIBUTOR shall immediately (but in no event more than five days
following the date of any such occurrence) report to ASTC in
writing the details and circumstances of any occurrence involving
the malfunction of any ASTC product resulting in or involved with
injury to or the death of any person. FAILURE TO COMPLY WITH THE
PROVISIONS OF THIS SUBSECTION 9.4
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<PAGE>
EXHIBIT A
SHALL CONSTITUTE CAUSE FOR THE IMMEDIATE TERMINATION OF THIS
AGREEMENT.
10. PROTECTION OF RIGHTS:
10.1. DISTRIBUTOR shall not dispute or contest the validity of any of
ASTC's rights to letters patents, trademarks, copyrights, product
registrations and approvals, know-how or other intangible property
interests with respect to ASTC Products.
10.2. DISTRIBUTOR shall not omit or alter patent numbers, trade names or
trademarks, numbers of series, or any other ASTC marking affixed on
the ASTC Products or alter any other product labeling. DISTRIBUTOR
shall, however, be entitled to mark the products with its trademark
or trade name in a prominent place, subject to ASTC prior written
consent. DISTRIBUTOR is not authorized to use the trademark and
trade name AMERICAN SURGICAL TECHNOLOGIES CORPORATION, ASTC, OR
* * * (or any other trade name, or trademark used by ASTC) in any
manner except to indicate, during the term of this Agreement, that
it is an independent authorized DISTRIBUTOR for ASTC and is selling
ASTC products. DISTRIBUTOR shall acquire no rights in the ASTC or
* * * trademark and trade names, or any other trademark owned by
ASTC.
10.3. DISTRIBUTOR understands and agrees that it is not authorized to use
the name American Surgical Technologies Corporation in connection
with its general business or to imply to third parties that it
relationship with ASTC is other than as a sales DISTRIBUTOR under
this Agreement.
10.4. DISTRIBUTOR shall hold ASTC harmless and indemnify it against
liability, including attorneys' fees and other costs of defense
resulting from actions of third parties claiming injury or loss as
a result of the failure by DISTRIBUTOR to honor the provisions of
this paragraph 10.
10.5. DISTRIBUTOR agrees to protect ASTC products against imitations and
unfair competition by others, and will promptly provide ASTC
written notice of any such conduct. DISTRIBUTOR agrees to
cooperate with ASTC at ASTC's request and expense, and to promptly
take whatever action is required to cause the termination of such
conduct. ASTC reserves the right to take whatever action it deems
appropriate to protect its trademarks and trade names.
* * * Confidential Treatment Requested
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EXHIBIT A
11. INDEPENDENT CONTRACTOR RELATIONSHIP: It is understood that both parties
hereto are independent contractors and engaged in the operation of their
own respective businesses. Neither party hereto is to be considered the
agent of the other party of any purpose whatsoever, and neither party has
any authority, express or implied, to enter into any contracts or assume
any obligations for the other party, to pledge the credit, or make any
warranties or representations on behalf of the other party except where
expressly authorized in writing to do so. Nothing in this Agreement or in
the activities of either party hereto shall be deemed to create an agency,
partnership, or joint venture relationship.
12. INDEMNITY, LEGAL ACTIONS AND PRODUCT CONDITION:
12.1. DISTRIBUTOR agrees to save and hold ASTC harmless from any and all
claims, costs, liabilities and responsibilities, regardless of the
claimant or his place of filing a claim, resulting from or in any
way associated with the functioning or performance of DISTRIBUTOR
as a distributor, supplier and seller, or other related descriptive
classifications, for ASTC Products supplied to DISTRIBUTOR by ASTC.
DISTRIBUTOR shall be the sole warrantor or guarantor of the safety,
operation and performance of the ASTC Products covered by this
Agreement to whatever extent such a warranty or guarantee is made
by DISTRIBUTOR. ASTC shall be responsible for any of its products
that fail to meet label specifications at the time of shipment to
DISTRIBUTOR, and shall indemnify and hold DISTRIBUTOR harmless with
respect to any and all claims resulting from use of such products.
12.2. DISTRIBUTOR agrees not to join ASTC or any ASTC employee as a party
defendant or plaintiff or any interest thereof, in any action at
law or in equity or in any other proceeding, regardless of the
descriptive classification, arising out of the liabilities, duties
and responsibilities above described which DISTRIBUTOR assumes or
performs. DISTRIBUTOR shall promptly notify ASTC of any and all
actions at law or equity or claims or governmental administrative
proceedings arising out of the operation or performance of this
Agreement.
12.3. ASTC warrants that all ASTC Products are in operating condition as
of the time of shipment. Nothing herein shall relieve ASTC of any
obligation or liability existing under applicable law regarding
claimed defects in the products supplied to DISTRIBUTOR by ASTC
provided that
12.3.1. such defect existed as of the time the product was
shipped by ASTC;
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<PAGE>
EXHIBIT A
12.3.2. ASTC has given DISTRIBUTOR reasonable notice of any
change in the specifications to any such ASTC Product;
12.3.3. no modifications to the said ASTC Product have been
made by or with the approval of DISTRIBUTOR or by the
customer;
12.3.4. the said ASTC Product has not been subject to misuse,
negligence, or accident;
12.3.5. the said ASTC Product has not had its serial or lot
number altered, effaced, or removed; and
12.3.6. the said ASTC Product has at all times been used in
accordance with its instructions for use.
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<PAGE>
EXHIBIT A
13. FORCE MAJEURE:
13.1. If due to industrial conflicts, mobilization, requisition, embargo,
currency restriction, insurrection, general shortage of transport,
material or power supply, fire, explosion, stroke of lightning,
force majeure and similar casualties or other events beyond ASTC
control, as well as default in deliveries from subcontractors due
to such circumstances as defined in the clause, it is impossible
for ASTC to deliver purchased products, DISTRIBUTOR shall not be
entitled to any damages during such period of impossibility and
ASTC shall not be considered in breach or default under this
Agreement.
13.2. If the performance of this Agreement by either party is made
commercially impracticable
13.2.1. by the occurrence of an economic contingency the non-
occurrence of which was a basic assumption on which
this Agreement was made, or
13.2.2. by compliance in good faith with any applicable foreign
or domestic governmental law, regulation, or order,
then this Agreement shall terminate immediately. For
purposes of this Agreement, currency devaluation,
currency restrictions, currency and exchange controls,
and other monetary controls, restrictions and
restraints shall not be considered to render the
performance of this Agreement by DISTRIBUTOR
commercially impracticable or otherwise be considered
force majeure with respect to DISTRIBUTOR.
14. CHANGES AND ADDITIONS TO AGREEMENT: The International Distribution
Agreement, including these Standard Terms and conditions
incorporated therein, constitutes the entire and final agreement
between the parties and supersedes all prior agreements and
understandings, oral or written, all of which are deemed to have
been merged herein. No modification, assignment, or any future
representation, promise, or agreement in connection with the
subject matter of this International Distribution Agreement shall
be binding on ASTC and DISTRIBUTOR unless made in writing and
signed by a duly authorized officer of each.
15. GOVERNING LAW AND JURISDICTION:
15.1. This Distribution Agreement shall be deemed to have been executed
and delivered in Chelmsford, Massachusetts, United States of
America, and all
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<PAGE>
EXHIBIT A
questions arising out of or under this Agreement shall be governed
by the laws of the Commonwealth of Massachusetts and the United
States of America.
15.2. Any and all claims, actions, and lawsuits seeking damages for
personal injuries or death resulting from the use of an ASTC
Product shall be subject to, and governed by the laws of the
jurisdiction where the injury or death is alleged to have occurred.
In case of any litigation arising out of any dispute between the
parties concerning the interpretation or the compliance with this
Agreement the parties hereby expressly declare to accept the
jurisdiction of the Massachusetts Courts. Notwithstanding the
foregoing however, ASTC shall be entitled at its discretion to seek
relief in a court of competent jurisdiction in the district in
which DISTRIBUTOR is domiciled.
16. PROPRIETARY INFORMATION:
16.1. DISTRIBUTOR acknowledges that it has access to valuable proprietary
information including but not limited to technical data and
customer and marketing information, all of which are the property
of ASTC, have been maintained confidential and are used in the
course of ASTC business.
16.2. DISTRIBUTOR shall not, either during the term of this Agreement or
thereafter, disclose such ASTC proprietary information to anyone
other than those of its employees having a need to know and shall
refrain from use of such information other than in the performance
of this Agreement. In addition, DISTRIBUTOR shall take all
reasonable precautions to protect the value and confidentiality of
such information to ASTC. All records, files, notes, drawings,
prints, samples, advertising material and the like relating to the
business, products, or projects of ASTC and all copies made from
such documents shall remain the sole and exclusive property of ASTC
and shall be returned to ASTC immediately upon written request by
ASTC.
16.3. Neither party shall be obligated or required to maintain in
confidence any information with respect to which it can demonstrate
with written records
16.3.1. is in the public domain or known to the receiving party
prior to disclosure by the disclosing party; or
16.3.2. becomes known to the public after disclosure by the
disclosing party, other than through breach of this
Agreement; or
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<PAGE>
EXHIBIT A
16.3.3. becomes known to the receiving party from a source
other than the disclosing party without breach of any
obligation of confidence; or
16.3.4. is or has been furnished to a third party by the
disclosing party without restriction on the third
party's right to disclose such information.
17. GOVERNMENT REGULATIONS:
17.1. DISTRIBUTOR agrees that it will secure and maintain any and all
required approvals by any government other than the United States
of America and all required product and public health registrations
for the implementation, execution and performance of the
Distribution Agreement.
17.2. Upon any expiration, cancellation, or termination of this
Agreement, such approvals and registrations shall be transferred
and delivered to, and shall inure to the benefit of ASTC, to the
extent that this is permissible under applicable law, to ASTC other
than lawfully imposed transfer fees. The cost of said transfer
will not exceed $10,000. DISTRIBUTOR shall obtain all necessary
documents or licenses and shall comply with all applicable laws and
regulations, including, if required, registration of this
International Distribution Agreement.
17.3. DISTRIBUTOR shall notify ASTC of all permits, approvals and
registrations obtained by it, and shall further notify ASTC of any
other regulatory requirements with respect to DISTRIBUTOR's sale,
distribution, or service of ASTC Products within the Territory, as
such regulatory requirements may be in effect from time to time.
17.4. DISTRIBUTOR agrees that it shall not allow either the products
supplied to it by ASTC, ASTC's trademarks, any proprietary data of
ASTC, or any direct product of such data, to be knowingly made
available, either directly or indirectly, or in any way to be
knowingly given, transferred, sold or re-exported to any country in
violation of its laws and export control regulations or applicable
laws of any country (or the European Economic Community).
17.5. United States laws and export control regulations governing the
exportability of technical data and products to nations are subject
to change. If any country included within DISTRIBUTOR's Primary
Area of Responsibility shall, at the time of execution of the
Distribution Agreement, or at any time during the life of the
Distribution Agreement,
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<PAGE>
EXHIBIT A
be placed in an excluded category by the United States government
for the receipt of either technical data or the manufacture or sale
of products of a type such as the ASTC Products, then the
DISTRIBUTOR agrees that it shall take all appropriate and necessary
actions so as to cease business activities, selling, and promoting
such ASTC Products in and within such excluded country.
18. UNFAIR COMPETITION AND PATENT INFRINGEMENT:
18.1. DISTRIBUTOR shall promptly advise ASTC of any infringement or
potential infringement by third parties of which DISTRIBUTOR
becomes aware, or of any issued patents relating to the ASTC
Products supplied by ASTC under this Agreement. ASTC shall have
the right, but not the obligation, to sue alleged infringers.
18.2. If suit is brought by ASTC, ASTC shall control the prosecution
thereof and be entitled to retain any amounts recovered in full by
reason of such infringement. DISTRIBUTOR agrees to cooperate with
and assist ASTC in any such suit. ASTC shall reimburse distributor
for reasonable costs related to such assistance if such costs were
incurred at the request of ASTC. ASTC shall have the exclusive
right to negotiate and approve any settlement of such suits.
18.3. In the event that DISTRIBUTOR joins ASTC by mutual agreement in
litigation relating to such infringement, DISTRIBUTOR shall bear an
agreed proportion of the legal costs. Should any damages or costs
in such litigation be awarded to ASTC and DISTRIBUTOR, DISTRIBUTOR
shall be entitled to recover the same proportion thereof as its
contribution to expenses.
18.4. ASTC represents that it has no knowledge of any patent rights in
the Territory that would be infringed by use or sale of ASTC
products therein, or by use of ASTC's proprietary information.
ASTC does not warrant that the manufacture, use or sale of any of
its products, or utilization of any of its proprietary information
is free of liability for infringement or charges of infringement of
patent rights owned by third parties. In the event that ASTC is
enjoined from making and selling and/or DISTRIBUTOR is enjoined
from selling ASTC Products as a result of charges of infringement
of patent rights, such injunction shall not constitute a breach of
this Agreement.
19. SUCCESSORS AND ASSIGNS: This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
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<PAGE>
EXHIBIT A
and assigns, provided, however, that neither party shall have the
right to assign or otherwise transfer its rights hereunder without
the express prior written consent of the other party. Any other
assignment without such consent shall be null and void. ASTC shall
have the right at its sole option to terminate this International
Distribution Agreement upon the making of any such purported
assignment by DISTRIBUTOR. Provided, however, by its execution of
this Agreement, DISTRIBUTOR expressly consents to the assignment by
ASTC of this Agreement to a successor to ASTC's business, in the
event of any such assignment by ASTC.
20. MISCELLANEOUS PROVISIONS:
20.1. ASTC shall have the right to manufacture ASTC Products in the
Territory. DISTRIBUTOR expressly acknowledges that it is granted
no rights under this Agreement to manufacture any ASTC Product.
20.2. Each of the parties hereto represents and warrants that it has not
employed any broker or finder in connection with this Agreement or
the transactions contemplated herein.
20.3. If any provision or provisions of this International Distribution
Agreement, including these Standard Terms and Conditions, shall be
held by a court of competent jurisdiction to be contrary to law,
such provision or provisions shall be deemed to be null and void
and the remainder of the Distribution Agreement and these Standard
Terms and conditions shall nonetheless remain in full force and
effect.
20.4. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one
and the same instrument.
20.5. Headings and captions are included herein solely for convenience
and reference, and do not constitute a part of this Agreement for
any other purpose.
20.6. The English language version of this Agreement shall be definitive
and shall control over any translation hereof.
21. RESOLUTION OF DISPUTES:
21.1. Any dispute arising out of or with respect to this Agreement shall
be referred to an arbitration proceeding to be conducted in Boston,
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<PAGE>
EXHIBIT A
Massachusetts, U.S.A. by the American Arbitration Association or
its designee. Except as otherwise determined by the duly appointed
Arbitrator, the rules of procedure to be followed with respect to
such arbitration shall be the then effective rules of the American
Arbitration Association.
21.2. Any award rendered in such arbitration shall be final and binding
upon the parties, and may be enforced in any court of competent
jurisdiction. Any monetary award shall be made and paid in United
States dollars. The arbitration shall be conducted in the English
language, and all evidence submitted to such arbitration shall be
submitted in the English language.
21.3. ASTC and DISTRIBUTOR expressly agree that the Arbitrator shall have
the power to, at the request of ASTC,
21.3.1. issue an interim order or award requiring DISTRIBUTOR
to cease sale and distribution of ASTC Products pending
final outcome of the arbitration, and
21.3.2. grant injunctive relief.
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<PAGE>
EXHIBIT B
* * * INTERNATIONAL DISTRIBUTOR PRODUCT/PRICE LIST
All prices in U.S. Dollars Effective November 1, 1993
INTERNATIONAL DISTRIBUTOR PRICING
The prices on the International Distributor Price List reflect a * * * discount
from the U.S. Hospital Price List.
ADDITIONAL INTERNATIONAL DISTRIBUTOR DISCOUNTS
Initial Distributor System Purchases (applies to complete system configurations
only):
Initial system (one only) * * * from International Distributor Price
Other system(s) (limit two) * * * from International Distributor Price
* * * Confidential Treatment Requested
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<PAGE>
EXHIBIT B
* * * INTERNATIONAL DISTRIBUTOR PRODUCT/PRICE LIST
All prices in U.S. Dollars Effective November 1, 1993
Price
Cat # Description Each
- ----- ----------- -----
* * *
* * * Confidential Treatment Requested
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<PAGE>
EXHIBIT B
* * * INTERNATIONAL DISTRIBUTOR PRODUCT/PRICE LIST
All prices in U.S. Dollars Effective November 1, 1993
SYSTEM COMPONENTS:
Price Each
Cat # Description ----------
- ----- -----------
* * *
* * * Confidential Treatment Requested
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<PAGE>
EXHIBIT B
* * * INTERNATIONAL DISTRIBUTOR PRODUCT/PRICE LIST
All prices in U.S. Dollars Effective November 1, 1993
* * * System Price: * * *
Qty Cat # Description
- --- ----- -----------
* * *
* * * Confidential Treatment Requested
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<PAGE>
EXHIBIT B
* * * INTERNATIONAL DISTRIBUTOR PRODUCT/PRICE LIST
All prices in U.S. Dollars Effective November 1, 1993
* * * System Price: * * *
Qty Cat # Description
- --- ----- -----------
* * *
* * * Confidential Treatment Requested
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<PAGE>
EXHIBIT B
* * * System Price: * * *
Qty Cat # Description
- --- ----- -----------
* * *
* * * Confidential Treatment Requested
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<PAGE>
EXHIBIT B
* * * INTERNATIONAL DISTRIBUTOR PRODUCT/PRICE LIST
All prices in U.S. Dollars Effective November 1, 1993
* * * System Price: * * *
Qty Cat # Description
- --- ----- -----------
* * *
* * * Confidential Treatment Requested
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<PAGE>
EXHIBIT B
* * * System Price: * * *
Qty Cat # Description
- --- ----- -----------
* * *
* * * Confidential Treatment Requested
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<PAGE>
EXHIBIT C
ORDERING INSTRUCTIONS
When placing an order please ensure the Purchase Order is made out to: American
Surgical Technologies Corp. and has the following information:
- Purchase Order Number
- Shipping Address
- Billing Address
- Itemized list of all components needed
- Price Specified
- Contact name and phone number
- Signed by an authorized individual
- Power Plug Type MUST be Specified
The Purchase Order should be sent to:
American Surgical Technologies Corporation
Attn: Customer Service
300 Billerica Road
Chelmsford, MA 01824 U.S.A.
Freight will be charged F.O.B., ASTC plant. All insurance, taxes, custom duties
and charges will be prepaid and added to invoice.
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<PAGE>
EXHIBIT 10.8
MANUFACTURING SUPPLY AGREEMENT
This MANUFACTURING SUPPLY AGREEMENT (the "Agreement"), dated this 19th day
of July, 1995, is made by and between Vista Medical Technologies ("Vista"), a
California Corporation, located at 2752 Loker Avenue West, Carlsbad, California
92008 and KAISER ELECTRO-OPTICS, INC. ("KEO"), a California Corporation, located
at 2752 Loker Avenue West, Carlsbad, California 92008.
RECITALS
WHEREAS, Vista has developed and owns exclusive rights to a proprietary
Medical Head Mounted Display ("MHMD"); and
WHEREAS, KEO has developed Head Mounted Displays ("HMD") for nonmedical
markets, provided development services for Vista's MHMD and possesses certain
know-how and manufacturing technology related to HMD; and
WHEREAS, Vista desires to have KEO manufacture the display optical
subassembly of its MHMD and any reasonable functional derivative thereof, such
subassemblies hereinafter referred to as "Product'; and
WHEREAS, KEO desires to manufacture Product and to meet Vista's reasonable
requirements as to competitive price, delivery, and quality;
NOW, THEREFORE, in consideration of the above matters and of the covenants
contained herein, Vista and KEO agree as follows:
AGREEMENT
1. PREFERRED SUPPLIER RELATIONSHIP: During the term of this Agreement,
KEO shall be Vista's preferred supplier of Product, and Vista shall contract
with KEO to supply up to 100%, but not less than 75%, of its requirements for
Product. Similarly,
<PAGE>
KEO shall not supply HMDs to any direct competitor of Vista in the medical
marketplace.
2. PRODUCT SPECIFICATIONS: KEO will supply Product to Vista consisting
of the head-mounted display optical subassembly of the MHMD, in accordance with
specifications defined prior to placing of a purchase order by Vista and
acceptance by KEO. All modifications of the Product must be mutually agreed
upon in writing by Vista and KEO and documented by Vista according to current
GMP (Good Management Practices) then in effect.
3. PRODUCT CONFORMITY: In the event of test results which show a lack of
Product conformity to quality or specifications provided and mutually agreed to,
KEO will repair or replace the Product within a reasonable time. Failure to
repair or replace non-conforming products, as defined in the purchase orders and
agreed upon specifications, within eight (8) weeks shall be considered a failure
to supply.
4. PURCHASE ORDERS: KEO will accept each purchase order submitted by
Vista hereunder that conforms with the terms of this Agreement. In the event
that pre-printed terms on Vista's purchase order are in conflict with this
Agreement, the terms of this Agreement shall prevail.
5. VISTA'S FORECAST: Vista will provide KEO with * * *
forecasts of its anticipated requirements for Product for the following * * *
* * * However, the * * * of this * * * forecast, as well as the
mutually agreed to purchase of long-lead items of significant value required to
meet the forecast beyond the * * * will be * * * to both parties. KEO
agrees to
* * * Confidential Treatment Requested
2
<PAGE>
meet Vista's reasonable schedule requirements; once agreed, repeated failure to
meet delivery schedules shall be considered a failure to supply.
6. COMPETITIVE PRICING: For the * * * , the price of the Product
sold by KEO to Vista will be that price agreed to be mutually acceptable prior
to the start of production. KEO's pricing for Vista's Product will remain
competitive over time to that generally charged for similar OEM products of the
same performance level in the medical marketplace. Failure to remain
competitive, according to evidence documented by Vista, shall be considered a
failure to supply.
7. REGULATORY APPROVAL: Vista shall be solely responsible for obtaining
any regulatory approvals it requires to market and sell its products. KEO
agrees to provide Vista with all specified information and materials required
for the purpose of obtaining any regulatory approvals. Vista will require KEO
to manufacture Product in accordance with Vista's specified GMP requirements for
suppliers. Failure to conform shall be considered a failure to supply.
8. INSURANCE: KEO shall maintain product liability insurance in effect
to cover any manufacturing deficiencies in its Product caused by non-conformance
to the product specification. KEO agrees to indemnify, protect, and save Vista
including Vista's dealers and agents harmless from and against all claims,
demands, proceedings, lawsuits, and actions and any liabilities, expenses, or
costs due directly to any product malfunction caused by non-conformance to the
Product specification. KEO will not be liable for any failures of the MHMD
caused by manufacturing or design defects in anything other than its own
manufacturing of Product.
* * * Confidential Treatment Requested
3
<PAGE>
9. INDEMNIFICATION: For and in consideration of Vista's purchase of
Product under this Agreement, KEO will indemnify, hold harmless and defend
Vista, including Vista's dealers and agents, from and against any claim, demand,
liability, loss, damage, suit, or judgment resulting from operational
deficiencies caused by non-conformance to the Product specification.
10. KEO WARRANTIES: KEO warrants that title to all Product delivered to
Vista will be free and clear of all liens, encumbrances and security interests;
and that all Product sold under this Agreement will conform to the
specifications accepted by KEO, and shall be free from defects in material and
workmanship under normal use and service. Any Product which exhibits such
defects in material and workmanship within 12 months from date of shipment to
the final customer but not more than 15 months from date of shipment to Vista
shall be repaired or replaced, at KEO's option, without charge, under terms of
this Agreement.
VISTA WARRANTIES: Vista agrees to be solely responsible for any
warranty that it extends or allows to be extended to its customers, whether
express or implied, with respect to the Product.
11. TERM OF AGREEMENT: The duration of this Agreement is three (3) years
from the date of execution provided that it is not terminated sooner pursuant to
paragraph 12 below. After termination, the following provisions will survive
and remain in force: paragraphs 8 (Insurance), 9 (Indemnification), 10
(Warranties), 12 (Termination), 13 (Obligations on Termination), 16 (Applicable
Law), 17 (Relationship of Parties), 20 (Tradenames/Trademarks), 21
(Non-Disclosure), and 23 (Statute of limitations).
4
<PAGE>
12. TERMINATION: The following provisions shall govern the termination of
this Agreement:
(a) If either party has defaulted or failed to perform any obligation
arising under this Agreement and fails to remedy such default or non-performance
after written notice by the other party within thirty (30) days for payment of
monies due and sixty (60) days for all other defaults (including KEO's failure
to supply), the other party has the right to terminate this Agreement
immediately upon further written notice.
(b) Either party, at its election, may treat this Agreement as
breached and, without prejudice to any other of its rights, may forthwith
terminate this Agreement by written notice to the other party on occurrence of
any of the following events:
(i) The other party shall make a general assignment for the
benefit of creditors;
(ii) A receiver of all or substantially all of the property of
the other party shall be appointed and not removed within thirty (30) days;
(iii) The other party shall file a petition for
reorganization under the provisions of federal bankruptcy laws;
(iv) The other party shall file a petition for an arrangement
under federal bankruptcy laws;
(v) The other party shall become or be declared insolvent;
and/or
(vi) The other party shall file a petition in bankruptcy or
shall be adjudged a bankrupt.
5
<PAGE>
(c) The two parties may elect to terminate the Agreement by mutual
written consent at any time.
13. OBLIGATIONS ON TERMINATION: Upon termination of this Agreement:
(a) All amounts owing by Vista or KEO shall remain due and payable as
provided herein;
(b) All unshipped orders due to be shipped after the effective date
of termination for breach shall be canceled without liability of either party to
the other;
(c) All unshipped orders (and mutually agreed in advance long-lead
items) due to be shipped after the effective date of termination if such
termination is for reasons other than a breach, shall be binding, unless
otherwise mutually agreed by the parties; and
(d) Neither party shall be liable to the other because of such
termination for compensation, reimbursement, or damages on account of the loss
of prospective profits or anticipated sales, or on account of expenditures,
investments, leases, or commitments in connection with the business or goodwill
of Vista or KEO or for any other reason whatsoever growing out of such
termination.
14. ASSIGNMENT: Neither party may assign or otherwise dispose of this
Agreement and any right or obligation arising under this Agreement without the
prior written approval given by the other party. However, the Agreement shall
survive a transfer of control or sale of either Vista or KEO to a 3rd party.
15. WAIVER: The waiver by either party of one breach or default hereunder
shall hot constitute the waiver of any subsequent breach or default.
6
<PAGE>
16. APPLICABLE LAW: This Agreement shall be governed by and construed in
accordance with the laws of the state of California, without reference to the
rules of conflict of laws.
17. RELATIONSHIP OF THE PARTIES: Each party shall act solely as an
independent contractor, and nothing in this Agreement shall be construed to give
either party the power or authority to act for or bind the other party.
18. HEADINGS: Headings are inserted in this Agreement only for
convenience and shall not be used to construe its terms.
19. NOTICES: All notices required or permitted by this Agreement, or
given in connection with this Agreement, shall be in writing and may be by
personal delivery by Federal Express or by depositing the written notice with
the United States Postal Service, postage pre-paid, first-class, Certified Mail,
return receipt requested, addressed to the party to receive the same as follows:
--------------------------------- -------------------------------
President President
Vista Medical Technologies, Inc. Kaiser Electro-Optics, Inc.
2752 Loker Avenue West 2752 Loker Avenue West
Carlsbad, CA 92008 Carlsbad, CA 92008
or to any other address or addresses as shall be designated in writing in the
same manner.
20. TRADENAMES/TRADEMARKS: Each party acknowledges the validity of each
other's tradenames and trademarks and that neither party shall have any right to
or interest in any tradenames or trademarks owned, used, or claimed now or in
the future by Vista or KEO as a result of this Agreement.
7
<PAGE>
21. NON-DISCLOSURE: Because the parties have and will continue to exchange
confidential, sensitive, and/or unique data relating to product, markets and/or
projects, the attached Non-Disclosure Agreement is incorporated herein as
Exhibit "A."
22. REGULATORY REQUIREMENTS: Vista is responsible for complying with
regulatory requirements including, but not limited to, all costs related to UL,
FDA, and resale of the product. KEO will provide Vista with all specified
information and materials required by Vista for the purpose of obtaining any
regulatory approvals. All regulatory data is the sole property of Vista.
23. STATUTE OF LIMITATIONS: Any action for breach of this Agreement must
be commenced within one (1) year after the cause of action has accrued.
24. ENTIRE AGREEMENT/SEVERABILITY: This Agreement, with its exhibits,
constitutes the entire Agreement between the parties with respect to the
manufacture and sale of products and supersedes any prior agreements or
understandings. The provisions of this Agreement may be waived, altered,
amended, or repealed in whole or in part only upon the written consent of both
parties. In case any provision(s) shall, insofar as possible, be construed or
applied in such manner as will permit enforcement; otherwise this Agreement
shall be construed as though such provision had never been made a part thereof.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the respective duly authorized representatives as of the date first
set forth above.
VISTA MEDICAL TECHNOLOGIES, INC. KAISER ELECTRO-OPTICS, INC.
BY: /s/ John Lyon By: /s/ Jerry Carollo
------------------------- ------------------------
John Lyon Jerry Carollo
President President
9
<PAGE>
EXHIBIT 10.9
- --------------------------------------------------------------------------------
U.S.A. AND CANADA DISTRIBUTION AGREEMENT
- --------------------------------------------------------------------------------
DELACROIX-CHEVALIER Inc. 575 Madison Avenue NEW YORK NY 10022, gives VISTA
Medical Technologies - loker avenue west CARLSBAD -CA 92008 USA, the right to
exclusive representation for U.S.A. and CANADA territory for its "Cardiovascular
and Thoracic" products.
This agreement is valid for * * * years except if the agreed annual turnover is
not reached. In that case the agreement can be canceled three months before the
end of each contract year and refers to all direct or indirect sales.
DELACROIX-CHEVALIER AGREES TO:
- Honor all orders
- Assist VISTA Medical Technologies in general marketing and promotion of
DELACROIX-CHEVALIER products towards increased sales.
- Forward all orders from U.S.A. and CANADA received directly by them to
VISTA Medical Technologies.
- Grant a discount of ***% on its current USD price list.
- Retain product liability as manufacturers.
VISTA MEDICAL TECHNOLOGIES AGREES TO:
- Honor all orders for U.S.A. and Canada customers only.
- Promote the label DELACROIX-CHEVALIER with an equal typography to VISTA
Medical Technologies.
- Observe reasonable marketing efforts in order not to prejudice
DELACROIX-CHEVALIER.
- Realize the following turnovers:
----------------------------------
* * * USD
* * * USD
* * * USD
- Settle all DELACROIX CHEVALIER invoices by credit transfer within 30 days
after receipt of goods by VISTA Medical Technologies.
- Becomes DELACROIX CHEVALIER's US agent for the FDA.
This agreement will be effective from * * * .
July 11, 1996 July 11, 1996
/s/ John Lyon /s/ illegible
VISTA Medical Technologies DELACROIX-CHEVALIER Inc.
* * * Confidential Treatment Requested
<PAGE>
EXHIBIT 10.10
DISTRIBUTOR AGREEMENT
BETWEEN:
PETERS,
a French corporation, having its principal address at
Z.1. Les Vignes - 42, rue Benoit Frachon
93000 BOBIGNY - FRANCE
(hereinafter referred to as "PETERS")
- and - OF THE FIRST PART,
VISTA MEDICAL TECHNOLOGIES
a California corporation, having its principal address at
5451 Avenida Encinas - Suite A
CARLSBAD, CA 92008 - U.S.A.
(hereinafter referred to as the "Distributor"),
OF THE SECOND PART.
WE, (PETERS) AGREE WITH YOU (THE "DISTRIBUTOR") AS FOLLOWS :
1. APPOINTMENT
PETERS appoints VISTA MEDICAL TECHNOLOGIES an exclusive distributor for the
territory of North America for their cardiovascular sutures (the "Product,"
description in Annexe I) on the Distributor Price List (Annexe II) attached
to and forming part of this Agreement (the "Price List").
2. DISTRIBUTOR RESPONSIBILITIES
As an exclusive distributor of the products in the territory of North
America, Distributor will:
<PAGE>
i) purchase the Products from PETERS at the prices set forth on the
Distributor price list ;
ii) shall not seek nor sell the Product to anyone outside the territory
unless specifically authorized to do so in writing by PETERS;
Distributor shall, however, transmit all inquiries it might receive
concerning the Products from outside the territory to PETERS ;
iii) be an independent contractor and not PETERS's agent ;
iv) not give any warranties or make any claims about the Products beyond
PETERS's standard warranties ;
v) pay all own expenses, including advertising and attendance at national
meetings ;
vi) do best to advertise and promote the Product ;
vii) provide customer service to defined customers ;
viii) * * *
3. MANUFACTURER RESPONSIBILITIES
PETERS will :
i) honor all orders in a timely fashion and provide distributor information
service re: product availability or backorder ;
ii) forward to Distributor, all customer orders received directly by PETERS
from USA customers ;
iii) assist in sales training ;
iv) provide assistance for importance physician customers as approved by
PETERS ;
v) provide product literature and competitive testing data ;
vi) upon the request of Distributor, PETERS will assist in selling, training
and company representation at three national meetings (congresses) in
the USA per year ;
* * * Confidential Treatment Requested
<PAGE>
vii) provide product for physician samples at * * * below Distributor price
and samples for demonstration at three national meetings at no charge in
quantities to be decided in accordance with both parties ;
viii) manufacture all Products sold hereunder in full compliance with FDA
regulations and be responsible for all defects in the products, as
manufacturer, and shall obtain product liability insurance. If PETERS
is unable to obtain this insurance, Distributor's rights and obligations
to distribution will terminate."
ix) in mutual accordance with Distributor, will have inventory on hand in
France for shipment to USA.
x) not appoint any other distributor of Products in Annex I to sell in the
USA.
4. TERM
The term of this agreement shall be for a period of three years,
commencing on July 15, 1996 except if conditions from paragraph 16(c)
are realized. Thereafter, the term shall be automatically extended for
successive one year terms, unless either party elects not to extend the
term or any additional term, it shall give the other party a written
notice thereof at least three months prior to the end of the term or the
then-current additional term.
5. PLACING ORDERS
(a) How Distributor places an order. Distributor may order Products under
this Agreement as follows :
i) in writing, by Purchase Order ;
ii) verbally, including telephone, provide Distributor later confirms
it in writing ; or
iii) electronically, including facsimile (fax).
(b) PETERS's acceptance of Distributor Order. A Product is covered under
this Agreement when we accept Distributor's order by :
i) providing Distributor with an invoice which confirms the details
of Distributor's order ; or
ii) shipping the Product ;
iii) Any order will not be executed without written confirmation.
* * * Confidential Treatment Requested
<PAGE>
(c) Business Forms. For the sake of consistency, PETERS's standard business
forms will govern all aspects of all transactions under this Agreement.
6. DELIVERY OF PRODUCTS
a) PETERS will try to meet Distributor's delivery requirements for Products
that Distributor orders and will keep Distributor informed of PETERS's
progress.
b) All orders of Products will be shipped C.I.F. Santa Ana - CALIFORNIA
c) If Distributor believes any shipment contains shortages or damaged
Products, Distributor must notify PETERS and transporter in writing
within eight (8) days of the date of delivery to Distributor (VISTA
MEDICAL TECHNOLOGIES).
7. TURNOVER
PETERS and the Distributor will decide by mutual agreement, at the end
of each year, the turnover for the next year. Each year (except for
1996), an annex III will be done to this contract mentioning the decided
turnover which will be signed by PETERS and the Distributor.
8. RETURNED GOODS
If Distributor wishes to return any item for credit or exchange,
Distributor must have PETERS's prior authorization.
9. PRICES
Until changed, prices for the Products will be those described on the
price List (Annex II).
10. PAYMENT TERMS AND BILLING
Payment is due 90 days from shipping date to permit collection from
customers. Payment will be made in U.S. Dollars to PETERS. Payment
will be made by irrevocable and confirmed letter of credit until
approval can be attained from COFACE. Late payment will incur * * * per
month penalty charge.
* * * Confidential Treatment Requested
<PAGE>
11. PRICE CHANGES
If PETERS needs to change Distributor's prices, PETERS will negotiate by
mutual agreement, a new price with Distributor, and must agree on the
new prices at least * * * before they go into effect.
12. DISCONTINUANCE OF PRODUCTS
From time to time, PETERS may discontinue particular Products, limit
their production or alter their design but will inform Distributor at
least * * * before change. New cardiovascular products developed
will be offered to Distributor by mutual agreement with first right of
refusal.
13. PROHIBITION ON MODIFICATION
Distributor may not alter or modify any Product or accessory of any
Product.
14. LIMITED WARRANTY
Except for the standard warranty PETERS provides directly to the end-
users of the Products,
PETERS MAKES NO OTHER WARRANTY, EITHER EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION,WARRANTIES OR REPRESENTATIONS AS TO DESCRIPTION,
QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
This Limited Warranty is PETERS's sole obligation as to the Products
sold under this Agreement except as covered in Section 19 ; PETERS shall
not be liable to you or any end-user for direct, consequential or
incidental damages, or damages arising from personal injury, loss of
life or lost profits.
15. TRADE MARKS
Distributor will have the non-exclusive right during this Agreement to
use our trade marks in promoting the sale of Products ; however,
Distributor must :
i) comply with all our instructions relating to the form and manner
of use of our trade marks ;
* * * Confidential Treatment Requested
<PAGE>
ii) refrain from using our trade marks in your corporate name ;
iii) refrain from removing or permitting the removal or alteration of
any trade marks, patent numbers, notices, nameplates or serial
numbers attached to any of the Products.
PETERS represents and warrants to Distributor that PETERS' trademarks
relating to the Products do not infringe the rights of any third parties
and PETERS agrees to indemnify, defend, and hold harmless Distributor
with respect to any claims of trademark or patent infringements or any
other violation on the infringement or rights of third parties.
16. TERMINATION
(a) PETERS may, in its sole discretion, terminate this Agreement, without
notice or delay if Distributor :
i) breaches of any of the terms or conditions of this Agreement ;
ii) becomes insolvent or is unable to pay its debts as they generally
become due ;
iii) contracts with a competitive suture company ;
iv) sells * * *, or more, of it's company share to a competitor of
PETERS.
(b) PETERS may terminate this Agreement if Distributor does not meet the
mutually agreed forecasted annual sales (see annex III).
(c) In the event of break of this Agreement, PETERS will notify Distributor
in writing of the termination of this Agreement three months in advance
of the termination date.
17. OBLIGATIONS FOLLOWING TERMINATION
Upon termination of this Agreement for any reason whatsoever,
Distributor will :
i) return to PETERS all advertising, informational or technical
material we have given to you ;
ii) stop using our trade names and trade marks ;
iii) if PETERS requests, sell back to peters, at the original net
price Distributor paid, plus actual freight charges for delivery
to PETERS, all Products on hand in your place of business or in
your possession or control at the time of termination and deliver
them to PETERS right away, provided however, that PETERS may
reject any of the Products so delivered, which are not in first
class condition ; and
* * * Confidential Treatment Requested
<PAGE>
iv) immediately pay all amounts Distributor owes to PETERS.
v) if PETERS declines to buy back all Products held by Distributor,
Distributor shall be entitled to dispose of the Products in its
ordinary course of business after the effective date of
termination of this Agreement.
This Section shall survice the termination of this Agreement.
18. NO DAMAGES ON TERMINATION
PETERS shall not, by reason of the termination of this Agreement, be
liable to Distributor for compensation, reimbursement or damages on
account of the loss of prospective profits on anticipated sales or on
account of expenditures, investments, leases or commitments in
connection with Distributor's business or goodwill.
19. MUTUAL INDEMNITY
PETERS will indemnify Distributor and save it harmless from any claim or
action made against the Distributor as a result of defects in any
Products that PETERS is responsible for. Likewise, Distributor will
indemnify PETERS and save it harmless against all losses, damages, costs
or expenses that PETERS incurs as a result of any claim or action made
against him because of any of the distributor's act or omissions such as
giving unauthorized representations or performing unauthorized repairs
or modifications.
20. SECURITY
a) As security for your payments and obligations under this agreement,
Distributor grants PETERS a security interest in all Products delivered
to Distributor from time to time and in their proceeds.
21. GOVERNING LAW
This Agreement shall be governed by the law of FRANCE. In case of
litigation, arbitration will be conducted by the Tribunal de Commerce de
PARIS.
<PAGE>
22. AGREEMENT AS COMPLETE EXPRESSION OF TERMS
THIS AGREEMENT IS THE FINAL AND COMPLETE AND EXCLUSIVE WRITTEN
EXPRESSION OF ALL TERMS GOVERNING YOUR APPOINTMENT. PETERS WILL NOT BE
BOUND BY ANY OTHER REPRESENTATIONS OR PROMISES MADE BY ANYONE ACTING ON
OUR BEHALF THAT DIFFER IN ANY WAY FROM THE TERMS OF THIS AGREEMENT.
IN WITNESS WHEREOF this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
BOBIGNY, July 15, 1996
PETERS VISTA MEDICAL TECHNOLOGIES
/s/ J.C. Peters /s/ John Lyon
J.C. PETERS JOHN LYON
PRESIDENT PRESIDENT
/s/ B. Cailleton /s/ Nancy Brief
B. CAILLETON NANCY BRIEF
DIRECTOR BUSINESS GENERAL MANAGER
DEVELOPMENT CARDIO
VASCULAR SURGERY
<PAGE>
ANNEX I
CARDIO VASCULAR PRODUCTS
- - CORONYL
- - CARDIONYL
POLYAMIDE MONOFILAMENT
- - CARDIOFLON
POLYESTER BRAID IMPREGNATED WITH TEFLON
- - TEFLENE (TEFLEX IN FRANCE)
P.V.D.F. MONOFILAMENT
- - STERNOPLAQUE
- - STAINLESS STEEL
<PAGE>
ANNEX II
ANNEX III
NOT PART OF ORIGINAL DOCUMENT
<PAGE>
EXHIBIT 10.11
SALES AGREEMENT
THIS SALES AGREEMENT (the "Agreement") is made and entered into as of the
27th day of November, 1996, between VISTA MEDICAL TECHNOLOGIES, INC. ("Vista"),
a Delaware corporation, and MEDTRONIC, INC. (as defined below, "Medtronic"), a
Minnesota corporation.
WITNESSETH:
WHEREAS, Vista is developing visualization and related information systems
for use in, among other areas, cardiothoracic surgical procedures; and
WHEREAS, Vista and Medtronic Asset Management, Inc., a wholly-owned
subsidiary of Medtronic ("MAMI") have entered into a Series C Preferred Stock
Purchase Agreement of even date herewith (the "Investment Agreement") pursuant
to which MAMI is purchasing Series C Preferred Stock of Vista; and
WHEREAS, MAMI is becoming a party to the Amended and Restated Investor
Rights Agreement of even date herewith (the "Investors' Rights Agreement")
pursuant to which MAMI will receive certain registration and other rights; and
WHEREAS, Vista and Medtronic are also entering into a Supplemental Rights
Agreement of even date herewith (the "Supplemental Rights Agreement") pursuant
to which Medtronic will receive certain additional rights; and
WHEREAS, it is a condition to MAMI's willingness to purchase such Vista
Series C Preferred Stock that the parties enter into this Agreement.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and for other valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties mutually
agree as follows:
ARTICLE 1
DEFINITIONS
1.1) SPECIFIC DEFINITIONS. As used in this Agreement, the following terms
have the meanings set forth or referenced below:
-1-
<PAGE>
"AFFILIATE" of a specified person (natural or juridical) means a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified. "Control"
shall mean ownership of more than 50% of the shares of stock entitled to vote
for the election of directors in the case of a corporation, and more than 50% of
the voting power in the case of a business entity other than a corporation.
"CHANGE OF CONTROL" of Vista shall have the meaning set forth in the
Supplemental Rights Agreement.
"CONFIDENTIAL INFORMATION" means know-how, trade secrets, and other unpublished
or proprietary information disclosed (whether before or during the term of this
Agreement) by one of the parties (the "disclosing party") to the other party
(the "receiving party") or generated under this Agreement, excluding information
which:
(a) is now or comes to be in the public domain through no fault of the
receiving party;
(b) is released without restriction to the receiving party by the
disclosing party in writing;
(c) is lawfully obtained by the receiving party from third parties;
(d) can be demonstrated by competent proof to have been known or hereafter
developed by the receiving party independently of any disclosure of
"Confidential Information by the disclosing party;
(e) has been in the possession of the receiving party, as a result of
disclosure under this Agreement, for a period of five (5) years; or
(f) is required by law to be disclosed; provided that the receiving party
has given the disclosing party prompt written notice of such disclosure
requirement and has cooperated with the disclosing party so that the
disclosing party may seek a protective order or other appropriate remedy to
avoid or limit such disclosure.
All Confidential Information disclosed by one party to the other under this
Agreement shall be in writing and bear a legend "Company Proprietary," "Company
Confidential" or words of similar import or, if disclosed in any manner other
than writing, shall be preceded by an oral statement indicating that the
information is Company proprietary or confidential, and shall be followed by
transmittal of a reasonably detailed written summary of the information provided
to the receiving party with identification as Confidential Information
designated as above within thirty (30) days.
-2-
<PAGE>
"EUROPE, THE MIDDLE EAST, AND AFRICA" means those countries included within
Medtronic's currently designated "Europe", "Middle East" and "Africa" sales
regions as more fully described on Schedule 1.1 hereto.
"FDA" means the U.S. Food and Drug Administration.
"FDA GOOD MANUFACTURING PRACTICES" means as defined in 21 Code of Federal
Regulations Part 820.
"FIELD OF USE" means cardiothoracic surgical procedures.
"INTELLECTUAL PROPERTY" means all patents, trade names, trademarks, service
marks, copyrights, and applications or registrations for any of the foregoing,
inventions, discoveries, know-how, trade secrets, data, information, technology,
processes, formulas, drawings, designs, computer programs, licenses, and all
amendments, modifications, and improvements to any of the foregoing.
"MEDTRONIC" means Medtronic, Inc. and its Affiliates.
"MEDTRONIC COMPETITORS" means any person engaged in the manufacture or sale of
cardiac surgery products that are marketed to the same class of persons (e.g.
cardiac surgeons) to whom Medtronic markets the Systems; provided that
"Medtronic Competitors" shall not include (i) * * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
"NET REVENUES OF SYSTEMS" in North America for a particular period means the
aggregate amount Vista invoices non-Affiliated third parties (or invoices
Medtronic pursuant to Section 2.3) for the sale, lease, license or other use of
Systems during such period, excluding sales, use or excise tax, freight, duty or
insurance included therein, discounts, and credits or repayments due to
rejection, defects or returns, and excluding a reasonable allowance for bad
debts and excluding amounts invoiced for services. In the event Vista combines
the Systems with other Vista products in a package in which the individual
Systems are not invoiced separately, then Vista's Net Revenues attributable to
the Systems component of such combined package shall be established by Vista in
good faith; provided, however, that if the Systems component of such combined
package is sold, leased, or licensed as an individual product by Vista in the
same geographic area, then Vista's Net Revenues attributable to such Systems in
the combined package shall be based on the Net Revenues of such Systems when
sold, leased, or licensed individually in such geographic area.
* * * Confidential Treatment Requested
-3-
<PAGE>
"NORTH AMERICA" means The United States of America and Canada, including all
territories and possessions thereof.
"PRIME RATE" means, for any calendar quarter, the prime commercial lending rate
quoted by the Wall Street Journal, as in effect on the first day of such
quarter.
"SPECIFICATIONS" means the current specifications for the Systems, as may be
amended from time to time hereafter by written agreement of the parties hereto.
"SYSTEMS" means Vista's current and future visualization and related information
systems, together with all associated accessories and disposables specific to
the visualization system in the Field of Use.
"VISTA" means Vista Medical Technologies, Inc. and its Affiliates.
1.2) OTHER TERMS. Other terms may be defined elsewhere in the text of this
Agreement and shall have the meaning indicated throughout this Agreement.
1.3) OTHER DEFINITIONAL PROVISIONS.
(a) The words "hereof," "herein," and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement
as a whole and not to any particular provisions of this Agreement.
(b) The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) References to an "Exhibit" are, unless otherwise specified, to
one of the Exhibits attached to or referenced in this Agreement, and
references to an "Article" or a "Section" are, unless otherwise specified,
to one of the Articles or Sections of this Agreement.
(d) The term "person" includes any individual, partnership, joint
venture, corporation, trust, unincorporated organization or government or
any department or agency thereof.
(e) The term "Dollars" or "$" shall refer to the currency of the
United States of America.
(f) The term "knowledge" means actual knowledge of a fact or the
knowledge which such person or its officers or employees could reasonably
be expected to have based on reasonable investigation and inquiry.
(g) All references to time shall refer to Minneapolis, Minnesota
time.
-4-
<PAGE>
ARTICLE 2
MEDTRONIC AS SALES AGENT IN NORTH AMERICA
2.1) APPOINTMENT. Vista hereby appoints Medtronic and Medtronic hereby
accepts appointment as Vista's sales agent for sales of the Systems in the Field
of Use in North America. Medtronic's duties, to be performed by applicable
portions of Medtronic's "cardiac surgery sales force" (i.e. the sales force
within Medtronic responsible for selling the products of Medtronic's Cardiac
Surgery Business) listed on Schedule 2.1, shall include:
(i) introducing the Systems and distributing literature and sales
materials about the Systems to current and potential customers who may be
interested in purchasing the Systems;
(ii) providing Vista with names of and contacts for potential purchasers
of Systems and forwarding other sales leads to Vista;
(iii) passing along to Vista information or ideas of which Medtronic's
cardiac surgery sales force becomes aware in the Field of Use for
increasing utilization or new potential applications of the Systems; and
(iv) acting as an account liaison where Systems are placed to monitor the
performance of, and customer satisfaction with, the Systems in the Field of
Use, including but not limited to reviewing and suggesting ways to improve
utilization of the Systems within such accounts, and communicating this
information to Vista on a regular basis.
2.2) VISTA SALES AND DISTRIBUTION.
(a) Vista shall retain the exclusive right to distribute Systems outside
the Field of Use worldwide. Vista shall retain the exclusive right to
distribute Systems within the Field of Use in North America and worldwide except
as provided in this Agreement. Vista intends to establish a direct sales force
for Systems in North America through a combination of Vista employees and/or
independent third-party sales representatives. Vista shall use all commercially
reasonable efforts to ensure that any such independent third-party sales
representatives of Systems in North America are not Medtronic Competitors.
During the term of Medtronic's sales agency pursuant to this Article 2, Vista
shall not appoint or permit any persons other than Vista employees or
independent third-party sales representatives, to act as distributors or sales
agents for the System in the Field of Use in North America. Notwithstanding the
foregoing, it is understood and agreed that Vista wishes to establish its
visualization platform as the system of choice in minimally invasive cardiac
surgery. As such, Medtronic acknowledges and agrees that Vista may make
available its visualization systems in North America and worldwide (other than
in the Field of Use in Europe, the Middle East and Africa, wherein the making
available of such systems by Vista and Vista's support of the clinical and
training programs therefor would be subject to prior discussion with and
agreement of Medtronic
-5-
<PAGE>
in Medtronic's discretion), for clinical and training programs organized by
companies and institutions other than Medtronic, and support such programs as
necessary.
(b) Vista shall cooperate with Medtronic as Medtronic reasonably requests
to enable Medtronic to include the System in Medtronic's "strategic alliance"
sales program, including making a Vista sales manager available to participate
with Medtronic in such meetings with such customers as Medtronic may request;
provided that such sales manager (i) shall be an employee of Vista and not have
any affiliation with any Medtronic Competitor, and (ii) shall enter into a
confidentiality agreement providing that all information received by such Vista
sales manager in connection with Medtronic's "strategic alliance" program shall
be held strictly confidential.
2.3) COMPLETION OF SALES. Except as otherwise agreed to by the parties,
Vista shall be solely responsible for undertaking and completing the actual sale
and invoicing of all Systems in North America and the collection of accounts
receivable therefrom; provided that, in those instances where Medtronic
reasonably believes it is necessary for Medtronic to invoice sales of Systems to
a customer under Medtronic's "strategic alliance" sales program (in order for
Medtronic to obtain credit under such program for the sale of such System),
Vista and Medtronic shall cooperate to have Vista invoice Medtronic for such
Systems and thereby allow Medtronic to invoice the sales of Systems to such
"strategic alliance" customer. Vista shall be responsible for obtaining all
import licenses and permits as may be required to import the Systems into the
United States (if applicable) and Canada in accordance with then prevailing laws
and regulations of such country. All such filings and registrations of the
Systems shall be in the name of Vista. Medtronic shall cooperate fully with
Vista in its efforts to obtain any such approvals.
2.4) NORTH AMERICA INSTALLATION AND SERVICE; TRAINING.
(a) Vista shall be solely responsible for installing and servicing all
Systems at Vista's expense.
(b) Vista shall be solely responsible for providing, at Vista's expense,
customer and physician in-service training to any purchaser of a System. Vista
shall coordinate with Medtronic and allow Medtronic the opportunity to
concurrently train those purchasers who are also purchasers of Medtronic's
cardiothoracic surgical products on the use of such Medtronic products with the
Systems, provided that Medtronic shall bear its proportional share of the cost
for any such training. Notwithstanding the foregoing, Medtronic and Vista shall
share the cost of training at those designated "centers of excellence", if any,
as the parties may mutually agree, with the sites, strategy, scope and cost of
such training as may be mutually agreed to by the parties.
2.5) REGULATORY APPROVALS. Vista shall be solely responsible for
obtaining, at Vista's expense and in Vista's name all necessary regulatory and
other approvals from the FDA and any other applicable regulatory agencies
prerequisite to the commercial sale of the Systems in the Field of Use in North
America. Such approval efforts shall include, but not necessarily be limited
to, the preparation and filing of any required
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Investigational Device Exemption, Pre-Market Approval or Section 510(k) filings
and the establishment and oversight of any required clinical investigations and
clinical follow-up relating to future commercial sale of the Systems. Vista
shall promptly notify Medtronic of receipt of any such approvals, and shall
provide Medtronic with such information regarding the status of pending
approvals as Medtronic may reasonably request.
2.6) SALES AND MARKETING.
(a) Medtronic and Vista shall jointly develop protocols and sales
strategies for use by the Medtronic sales agents and Vista sales representatives
to co-promote the Systems and Medtronic's minimally invasive cardiac surgery
products to potential customers in North America. Vista and Medtronic shall
also establish protocols and procedures for coordinating Systems demonstrations
to potential customers referred by Medtronic for the Systems and for Medtronic's
minimally invasive surgical products in North America.
(b) Vista and Medtronic shall jointly fund such additional marketing
clinical studies for use of Medtronic minimally invasive surgical products in
connection with the Systems as the parties mutually agree, the results of which
could be used by either or both of Medtronic and Vista in connection with the
marketing and sale of the Systems in the Field of Use.
(c) Vista shall be responsible for designing, developing and producing, at
Vista's expense, Systems sales and marketing materials for use in the Field of
Use in North America. Vista, at its cost, shall provide Medtronic with
reasonable and adequate quantities of such appropriate sales and marketing
materials. In addition, Vista and Medtronic shall jointly develop sales and
marketing materials that feature and showcase both the Systems and Medtronic's
minimally invasive surgical products, with the costs thereof to be paid as
mutually agreed by the parties.
(d) Vista and Medtronic may jointly fund and participate in those North
America trade shows as mutually agreed to by the parties. As further mutually
agreed to by the parties, employees of Vista and Medtronic, respectively, shall
be allowed to interact with customers in the appropriate trade show booth of the
other. In addition, Medtronic shall have the right to demonstrate the Systems
in its North America trade show booths in connection with the application of its
minimally invasive surgical products.
2.7) MEDTRONIC'S COMMISSION.
(a) In consideration of Medtronic's performance as sales agents for the
Systems in North America, Vista shall pay to Medtronic on a calendar
quarterly basis a commission in an amount equal to * * * of
Vista's Net Revenues of Systems in North America. Such payments shall be
made within * * * after the end of each calendar quarter, and shall be
accompanied by a written statement setting forth the calculation of such
amount in such detail as Medtronic may reasonably request. Vista
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shall also give Medtronic monthly estimates of the amount of commissions which
have accrued for payment to Medtronic.
(b) Medtronic and Vista shall work together to create, by January 31,
1997, a sales incentive plan which creates the appropriate incentives for
Medtronic's cardiac surgery sales force marketing the System in North America.
(c) Vista shall keep accurate written records sufficient in detail to
enable Vista's Net Revenues of Systems in the Field of Use in North America to
be determined and verified by Medtronic. Such records for each calendar quarter
shall be retained by Vista for a period of not less than five years after the
end of such quarter.
(d) Upon reasonable notice and during regular business hours, Vista shall
from time to time (but no more frequently than once annually) make available the
records referred to in Section 2.7(b) for audit at Medtronic's expense by
independent accounting representatives selected by Medtronic and reasonably
acceptable to Vista to verify the accuracy of the statements provided to
Medtronic. Such representatives shall execute a suitable confidentiality
agreement reasonably acceptable to Vista prior to conducting such audit. Such
representatives may disclose to Medtronic only their conclusions regarding the
accuracy of Vista's calculation of Vista's Net Revenues of Systems in the Field
of Use in North America, and shall not disclose Vista's confidential business
information to Medtronic without the prior written consent of Vista.
2.8) NONCOMPETITION. During the term of Medtronic's sales agency pursuant
to this Article 2, Medtronic shall not market or sell in North America direct
visualization products which are competitive with the Systems in the Field of
Use ("Competitive Products"); provided that, for purposes of clarification,
Competitive Products shall not include intra-vascular or intra-cardiac imaging
or visualization products or systems.
ARTICLE 3
MEDTRONIC AS DISTRIBUTOR IN EUROPE, MIDDLE EAST AND AFRICA
3.1) APPOINTMENT.
(a) Vista hereby appoints Medtronic, and Medtronic hereby accepts
appointment, as Vista's exclusive distributor, with the right to sell and
distribute the Systems in the Field of Use in Europe, the Middle East and Africa
(as defined above). Vista represents and warrants to Medtronic that all other
distributorship agreements or sales representative agreements, written or oral,
with any third party permitting the sale of Systems in the Field of Use in
Europe, the Middle East and Africa have been terminated at Vista's sole cost and
expense.
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(b) During the term of Medtronic's distribution rights pursuant to this
Article 3, Medtronic shall not market or sell Competitive Products (as defined
in Section 2.8) in Europe, the Middle East or Africa.
(c) Medtronic may appoint subdistributors for the sale or distribution of
Systems in the Field of Use in Europe, the Middle East and Africa, and will
provide to Vista a list of such subdistributors from time to time.
Notwithstanding such appointment of subdistributors, Medtronic shall remain
fully responsible for the performance of all of its covenants and obligations
hereunder, and any sales by Vista to such Medtronic subdistributors shall be
billed by Vista to Medtronic directly.
(d) Vista shall promptly forward to Medtronic all leads for sales of
Systems in the Field of Use in Europe, the Middle East and Africa.
3.2) REGULATORY APPROVALS.
(a) Medtronic shall be solely responsible for obtaining, at Medtronic's
expense and in Medtronic's name, all necessary regulatory and other approvals
from the applicable regulatory agencies prerequisite to the commercial sale of
the Systems in the Field of Use in the Middle East and Africa. Such approval
efforts shall include, but not necessarily be limited to, the preparation and
filing of any required filings and the establishment and oversight of any
required clinical investigations and clinical follow-up relating to future
commercial sale of the Systems in the Field of Use in the Middle East and
Africa.
(b) In Europe, Vista will be responsible for gaining, at Vista's expense
and in Vista's name, the CE Mark under the appropriate Medical Device Directive.
Medtronic will be responsible for all dealings with the appropriate Competent
Authority such as Notification, Medical Device Vigilance and national labeling
issues, provided that Vista will bear final legal responsibility for the content
of all its own labeling. Medtronic will also be named as the "Authorized
Representative" as defined in the Directives. Medtronic may also distribute
Systems in particular countries within Europe under country-specific regulatory
approvals prior to Vista's gaining the CE Mark or in particular countries where
CE Mark approval is not the requisite form of commercial sale approval, and in
such circumstances Vista shall (i) provide Medtronic with such information and
cooperation as is necessary to obtain any such country-specific approvals in
Europe, (ii) bear the expenses of meeting any applicable product design and
manufacturing facility requirements, and (iii) take all steps as are necessary
to meet the EMC Directive.
3.3) PRICING.
(a) For the period from the date hereof until December 31, 1997, Medtronic
shall purchase Systems from Vista at a price (the "Transfer Price") * * *
* * *
* * * , reasonably determined in accordance with
generally
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accepted accounting principles as then currently applied by Vista, as
applicable, plus a projected mark-up presently estimated to be *** but in no
event less than ***, subject to final determination as hereinafter provided.
Such transfer price shall be finally determined by the parties based on market
conditions at the time of commercial introduction of the Systems; provided that
in no event shall the price to Medtronic of a standard System exceed U.S. * *
*. (The components of the current standard System, exclusive of accessories and
disposables, are listed on Schedule 3.3). No later than * * * , and
by * * * thereafter, the parties shall amend the Transfer Price for
the following * * * period pursuant to a formula to be mutually agreed to
by the parties, taking into account then market conditions.
(b) In addition, Medtronic shall be entitled to purchase from Vista a
reasonable number of demonstration Systems at a price equal to Vista's * * *
* * * for a System as determined above. Such reasonable number
of demonstration Systems (not to exceed *** per year) shall be consistent with
the number of Medtronic's "sales specialists" and the number of demonstrations
to be conducted by such sales specialists in connection with selling the
Systems.
(c) Payments made by Medtronic for Systems purchased hereunder shall be
due and payable in full within * * * days after the date of invoice by
Vista.
3.4) INSPECTION AND WARRANTY.
(a) In the event of any shortage, damage or discrepancy in or to a
shipment of Systems or in the event any of the Systems fail to comply with the
then current specifications for the Systems, Medtronic shall report the same to
Vista and furnish such written evidence or other documentation as Vista
reasonably may deem appropriate. If the substantiating evidence delivered by
Medtronic demonstrates that such shortage, damage or discrepancy or non-
conformity with specifications existed at the time of delivery of the Systems at
the F.O.B. point, Medtronic may return the Systems to Vista at Vista' expense,
and at Medtronic's request Vista shall use all reasonable efforts to deliver
promptly replacement Systems to Medtronic in accordance with the delivery
procedures set forth herein.
(b) Vista represents and warrants to Medtronic that all Systems sold and
delivered to any account under this Agreement will have been manufactured, if
required by law, in accordance with FDA Good Manufacturing Practices, European
Medical Device Directive requirements, ISO 9001 certification or successor
requirements, and all other applicable manufacturing requirements, and that
continually during the term of this Agreement no Systems delivered by Vista to
Medtronic or to any Medtronic Account shall be adulterated or misbranded at the
time of delivery within the meaning of the U.S. Food, Drug and Cosmetic Act and
regulations thereunder. Vista shall cause Medtronic's regulatory personnel to
be provided with reasonable access from time to time to the facilities and
records of Vista for the purpose of confirming Vista's compliance with all
applicable requirements noted in this Section.
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(c) Vista warrants to Medtronic and to Medtronic's customers that Systems
sold by Vista will not infringe any currently issued patents, trade secrets,
trademarks, or other intellectual property rights of any third party, and that
such products shall, when delivered at the F.O.B. point, meet the Specifications
and shall be free from defects in materials and workmanship. Medtronic shall
invoice Vista for, and Vista shall promptly pay, Medtronic's reasonable labor
charges and Medtronic's out-of-pocket materials, handling, shipping,
transportation, insurance and other expenses actually incurred in replacing
defective Systems which were under warranty.
(d) THE WARRANTIES SET FORTH ABOVE ARE IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, WHICH ARE HEREBY DISCLAIMED AND EXCLUDED BY VISTA,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE, EXCEPT VISTA SHALL ALSO PROVIDE WITH RESPECT TO
SYSTEMS SOLD TO MEDTRONIC OR TO MEDTRONIC'S CUSTOMERS SUCH OTHER WARRANTIES AS
VISTA CUSTOMARILY PROVIDES TO ITS CUSTOMERS OR END-USERS OF THE SYSTEMS IN THE
FIELD OF USE (A COPY OF THE CURRENT VERSION OF SUCH CUSTOMER WARRANTY IS
ATTACHED HERETO AS SCHEDULE 3.4). VISTA MAY CHANGE ITS STANDARD CUSTOMER
WARRANTY FROM TIME TO TIME.
3.5) SALES AND SERVICE.
(a) Medtronic shall be solely responsible for selling, installing and
servicing all Systems in the Field of Use in Europe, the Middle East and Africa.
The Systems shall be sold under Vista trademarks and trade names subject to
Medtronic's right to indicate its status as distributor thereof on sales and
marketing materials for the Systems.
(b) Subject to Section 3.7 below, Medtronic shall be solely responsible
for providing customer and physician training to any purchaser of Systems for
use in the Field of Use in Europe, the Middle East and Africa.
(c) Medtronic shall be solely responsible for establishing, subject to
Vista's right to be consulted with respect thereto, the marketing, selling and
pricing strategies for the Systems in the Field of Use in Europe, the Middle
East and Africa.
3.6) MARKETING.
(a) Vista shall provide Medtronic from time to time as requested by
Medtronic with an adequate supply of Systems sales and marketing materials at
Vista's * * * * * * for use in Europe, the
Middle East and Africa. Medtronic shall, * * * and subject to the
reasonable approval of Vista, adapt or modify the Vista sales and marketing
materials and user manuals as deemed appropriate by Medtronic to reflect the
culture or business practices and languages of the particular regions within
Europe, the Middle East and Africa and to reflect
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Medtronic as the exclusive distributor of the Systems, or as otherwise deemed
appropriate by Medtronic.
(b) Vista and Medtronic may jointly fund and participate in those trade
shows within Europe, the Middle East or Africa that are designated as
"international", as mutually agreed to by the parties. Medtronic shall
participate, at Medtronic's discretion and expense, in those trade shows within
Europe, the Middle East or Africa that are designated as "national". As further
mutually agreed to by the parties, employees of Vista and Medtronic,
respectively, shall be allowed to interact with customers in the appropriate
trade show booth of the other. In addition, Medtronic shall have the right to
demonstrate the Systems in its trade show booths in connection with the
application of its minimally invasive surgical products.
3.7) TRAINING. Vista shall, * * * , provide initial technical
training of Medtronic's sales specialists and field service supervisors in
Europe, the Middle East and Africa in the use, installation and service of the
Systems at such reasonable times and places as the parties shall agree.
Medtronic * * * providing ongoing training of
Medtronic's field sales and service representatives in Europe, the Middle East
and Africa; such ongoing training costs * * *
* * *
* * *
3.8) ORDERS.
(a) Medtronic and Vista shall jointly develop order and delivery
procedures and guidelines for the Systems. Medtronic's orders shall be given no
less favorable treatment by Vista than orders from customers in North America.
The parties intend that Medtronic will maintain mutually agreed upon adequate
inventories of Systems, and that under most circumstances, Vista will ship
Systems directly to locations designated by Medtronic.
(b) Medtronic shall submit purchase orders for Systems to Vista in
writing, whether by mail, telecopier, telegram or otherwise, which shall, at a
minimum, set forth the product numbers, quantities, delivery dates, and shipping
instructions and shipping addresses for all Systems ordered. All orders shall
be subject to acceptance in accordance with the terms of this Agreement by Vista
at its office. Each purchase order shall, upon acceptance by Vista, give rise
to a contract between Medtronic and Vista for the sale of the Systems ordered
and shall be subject to and governed by the terms of this Agreement. The terms
and conditions of this Agreement shall so govern and supersede any additional or
contrary terms set forth in Medtronic's purchase order or any Vista or Medtronic
acceptance, confirmation, invoice or other document unless duty signed by an
officer of Medtronic and an officer of Vista and expressly stating and
identifying which specific additional or contrary terms shall supersede the
terms and conditions of this Agreement. Deliveries will first commence to
Medtronic no earlier than *** days from the date Medtronic delivers its initial
forecast to Vista.
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(c) On or before January 1, 1997, Medtronic shall provide Vista with a
twelvemonth international sales plan indicating by month the number of Systems
anticipated to be sold by Medtronic or purchased by Medtronic for use as
demonstration units (as updated as provided herein, the "Plan"). The Plan shall
be updated by Medtronic on a * * * basis (on or before the first day of
each * * * ) for a rolling successive * * * . The first ***
months of each Plan shall constitute a firm purchase commitment by Medtronic for
delivery of the number of Systems specified therein. The * * * month of each
Plan shall constitute a firm purchase commitment only insofar as Medtronic
agrees not to reduce the quantity specified. therein by more than ***, but
Medtronic otherwise may modify such quantity in the next Plan. The * * *
through * * * of each Plan shall be used for purposes of facilitating
Medtronic's marketing plans and meeting the lead times required by certain of
Vista's suppliers, but are not legally binding on Medtronic in any manner.
(d) Vista shall not be required to deliver quantities in excess of *** of
forecasted requirements unless Vista has been given at least *** days advance
written notice of the quantities to be delivered which exceed the forecasted
amounts; provided, however, that Vista shall use all commercially reasonable
efforts to supply such excess.
(e) No purchase order shall be modified or canceled except upon the mutual
agreement of the parties. Mutually agreed change orders shall be subject to all
provisions of this Agreement, whether or not the change order so states.
Notwithstanding the foregoing, any purchase order may be cancelled by Medtronic
as to any Systems which are not delivered within * * * days of the delivery
date requested by Medtronic, and any such cancellation shall not limit or affect
any contract remedies available to Medtronic with respect thereto. Any such
cancellation by Medtronic must be by written notice to Vista given within * * *
business days after such *** day.
(f) All deliveries of Systems shall be F.O.B. Vista's manufacturing
facility located at Westborough, Massachusetts. Except as provided in Section
3.4 above, Vista shall have no further responsibility for Systems, and all risk
of damage to or loss or delay of Systems shall pass to Medtronic, upon their
delivery at the aforesaid F.O.B point. All Systems deliveries shall be made by
a common carrier specified by Medtronic or, in the event that no carrier shall
have been specified by Medtronic on or before the date fifteen (15) days prior
to the requested shipment date, a common carrier reasonably selected by Vista.
(g) Vista shall inform Medtronic of any material changes in the
Specifications for the Systems and, if such changes affect the applicable
regulatory approvals of the Systems, Medtronic shall not be obligated to
purchase such altered Systems.
(h) Vista shall be responsible for packaging and any necessary
sterilization of Systems purchased under this Agreement in accordance with
specifications which are mutually satisfactory to the parties.
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3.9) UPGRADES. Vista shall make software and hardware upgrades available
to Medtronic for the Systems at prices and on terms and conditions * * *
* * *
* * * in the Field of Use in North America. Except as provided in
Section 3.4 with respect to warranty replacement parts, Vista shall sell
replacement parts for the Systems to Medtronic at prices equal to Vista's
fully-burdened manufacturing cost thereof plus ***.
3.10) REPORTS. Medtronic shall provide Vista, on a quarterly basis, with
current customer lists for Systems sold by Medtronic and physician users (of
which Medtronic is aware) of the Systems in the Field of Use in Europe, the
Middle East and Africa. Medtronic also will periodically provide Vista with the
customer name and address for each System installation in the Field of Use in
Europe, the Middle East and Africa for warranty and regulatory purposes.
Medtronic shall report any "adverse events" (as defined by FDA regulations)
promptly to Vista.
3.11) EXPORT/IMPORT APPROVALS.
(a) Vista shall be responsible for obtaining all export licenses and
permits as may be required to export the Systems from the country of manufacture
into the particular countries within Europe, the Middle East and Africa.
(b) Medtronic shall be responsible for obtaining all import licenses and
permits as may be required to import the Systems into particular countries
within Europe, the Middle East and Africa as selected by Medtronic in accordance
with then prevailing laws and regulations of such countries. All such filings
and registrations of the Systems shall be in the name of Medtronic, whenever
feasible in accordance with prevailing laws and regulations. Vista shall
cooperate fully with Medtronic in its efforts to obtain any such approvals.
ARTICLE 4
FIRST REFUSAL FOR DISTRIBUTION IN OTHER REGIONS
4.1) RIGHT OF FIRST REFUSAL.
(a) In the event that Vista proposes to enter into any distribution or
sales representative agreement with any third party regarding the sale or
distribution of the Systems in the Field of Use in any region outside of North
America, and Europe/the Middle East/Africa (such regions to be described as (i)
Japan (ii) Asia Pacific (ex. Japan), (iii) Australia/New Zealand, and (iv)
Central/South America), then, prior to entering into any discussions regarding
such distribution or sales representative agreement, Vista shall notify
Medtronic in writing of such intention to enter into such discussions, including
the material terms and provisions upon which Vista would be willing to enter
into such a distribution or sales representative agreement for such region
("Vista's Notice").
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(b) For a period of *** days after Medtronic's receipt of Vista's Notice
(the "Exclusive Period"), Vista shall negotiate in good faith exclusively with
Medtronic regarding such distribution or sales representative agreement for the
applicable region specified in Vista's Notice. During the Exclusive Period,
Vista will not solicit offers from, negotiate with, or provide information to
any third party regarding any distribution or sales representative relationship
for Systems in such region.
(c) If Medtronic and Vista fail to reach mutual agreement upon the terms
and provisions of a definitive agreement for such distribution or sales
representative relationship, then Vista shall have *** days from the earlier
of expiration of the Exclusive Period or termination by Medtronic of
negotiations between Vista and Medtronic in which to enter into a definitive
agreement for such distribution or sales representative relationship with a
third party for the applicable region specified in Vista's Notice; provided
that Vista may not enter into such definitive agreements unless the terms and
provisions thereof are, in the aggregate, more favorable to Vista than the
terms and provisions proposed by Medtronic during the Exclusive Period. If
Vista fails to enter into such definitive agreement for the applicable region
within such * * * period, then Medtronic's rights under this Section shall
be reinstated and Vista may not enter into any distribution or sales
representative relationship for the sale of Systems in such region without
first giving Medtronic a new Vista's Notice and complying with the terms of
this Section.
ARTICLE 5
PRODUCT DEVELOPMENT
5.1) CUSTOMIZED SYSTEMS. Medtronic may refer new product ideas or product
customization requests for the Systems in the Field of Use to designated Vista
marketing representatives. Vista shall consider development of Medtronic's
custom product requests in a reasonable and timely manner consistent with the
way in which Vista undertakes custom product requests for its customers in North
America.
5.2) NEW PRODUCTS. Vista and Medtronic shall each have the right to offer
to the other party the opportunity to co-develop products or technologies with
potential application in the Field of Use which the offering party owns or has
the right to use, subject to such mutually acceptable terms and conditions as
the parties may agree. The cost of such co-development efforts shall be shared
as may be mutually agreed to by the parties.
ARTICLE 6
TERM AND TERMINATION
6.1) INITIAL TERM. The initial term (the "Initial Term") for Medtronic's
rights and obligations as (i) the sales agent for Systems in North America shall
commence on the date hereof and continue until December 31, 1999, and (ii) the
exclusive distributor for Systems in Europe, the Middle East and Africa, shall
commence on the date hereof
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and continue until the third anniversary of the initial commercial release of
Systems in Europe.
6.2) RENEWAL TERM: PERFORMANCE OBJECTIVES.
(a) The Initial Term shall be automatically renewed for an additional
two-year period (the "Renewal Term"), unless such Initial Term has been
terminated by Vista due to Medtronic's failure to achieve certain reasonable and
mutually agreeable performance objectives to be established by the parties (the
"Performance Objectives"). There shall be one set of Performance Objectives
with respect to Medtronic's rights and obligations as the sales agent for
Systems in North America on an aggregate basis, and one set of Performance
Objectives with respect to Medtronic's rights and obligations as the exclusive
distributor for Systems in Europe, the Middle East and Africa on an aggregate
basis.
(b) Vista and Medtronic shall negotiate in good-faith to establish on or
before December 31, 1997 the Performance Objectives for the Initial Term. The
Performance Objectives shall take into account such factors as the size of the
market, price of the Systems, potential applications of the Systems, selling
cycle, Vista's manufacturing capacity, size of the relative sales forces, and
other relevant factors. The Performance Objectives for Europe, the Middle East
and Africa shall include aggregate sales volume targets and regulatory approval
requirements.
(c) The parties shall, within *** days preceding the commencement of the
Renewal Term, establish mutually acceptable Performance Objectives for such
Renewal Term.
6.3) TERMINATION FOR FAILURE TO MEET PERFORMANCE OBJECTIVES OR ABANDONMENT
OF AREA.
(a) Subject to Article 8 hereof, if Medtronic fails to meet the
Performance Objectives for North America, Vista shall have the right to
terminate Medtronic's rights and obligations as sales agent for North America.
Subject to Article 8 hereof, if Medtronic fails to meet the Performance
Objectives for Europe, the Middle East, and Africa, Vista shall have the right
to terminate Medtronic's rights and obligations as distributor for Europe, the
Middle East and Africa. Vista shall give Medtronic written notice of any such
intent to terminate, and Medtronic shall have * * * in which to cure
such failure to meet the Performance Objectives. Vista's rights under this
Section 6.3(a) shall be Vista's sole and exclusive remedy for Medtronic's
failure to meet the Performance Objectives.
(b) In addition to Vista's rights under subsection (a) above and whether
or not Medtronic has met the aggregate Performance Objectives for Europe, the
Middle East and Africa, if at any time after commercial release of the Systems
Medtronic is making no efforts (and has no plans to make such efforts) to sell,
distribute, or promote the Systems in Europe, the Middle East, or Africa, then
Vista shall have the right to
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terminate Medtronic's rights and obligations as distributor with respect to
such geographic area in which no efforts are being made or are planned (i.e.
either Europe, the Middle East or Africa, as applicable). Vista shall give
Medtronic written notice of any such intent to terminate, and Medtronic shall
have * * * in which to commence such sales efforts (or provide a plan to
commence such sales efforts) in such geographic area. Except as provided in
Subsection 6.3(a), Vista's rights under this Subsection 6.3(b) shall be
Vista's sole and exclusive remedy for any failure by Medtronic to sell,
distribute or promote the Systems.
(c) Upon any such termination pursuant to Subsections 6.3(a) or 6.3(b)
above, Vista will repurchase from Medtronic, at Medtronic's cost, Medtronic's
entire inventory of Systems (excluding demonstration Systems) and related
accessories that do not contain Medtronic's name or trademarks as of the
termination date relating to the geographic area to which such termination
relates.
(d) If (i) Vista has elected to utilize a "procedure-based pricing
strategy" in North America (which strategy would involve the payment of
Medtronic's commission over the collective term of all individual System
agreements), and (ii) Vista terminates Medtronic's rights and obligations as its
North American sales agent for failure to meet the Performance Objectives
pursuant to subsection (a) above, Vista shall continue to pay
Medtronic on a * * * basis * * *
* * * which would have become due and payable but for such termination on
each such North America "procedure-based pricing" customer agreement in effect
on the termination date for the * * *
or (ii) * * * . This formula is intended to recognize that such
customer agreements were entered into during the period that Medtronic was
Vista's sales agent, and that Medtronic's revenue-based commissions were to be
paid over the term of each such agreement.
6.4) TERMINATION FOR CHANGE OF CONTROL.
(a) Vista shall be entitled to terminate Medtronic's rights and
obligations as sales agent for North America if Vista has afforded to Medtronic
its "First Offer Purchase Rights" pursuant to Section 2.1 of the Supplemental
Rights Agreement with respect to a "Proposed Transaction" (as such terms are
defined in the Supplemental Rights Agreement) and such "Proposed Transaction"
has resulted in a Change of Control of Vista. On or before such Change of
Control, Vista shall give Medtronic written notice of any such intent to
terminate, which termination shall be effective six months after the effective
date of the Change of Control.
(b) Upon any such termination pursuant to Subsection 6.4(a) above, Vista
will repurchase from Medtronic, at Medtronic's cost, Medtronic's entire
inventory of Systems (including demonstration Systems) and related materials
that do not contain Medtronic's name or trademarks as of the termination date
relating to the geographic area to which such termination relates.
* * * Confidential Treatment Requested
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(c) Upon any such termination pursuant to Subsection 6.4(a) above, if
Vista has elected to utilize a "procedure-based pricing strategy" in North
America, Vista shall continue to pay Medtronic for * * *
* * * which would have become due and payable but for such termination on
all such North America "procedure-based pricing" customer agreements in effect
on the termination date.
(d) In no event, however, shall Vista have the right to terminate
Medtronic's rights as the exclusive distributor for the Systems in Europe, the
Middle East and Africa, or any other region, by reason of any "Change of
Control" of Vista.
6.5) MEDTRONIC'S TERMINATION FOR VISTA BREACH.
(a) Subject to Article 8 hereof, if Vista breaches any of its material
obligations under this Agreement with respect to Article 2 and/or Article 3 of
this Agreement, then Medtronic shall be entitled to terminate Medtronic's rights
and obligations under Article 2 and/or, at Medtronic's election, Article 3 of
this Agreement. Medtronic shall give Vista written notice of any such intent to
terminate, specifying whether such termination will apply to Medtronic's rights
and obligations under Article 2 or Article 3, or both, and Vista shall have
* * * in which to cure such material breach.
(b) Upon any such termination pursuant to Subsection 6.5(a) above, Vista
will repurchase from Medtronic, at Medtronic's cost, Medtronic's entire
inventory of Systems (including demonstration Systems) and related materials
that do not contain Medtronic's name or trademarks as of the termination date
relating to Medtronic's rights and obligations under Article 2 and/or Article 3
of this Agreement, as applicable.
(c) Upon any such termination pursuant to Subsection 6.5(a) above with
respect to Medtronic's rights and obligations under Article 2, if Vista has
elected to utilize a "procedure-based pricing strategy" in North America, Vista
shall continue to pay Medtronic for * * * which
would have become due and payable but for such termination on all such North
America "procedure-based pricing" customer agreements in effect on the
termination date.
6.6) VISTA'S TERMINATION FOR MEDTRONIC BREACH.
(a) Subject to Article 8 hereof and except as otherwise provided in
Section 6.3, if Medtronic breaches any of its material obligations under this
Agreement with respect to Article 2 and/or Article 3 of this Agreement, then
Vista shall be entitled to terminate Medtronic's rights and obligations under
Article 2 and/or, at Vista's election, Article 3 of this Agreement. Vista shall
give Medtronic written notice of any such intent to terminate, specifying
whether such termination will apply to Medtronic's rights and obligations under
Article 2 or Article 3, or both, and Medtronic shall have * * *
in which to cure such material breach.
* * * Confidential Treatment Requested
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(b) Upon any such termination pursuant to Subsection 6.6(a) above, Vista
will repurchase from Medtronic, * * *
* * * and related materials that do not contain Medtronic's
name or trademarks as of the termination date relating to Medtronic's rights and
obligations under Article 2 and/or Article 3 of this Agreement, as applicable.
(c) Upon any such termination pursuant to Subsection 6.6(a) above with
respect to Medtronic's rights and obligations under Article 2, if Vista has
elected to utilize a "procedure-based pricing strategy" in North America, Vista
shall continue to pay Medtronic for * * * which
would have become due and payable but for such termination on all such North
America "procedure-based pricing" customer agreements in effect on the
termination date.
6.7) RIGHTS AND OBLIGATIONS ON TERMINATION. In the event of termination of
all or a portion of this Agreement for any reason, the parties shall have the
following rights and obligations:
(a) Termination of all or a portion of this Agreement shall not release
either party from the obligation to make payment of all amounts previously
due and payable;
(b) In the event of the termination of Medtronic's distribution rights
with respect to all of Europe, the Middle East and Africa in accordance
with Section 6.3(a), Section 6.5 or Section 6.6, or with respect to Europe,
the Middle East or Africa in accordance with Section 6.3(b), (i) Vista
shall have the right, at its option, to cancel any or all purchase orders
for Systems which provide for delivery to such geographic area after the
effective date of termination, (ii) Medtronic shall assign, * * * ,
all regulatory approvals and files regarding sales of Systems in such
geographic area to Vista, and (iii) Medtronic and Vista shall cooperate to
assure continued service and support to customers in such geographic area
who purchased Systems from Medtronic. Vista hereby acknowledges
Medtronic's right to continue to sell Systems purchased from Vista to any
person or entity until such time as Medtronic's entire inventory of Systems
is sold; and
(c) Without limitation of Section 10.6 hereof, the parties' payment and
audit obligations pursuant to Articles 2 and 3 hereof, and the parties
obligations pursuant to Articles 7, 9 and 10 hereof, shall survive
termination of this Agreement.
* * * Confidential Treatment Requested
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ARTICLE 7
INDEMNIFICATION
7.1) VISTA'S LIABILITY. Vista shall indemnify, defend and hold harmless
Medtronic and each of its subsidiaries, officers, directors, employees,
shareholders and distributors from and against and in respect of any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, interest and penalties, costs and expenses (including, without
limitation, reasonable legal fees and disbursements incurred in connection
therewith and in seeking indemnification therefor, and any amounts or expenses
required to be paid or incurred in connection with any action, suit, proceeding,
claim, appeal, demand, assessment or judgment) ("Indemnifiable Losses"),
resulting from, arising out of, or imposed upon or incurred by any person to be
indemnified hereunder by reason of (i) any breach of representation, warranty,
covenant or agreement on the part of Vista under this Agreement, (ii) total or
partial Systems recalls, or (iii) alleged defects in materials, workmanship,
product performance, or design of the Systems, but in any event excluding
matters for which Medtronic is responsible under Section 7.2 below. Vista shall
maintain product liability insurance or self-insurance in such amounts as is
advisable pursuant to ordinary good business practice for a similar company in a
similar type of business, and shall provide Medtronic with evidence of this
coverage.
7.2) MEDTRONIC'S LIABILITY. Medtronic shall indemnify, defend and hold
harmless Vista and each of its subsidiaries, officers, directors, employees,
shareholders and suppliers from and against and in respect of any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, interest and penalties, costs and expenses (including, without
limitation, reasonable legal fees and disbursements incurred in connection
therewith and in seeking indemnification therefor, and any amounts or expenses
required to be paid or incurred in connection with any action, suit, proceeding,
claim, appeal, demand, assessment or judgment) ("Indemnifiable Losses"),
resulting from, arising out of, or imposed upon or incurred by any person to be
indemnified hereunder by reason of (i) any breach of representation, warranty,
covenant, or agreement on the part of Medtronic under this Agreement, (ii)
product claims whether written or oral, made or alleged to be made, by Medtronic
in its advertising, publicity, promotion, or sale of any Systems where such
product claims were not provided by or approved by Vista, or (iii) negligent
handling by Medtronic of the Systems, but in any event excluding matters for
which Vista is responsible under Section 7.1 above.
7.3) THIRD PARTY CLAIMS. If a claim by a third party is made against any
indemnified party, and if the indemnified party intends to seek indemnity with
respect thereto under this Article 7, such indemnified party shall promptly
notify the indemnifying party of such claim; provided, however, that failure to
give timely notice shall not affect the rights of the indemnified party so long
as the failure to give timely notice does not materially adversely affect the
indemnifying party's ability to defend such claim against a third party. The
indemnifying party shall be entitled to settle or assume the defense of such
claim, including the employment of counsel reasonably satisfactory to the
indemnified party, as provided below. If the indemnifying party elects to
settle or defend such claim, it shall notify the indemnified party within thirty
(30) days (but in no
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event less than twenty (20) days before any pleading, filing or response on
behalf of the indemnified party is due) of its intent to do so. If the
indemnifying party elects not to settle or defend such claim or fails to notify
the indemnified party of its election within thirty (30) days (or such shorter
period provided above) after receipt of the indemnified party's notice of a
claim of indemnity hereunder, the indemnified party shall have the right to
contest, settle or compromise the claim without prejudice to any rights to
indemnification hereunder. Regardless of which party is controlling the
settlement or defense of any claim, (i) both the indemnified party and
indemnifying party shall act in good faith, (ii) the indemnifying party shall
not thereby permit to exist any lien, encumbrance or other adverse charge upon
any asset of any indemnified party or of its subsidiaries, (iii) the
indemnifying party shall permit the indemnified party to participate in such
settlement or defense through counsel chosen by the indemnified party, provided
that all fees, costs and expenses of such counsel in an action controlled by the
indemnifying party shall be borne by the indemnified party, unless the
indemnifying party and indemnified party have different available defenses to
such third party claim, in which case such fees, costs and expenses shall be
borne by the indemnifying party, (iv) no entry of judgment or settlement of a
claim may be agreed to without the written consent of both the indemnified party
and the indemnifying party, which consents shall not be unreasonably withheld,
and (v) the indemnifying party shall agree promptly to reimburse the indemnified
party for the full amount of such claim pursuant to this Article 7. So long as
the indemnifying party is reasonably contesting any such claim in good faith as
permitted herein, the indemnified party shall not pay or settle any such claim;
provided that the indemnified party may settle any such claim so long as the
indemnifying party is not adversely affected thereby. The controlling party
shall deliver, or cause to be delivered, to the other party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the settlement or defense of any
such claim, and timely notices of, and the right to participate pursuant to
(iii) above in any hearing or other court proceeding relating to such claim.
7.4) COOPERATION AS TO INDEMNIFIED LIABILITY. Each party hereto shall
cooperate fully with the other parties with respect to access to books, records,
or other documentation within such party's control, if deemed reasonably
necessary or appropriate by any party in the defense of any claim which may give
rise to indemnification hereunder.
ARTICLE 8
FORCE MAJEURE
8.1) FORCE MAJEURE. "Force Majeure" shall mean any event or condition, not
existing as of the date of signature of this Agreement, not reasonably
foreseeable as of such date and not reasonably within the control of either
party, which prevents in whole or in material part the performance by one of the
parties of its obligations hereunder, such as act of God, act of government, war
or related actions, civil insurrection, riot, sabotage, strike, epidemic, fire,
flood, windstorm, and similar events.
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8.2) NOTICE. Upon giving notice to the other party, a party affected by an
event of Force Majeure shall be released without any liability on its part from
the performance of its obligations under this Agreement, except for the
obligation to pay any amounts due and owing hereunder, but only to the extent
and only for the period that its performance of such obligations is prevented by
the event of Force Majeure.
8.3) SUSPENSION OF PERFORMANCE. During the period that the performance by
one of the parties of its obligations under this Agreement has been suspended by
reason of an event of Force Majeure, the other party may likewise suspend the
performance of all or part of its obligations hereunder to the extent that such
suspension is commercially reasonable.
ARTICLE 9
INTELLECTUAL PROPERTY
9.1) TRADEMARK LICENSE. Medtronic shall have a * * * license to use
all trademarks, trade names and logotypes of Vista relating to the Systems
solely in connection with the sale or other distribution, promotion, advertising
and/or maintenance of the Systems in the Field of Use. Medtronic shall acquire
no right, title or interest in such Vista trademarks, trade names and logotypes,
other than as provided for above, and Medtronic shall not use any Vista
trademarks, trade names and logotypes as part of Medtronic's corporate or trade
name or permit any third party under Medtronic's control to do so without the
prior written consent of Vista. All rights under this Section 9.1 shall
terminate upon termination of this Agreement under Article 6, subject to Section
6.5(b).
9.2) OWNERSHIP. Vista represents and warrants to Medtronic the following:
Vista is the exclusive owner or licensee of all right, title and interest in and
to all Intellectual Property used in the research, design, development,
manufacture or sale of the Systems (the "Vista Intellectual Property") free and
clear of any liens, charges, security interests, mortgages, pledges,
restrictions, adverse claims or any other encumbrances of any kind. Neither
Vista, its business, any of the Systems, nor the execution and performance of
this Agreement and the transactions contemplated herein, infringes, misuses,
misappropriates or conflicts with the rights, including patent and other
intellectual property rights or contract rights, of others. To the knowledge of
Vista, the Vista Intellectual Property is valid and has not been challenged in
any judicial or administrative proceeding. To the knowledge of Vista, Vista has
not failed to take any necessary steps or appropriate actions to record its
interests, or to protect its rights, in the Vista Intellectual Property. To the
knowledge of Vista, no person or entity nor such person's or entity's business
or products has infringed, misused, misappropriated or conflicted with the Vista
Intellectual Property or currently is infringing, misusing, misappropriating or
conflicting with the Vista Intellectual Property.
* * * Confidential Treatment Requested
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9.3) PROTECTION OF VISTA'S INTELLECTUAL PROPERTY AND IMPROVEMENTS. During
the term of this Agreement, Vista shall promptly inform Medtronic of any
invention, improvement, upgrading or modification relating to the Systems or
Vista's Intellectual Property relating to the Systems.
ARTICLE 10
MISCELLANEOUS
10.1) NON-DISCLOSURE. Except as permitted or required for performance by
the party receiving such Confidential Information of its rights or duties
hereunder, each party agrees (i) not to disclose or use any Confidential
Information of the other party obtained in connection with the performance of
this Agreement, and (ii) not to disclose or provide any of such Confidential
Information of the other party to any third party and to take appropriate
measures to prevent any such disclosure by its present and future employees,
officers, agents, subsidiaries, or consultants.
10.2) RELATIONSHIP. This Agreement does not make either party the
employee, agent or legal representative of the other for any purpose whatsoever.
Neither party is granted any right or authority to assume or to create any
obligation or responsibility, express or implied, on behalf of or in the name of
the other party. In fulfilling its obligations pursuant to this Agreement, each
party shall be acting as an independent contractor.
10.3) ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors or assigns of the parties
hereto; provided, that (i) the rights and obligations of Vista herein may not be
assigned except to any person who succeeds to substantially all of the assets
and business of Vista to which this Agreement relates, and (ii) the rights and
obligations of Medtronic herein may not be assigned except to any person who
succeeds to substantially all of that portion of Medtronic's business to which
this Agreement relates.
10.4) COMPLETE AGREEMENT. This Agreement, the Investment Agreement, the
Investors' Rights Agreement, the Supplemental Rights Agreement, and the Exhibits
hereto and thereto constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and supersede all prior agreements
whether written or oral relating hereto.
10.5) GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of California, including all matters of
construction, validity, performance and enforcement, without giving effect to
principles of conflict of laws.
10.6) SURVIVAL. All of the representations, warranties, and covenants made
in this Agreement, and all terms and provisions hereof intended to be observed
and performed
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by the parties after the termination hereof, shall survive such termination and
continue thereafter in full force and effect.
10.7) WAIVER, DISCHARGE, AMENDMENT, ETC. The failure of any party
hereto to enforce at any time any of the provisions of this Agreement shall in
no way be construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any part thereof or the right of the
party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to be a waiver of any other or subsequent
breach. Any amendment to this Agreement shall be in writing and signed by the
parties hereto.
10.8) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed as original and all of which
together shall constitute one instrument.
10.9) TITLES AND HEADINGS; CONSTRUCTION. The titles and headings to
Sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. This Agreement shall be construed without regard to any presumption
or other rule requiring construction hereof against the party causing this
Agreement to be drafted.
10.10) BENEFIT. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties to this Agreement or
their respective successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
10.11) NOTICES. All notices or other communications to a party required
or permitted hereunder shall be deemed given if in writing and delivered
personally or sent by telecopy (with confirmation of transmission) or certified
mail (return receipt requested) to such party at the following addresses (or at
such other addresses as shall be specified by like notice):
if to Medtronic, to:
Medtronic, Inc.
Corporate Center
7000 Central Avenue N.E.
Minneapolis, MN 55432
Attention: General Counsel
FAX (612) 572-5459
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with a copy to:
Medtronic, Inc.
Corporate Center
7000 Central Avenue N.E.
Minneapolis, MN 55432
Attention: Vice President Corporate Development and Associate General
Counsel
FAX (612) 572-5404
and if to Vista, to:
Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
Attention: John Lyon
FAX (619) 603-9170
with a copy to:
Brobeck Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, CA 92101
Attention: Craig Andrews
FAX (619) 234-3848
Medtronic or Vista may change their respective above-specified recipient and/or
mailing address by notice to the other party given in the manner herein
prescribed. All notices shall be deemed given on the day when actually
delivered as provided above (if delivered personally or by telecopy) or on the
day shown on the return receipt (if delivered by mail).
10.12) ILLEGALITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
10.13) PUBLIC ANNOUNCEMENT. Each of the parties to this Agreement
hereby agrees with the other parties hereto that, except as may be required to
comply with the requirements of applicable law or any exchange upon which such
party's capital stock is listed or traded, no press release or similar public
announcement or communication will
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be made or caused to be made concerning the execution or performance of this
Agreement unless specifically approved in advance by Medtronic and Vista. The
foregoing shall not restrict either party's communications with employees,
customers or private investors.
10.14) EXECUTION OF FURTHER DOCUMENTS. Each party agrees to execute and
deliver without further consideration any further applications, licenses,
assignments or other documents, and to perform such other lawful acts as the
other party may reasonably require to fully secure and/or evidence the rights or
interests herein.
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IN WITNESS WHEREOF, each of the parties has caused this Sales Agreement to
be executed in the manner appropriate to each, as of the date first above
written.
VISTA MEDICAL TECHNOLOGIES, INC.
By: /s/ JOHN LYON
------------------------------
Its:PRESIDENT
-----------------------------
MEDTRONIC, INC.
By: /s/ MICHAEL D. ELLWEIN
------------------------------
Its:PRESIDENT
-----------------------------
ATTACHMENTS:
Schedule 1.1 - "Europe, the Middle East, and Africa"
Schedule 2.1 - Medtronic's "cardiac surgery sales force"
Schedule 3.3 - System Components
Schedule 3.4 - Vista's current System product warranty
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Schedule 1.1
"EUROPE, THE MIDDLE EAST AND AFRICA"
1. EUROPE. Europe shall include all of continental Europe, and further
include the United Kingdom, Ireland and the Scandinavian countries and
Eastern Europe, including the Czech Republic, Serbia, Russia and Central
Independent States of the former USSR.
2. MIDDLE EAST. The Middle East shall include all of the Middle East north
and east of the Red Sea, from Turkey in the north and west, to Iran in the
east and Yemen in the south, excluding Afghanistan and Pakistan.
3. AFRICA. Africa shall include the entire continent of Africa and all
islands appurtenant thereto.
<PAGE>
Schedule 2.1
MEDTRONIC'S "CARDIAC SURGERY SALES FORCE"
Medtronic's "cardiac surgery sales force" shall mean: * * *
* * *
* * * as Medtronic,
with Vista's consent (not to be unreasonably withheld), deems appropriate to
promote the System.
* * * Confidential Treatment Requested
<PAGE>
SCHEDULE 3.3
CardioView advanced visualization and information management system:
Cardio 3DScope - A complete set of stereo cameras and endoscopes (either
Miniature or Traditional).
-A miniature camera 1.3" in length capable of attaching to retractor
systems or delivered within the surgical field by attachment to
malleable or rigid guide; or
-Traditional 4.7 mm rotable Thoracoscope.
CardioCamera - 1.3" in length miniature one chip mono camera to be placed
within the body.
CardioView - head mounted display system.
-Lightweight, ergonomic display with LCD chips providing real time 3D
video.
-Image resolution equivalent to conventional TV monitor.
-Can be worn with surgical loops.
-Providing voice activated command for the delivery of patient
information.
-First generation to include TEE (Trans Esophageal Echo), "picture in
picture".
-Consisting of up to four head mounted displays operating off one
central control unit. Standard system includes two HMDs.
CardioConsole - Elegant, user friendly system to rack mount a customized
information management system for Cardiothoracic surgery. CardioConsole
will contain:
CardioController - High resolution stereo image processor.
-Will operate either the mono or stereo cameras.
-Capable of running all cameras in cardiac surgery.
-Can "slave" to other medical monitors in O.R.
CardioRecorder - 3 dimensional CD ROM image recorder.
CardioLight, Advanced single fiber light delivery technology.
-Cogent Light xenon light source
Standard 13" medical monitor.
-For setup, calibration, and trouble shooting
<PAGE>
Schedule 3.4
LIMITED EXPRESS WARRANTY
THE LIMITED EXPRESS WARRANTY AS SET FORTH HEREIN IS EXCLUSIVE AND IN LIEU OF
ALL OTHER WARRANTIES EXPRESS OR IMPLIED, REMEDIES, OBLIGATIONS, AND LIABILITIES,
MERCHANTABILITY AND FITNESS FOR USE AND OF CONSEQUENTIAL DAMAGES. THE PRODUCTS
ARE BEING SOLD ONLY FOR THE PURPOSES DESCRIBED HEREIN AND SUCH LIMITED EXPRESS
WARRANTY RUNS ONLY TO THE CUSTOMER. IN NO EVENT SHALL VISTA BE LIABLE FOR ANY
BREACH OF WARRANTY IN ANY AMOUNT EXCEEDING THE PURCHASE PRICE OF THE PRODUCT.
Should the medical equipment described below become inoperable within one
period of usage specified for the applicable equipment due to a defect in
material or workmanship, Vista will at its sole option, either repair or replace
the applicable equipment at no charge.
- CAMERAS HMD'S: 1 year from date of sale.
- ACCESSORIES, SCOPES, COUPLERS: 90 days from date of sale.
- LIGHT SOURCES: 1 year from date of sale. Light source bulbs are not
covered under this warranty. Bulbs are warranted to be defect free
only at the time of delivery.
- MONITORS / VCRS: 90 days from date of sale.
- VIDEO CARTS: Defect free only at time of delivery.
- ALL OTHER PRODUCTS: Defect free only at time of delivery.
- REPAIR WARRANTIES: 90 days after date of repair.
A sterilized device, subject to this Limited Express Warranty, is supplied
to the customer in a sterile package. If during the first 90 days from the date
of receipt of the sterile package or if at time of use, the device is found to
be unstable due to a defect in material or workmanship, Vista will, at its
option refund the purchase price of the device or replace the device at no
charge. This Limited Express Warranty does not extend to sterile packaging
where the sterile integrity of the package is compromised. A sterile package
which is compromised should be rejected by the original purchaser at the time of
delivery.
Should a surgical instrument become damaged when used for any purpose other
than originally intended by the manufacturer or through accidental damage,
negligence, or normal wear and tear prevailing repair charges will be applicable
for refurbishing or replacement parts that are required.
Vista reserves the right to make design changes on its products without
liability to incorporate said change in Vista products previously designed or
sold.
Work performed on Vista products by anyone other than Vista will void any
and all warranties.
Upon receipt of the product, it should be carefully inspected, and if any
defect is discovered, notification must be given immediately to the
manufacturer.
Trademark Notice:
CardioCamera-TM-, CardioScope-TM-, CardioView-TM-, CardioLight-TM- and Vista
CardioThoracic-TM- are trademarks of Vista Medical Technologies.
Copyright 1966 Vista Medical Technologies. All rights reserved.
<PAGE>
EXHIBIT 10.12
SUPPLY AND SERVICES AGREEMENT
This Supply and Services Agreement (the "Agreement") is dated as of this
22nd day of February, 1997 (the "Effective Date") by and between Heartport,
Inc., a Delaware corporation located at 700 Chesapeake Drive, Redwood City,
California 94063 ("Heartport"), and Vista Medical Technologies, Inc., a Delaware
corporation located at 5451 Avenida Encinas, Suite A, Carlsbad, California
92008, through its Vista CardioThoracic Surgery division, (individually and
collectively, "Vista").
RECITALS
WHEREAS, as partial consideration for this Agreement, Heartport has been
issued a Common Stock Purchase Warrant, dated as of the Effective Date (the
"Warrant"), pursuant to which Heartport may purchase up to 100,000 shares of the
Common Stock of Vista;
WHEREAS, Vista desires to supply to Heartport, and Heartport desires to
purchase from Vista, four (4) Vista Systems (as defined below) as set forth in
this Agreement;
WHEREAS, Heartport and Vista desire to set forth the terms of the services
Vista will provide to Heartport with respect to such Vista Systems in this
Agreement; and
WHEREAS, Vista desires to sell such Vista Systems to surgeons that have
been trained at HRTC (as defined below) and/or the hospitals with which they are
affiliated and Heartport and Vista desire to set forth their agreement with
respect to such sales in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS.
1.1 "AFFILIATE" means any entity directly or indirectly controlling,
controlled by, or under common control with either party hereto and shall
include, without limitation, any entity more than fifty percent (50%) of whose
voting stock or participating profit interest is owned or controlled, directly
or indirectly, by either party and any entity which owns or controls, directly
or indirectly, more than fifty percent (50%) of the voting stock of either
party.
<PAGE>
1.2 "EFFECTIVE DATE" means the date of this Agreement set forth in the
preamble.
1.3 "HRTC" means the Heartport Research and Training Center in Salt Lake
City, Utah or other comparable research and training center used by Heartport in
North America where Vista Systems are installed.
1.4 "NORTH AMERICA" means the United States, its territories, and Canada.
1.5 "PORT-ACCESS-TM- HOSPITAL" means a hospital, clinic or other similar
site in North America where cardiothoracic surgery is performed, where at least
one cardiothoracic surgeon has been trained at HRTC to perform one or more
Port-Access Procedures (and, after the first two (2) Vista Systems have been
installed at HRTC pursuant to this Agreement, such surgeon shall have been
exposed to the Vista System in the course of the training program during the
Services Term), and such site is a Heartport customer at the time it places an
order with Vista for one or more Vista Systems. A Port-Access Hospital is a
Heartport customer if a surgeon affiliated with it is performing Port-Access
Procedures and/or the site is under contract with Heartport to purchase Port-
Access Procedures or devices or instruments for performing such procedures.
1.6 "PORT-ACCESS-TM- PROCEDURES" means minimally invasive procedures for
cardiothoracic surgery using technology developed, licensed or otherwise owned
by Heartport.
1.7 "PROPRIETARY INFORMATION" means information developed, known by or
conveyed to a party, including, without limitation, trade secrets, copyrights,
ideas, techniques, know-how, inventions (whether patentable or not), and/or any
other information of any type relating to designs, configurations, toolings,
clinical procedures or treatments, documentation, recorded data, schematics,
source code, object code, master works, master databases, algorithms, flow
charts, formulae, circuits, works of authorship, mechanisms, research,
manufacture, improvements, assembly, installation, intellectual property
including patents and patent applications, business plans, past or future
financing, marketing, forecasts, pricing, customers, the salaries, duties,
qualifications, performance levels, and terms of compensation of employees,
and/or cost or other financial data concerning any of the foregoing or the
party, its Affiliates and their operations generally.
1.8 "SERVICES TERM" means the period from the Effective Date through
December 31, 1999; provided, however, that the Services Term shall terminate in
the event that this Agreement is terminated in accordance with Article 8 hereof.
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1.9 "VISTA CARDIOVIEW-TM- DISPLAY" shall mean Vista's CardioView-TM- Head
Mounted Display or any iteration or improvement thereof or other similar head-
mounted display developed, licensed or otherwise owned by Vista or its Affiliate
and any variation, improvement or upgrade thereto or revision or replacement
thereof.
1.10 "VISTA SYSTEM" shall mean Vista's Series 8000 Visualization and
Information System (including, without limitation, one Vista Cardio-TM-View
Display, one 3-D camera, all related software and hardware and Vista's standard
warranty for such Vista System), or other similar visualization and information
system in the field of cardiac surgery related to the Vista Series 8000
Visualization and Information System, or any iteration or improvement thereof
developed, licensed or otherwise owned by Vista or its Affiliate and any
variation, improvement or upgrade thereto or revision or replacement thereof.
2. SUPPLY TO HEARTPORT.
2.1 SUPPLY OF VISTA SYSTEMS. Subject to the terms and conditions of this
Agreement, Vista will supply to Heartport four (4) Vista Systems in accordance
with the following delivery and payment schedules. Vista will ship two (2)
Vista Systems to * * * * * * , for delivery in * * * (or Vista shall use
commercially reasonable efforts to deliver as soon as possible thereafter) and
Heartport will pay Vista * * * within * * * days of the delivery and
installation of such Vista Systems. Vista will ship two (2) Vista Systems to
HRTC, * * * , for delivery in * * * (or Vista shall use
commercially reasonable efforts to deliver as soon as possible thereafter) and
Heartport will pay Vista * * * within * * * days of the delivery and
installation of such Vista Systems. Vista will notify Heartport in writing of
the exact delivery dates at least thirty (30) days in advance of such shipments.
In further consideration of this Section 2.1 and Vista's other obligations under
this Agreement, Heartport shall make the following additional payments to Vista
in accordance with the schedule set forth below:
* * *
All costs, taxes, insurance premiums, and other expenses relating to Vista
Systems transportation and delivery shall be at * * * . Prior to
exercising the Warrant, Heartport or its successor agree to pay to Vista all
unpaid amounts payable pursuant to this Section 2.1.
2.2 LATE DELIVERY. If Vista becomes aware that any Vista System will not
be delivered within the range of acceptable delivery dates, Vista shall
immediately notify
* * * Confidential Treatment Requested
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Heartport in writing no more than five (5) days after becoming aware of the
possibility of late delivery and prior to delivery of such Vista System.
Heartport may, at its discretion, accept late delivery of any such Vista System.
Heartport's rejection of such late Vista System shall not give rise to the
termination of this Agreement and the parties shall negotiate in good faith with
regard to the payments due to Vista hereunder with respect to such Vista System.
2.3 TITLE AND RISK OF LOSS. * * *
* * *
* * *
2.4 RESALE OF VISTA SYSTEMS BY HEARTPORT. Except in connection with the
sale of all or substantially all of the assets of HRTC or a change in control of
Heartport and/or HRTC, Heartport agrees that it will not sell or transfer the
Vista Systems purchased pursuant to this Agreement during the Services Term.
After the Services Term, prior to selling a Vista System to a third party,
Heartport shall first offer such Vista System to Vista for repurchase by Vista
and the parties agree to negotiate in good faith for * * * days to reach a
fair price. If the parties have not reached agreement during such * * *
day period, Heartport may sell such Vista System to a third party on material
terms no more favorable than those offered to or by Vista.
3. SERVICES TO HEARTPORT.
3.1 INSTALLATION, SUPPORT AND SERVICE. Notwithstanding anything in this
Agreement to the contrary, during the Services Term, Vista will install all
Vista Systems purchased by Heartport hereunder at HRTC in accordance with the
terms of this Agreement. In addition, during the Services Term, Vista shall
provide on-site in-service to operate and repair the Vista Systems at
Heartport's request. During the Services Term, Heartport will notify Vista of
any defective Vista System as soon as reasonably practical after Heartport
becomes aware of such defective Vista System. If Vista cannot timely repair the
defective Vista System, Vista will use commercially reasonable efforts to
replace the defective Vista System within * * * days after receipt of
notice of such defective from Heartport or as otherwise agreed to by Heartport.
During the Services Term, Vista will promptly provide and install all available
upgrades to the Vista Systems at HRTC so that the Vista Systems at HRTC are the
most current commercially available state-of-the-art. The parties will
cooperate to ensure that representatives of Vista will receive reasonably
adequate access to HRTC to perform the services and support provided hereunder.
Vista agrees to arrange the schedule of in-service provided by Vista at HRTC in
advance with Heartport's Director of Clinical Affairs or his designee and to
visit HRTC in accordance with the arranged schedule. All such representatives
will execute and abide by Heartport's standard Confidential Disclosure Statement
at HRTC.
* * * Confidential Treatment Requested
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3.2 TRAINING MATERIALS. Members of Vista's and Heartport's management
will work together to prepare all training materials with respect to Vista
Systems that are provided to Heartport trainees at HRTC. Such training material
will be subject to the written approval of at least one (1) member of the senior
management of each of Heartport and Vista prior to its distribution to Heartport
trainees.
4. VISTA SYSTEM COMPATIBILITY. During the Services Term and for a period of
* * * years thereafter, Vista and Heartport agree to mutually evaluate new
software or digital signal processing technology or similar technology useful in
the performance of Port-Access Procedures. If the parties mutually determine in
good faith that it would be commercially and technically appropriate, they will
work together using commercially reasonable efforts with the goal of ensuring
that the Vista System, including, without limitation, the Vista CardioView-TM-
Display, is compatible with such software or digital signal processing or
similar technology. Notwithstanding the foregoing, Vista agrees to work with
Heartport using commercially reasonable efforts to satisfy Heartport's
reasonable requests for inclusion of specified features in the Vista CardioView-
TM- Display that relate to Port-Access Procedures.
5. PROMOTIONAL ACTIVITY. During the Services Term, Heartport will promote
that its HRTC training courses utilize Vista Systems and will endorse such Vista
Systems as the preferred three-dimensional video visualization and information
solution for minimally invasive cardiac surgery and Vista will promote that
Heartport's HRTC training course utilize Vista Systems. Such promotional
activity will be subject to the written approval of at least one (1) member of
the senior management of each of Heartport and Vista prior to its distribution.
Heartport will provide Vista with lists of the names and hospital affiliations
of the HRTC trainee surgeons on at least a quarterly basis. Heartport also
agrees to endorse such Vista Systems as a preferred three-dimensional video
visualization and information solution for minimally invasive cardiac surgery
after the Services Term for so long as Vista is obligated to sell Vista Systems
to Port-Access Hospitals pursuant to Article 6 hereof.
6. SUPPLY TO PORT-ACCESS HOSPITALS.
6.1 NON-DISCRIMINATION. During the Services Term and for four (4) years
thereafter (the "Supply Term"), Vista will sell Vista Systems to each Port-
Access Hospital without discrimination and on the best available terms and
conditions it offers to any other similarly situated Vista customer in North
America purchasing similar quantities of Vista Systems (whether on a per unit
payment basis or on a per procedure payment basis). Such terms and conditions
include, without limitation, price, priority of delivery, warranty, service and
rights to receive upgrades. For purposes of this Agreement, "similarly
situated" shall be determined by Vista in good faith based on factors such as
quantity ordered, number of procedures performed, payment, delivery and services
terms, revenues anticipated to be generated at the site, quantities already
installed or
* * * Confidential Treatment Requested
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committed to be installed and geographic considerations. * * *
* * *
* * *
If a Port-Access Hospital places an order for one (1) or more Vista Systems (or
procedures) the aggregate number of which is not eligible for a volume discount,
the best available terms and conditions shall be determined by reference to
similar sales to other Vista customers in North America. Notwithstanding the
foregoing, in the event Vista sells Vista Systems in North America as a kit with
other products, the best available terms and conditions for Vista Systems shall
be determined by the following equation:
Price (the "New Price") for stand-alone Vista System if Vista sells as a kit
with other products = (A/A+B)C
where
***
***
If a product or relevant Vista System is not sold * * *
* * *, the parties shall in good faith mutually agree upon a fair price for
such component of the formula. The determination of price for a * * *
* * * shall take into account the fairest
determination of * * * given the circumstances
* * *
* * * . Nothing in this Article 6 shall prevent Vista
from implementing reasonable price increases for Vista Systems, provided that
such increases apply equally to all similarly situated Vista customers in North
America.
6.2 MEET AND CONFER. The parties agree that Vista's obligations pursuant
to this Article 6 are an important component of the consideration for this
Agreement. In the event of a misunderstanding between the parties with respect
to the terms of this Article 6, each party hereby represents and warrants to the
other party that at least one (1) member of its senior management will meet with
at least one (1) member of the senior management of the other party within no
more than fifteen (15) days after
* * * Confidential Treatment Requested
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receiving written notice of the other party's concern or request for
clarification under this Article 6. The parties agree to discuss the concern or
request for clarification in good faith with the goal of resolving the
misunderstanding to the satisfaction of both parties. In addition, the parties
agree that during the period of discussion covered by this Section 6.2 that each
party will honor reasonable requests for the review of its records related to
the misunderstanding. In the event that the party giving notice of the concern
or requested clarification is not satisfied with the results of negotiation
after thirty (30) days from the date of the first meeting between the parties,
such party shall have the right to pursue other remedies available under the
terms of this Agreement.
6.3 EXTENSION OF SUPPLY TERM. At Heartport's request, Vista will
negotiate in good faith to extend the Services Term and/or the Supply Term on
mutually acceptable terms.
7. CONFIDENTIALITY.
7.1 Each party acknowledges the importance of the other party's
Proprietary Information. Each party agrees (i) to hold the other party's
Proprietary Information in confidence and to take all reasonable precautions to
protect such Proprietary Information (including, without limitation, all
precautions such party employs with respect to its confidential materials),
(ii) not to divulge any such Proprietary Information or any information derived
therefrom to any third person (including Affiliates, except on a "need to know"
basis, (iii) not to make any use whatsoever at any time of such Proprietary
Information except as expressly authorized in this Agreement and (iv) not to
copy, study, analyze, examine or reverse engineer any such Proprietary
Information except as expressly authorized in this Agreement. Any employee or
contractor given access to any such Proprietary Information must have a
legitimate "need to know" and shall be similarly bound.
7.2 Without granting any right or license, each party agrees that
Section 7.1 shall not apply to information a party can document (i) is in or,
through no improper action or inaction by such party or any Affiliate, agent or
employee, enters the public domain (and is readily available without substantial
effort), or (ii) was rightfully disclosed to it by a third party not under
restriction not to disclose such information, or (iii) was independently
developed by it by persons without access to, or use of, any Proprietary
Information of the other party. A party must promptly notify the other party of
any information it believes comes within any circumstance listed in the
immediately preceding sentence and will bear the burden of proving the existence
of any such circumstance by clear and convincing evidence.
7.3 Immediately upon (i) termination of this Agreement or (ii) a party's
earlier written request, a receiving party will turn over to the disclosing
party all of such disclosing party's Proprietary Information and all documents
or media containing any
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such Proprietary Information (and any and all copies or extracts thereof) and
shall have an officer of such party so certify to the disclosing party in
writing. In such instance, each party's chief legal officer may retain one
archival copy of the other party's Proprietary Information in secure files,
provided, however, that if such copies are retained, the officer's certificate
referred to in this Section 7.3 shall so state.
7.4 Each party acknowledges and agrees that due to the unique nature of
the other party's Proprietary Information, there can be no adequate remedy at
law for any breach of its obligations hereunder, that any such breach may allow
the receiving party or third parties to unfairly compete with the disclosing
party resulting in irreparable harm to the disclosing party, and, therefore,
upon any such breach or any threat thereof, the disclosing party shall be
entitled to appropriate equitable relief in addition to whatever remedies it
might have at law and to be indemnified by receiving party from any loss or
harm, including, without limitation, lost profits and attorney's fees, in
connection with the unauthorized use or release of any Proprietary Information
of the disclosing party or breach of this Article 7. A receiving party shall be
obligated to notify the disclosing party in writing immediately upon the
occurrence of any such unauthorized use or release or breach of this Article 7.
7.5 The obligations imposed by Sections 7.1 and 7.2 with respect to the
protection of Proprietary Information shall continue for a period of * * *
following disclosure of such Proprietary Information unless otherwise agreed
to in writing by the parties.
8. TERM AND TERMINATION.
8.1 TERM. Except as otherwise set forth in this Agreement, Vista shall be
obligated to provide the services to Heartport set forth in Article 2 and
Article 3 of this Agreement and Heartport shall be obligated to make the
payments to Vista described in Article 2 of this Agreement during the Services
Term. In addition, Vista shall be obligated to supply Vista Systems to Port-
Access Hospitals during the Supply Term defined in Article 6 hereof and both
parties shall be obligated to perform their respective obligations pursuant to
Articles 4, 5, 6 and 7 during the terms set forth therein. Unless otherwise
expressly set forth herein, this Agreement will terminate at the end of the
Supply Term unless extended by the parties in accordance with the terms of this
Agreement.
8.2 TERMINATION BY EITHER PARTY. If either party is in material breach of
one or more provisions of this Agreement, the Agreement may be terminated by the
non-breaching party if the breach is not cured by the breaching party within
* * * days of written notification of the breach by the non-breaching party.
The breach may be cured after * * * days of such notification by mutual
written agreement of the parties.
* * * Confidential Treatment Requested
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8.3 SURVIVAL. Except as otherwise set forth in this Agreement, upon the
termination or expiration of this Agreement, all rights and obligations of the
parties under this Agreement shall cease, except that the provisions of
Articles 7 and 9 and this Section 8.3 shall survive and any other provisions
which by their terms or nature are intended to survive such termination or
expiration shall survive and continue to be enforceable. Notwithstanding the
foregoing, upon any termination, pending orders received by Vista from Port-
Access Hospitals prior to such termination shall be completed and shipped
pursuant to the terms of this Agreement and any arrangements between the Port-
Access Hospital and Vista.
9. MISCELLANEOUS.
9.1 RELATIONSHIP OF PARTIES. The relationship of the parties shall be
solely that of independent contractors. At no time will either party hold
itself out to be the agent, employee, partner or joint venture of the other
party. Neither party hereto shall have the express or implied right or
authority to assume or create any obligation on behalf or in the name of the
other party, or to bind the other party in regard to any contract, agreement or
undertaking with any third party.
9.2 THIRD PARTY BENEFICIARIES. Each Port-Access Hospital is expressly
intended to be a third party beneficiary of Article 6 of this Agreement;
provided, however, that Heartport must be a party to any action brought to
enforce the terms of Article 6 with respect to any Port-Access Hospital. The
parties agree that depending upon the circumstances, equitable relief such as
specific performance may be the most appropriate remedy for the enforcement of
Article 6.
9.3 ASSIGNMENT. Neither party may assign this Agreement in whole or in
part without the prior written consent of the other party, except that neither
party may, without consent, assign this Agreement to an acquirer of, or
successor to, all or substantially all of such party's business, stock or assets
that relate to the subject matter of this Agreement.
9.4 CHANGE IN CONTROL. This Agreement is expressly intended to survive a
change in control or reorganization or other such corporate restructuring
(including a sale of all or substantially all assets) of either (or both) party
and each party hereby represents and warrants to the other party that it and its
Affiliates and any successor or assign will honor and perform the obligations
set forth in this Agreement in such event.
***
* * * Confidential Treatment Requested
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9.5 TRADEMARKS. Except as required by law or other governmental
authorities (in which case the party using such trademark, service mark or trade
name shall use it with property attribution), neither party shall, without the
express written consent of the other party, use any trademark, service mark or
trade name of the other party.
9.6 PUBLICITY. Except as expressly set forth in this Agreement or as
required by law or regulation, neither party shall issue any publicity about the
other party, this Agreement or the parties' performance under this Agreement
without the prior written consent of the other party. In the event that a party
must describe this Agreement in a document to be filed with the United States
Securities and Exchange Commission, such party will provide a draft of the
disclosure to the other party for their reasonable review, comment and written
approval as soon as practicable after preparation (but no less than 24 hours
prior to filing).
9.7 GOVERNING LAW. The rights and obligations of the parties to this
Agreement shall be governed by and construed in accordance with the laws of the
State of California, without regard to the conflict of laws provisions therein.
9.8 HEADINGS. Section headings are for convenience of reference only and
shall not be considered in the interpretation of this Agreement.
9.9 NOTICES. All notices, requests, consents or other communications made
hereunder shall be in writing and will be deemed duly given upon delivery if
delivered personally, upon confirmation of transmission if sent by telex or
facsimile, upon the third business day after mailing if sent by U.S. mail,
postage prepaid, and upon receipt if sent by reputable overnight courier to the
parties at the following addresses or such other addresses as may be designated
in writing by the respective parties:
If to Vista:
Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
Attn: President and Chief Executive Officer
Facsimile: (619) 603-9170
If to Heartport:
Heartport, Inc.
700 Chesapeake Drive
Redwood City, CA 94063
Attn: General Counsel
Facsimile: (415) 482-4436
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9.10 CONSENTS. Any consents or approvals given or required to be given
under this Agreement shall be effective only if given in writing and executed by
an executive officer of the party granting such consent or approval.
9.11 WAIVER. The failure of either party to enforce its rights under this
Agreement at any time for any period shall not be construed as a waiver of such
rights.
9.12 ENTIRE AGREEMENT. This Agreement together with any Appendices and
Addenda attached hereto and the Mutual Non-Disclosure Statement dated as of
October 16, 1995, between the parties, constitute the entire agreement between
the parties relating to the subject matter hereof, and supersede all prior or
contemporaneous written or oral negotiations, representations or agreements. No
modification of this Agreement shall be binding on either party unless it is in
writing and signed by both parties. In the event of any discrepancy or conflict
between the terms of this Agreement and any purchase order, invoice or other
report regarding the purchase and sale of Vista Systems hereunder, the terms of
this Agreement shall prevail. Both parties acknowledge that this Agreement is
the result of mutual negotiation and therefore any ambiguity in its terms shall
not be construed against the drafting party.
9.13 ARBITRATION. All disputes, controversies or differences arising out
of or in relation to or in connection with this Agreement, which cannot be
settled by discussion and mutual accord shall be finally settled by binding
arbitration to be conducted in Los Angeles, California, in accordance with the
rules of the American Arbitration Association. Demand for arbitration shall be
made in writing and shall be served upon the party or parties to whom the demand
is addressed in the manner provided for the tender of notices in Section 9.9
hereof. Unless otherwise agreed by the parties, there shall be three (3)
arbitrators, one (1) chosen by each party and the third chosen by the two (2)
arbitrators. The parties agree that all remedies, including equitable remedies,
shall be available to such arbitrator(s); provided, however, that the parties
expressly agree that neither party will seek, nor shall the arbitrator(s) be
entitled to award either party, punitive damages and that any consequential
damages claimed or awarded shall be reasonable. In the event that consequential
damages are awarded in an arbitration hereunder, Vista may submit the
determination that consequential damages are to be awarded and the amount of
such consequential damages (and no other finding of the arbitrator) to any court
having jurisdiction of the matter, and, if so submitted, the arbitrator's award
only as to consequential damages will be non-binding. Furthermore, no such
arbitrator shall have authority to alter, amend, add to, subtract from or
supplement the Agreement to grant punitive or exemplary damages. Judgment upon
the award rendered may be entered in any court having jurisdiction of the
matter. The arbitrators shall be instructed, in connection with the
issuance of their award, to prepare a written finding of facts and law
concerning the award.
9.14 ATTORNEYS' FEES. In the event of litigation or other legal proceeding
between the parties arising from this Agreement, the prevailing party shall be
entitled to
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recover, in addition to any other relief awarded or granted, its reasonable
costs and expenses (including attorneys' fees and expert witness costs) incurred
in the proceeding.
9.15 COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument. If this Agreement is executed in
counterparts, no signatory hereto shall be bound until both the parties named
below have duly executed or caused to be duly executed a counterpart of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives as of the Effective Date.
HEARTPORT, INC.
By:/s/ Wesley D. Sterman M.D.
------------------------------
Wesley D. Sterman, M.D.
President and Chief Executive Officer
VISTA MEDICAL TECHNOLOGIES, INC.
By:/s/ John P. Lyon
------------------------------
John P. Lyon
President and Chief Executive Officer
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EXHIBIT 10.13
SUPPLEMENTAL RIGHTS AGREEMENT
THIS SUPPLEMENTAL RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of the 27th day of November, 1996, between VISTA MEDICAL TECHNOLOGIES,
INC. ("Vista"), a California corporation, and MEDTRONIC, INC. ("Medtronic"), a
Minnesota corporation.
WITNESSETH:
WHEREAS, Vista and Medtronic Asset Management, Inc., a wholly-owned
subsidiary of Medtronic ("MAMI") have entered into a Series C Preferred Stock
Purchase Agreement of even date herewith (the "Investment Agreement") pursuant
to which MAMI is purchasing Series C Preferred Stock of Vista; and
WHEREAS, MAMI is becoming a party to the Amended and Restated Investors'
Rights Agreement of even date herewith (the "Investors' Rights Agreement")
pursuant to which MAMI will receive certain registration and other rights; and
WHEREAS, Vista and Medtronic are also entering into a Sales Agreement of
even date herewith (the "Sales Agreement") pursuant to which Medtronic will
receive certain rights to distribute, and act as sales agent for the sale of,
certain of Vista's products; and
WHEREAS, it is a condition to MAMI's willingness to purchase such Vista
Series C Preferred Stock that the parties enter into this Agreement.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and for other valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties mutually
agree as follows:
ARTICLE 1
DEFINITIONS
1.1) SPECIFIC DEFINITIONS. As used in this Agreement, the following terms
have the meanings set forth or referenced below:
"AFFILIATE" of a specified person (natural or juridical) means a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under
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common control with, the person specified. "Control" shall mean ownership of
more than 50% of the shares of stock entitled to vote for the election of
directors in the case of a corporation, and more than 50% of the voting power in
the case of a business entity other than a corporation.
"AGREEMENT" means this Agreement and all Exhibits and Schedules hereto.
"BOARD OF DIRECTORS" means Vista's Board of Directors.
"CHANGE OF CONTROL" means, with respect to Vista, any of the following events:
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) in a single transaction acquires "beneficial ownership" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Vista representing 50% or more of the combined voting power (with
respect to the election of directors) of Vista's then outstanding securities;
(2) the consummation of a merger, combination or consolidation of Vista with or
into any other corporation, other than a merger, combination or consolidation
which would result in the voting securities of Vista outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 50% of
the combined voting power (with respect to the election of directors) of the
securities of Vista or of such surviving entity outstanding immediately after
such merger, combination or consolidation; or (3) the consummation of a plan of
complete liquidation of Vista or of an agreement for the sale or disposition by
Vista of all or substantially all of Vista's business or assets.
"CONFIDENTIAL INFORMATION" means know-how, trade secrets, and other unpublished
or proprietary information disclosed (whether before or during the term of this
Agreement) by one of the parties (the "disclosing party") to the other party
(the "receiving party") or generated under this Agreement, excluding information
which:
(a) is now or comes to be in the public domain through no fault of the
receiving party;
(b) is released without restriction to the receiving party by the
disclosing party in writing;
(c) is lawfully obtained by the receiving party from third parties;
(d) can be demonstrated by competent proof to have been known or
hereafter developed by the receiving party independently of any disclosure
of "Confidential Information by the disclosing party;
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(e) has been in the possession of the receiving party, as a result of
disclosure under this Agreement, for a period of five (5) years; or
(f) is required by law to be disclosed; provided that the receiving party
has given the disclosing party prompt written notice of such disclosure
requirement and has cooperated with the disclosing party so that the
disclosing party may seek a protective order or other appropriate remedy to
avoid or limit such disclosure.
All Confidential Information disclosed by one party to the other under this
Agreement shall be in writing and bear a legend "Company Proprietary," "Company
Confidential" or words of similar import or, if disclosed in any manner other
than writing, shall be preceded by an oral statement indicating that the
information is Company proprietary or confidential, and shall be followed by
transmittal of a reasonably detailed written summary of the information provided
to the receiving party with identification as Confidential Information
designated as above within thirty (30) days.
"DEFINITIVE AGREEMENTS" with respect to a proposed transaction means one or more
binding written agreements which (i) set forth all of the terms and provisions
of such proposed transaction, (ii) are not subject to any further material
negotiations or agreements, (iii) do not condition either party's obligations
upon any further approval (other than shareholder approval) or due diligence
review by such party, or upon any other condition within the control of such
party.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXCLUSIVE PERIOD" means, with respect to a Proposed Transaction, the * * *
period following Medtronic's receipt of Vista's Notice with respect to such
Proposed Transaction.
"MEDTRONIC COMPETITOR" means any of the persons listed on Schedule 1. 1 hereto
(as such schedule may be updated by Medtronic with Vista's consent, not to be
unreasonably withheld) and any successor to any substantial portion of such
listed person's business involving the manufacture or sale of products
competitive with any products manufactured or sold by Medtronic.
"SUBSTANTIAL PORTION OF VISTA'S ASSETS" means assets (i) having a * * *
representing at least *** or more of aggregate * * * of Vista's assets
(excluding * * * * * * , (ii) constituting all or
substantially all of the assets of a line of "business" which represented at
least *** of Vista's * * * * * * during the most recently completed
* * * or * * * , or (iii) which include Vista's rights in or to
patents, trade secrets and/or know-how used in Vista's visualization and
related information systems products in the Field of Use.
* * * Confidential Treatment Requested
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1.2) OTHER TERMS. Other terms may be defined elsewhere in the text of
this Agreement and shall have the meaning indicated throughout this Agreement.
1.3) OTHER DEFINITIONAL PROVISIONS.
(a) The words "hereof," "herein," and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provisions of this Agreement.
(b) The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(c) References to an "Exhibit" or to a "Schedule" are, unless otherwise
specified, to one of the Exhibits or Schedules attached to or referenced in this
Agreement, and references to an "Article" or a "Section" are, unless otherwise
specified, to one of the Articles or Sections of this Agreement.
(d) The term "person" includes any individual, partnership, joint
venture, corporation, trust, unincorporated organization or government or any
department or agency thereof.
(e) The term "Dollars" or "$" shall refer to the currency of the United
States of America.
(f) All references to time shall refer to Minneapolis, Minnesota time.
ARTICLE 2
MEDTRONIC'S SUPPLEMENTAL RIGHTS
2.1) FIRST OFFER PURCHASE RIGHTS.
(a) Vista shall not enter into any transaction of the general types
described in subsection (b) below without first giving Vista's Notice (as
defined below) to Medtronic with respect thereto and complying with the terms of
this Section.
(b) In the event that (referred to as a "Proposed Transaction"):
(i) Vista receives a bona fide offer from a third party to
purchase, in one or more transactions, all or substantially all of
the outstanding capital stock of Vista, or to purchase, license or
otherwise acquire all or substantially all of the assets (excluding
cash and marketable securities) of Vista, or to otherwise acquire
control of Vista; or
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(ii) Vista receives a bona fide offer from a Medtronic Competitor to
purchase, in one or more transactions, capital stock (or securities
exercisable for or convertible into capital stock) of Vista equal to
*** or more of the issued and outstanding capital stock of Vista, or
to purchase, license or otherwise acquire a Substantial Portion of
Vista's Assets, or to otherwise acquire control of Vista; or
(iii) Vista's Board of Directors determines that it wishes to sell,
license, dispose of or otherwise transfer all or a Substantial
Portion of Vista's Assets or *** or more of the issued and
outstanding capital stock of Vista (other than in a public offering)
(including, without limitation, a determination to seek indications
of interest with respect to such a transaction);
then Vista shall, within * * * after such event notify Medtronic in
writing of Vista's receipt of such offer described in (i) or (ii) above or of
Vista's determination described in (iii) above ("Vista's Notice"). Vista's
Notice shall identify the third party offeror, in the case of (i) or (ii) above,
and shall set forth the material terms and provisions upon which Vista would be
willing to enter into a comparable transaction (the "Medtronic Transaction")
with Medtronic.
(c) During the Exclusive Period, Vista shall negotiate in good faith
exclusively with Medtronic regarding the Medtronic Transaction or any comparable
transaction. During the Exclusive Period, Vista will not solicit offers from,
negotiate with, or provide information to any third party regarding the Proposed
Transaction or any comparable transaction.
(d) If Medtronic and Vista fail to reach mutual agreement upon the terms
and provisions of definitive agreement(s) for the Medtronic Transaction during
the Exclusive Period, then Vista shall have * * * from the expiration of the
Exclusive Period in which to enter into Definitive Agreements for the related
Proposed Transaction with the third party whose bona fide offer was described in
Vista's Notice (with respect to a Proposed Transaction described in (b)(i) or
(b)(ii) above) or with any third party (with respect to a Proposed Transaction
described in (b)(iii) above); provided that Vista may not enter into such
Definitive Agreements unless the terms and provisions thereof are, in the
aggregate, more favorable to Vista than the final terms and provisions proposed
by Medtronic during the Exclusive Period. If Vista fails to enter into such
Definitive Agreements with respect to such particular Proposed Transaction
within such * * * period or if such Proposed Transaction is not completed
within * * * after the expiration of the Exclusive Period, then Medtronic's
rights under this Section shall be reinstated and Vista may not enter into such
Proposed Transaction without first giving Medtronic a new Vista's Notice and
complying with the terms of this Section 2.1.
* * * Confidential Treatment Requested
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(e) Medtronic's "First Offer Purchase Rights" pursuant to this Section
2.1 shall terminate upon the earlier of (i) the * * * anniversary of the
date of this Agreement, (ii) the closing of a public offering of Vista
securities registered on Form S-1 or SB-2 (or comparable forms) which results in
net proceeds to Vista of more than * * * , or (iii) if Vista has complied
with Medtronic's "First Offer Purchase Rights" pursuant to this Section 2.1 with
respect to a Proposed Transaction and such Proposed Transaction has resulted in
a Change of Control of Vista.
2.2) BOARD REPRESENTATIVE.
(a) So long as Medtronic (together with its Affiliates) owns at least an
aggregate of *** of the issued and outstanding shares of Vista Common Stock
(assuming conversion of all Vista Preferred Stock) (appropriately adjusted in
the event of stock splits, reverse stock splits, or dividends paid in the form
of Vista stock), Vista shall permit Medtronic to designate one representative
reasonably acceptable to Vista as an observer to the Board of Directors or,
anytime after December 31, 1997 if Medtronic so elects in its discretion, as a
member of the Board of Directors. If Medtronic's representative has a change in
employment responsibilities or ceases to be employed by Medtronic, Medtronic
shall be entitled to designate a replacement for its representative.
Medtronic's representative shall receive all notices, documents, and other
information in the same time and manner as such information is supplied to
members of the Board of Directors. Vista shall make reasonable efforts to
permit Medtronic's representative to participate in or observe Board of
Directors meetings by telephone if such representative is unable to attend in
person. Vista agrees to pay the reasonable expenses incurred by Medtronic's
representative in connection with attending Board of Directors meetings as a
member of (but not as an observer to) the Board of Directors if and to the
extent that Vista pays any expenses of any other member of the Board of
Directors.
(b) So long as Medtronic has the right to have a representative to the
Board of Directors pursuant to (a) above and does not elect to have such
representative become a member of the Board of Directors, Medtronic shall
receive from Vista notices of all meetings of the Board of Directors, including
without limitation telephonic meetings, and Medtronic shall receive, with such
limitations provided herein, any materials distributed for such meeting, and may
send one representative to such meetings.
(c) Notwithstanding the foregoing subsection (a) and (b), Vista may
require as a condition precedent that such Medtronic's representative proposing
to attend any meeting of the Board of Directors shall agree to hold in
confidence and trust, and to act in a fiduciary manner if such individual is a
Board member with respect to all information so received during such meetings
and may require that such representative sign a confidentiality agreement with
Vista and; provided, further, that Vista reserves the right not to provide
information and to exclude such representative from any meeting or portion
thereof if attendance at such meeting by such representative or dissemination of
* * * Confidential Treatment Requested
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any information at such meeting to such representative would, in the good faith
judgment of the Board of Directors, would compromise or adversely affect the
attorney-client privilege between Vista and its counsel, or would, in the good
faith judgment of the Board of Directors, result in a conflict of interest
situation. In no event shall any provision of this Section waive any obligation
of confidentiality to Vista owed by any such representative or Medtronic.
(d) Unless Medtronic elects to have its designee to act as a non-voting
observer to the Board of Directors, from and after December 31, 1997, the Board
of Directors agrees to nominate Medtronic's designee for election to the Board
of Directors and Vista agrees to use its best efforts to cause Medtronic's
designee to be so elected.
(e) Medtronic's rights pursuant to this Section 2.2 shall terminate upon
the earlier of (i) the closing of a public offering of Vista securities
registered on Form S-1 or SB-2 (or comparable forms) which results in net
proceeds to Vista of more than *** * * * or (ii) if Vista has complied with
Medtronic's "First Offer Purchase Rights" pursuant to Section 2.1 with respect
to a Proposed Transaction and such Proposed Transaction has resulted in a Change
of Control of Vista.
2.3) INVESTORS' RIGHTS AGREEMENT. Vista agrees not to amend, modify or
obtain a waiver of its obligations under the Investors' Rights Agreement in any
manner that discriminates against Medtronic unless Medtronic or MAMI is among
the holders of a majority of Registrable Securities thereunder consenting to
such amendment, modification or waiver.
2.4) ISSUANCE OF PREFERRED STOCK. For so long as Medtronic or its
Affiliates owns any Series C Preferred Stock, Vista agrees not to issue or sell
any shares of Series A-1, Series A-3, or Series B Preferred Stock, or "Options"
to purchase or securities convertible into shares of Series A-1, Series A-3, or
Series B Preferred Stock, for a consideration per share (determined pursuant to
Section B.4.c.(5) of Article IV of Vista's Amended and Restated Certificate of
Incorporation) less than the "Series C Conversion Price" then in effect, except
that this Section shall not apply to issuances or sales described in subparts
(iv) or (v) of Section B.4.c.(1)(d) of Article IV of Vista's Amended and
Restated Certificate of Incorporation.
ARTICLE 3
MISCELLANEOUS
3.1) COMPLETE AGREEMENT. This Agreement, the Investment Agreement, the
Investors' Rights Agreement, the Sales Agreement, and the Schedules and Exhibits
hereto and thereto, constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and supersede all prior agreements
whether written or oral relating hereto.
* * * Confidential Treatment Requested
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3.2) WAIVER, DISCHARGE, AMENDMENT, ETC. The failure of any party hereto
to enforce at any time any of the provisions of this Agreement, including the
election of such party to proceed with the transactions contemplated hereby
despite a failure of any condition to such party's obligations to occur, shall
in no way be construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any part thereof or the right of the
party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to be a waiver of any other or subsequent
breach. Any amendment to this Agreement shall be in writing and signed by the
parties hereto.
3.3) NOTICES. All notices hereunder shall be deemed given if in writing
and delivered personally or sent by telecopy (with confirmation of transmission)
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other addresses as shall be specified by like notice):
if to Medtronic, to:
Medtronic, Inc.
Corporate Center
7000 Central Avenue N.E.
Minneapolis, MN 55432
Attention: General Counsel
FAX (612) 572-5459
with a copy to:
Medtronic, Inc.
Corporate Center
7000 Central Avenue N.E.
Minneapolis, MN 55432
Attention: Vice President Corporate Development and Associate General
Counsel
FAX (612) 572-5404
and if to Vista, to:
Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
Attention: John Lyon
FAX (619) 603-9170
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with a copy to:
Brobeck Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, CA 92101
Attention: Craig Andrews
FAX (619) 234-3848
Any party may change the above specified recipient and/or mailing address
by notice to all other parties given in the manner herein prescribed. AR
notices shall be deemed given on the day when actually delivered as provided
above (if delivered personally or by telecopy) or on the second business day
after the date postmarked (if delivered by mail).
3.4) PUBLIC ANNOUNCEMENT. Each of the parties to this Agreement hereby
agrees with the other parties hereto that, except as may be required to comply
with the requirements of applicable law and the New York Stock Exchange, no
press release or similar public announcement or communication will be made or
caused to be made concerning the execution or performance of this Agreement
unless specifically approved in advance by Medtronic and Vista. The foregoing
shall not restrict Medtronic's communications with employees or customers.
3.5) GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Minnesota, including all matters of
construction, validity, performance and enforcement, without giving effect to
principles of conflict of laws.
3.6) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and the successors or assigns of the
parties hereto; provided that the rights of Vista herein may only be assigned to
any business organization that shall succeed to the business of Vista to which
this Agreement relates, and the rights of Medtronic may only be assigned to any
Affiliate of Medtronic, to any business organization that shall succeed to the
business of Medtronic or of such subsidiary to which this Agreement relates, or
to any person to whom Medtronic transfers at least * * * Shares.
3.7) TITLES AND HEADINGS: CONSTRUCTION. The titles and headings to
Sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. This Agreement shall be construed without regard to any presumption
or other rule requiring construction hereof against the party causing this
Agreement to be drafted.
* * * Confidential Treatment Requested
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3.8) BENEFIT. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective permitted successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
3.9) ILLEGALITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
3.10) NON-DISCLOSURE. Each party agrees not to disclose or use (except as
permitted or required for performance by the party receiving such Confidential
Information of its rights or duties under this Agreement, the Investment
Agreement, the Investors' Rights Agreement, the Sales Agreement, or the Exhibits
hereto or thereto) any Confidential Information of the other party obtained
under this Agreement.
3.11) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed as original and all of which
together shall constitute one instrument.
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IN WITNESS WHEREOF, each of the parties has caused this Supplemental Rights
Agreement to be executed in the manner appropriate for each, as of the date
first above written.
MEDTRONIC, INC.
By: /s/ Michael D. Ellwein
------------------------------------
Its: Vice President
-------------------------------
VISTA MEDICAL TECHNOLOGIES, INC.
By: John Lyon
------------------------------------
Its: President
-------------------------------
ATTACHMENTS:
Schedule 1.1 - Medtronic Competitors
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Schedule 1.1
MEDTRONIC COMPETITORS
MEDTRONIC COMPETITORS INCLUDE THE FOLLOWING ENTITIES AND THEIR RESPECTIVE
AFFILIATES:
* * *
* * * Confidential Treatment Requested
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* * *
* * * Confidential Treatment Requested
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EXHIBIT 10.14
VISTA MEDICAL TECHNOLOGIES, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
November 27, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS . . . . . . . 1
1.1 Restrictions on Transferability . . . . . . . . . . . . . . 1
1.2 Certain Definitions . . . . . . . . . . . . . . . . . . . . 2
1.3 Restrictive Legend(s) . . . . . . . . . . . . . . . . . . . 3
1.4 Notice of Proposed Transfers. . . . . . . . . . . . . . . . 3
1.5 Demand Registration Rights. . . . . . . . . . . . . . . . . 4
1.6 Company Registration. . . . . . . . . . . . . . . . . . . . 6
1.7 Form S-3 Registration Rights. . . . . . . . . . . . . . . . 7
1.8 Expenses of Registration. . . . . . . . . . . . . . . . . . 8
1.9 Registration Procedures . . . . . . . . . . . . . . . . . . 8
1.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . 9
1.11 Information by Holder . . . . . . . . . . . . . . . . . . . 11
1.12 Rule 144 Reporting. . . . . . . . . . . . . . . . . . . . . 11
1.13 Transfer of Registration Rights . . . . . . . . . . . . . . 12
1.14 Termination of Registration Rights. . . . . . . . . . . . . 12
1.15 "Market Stand Off" Agreement. . . . . . . . . . . . . . . . 13
SECTION 2. AFFIRMATIVE COVENANTS OF THE COMPANY AND STOCKHOLDERS . . . 13
2.1 Financial Information . . . . . . . . . . . . . . . . . . . 13
2.2 Assignment of Rights to Financial Information . . . . . . . 14
2.3 Inspection Rights . . . . . . . . . . . . . . . . . . . . . 14
2.4 Attendance at Board Meetings. . . . . . . . . . . . . . . . 15
2.5 Termination of Covenants. . . . . . . . . . . . . . . . . . 15
2.6 Confidential Information, etc . . . . . . . . . . . . . . . 15
SECTION 3. RIGHTS OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . 16
3.1 Right of First Refusal on Company Issuances . . . . . . . . 16
SECTION 4. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 17
4.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 17
4.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . 17
4.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 18
4.4 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 18
4.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . 18
4.7 Separability. . . . . . . . . . . . . . . . . . . . . . . . 18
4.8 Approval of Amendments and Waivers. . . . . . . . . . . . . 18
4.9 Amendment of Prior Agreement. . . . . . . . . . . . . . . . 19
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "Agreement") is
made as of the 27th day of November, 1996 (the "Effective Date"), by and between
Vista Medical Technologies, Inc., a Delaware corporation (the "Company"), and
the Stockholders listed on Schedule A hereto, each of which is herein referred
to as a "Stockholder."
RECITALS
WHEREAS, the Company and certain of the Stockholders (the "Series A
Stockholders") are parties to a certain Investors' Rights Agreement dated as of
July 12, 1996, as amended through the date hereof (the "Prior Agreement"),
pursuant to which certain of the Stockholders possess registration rights,
information rights, rights of first refusal and other rights, and the Company is
obligated thereunder;
WHEREAS, the Company and one of the Stockholders are parties to the
Series C Preferred Stock Purchase Agreement dated the date hereof (the "Series C
Agreement"); and
WHEREAS, in order to induce the Company to enter into the Series C
Agreement and to induce such Stockholder to purchase shares of the Company's
Series C Preferred Stock (the "Series C Preferred") pursuant to the Series C
Agreement, the Stockholders and the Company hereby agree that this Agreement
shall amend the Prior Agreement so that this Agreement shall govern the
obligations of the Company to register the resale of shares of Common Stock
issuable to the Stockholders upon conversion of their shares of the Company's
Series A-1 Preferred Stock, Series A-3 Preferred Stock (collectively, the
"Series A Preferred"), Series B Preferred Stock (the "Series B Preferred")
and/or Series C Preferred, and certain other matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
SECTION 1.
RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
1.1 RESTRICTIONS ON TRANSFERABILITY. Neither the Series A Preferred,
the Series B Preferred or the Series C Preferred nor the Registrable Securities
(as defined below) shall be transferable except upon the conditions specified in
this Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act (as defined below), or upon such other terms as
are in the opinion of counsel to the Company satisfactory to comply with the
provisions of the Securities Act. Except for transfers made pursuant to Rule
144 of the Securities Act, the Stockholders will cause any proposed transferee
of Series
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A Preferred, Series B Preferred, Series C Preferred or Registrable Securities
held by any Stockholder to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement and it will be a
condition precedent to the effectiveness of any such transfer that the Company
shall have secured a written agreement in form and substance satisfactory to the
Company to that effect, if so requested by the Company,
1.2 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"FORM S-3" shall mean Form S-3 under the Securities Act (as defined below)
as in effect on the date of this Agreement, or any substantially similar,
equivalent or successor form under the Securities Act.
"HOLDER" shall mean each holder of Registrable Securities.
"REGISTRABLE SECURITIES" means (i) the Common Stock issuable or issued
upon conversion of the Series A Preferred, (ii) the Common Stock issuable or
issued upon conversion of the Series B Preferred, (iii) the Common Stock
issuable or issued upon conversion of the Series C Preferred, and (iv) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the shares referenced in (i), (ii) and (iii) above, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his rights under this Section 1 are not assigned and any Registerable Securities
as to which the registration rights granted hereunder have been terminated
pursuant to Section 1.14.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with Sections 1.5, 1.6 and 1.7 hereof other than Selling Expenses,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of Company counsel, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
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"RESTRICTED SECURITIES" shall mean the securities of the Company required
to bear the legend set forth in Section 1.3 hereof or a legend substantially
similar thereto and all shares of Common Stock outstanding on the date of this
Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the applicable sale.
1.3 RESTRICTIVE LEGEND(S).
(a) Each certificate representing the shares of Series A Preferred,
Series B Preferred, Series C Preferred and Registrable Securities shall (unless
otherwise permitted by the provisions of Section 1.4 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable California or other state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION.
(b) Each certificate representing shares of Registrable Securities into
which shares of the Series A Preferred, Series B Preferred and/or Series C
Preferred are converted also shall be stamped or otherwise imprinted with any
legend required by the Bylaws of the Company (in addition to any legend required
under applicable California or other state securities laws).
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing the Restricted Securities, by acceptance thereof, agrees to comply
in all respects with the provisions of this Section 1.4. Prior to any proposed
transfer of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall be
accompanied (except in transactions in compliance with Rule 144) by either (i) a
written opinion of legal counsel which shall be reasonably satisfactory to the
Company addressed to the Company and
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reasonably satisfactory in form and substance to the Company's counsel, to the
effect that the proposed transfer of the Restricted Securities may be effected
without registration under the Securities Act, or (ii) a "no action" letter from
the Commission, a copy of any holder's request (together with all supplements or
amendments thereto) to which shall have been provided to the Company, at or
prior to the time of first delivery to the Commission's staff, to the effect
that the transfer of such securities without registration will not result in a
recommendation by such staff that action be taken with respect thereto,
whereupon the holder of such Restricted Securities shall be entitled to transfer
such Restricted Securities in accordance with the terms of the notice delivered
by the holder to the Company. Each certificate evidencing the Restricted
Securities transferred as provided for above shall bear the appropriate
restrictive legend set forth in Section 1.3 above, except that such certificate
shall not bear such restrictive legend if, in the opinion of counsel for the
Company or counsel for such holder, such legend is not required in order to
establish compliance with any provisions of the Securities Act.
Notwithstanding the provisions above, no such opinion of counsel or "no
action letter" shall be necessary for a transfer by a Stockholder which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner ("Partners"), if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if he were an original
Stockholder hereunder.
1.5 DEMAND REGISTRATION RIGHTS.
(a) Commencing on the third anniversary of the Effective Date, if the
Company shall receive a written request (specifying that it is being made
pursuant to this Section 1.5) from the Holders of at least forty percent (40%)
of the Registrable Securities that the Company file a registration statement or
similar document under the Securities Act covering the registration of
Registrable Securities the expected aggregate offering price to the public of
which is at least $7,500,000, then the Company shall promptly notify all other
Holders of such request and shall use its best efforts to cause all Registrable
Securities that such Holders have requested, within fifteen (15) days after
receipt of such written notice, to be registered in accordance with this Section
1.5 to be registered under the Securities Act. The Holders making the written
request pursuant to this Section 1.5 shall be referred to hereinafter as the
"Initiating Holders".
Notwithstanding the foregoing, (i) the Company shall not be obligated to
effect a registration pursuant to this Section 1.5 during the period starting
with the date one hundred twenty (120) days prior to the Company's estimated
date of filing of, and ending on a date one hundred eighty (180) days following
the effective date of, a registration statement pertaining to an underwritten
public offering of the Company's securities, provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; and (ii)
if the Company shall furnish to such
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Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its stockholders for a registration statement to be filed in
the near future, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed six (6)
months; provided, however, that the Company shall not obtain such a deferral
more than once in any 12-month period.
The Company shall be obligated to effect not more than two (2)
registrations pursuant to this Section 1.5 for which holders of Registrable
Securities are the Initiating Holders.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their demand by means of an underwriting, they shall so
advise the Company as part of their demand made pursuant to this Section 1.5,
and the Company shall include such information in the notice referred to in
Section 1.5(a). In such event, the right of any Holder to registration pursuant
to this Section 1.5 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.
The Company shall, together with all Holders proposing to distribute their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by the Company and
reasonably satisfactory to a majority of interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.5, if the underwriter
shall advise the Company in writing that marketing factors (including, without
limitation, an adverse effect on the per share offering price) require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities that would otherwise be registered
and underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated pro rata among such Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such Holder
may elect to withdraw therefrom by written notice to the Company, the
underwriter and the Initiating Holders. The Registrable Securities so withdrawn
shall also be withdrawn from registration. If by the withdrawal of such
Registrable Securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used in
determining the underwriter limitation in this Section 1.5.
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If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account (or for
the account of other securityholders) in such registration if the underwriter so
agrees and if the number of Registrable Securities that would otherwise have
been included in such registration and underwriting will not thereby be limited.
1.6 COMPANY REGISTRATION.
(a) If, at any time or from time to time, the Company shall determine to
register any of its securities, either for its own account or the account of a
securityholder or holders exercising their respective demand registration
rights, other than a registration relating solely to employee benefit plans on
Form S-8 or similar forms which may be promulgated in the future or a
registration on Form S-4 or similar forms which may be promulgated in the future
relating solely to a Securities and Exchange Commission Rule 145 or similar
transaction the Company will (i) promptly give to each Holder written notice
thereof and (ii) include in such registration (and any related qualification
under Blue Sky laws or other compliance), and in any underwriting involved
therein, all Registrable Securities of such Holders as specified in a written
request or requests made within fifteen (15) days after receipt of such written
notice from the Company.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
indicate in the notice given pursuant to Section 1.6(a). In such event the right
of any Holder to registration pursuant to this Section 1.6 shall be conditioned
upon such Holder's agreeing to participate in such underwriting and to the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other Holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company or by other holders exercising any
demand registration rights. Notwithstanding any other provision of this Section
1.6, if the underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the underwriter may exclude some or
all Registrable Securities or other securities from such registration and
underwriting (hereinafter an "Underwriter Cutback"); provided, however, that if
such underwriting relates to any registration statement other than a
registration statement being filed with respect to the first registration
statement filed by the Company covering an underwritten offering of any of its
securities to the general public ("Initial Public Offering") in which no
secondary shares are included, then (i) in no event shall the aggregate number
of shares of Registrable Securities included in such underwriting be reduced
below thirty (30%) of the total number of shares proposed to be included in such
underwriting. In the event of an Underwriter Cutback, the Company shall so
advise all Holders and the other holders distributing their securities through
such underwriting, and the number of Registrable Securities and other securities
that may be included in the registration and underwriting shall be allocated
among all holders thereof (other than those holders who are exercising their
demand registration
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rights) on the basis that the holders who are not Holders shall be cut back
before any cutback of Holders. If the limitation determined by the underwriter
requires an Underwriter Cutback, such Underwriter Cutback shall be in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement. If any Holder disapproves of the terms of any such underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company and
the underwriter. Any securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
1.7 FORM S-3 REGISTRATION RIGHTS. After the Initial Public Offering,
the Company shall use its best efforts to qualify for registration on Form S-3,
and to that end the Company shall use its best efforts to comply with the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), within twelve (12) months following the effective date of the
first registration of any securities of the Company for an underwritten
registered public offering. After the Company has qualified for the use of Form
S-3, and subject to the provisions of Section 1.14, each Holder shall have the
right to request registrations on Form S-3 (such requests shall be in writing
and shall state the number of shares of Registrable Securities to be disposed of
and the intended method of disposition of such shares by each such Holder),
subject only to the following limitations:
(a) The Company shall not be obligated to cause a registration on Form
S-3 to become effective prior to one hundred eighty (180) days following the
effective date of a Company initiated registration (other than a registration
relating solely to employee benefit plans on Form S-8 or similar forms which may
be promulgated in the future or a registration on Form S-4 or similar forms
which may be promulgated in the future relating solely to a Securities and
Exchange Commission Rule 145 or similar transaction the Company);
(b) The Company shall not be required to effect a registration pursuant
to this Section 1.7 unless the Holder or Holders requesting such a registration
propose to dispose of shares of Registrable Securities having an aggregate
disposition price (before deduction of underwriting discounts and expenses of
sale) of at least $500,000;
(c) The Company shall not be required to effect a registration pursuant
to this Section 1.7 if the Company shall furnish to the requesting 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 or its stockholders for the registration statement to
be filed at the date filing would be required, in which case the Company shall
have an additional period of not more than one hundred twenty (120) days within
which to file such registration statement; PROVIDED HOWEVER, that the Company
shall not use this right more than once in any 12-month period;
(d) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding one hundred twenty
(120) days from the effective date thereof;
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(e) The Company shall not be obligated to cause a registration on Form
S-3 if in the prior six-month period the Company has caused a registration on
Form S-3 to become effective; and
(f) The Company shall be obligated to effect not more than two
registrations per year pursuant to this Section 1.7 for which holders of
Registrable Securities request such registration.
The Company shall give notice to all Holders of the receipt of a request
for registration pursuant to this Section 1.7 and shall use its best efforts to
cause all Registrable Securities that such Holders have requested, within
fifteen (15) days after receipt of such written notice, be registered in
accordance with this Section 1.7 to be registered under the Securities Act.
Subject to the foregoing, the Company will use its best efforts to effect
promptly any registration pursuant to this Section 1.7. The provisions of
Section 1.5(b) shall apply to any registration effected pursuant to this Section
1.7
1.8 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.5, 1.6 and 1.7 (exclusive of Selling Expenses but inclusive of the
reasonable fees and expenses of one special counsel to the selling Holders)
shall be borne by the Company. Notwithstanding anything to the contrary herein,
the Company shall not be required to pay for any expenses of any registration
proceeding under Section 1.5 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to have been registered, unless such Holders agree to forfeit their
right to a demand registration pursuant to Section 1.5 (in which event such
right shall be forfeited by all Holders). In the absence of such an agreement
to forfeit, the Holders of Registrable Securities to have been registered shall
bear all such expenses pro rata on the basis of the Registrable Securities to
have been registered. Notwithstanding the foregoing, however, if at the time of
the 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, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said expenses
and shall retain their rights pursuant to Section 1.5.
1.9 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Keep such registration, qualification or compliance effective for a
period of one hundred twenty (120) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs;
(b) Prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration
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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;
(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; and
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 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.
Notwithstanding any provision to the contrary in this Agreement, the
Company shall not be required in connection with any registration pursuant to
Sections 1.5, 1.6 or 1.7 to qualify shares in any state or jurisdiction which
requires the Company to qualify to do business or to file a general consent to
service of process.
1.10 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
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required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will promptly reimburse each such Holder, each of its
officers and directors and partners, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred (as and when incurred) in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers and directors and partners and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof) including any of the foregoing incurred in
settlement of any litigation commenced or threatened, arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification, or compliance,
and will promptly reimburse the Company, such Holders, such directors,
officer's, partners, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred (as and when incurred) in connection with
investigation, preparing or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by an instrument
duty executed by such Holder and stated to be specifically for use therein,
provided, however, that the obligations of each such Holder hereunder shall be
limited to an amount equal to the proceeds to each such Holder of Registrable
Securities sold as contemplated herein.
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(c) Each party entitled to indemnification under this Section 1.10 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense, and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 1 unless such failure resulted in actual
detriment to the Indemnifying Party. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party a release from all liability in respect of
such claim or litigation.
(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. 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) 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 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 1.
1.12 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the
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Restricted Securities to the public without registration, after such time as a
public market exists for the Common Stock of the Company, the Company agrees to:
(a) Use its best efforts to make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities Act
at all times after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public;
(b) Use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Exchange Act at any time after it has become subject to such reporting
requirements,
(c) So long as a Stockholder owns any Restricted Securities, to furnish
to the Stockholder forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public) and of
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent annual report of the
Company, and such other reports and documents of the Company as a Stockholder
may reasonably request in availing itself of any rule or regulation of the
Commission allowing a Stockholder to sell any such securities without
registration.
1.13 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted under Sections 1.5, 1.6 and 1.7 may be assigned or
otherwise conveyed to a transferee or assignee of Registrable Securities, who
shall be considered a "Holder," and the transferred shares shall be considered
"Registrable Securities," for purposes of this Section 1, provided that (i) said
transferee acquires (or, together with affiliates (as defined under the
Securities Act) ("Affiliates") of said transferee, after the acquisition then
beneficially owns) at least 250,000 shares of the Registrable Securities
(including shares of Series A Preferred, Series B Preferred and Series C
Preferred prior to conversion into Registrable Securities) and (ii) the Company
is given written notice by such Holder at the time of or within a reasonable
time (but not more than thirty (30) days) after said transfer, stating the name
and address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned, subject to said
transferee's agreement to be bound by and comply with the provisions of this
Section 1.
1.14 TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
pursuant to this Section 1 shall terminate (i) upon the seventh anniversary of
the effective date of the first registration statement filed by the Company
covering the Initial Public Offering or (ii) if earlier, as to any individual
Holder, at such time after the Company's Initial Public Offering as all
Registrable Securities (including shares of Series A Preferred, Series B
Preferred and Series C Preferred prior to conversion into Registrable
Securities) held by such Holder (together with shares of any other holder whose
sales of Registrable Securities must be aggregated with sales of Holder pursuant
to Rule 144(e)) can be sold within any
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three-month period without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 (including Rule 144(k)) promulgated
thereunder.
1.15 "MARKET STAND OFF" AGREEMENT. Each Holder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; PROVIDED, HOWEVER, that:
(a) such agreement shall not exceed 180 days for the first
such registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) such agreement shall not exceed 90 days for any
subsequent registration statement of the Company which covers Common Stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(c) all executive officers and directors of the Company and
all other persons with registration rights under this Agreement or any other
agreement enter into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Notwithstanding the
foregoing, the obligations described in this Section 1.15 shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a SEC Rule 145 transaction on Form S-4 or similar forms which may be
promulgated in the future.
SECTION 2.
AFFIRMATIVE COVENANTS OF THE COMPANY AND STOCKHOLDERS
2.1 FINANCIAL INFORMATION. Subject to Section 2.3, the Company will
furnish the following reports to the Stockholders for so long as the
Stockholders are holders of any Series A Preferred, Series B Preferred, Series C
Preferred or Registrable Securities:
(a) As soon as practicable after the end of each fiscal year, and in any
event within 90 days thereafter, audited consolidated balance sheets of the
Company and its
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subsidiaries, if any, as of the end of such fiscal year, and consolidated
statements of income and surplus and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and certified by independent public accountants of
recognized national standing selected by the Company;
(b) Each month, an unaudited consolidated balance sheet of the Company
and its subsidiaries, if any, and consolidated statements of income and
consolidated statements of changes in financial condition of the Company and its
subsidiaries for such period, all in reasonable detail and signed, subject to
changes resulting from year-end audit adjustments, by the principal financial or
accounting officer of the Company;
(c) An annual operating budget for each coming year, delivered on or
before January 1 of each year; and
(d) Such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the investor may from
time to time request, provided, however, that the Company shall not be obligated
to provide information which it deems proprietary.
2.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights granted
pursuant to Section 2.1 may be assigned by the Stockholders (or by any permitted
transferee of any such rights) so long as (i) the Company is given notice of any
such assignment within a reasonable time after the date the same is effected,
(ii) the transferee shall have acquired (or, together with such transferee's
Affiliates, after the acquisition shall then beneficially own) at least 250,000
shares of Registrable Securities (including shares Series A Preferred, Series B
Preferred and Series C Preferred prior to conversion into Registrable
Securities) in a private transaction and (iii) the transferee is not engaged in
a business that is competitive with the Company.
2.3 INSPECTION RIGHTS.
(a) The Company will permit any Investor, so long as such Investor (or
its representative) owns at least 200,000 Shares, or such number of shares of
Common Stock issued upon conversion of 200,000 or more Shares, or any
combination thereof (as presently constituted and subject to subsequent
adjustment for stock splits, stock dividends, reverse stock splits,
recapitalizations and the like) (a "Significant Holder") (or a representative of
any Significant Holder) to visit and inspect any of the properties of the
Company, including its books of account and other records (and make copies
thereof and take extracts therefrom), and to discuss its affairs, finances and
accounts with the Company's officers and its independent public accountants, all
at such reasonable times and as often as any such person may reasonably request.
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(b) The provisions of Section 2.2 and this Section 2.3 shall not be in
limitation of any rights which any Holder or Significant Holder may have with
respect to the books and records of the Company and its subsidiaries, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
2.4 ATTENDANCE AT BOARD MEETINGS. So long as Foster City Partners
("Foster") owns at least an aggregate of 1,000,000 shares of Series A Preferred,
and so long as Foster does not have a representative on the Board of Directors
of the Company, Foster shall receive from the Company notices of all meetings of
the Board of Directors, including without limitation telephonic meetings, and
Foster shall receive, with such limitations provided herein, any materials
distributed for such meeting, and may send one representative to such meetings,
PROVIDED, HOWEVER, that the Company may require as a condition precedent that
such representative proposing to attend any meeting of the Board of Directors
shall agree to hold in confidence and trust and to act in a fiduciary manner
with respect to all information so received during such meetings and may require
that such representative sign a confidentiality agreement with the Company; and,
PROVIDED, FURTHER, that the Company reserves the right not to provide
information and to exclude such representative from any meeting or portion
thereof if attendance at such meeting by such representative or dissemination of
any information at such meeting to such representative would, in the good faith
judgment of the Board of Directors, result in disclosure of trade secrets to
such representative, would compromise or adversely affect the attorney-client
privilege between the Company and its counsel, or would, in the good faith
judgment of the Board of Directors, result in a conflict of interest situation.
If such representative in his or her good faith judgment believes that an item
to be discussed by the Board of Directors would result in any conflict of
interest, such representative shall promptly bring such conflict to the
attention of the Chairman of the Board. In no event shall any provision of this
paragraph waive any obligation of confidentiality to the Company owed by any
such representative or Foster.
2.5 TERMINATION OF COVENANTS. The covenants set forth in Section 2.1,
Section 2.3 and Section 2.4 shall terminate and be of no further force or effect
after the closing date of the Initial Public Offering.
2.6 CONFIDENTIAL INFORMATION, ETC. Each Stockholder agrees that all
information received by it pursuant to this Section 2, and any other information
relating to the Company's technology, processes or formulas that is disclosed by
the Company to any Stockholder in writing and is marked "Confidential," shall be
considered confidential information. Each Stockholder further agrees that it
shall hold all such confidential information in confidence and shall not
disclose any such confidential information to any third party other than its
counsel or accountants nor shall such Stockholder use such confidential
information for any purpose other than evaluation of such Stockholder's
investment in the Company; provided, however, that the foregoing obligation to
hold in confidence and not to disclose confidential information shall not apply
to any such
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<PAGE>
information that (a) was known to the public prior to disclosure by the Company,
(b) becomes known to the public through no fault of such Stockholder, (c) is
disclosed to such Stockholder on a non-confidential basis by a third party
having a legal right to make such disclosure or (d) is independently developed
by such Stockholder.
SECTION 3.
RIGHTS OF FIRST REFUSAL
3.1 RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES.
(a) The Company hereby grants to each Stockholder the right of first
refusal to purchase its Pro Rata Share (defined below) of all (or any part) of
New Securities (defined below) that the Company may from time to time propose to
sell and issue. Such Stockholder's "Pro Rata Share," for purposes of this
Section 3, is the ratio of the number of shares of Common Stock (assuming
conversion of all shares of Series A Preferred, Series B Preferred and Series C
Preferred) then held by such Stockholder to the total number of shares of Common
Stock then outstanding (assuming conversion of all shares of Series A Preferred,
Series B Preferred and Series C Preferred). This right of first refusal shall
be subject to the following provisions:
(b) "New Securities" shall mean any Common Stock or Preferred Stock of
the Company, whether now authorized or not, and rights, options, or warrants to
purchase said Common Stock or Preferred Stock, and securities of any type
whatsoever that are, or may become, convertible into or exchangeable for said
Common Stock or Preferred Stock; provided, however, that "New Securities" does
not include (i) securities issuable upon conversion of or with respect to Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred or any future
series of preferred stock; (ii) shares of the Company's Common Stock (or related
options) issued to officers, directors, employees of and/or consultants to the
Company pursuant to plans or agreements as approved by the Company's Board of
Directors; (iii) shares of the Company's Common Stock or Preferred Stock issued
in connection with any stock split, stock dividend, or recapitalization by the
Company; (iv) securities issued in connection with any equipment leasing,
technology licensing, corporate partnering, strategic alliance, acquisition,
merger, purchase of assets or similar transaction as approved by the Company's
Board of Directors; and (v) shares of the Company's Common Stock issued or
issuable as a result of any antidilution adjustment provided for in the
Company's Certificate of Incorporation as in effect at the time of such
issuance.
(c) In the event that the Company proposes to undertake an issuance of
New Securities, it shall give each Stockholder written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Stockholder shall have
twenty (20) business days from the date of receipt of any such notice to agree
to purchase some or all of his Pro Rata Share of such New Securities for the
price and upon the general terms specified in the notice by giving
-16-
<PAGE>
written notice to the Company and stating therein the quantity of New Securities
to be purchased. Each Stockholder shall have a right of over-allotment such
that if any Stockholder fails to exercise his right hereunder to purchase his
Pro Rata Share of New Securities, the other Stockholders may purchase the
non-purchasing Stockholder's portion on a pro rata basis, within fifteen (15)
business days from the date such non-purchasing Stockholder fails to exercise
his right hereunder to purchase his Pro Rata Share of New Securities.
(d) In the event that the Stockholders fail to exercise in full the
right of first refusal within said twenty (20) plus fifteen (15) business day
period, the Company shall have one hundred twenty (120) days thereafter to sell
(or enter into an agreement pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within one hundred twenty (120) days from
the date of said agreement) the New Securities respecting which the
Stockholders' rights were not exercised, at a price and upon general terms no
more favorable to the purchasers thereof than specified in the Company's notice.
In the event the Company has not sold the New Securities within said one hundred
twenty (120) day period (or sold and issued New Securities in accordance with
the foregoing within one hundred twenty (120) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Stockholders in the manner
provided above.
(e) The right of first refusal granted under this Section 3. 1 shall not
apply to and shall expire upon the closing of the Company's Initial Public
Offering.
(f) The rights granted pursuant to this Section 3.1 may be assigned by
the Stockholders (or by any permitted transferee of any such rights) so long as
(i) the Company is given notice of any such assignment within a reasonable time
after the date the same is effected and (ii) the transferee shall have acquired
(or, together with such transferee's Affiliates, after the acquisition shall
then beneficially own) at least 250,000 shares of Registrable Securities
(including shares of Series A Preferred, Series B Preferred and Series C
Preferred prior to conversion into Registrable Securities) in a private
transaction.
SECTION 4.
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware as applicable to contracts entered into and performed entirely
within the State of Delaware by Delaware residents.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
-17-
<PAGE>
4.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
4.4 NOTICES. ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to the Stockholders, to such Stockholders'
addresses set forth on the Schedule of Stockholders or to such other address as
such Stockholders shall have furnished to the Company in writing, (b) if to any
other holder of Registrable Securities, at such address as such holder shall
have furnished the Company in writing, or (c) if to the Company, to its address
set forth above and addressed to the attention of the President or at such other
addresses as the Company shall have furnished to the Stockholders. All notices
and other communications pursuant to the provisions of this Section 4.4 shall be
deemed delivered when mailed or sent by facsimile.
4.5 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
4.6 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
4.7 SEPARABILITY. Any invalidity, illegality, or limitation of the
enforceability with respect to any Stockholder of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Stockholder's domicile or otherwise, shall in no way affect
or impair the validity, legality, or enforceability of this Agreement with
respect to other Stockholder.
4.8 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may
be amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of (i) the Company and (ii) the holders
of at least a majority of the then outstanding shares of Registrable Securities,
excluding from the determination of such a majority in clause (ii) (both in
determining the total number of such shares outstanding and the number of such
shares consenting or not consenting) all shares previously disposed of by such
holders pursuant to one or more registration statements under the Securities Act
or pursuant to Rule 144. Any amendment, termination or waiver effected in
accordance with this section shall be binding upon the Stockholders, each of
their transferees and the Company. Each Stockholder acknowledges that by the
operation of this Section the holders of a majority of the outstanding
Registrable Securities as aforesaid may have the right and power to diminish or
eliminate all rights of such Stockholders under this Agreement.
-18-
<PAGE>
4.9 AMENDMENT OF PRIOR AGREEMENT. This Agreement constitutes an
amendment of the Prior Agreement and is cast in the form of an amendment and
restatement solely for the ease of the parties hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-19-
<PAGE>
The foregoing Restated Investors' Rights Agreement is hereby executed as of the
date first above written.
THE COMPANY:
VISTA MEDICAL TECHNOLOGIES, INC.
By: /s/ John Lyon
----------------------------------------
Title:President
---------------------------------------
Address: 5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
THE STOCKHOLDERS:
FOSTER CITY PARTNERS
By:H. J. Smead
------------------------------------------
Title:General Partner
---------------------------------------
Address: 950 Tower Lane, Ste. 800
Foster City, CA 94404
ONE LIBERTY FUND III, L.P.
By:/s/ D. J. Holland
------------------------------------------
Title:
---------------------------------------
Address: 1 Liberty Square, 2nd Floor
Boston, MA 02109
[SIGNATURE PAGE TO AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
GILDE INTERNATIONAL, B.V.
By:/s/ D. J. Holland
------------------------------------------
Title:
---------------------------------------
Address: 1 Liberty Square, 2nd Floor
Boston, MA 02109
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
By:/s/ Kathleen K. Shoemaker
------------------------------------------
Title:General Partner
---------------------------------------
Address: One Palmer Square, Ste. 515
Princeton, NJ 08542
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
By:/s/ Kathleen K. Shoemaker
------------------------------------------
Title:Attorney - In - Fact
---------------------------------------
Address: St. Julian's Court
St. Peter Port
Guernsey, Channel Islands
[SIGNATURE PAGE TO AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
D.P. III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.
By:/s/ Kathleen K. Shoemaker
------------------------------------------
Title:General Partner
---------------------------------------
Address: One Palmer Square, Ste. 515
Princeton, NJ 08542
SBIC PARTNERS, L.P.
By: Forrest Binkley & Brown L.P.,
General Partner
By: Forrest Binkley & Brown
Venture Co., General Partner
By:/s/ Nicholas B. Binkley
------------------------------------------
Title:President
---------------------------------------
By: SL-SBIC Partners, L.P.,
General Partner
By: FW-SBIC, Inc.,
General Partner
By:/s/ illegible
-----------------------------------------
Title:
--------------------------------------
Address: 201 Main Street, Suite 2302
Fort Worth, TX 76102
[SIGNATURE PAGE TO AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
KOICHIRO HIRO
/s/ Koichiro Hiro
---------------------------------------------
Address: c/o Oktas
134 Flanders Road
Westborough, MA 01581
MEDTRONIC ASSET MANAGEMENT, INC.
---------------------------------------------
By:/s/ Michael D. Ellwein
------------------------------------------
Title: Vice President
---------------------------------------
Address: 7000 Central Avenue NE
Minneapolis, MN 55432
[SIGNATURE PAGE TO AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT A
SCHEDULE OF STOCKHOLDERS
STOCKHOLDERS
FOSTER CITY PARTNERS
950 Tower Lane, Ste. 800
Foster City, CA 94404
Attention: Dr. H.J. Smead
ONE LIBERTY FUND III
1 Liberty Square, 2nd Floor
Boston, MA 02109
Attention: Dan Holland
GILDE INTERNATIONAL B.V.
1 Liberty Square, 2nd Floor
Boston, MA 02109
Attention: Dan Holland
B. U. N. P.
c/o Community Technology Fund
Boston University Ventures
147 Bay State Road
Boston, MA 02215
Attention: John E. Bagalay, Jr.
DOMAIN PARTNERS III, L.P.
One Palmer Square. Ste. 515
Princeton. NJ 08542
Attention: James C. Blair. Ph.D.
BIOTECHNOLOGY INVESTMENTS LIMITED
St. Julian's Court
St. Peter Pon
Guernsey. Channel Islands
with copy to:
c/o Domain Associates
One Palmer Square, Ste. 515
Princeton, NJ 08542
Attention: James C. Blair. Ph.D.
A-1
<PAGE>
DP III ASSOCIATES, L.P.
One Palmer Square, Ste. 515
Princeton, NJ 08542
Attention: James C. Blair, Ph.D
SBIC PARTNERS. L.P.
201 Main Street, Suite 2302
Fort Worth, TX 76102
Attention: Nicholas Binkley
KOICHIRO HORI
c/o Oktas
134 Flanders Road
Westborough, MA 01581
DELAWARE CHARTER GUARANTEE &
TRUST TTEE FBO NANCY M. BRIEFS
3000 Sand Hill Road 3-190
Menlo Park, CA 94025
Attention: Dick Blakeley
with copy to:
c/o Oktas
134 Flanders Road
Westborough, MA 01581
Attention: Nancy Briefs
PIONEER CAPITAL CORPORATION
60 State Street
Boston, MA 02109
ACCEL III, L.P.
1 Palmer Square, Ste. 515
Princeton, NJ 08542
ACCEL JAPAN, L.P.
1 Palmer Square, Ste. 515
Princeton, NJ 08542
ACCEL '91
1 Palmer Square, Ste. 515
Princeton, NJ 08542
A-2
<PAGE>
OAK INVESTMENT PARTNERS V, L.P.
1 Gorham Island
Westport, CT 06880
OAK V AFFILIATES FUND, L.P.
1 Gorham Island
Westport, CT 06880
CRAIG S. ANDREWS
3543 Garrison Street
San Diego, CA 92106
JOHN DENNISTON
16338 Via del Alba
Rancho Santa Fe, CA 92067
FAYE HUNTER RUSSELL TRUST U/A DTD 7-11-88
P.O. Box 1759
La Jolla, CA 92038
ALBERT STARR, M.D.
9155 S. W. Barnes Road, Suite 240
Portland, OR 97225
NATIONAL CITY BANK AS CUSTODIAN
CARDIAC SURGICAL FBO DR. WILLIAM F.
NORTHRUP, IV
651 Nicollet Mall, FAC-4
Minneapolis, MN 55402
GUARANTEE & TRUST CO., TRUSTEE
FBO GIACOMO A. DELARIA, M.D.
P. O. Box 9755
Rancho Santa Fe, CA 92067
MEREDITH L. SCOTT, M.D.
1615 Barcelona Way
Winter Park, FL 32789
SELECTED MEDICAL ENTERPRISES
1017 Mary Lan
Lomira, WI 53048
A-3
<PAGE>
PROMEDICA INTERNATIONAL, INC.
620 Newport Center Drive, #575
Newport Beach, CA 92660
MEDTRONIC ASSET MANAGEMENT, INC.
7000 Central Avenue NE
Minneapolis, MN 55432
A-4
<PAGE>
EXHIBIT 10.15
VISTA MEDICAL TECHNOLOGIES, INC.
AMENDMENT TO THE AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS AMENDMENT TO THE AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Amendment") is made as of the 22nd day of February, 1997 (the "Effective
Date"), by and among VISTA MEDICAL TECHNOLOGIES, INC., a Delaware corporation
(the "Company"), HEARTPORT, INC., a Delaware corporation (the "Warrant Holder")
and the Stockholders listed on Exhibit "A" hereto, each of which is herein
referred to as a "Stockholder."
R E C I T A L S
WHEREAS, the Company and certain of the Stockholders are parties to a
certain Amended and Restated Investors' Rights Agreement dated as of
November 27, 1996, as amended through the date hereof (the "Agreement"),
pursuant to which certain of the Stockholders possess registration rights,
information rights, rights of first refusal and other rights, and the Company is
obligated thereunder;
WHEREAS, the Company has issued a warrant ("Warrant") to Warrant Holder to
purchase up to 133,333 shares of Common Stock of the Company; and
WHEREAS, the Stockholders, the Company and the Warrant Holder hereby intend
that this Amendment shall amend the Agreement so that the obligations of the
Company to register Common Stock issuable to Warrant Holder upon exercise of the
Warrant are covered by the Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Section 1.2 entitled "Certain Definitions" is hereby amended to add
the following definition:
"WARRANT: shall mean that certain Warrant dated February 22, 1997 issued by
the Company to Heartport, Inc."
2. The following definition in the Agreement is amended in its entirety
to read as follows:
"REGISTRABLE SECURITIES" means (i) the Common Stock issuable or issued upon
conversion of the Series A Preferred, (ii) the Common Stock issuable or issued
upon conversion of the Series B Preferred, (iii) the Common Stock issuable or
issued upon
-1-
<PAGE>
conversion of the Series C Preferred, (iv) the Common Stock issuable or issued
upon exercise of the Warrant and (v) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, the shares referenced in (i), (ii),
(iii) and (iv) above, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his rights under this
Section 1 are not assigned and any Registrable Securities as to which the
registration rights granted hereunder have been terminated pursuant to Section
1.14.
3. Section 4.8 is amended in its entirety to read as follows:
"4.8 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement
may be amended or terminated and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) with the written consent of (i) the Company and
(ii) the holders of at least a majority of the then outstanding shares of
Registrable Securities (including for this purpose shares of Series A Preferred,
Series B Preferred and Series C Preferred prior to conversion into Registrable
Securities), excluding from the determination of such a majority in clause (ii)
(both in determining the total number of such shares outstanding and the number
of such shares consenting or not consenting) all shares previously disposed of
by such holders pursuant to one or more registration statements under the
Securities Act or pursuant to Rule 144. Any amendment, termination or waiver
effected in accordance with this section shall be binding upon the Stockholders,
each of their transferees and the Company. Each Stockholder acknowledges that
by the operation of this Section the holders of a majority of the outstanding
Registrable Securities as aforesaid may have the right and power to diminish or
eliminate all rights of such Stockholders under this Agreement."
4. Section 1.15 is amended to replace the word "Investor" with the word
"Holder" in the second line of the last paragraph of Section 1.15. Section
2.3(a) is amended to replace the word "Investor" in line 1 with the word
"Stockholder." Section 2.3(b) is amended to replace the word "Holder" the first
time that it appears in line 2 with the word "Stockholder." Sections 4.4 and
4.7 are each hereby amended to replace all references to the words
"stockholders" and "Stockholders" with the words "Holder" and "Holders",
respectively.
5. By signature below, Warrant Holder agrees that it will have and comply
with all of the rights and obligations of a Holder under the Agreement. All
other terms and provisions of the Agreement remain in full force and effect.
-2-
<PAGE>
The foregoing Amendment to the Amended and Restated Investors' Rights
Agreement is hereby executed as of the date first above written.
THE COMPANY:
VISTA MEDICAL TECHNOLOGIES, INC.
By: /s/ John Lyon
------------------------------
Title: President
-----------------------------
Address: 5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
THE STOCKHOLDERS:
FOSTER CITY PARTNERS
By:
------------------------------
Title:
---------------------------
Address: 950 Tower Lane, Ste. 800
Foster City, CA 94404
ONE LIBERTY FUND III, L.P.
By:/s/ D. Holland
------------------------------
Title:
---------------------------
Address: 1 Liberty Square, 2nd Floor
Boston, MA 02109
-3-
<PAGE>
GILDE INTERNATIONAL, B.V.
By:
------------------------------
Title:
---------------------------
Address: 1 Liberty Square, 2nd Floor
Boston, MA 02109
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
By:/s/ James C. Blair
------------------------------
Title:General Parner
---------------------------
Address: One Palmer Square, Ste. 515
Princeton, NJ 08542
BIOTECHNOLOGY INVESTMENTS
LIMITED
By: Old Court Limited
By:/s/ James C. Blair
------------------------------
Title:Attorney in Fact
---------------------------
Address: St. Julian's Court
St. Peter Port
Guernsey, Channel Islands
D.P. III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.
By:James C. Blair
------------------------------
Title:General Partner
---------------------------
Address: One Palmer Square, Ste. 515
Princeton, NJ 08542
-4-
<PAGE>
SBIC PARTNERS, L.P.
By: Forrest Binkley & Brown L.P.,
General Partner
By: Forrest Binkley & Brown Venture Co.,
General Partner
By:
------------------------------
Title:
---------------------------
By: SL-SBIC Partners, L.P.,
General Partner
By: FW-SBIC, Inc.,
General Partner
By:
------------------------------
Title:
---------------------------
Address: 201 Main Street, Suite 2302
Fort Worth, TX 76102
KOICHIRO HIRO
---------------------------------
Address: c/o Oktas
134 Flanders Road
Westborough, MA 01581
MEDTRONIC ASSET MANAGEMENT, INC.
---------------------------------
By:/s/ M. J. Estwood
------------------------------
Title: V.P.
---------------------------
Address: 7000 Central Avenue NE
Minneapolis, MN 55432
-5-
<PAGE>
WARRANT HOLDER:
HEARTPORT, INC., a Delaware corporation
---------------------------------
By: Wesley D. Sterman
------------------------------
Title:C.E.O.
---------------------------
Address: 700 Chesapeake Drive
Redwood City, CA 94063
-6-
<PAGE>
EXHIBIT A
SCHEDULE OF STOCKHOLDERS
------------------------
Stockholders
------------
FOSTER CITY PARTNERS
950 Tower Lane, Ste. 800
Foster City, CA 94404
Attention: Dr. H.J. Smead
ONE LIBERTY FUND III
1 Liberty Square, 2nd Floor
Boston, MA 02109
Attention: Dan Holland
GILDE INTERNATIONAL B.V.
1 Liberty Square, 2nd Floor
Boston, MA 02109
Attention: Dan Holland
B. U. N. P.
c/o Community Technology Fund
Boston University Ventures
147 Bay State Road
Boston, MA 02215
Attention: John E. Bagalay, Jr.
DOMAIN PARTNERS III, L.P.
One Palmer Square. Ste. 515
Princeton. NJ 08542
Attention: James C. Blair. Ph.D.
BIOTECHNOLOGY INVESTMENTS LIMITED
St. Julian's Court
St. Peter Pon
Guernsey. Channel Islands
with copy to:
c/o Domain Associates
One Palmer Square, Ste. 515
Princeton, NJ 08542
Attention: James C. Blair. Ph.D.
A-1
<PAGE>
DP III ASSOCIATES, L.P.
One Palmer Square, Ste. 515
Princeton, NJ 08542
Attention: James C. Blair, Ph.D
SBIC PARTNERS. L.P.
201 Main Street, Suite 2302
Fort Worth, TX 76102
Attention: Nicholas Binkley
KOICHIRO HORI
c/o Oktas
134 Flanders Road
Westborough, MA 01581
DELAWARE CHARTER GUARANTEE &
TRUST TTEE FBO NANCY M. BRIEFS
3000 Sand Hill Road 3-190
Menlo Park, CA 94025
Attention: Dick Blakeley
with copy to:
c/o Oktas
134 Flanders Road
Westborough, MA 01581
Attention: Nancy Briefs
PIONEER CAPITAL CORPORATION
60 State Street
Boston, MA 02109
ACCEL III, L.P.
1 Palmer Square, Ste. 515
Princeton, NJ 08542
ACCEL JAPAN, L.P.
1 Palmer Square, Ste. 515
Princeton, NJ 08542
ACCEL '91
1 Palmer Square, Ste. 515
Princeton, NJ 08542
A-2
<PAGE>
OAK INVESTMENT PARTNERS V, L.P.
1 Gorham Island
Westport, CT 06880
OAK V AFFILIATES FUND, L.P.
1 Gorham Island
Westport, CT 06880
CRAIG S. ANDREWS
3543 Garrison Street
San Diego, CA 92106
JOHN DENNISTON
16338 Via del Alba
Rancho Santa Fe, CA 92067
FAYE HUNTER RUSSELL TRUST U/A DTD 7-11-88
P.O. Box 1759
La Jolla, CA 92038
ALBERT STARR, M.D.
9155 S. W. Barnes Road, Suite 240
Portland, OR 97225
NATIONAL CITY BANK AS CUSTODIAN
CARDIAC SURGICAL FBO DR. WILLIAM F.
NORTHRUP, IV
651 Nicollet Mall, FAC-4
Minneapolis, MN 55402
GUARANTEE & TRUST CO., TRUSTEE
FBO GIACOMO A. DELARIA, M.D.
P. O. Box 9755
Rancho Santa Fe, CA 92067
MEREDITH L. SCOTT, M.D.
1615 Barcelona Way
Winter Park, FL 32789
SELECTED MEDICAL ENTERPRISES
1017 Mary Lan
Lomira, WI 53048
A-3
<PAGE>
PROMEDICA INTERNATIONAL, INC.
620 Newport Center Drive, #575
Newport Beach, CA 92660
MEDTRONIC ASSET MANAGEMENT, INC.
7000 Central Avenue NE
Minneapolis, MN 55432
A-4
<PAGE>
EXHIBIT 10.16
INVESTMENT REPRESENTATIONS AND REGISTRATION RIGHTS
December 13, 1996
Urohealth Systems, Inc.
Five Civic Plaza, Suite 100
Newport Beach, California 92660
Ladies and Gentlemen:
Reference is made to that certain License Agreement dated as of December
13, 1996 (the "AGREEMENT") between Urohealth Systems, Inc., a Delaware
corporation (the "COMPANY"), and Vista Medical Technologies, Inc., a Delaware
corporation ("VISTA"). Pursuant to the Agreement, Vista will license certain
technology to the Company in exchange for, among other consideration, shares of
Common Stock of the Company (the "STOCK").
Vista represents and warrants to, and agrees with, the Company as follows:
1. Vista has been advised that the issuance of the Stock to Vista
pursuant to the Agreement will not be registered with the Securities and
Exchange Commission (the "COMMISSION") under the Securities Act of 1933, as
amended ("ACT"), and, therefore, the Stock will constitute "restricted
securities" within the meaning of Rule 144 promulgated under the Act. Vista has
been advised that dispositions of the Stock, under current law, may only be made
in accordance with the provisions of Rule 144 under the Act, pursuant to an
effective registration statement under the Act or pursuant to an exemption
provided thereunder. Vista understands that the provisions of Rule 144
currently restrict sales of the Stock during the two year period after the
issuance of the Stock, and permit sales, in general, only while the Company is
subject to the requirements to file, and is filing, periodic reports under
Section 13 or 15(d) of the Securities Exchange Act of 1934, in brokers'
transactions (or transactions directly with a market maker) where the aggregate
number of shares sold at any time, together with all sales of restricted shares
of Common Stock of the Company sold for Vista's account during the preceding
three month period, does not exceed the greater of (i) one percent of the number
of shares of Common Stock of the Company outstanding or (ii) the average weekly
volume of trading in shares of Common Stock of the Company on all national
securities exchanges, and/or reported through the automated quotation system of
a registered securities association, during the four week period preceding any
such sale.
2. Vista understands that except as provided in paragraph 4 below, the
Company is under no obligation to register the sale, transfer or other
disposition of the shares of the Stock that Vista will receive under the
Agreement or to take any other action necessary in order to obtain compliance
with an exemption from registration that may be available.
<PAGE>
Urohealth Systems, Inc.
December 13, 1996
Page 2
3. Vista understands that stop transfer instructions may be given to the
Company's transfer agent with respect to the Stock and that there will be placed
on the certificates for such shares, or any substitution therefor, a legend to
the foregoing effect.
4. Vista understands that, pursuant to the terms and conditions of the
Agreement, the Company hereby grants to Vista certain rights with respect to the
registration of the Stock which it will receive under the Agreement, which
rights are as follows:
(a) PARTICIPATION REGISTRATION. Subject to paragraph (b) of this
Section 4, if the Company shall, at any time after the date hereof and on or
prior to 24 months following the date on which the Stock is issued under the
Agreement (or such earlier date on which Vista is then able to dispose of the
Stock pursuant to Rule 144 under the Act), propose the registration under the
Act of an offering of shares of Common Stock of the Company, the Company shall
give written notice as promptly as possible of such proposed registration to
Vista and will use reasonable efforts to cause to be included in the
registration statement such number of shares of the Stock owned by Vista as it
shall request (the "REQUESTED SHARES"), within 15 days after the giving of such
notice, such shares to be included, upon the same terms (including the method of
distribution) of any such offer; provided that (A) the Company shall not be
required to give notice or include the Requested Shares in any such registration
if the proposed registration is not to be made on Form S-1 or Form S-3 (or a
form similar thereto) or is primarily (i) a registration of a stock option or
compensation plan or of securities issued or issuable pursuant to any such plan,
or (ii) 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; and (B) the Company may, in its sole discretion and without
the consent of Vista, withdraw such registration statement and abandon the
proposed offering in which Vista had requested to participate.
(b) REDUCTION. Vista acknowledges and agrees that the rights granted
hereunder are subject to the existing rights of parties to that certain
Registration Rights Agreement, dated May 13, 1996, among the Company and the
stockholders identified therein (the "EXISTING REGISTRATION RIGHTS AGREEMENT"),
and the rights granted hereunder shall in no event exceed the rights of
Miscellaneous Shares (as defined in the Existing Registration Rights Agreement)
under such agreement. In the event that the Company is advised by its
investment banking firm that, in its reasonable opinion, the number of Requested
Shares will interfere with the orderly sale and distribution of the shares of
Common Stock being offered by the Company or the holders under the Existing
Registration Rights Agreement, the Company shall not be required to include the
Requested Shares in the registration.
(c) INDEMNIFICATION. The Company shall provide Vista with the usual
and customary indemnification in connection with any registration pursuant
hereto.
(d) REGISTRATION EXPENSES. The Company shall bear all reasonable
costs and expenses incurred with any registration pursuant to paragraph (a)
above, except that Vista will pay for the fees and expenses of its counsel and
its pro rata portion of the
<PAGE>
Urohealth Systems, Inc.
December 13, 1996
Page 3
underwriters' discounts, commissions or other compensation and any applicable
transfer taxes.
(e) ASSIGNMENT. Vista shall have the right to assign the rights
granted to it hereunder in connection with the sale or transfer of all or a
portion of the Stock; provided, that such transferee receives at least 25% of
the Stock issued to Vista under the License Agreement.
(f) SUBSEQUENT REGISTRATION RIGHTS. From and after the date of this
Agreement, the Company will not, without the prior written consent of Vista,
enter into any agreement with any holder or prospective holder of securities of
the Company which would allow such holder or prospective holder to include such
securities in a registration filed under Section 4(a) or otherwise 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
such holder's securities will not reduce the amount of the Stock which is
included. Notwithstanding the provisions of this subparagraph (f) to the
contrary, the Company shall only be restricted in granting rights to a holder or
prospective holder which rights would give such holder priority over the
registration rights granted Vista hereunder and nothing herein shall prevent the
Company from granting demand registration rights which have a priority in
connection with any demand to a holder or prospective holder (excluding any
holder or prospective holder who is granted those rights in connection with a
joint venture between such holder and the Company or other similar corporate
partnering arrangement).
<PAGE>
Urohealth Systems, Inc.
December 13, 1996
Page 4
Vista acknowledges that it has carefully read this letter and discussed its
requirements and other applicable limitations upon the sale, transfer or other
disposition of the shares of Common Stock to be acquired by it under the
Agreement, to the extent it felt necessary, with its counsel.
Very truly yours,
VISTA MEDICAL TECHNOLOGIES, INC.
By: /s/ John Lyon
----------------------
Name: John Lyon
Title: President
Accepted and agreed to this
13th day of December, 1996
UROHEALTH SYSTEMS, INC.
By: /s/ Kevin M. Higgins
--------------------------------
Name: Kevin M. Higgins
Title: Senior Vice President
<PAGE>
EXHIBIT 10.17
CONSULTING AGREEMENT
This is an agreement ("Consulting Agreement") effective as of September 15,
1995 by and between Vista Medical Technologies, Inc. a California corporation
having a place of business at 134 Flanders Road, Westboro, Massachusetts 01581
(hereinafter referred to as the "Company); and Harry R. McKinley, an individual
residing at Southampton, Massachusetts 01073 (hereinafter referred to as
"McKinley" or "Consultant").
1. Collateral Agreements:
(1) This Consulting Agreement is related to a business arrangement
involving the transfer to the Company of a certain license agreement (entitled
"LICENSE AND DEVELOPMENT AGREEMENT", dated 18 December 1991) relating to
endoscopes entered into between Consultant and McKinley Optics, Inc. of
Southampton, Massachusetts ("MOI") as Licensor and American Surgical
Technologies Corporation of Boston, Massachusetts ("AST") as Licensee (the
"License Agreement"). The License Agreement was amended 28 June 1994 by letter
agreement between Licensor and Licensee. A further amendment to the License
Agreement is being made by Licensor and the Company contemporaneously with this
agreement.
(2) This Consulting Agreement is related to and is intended to complement
and incorporate by reference thereto an existing agreement entitled:
McKinley Agreement
<PAGE>
"Non-Competition, Non-Disclosure And Patent And Invention Assignment Agreement",
executed 18 December 1991, by and between Consultant and MOI on the one hand and
AST on the other hand (hereinafter referred to as "Non-Compete, Invention
Agreement".
(3) This consulting agreement is being entered into for the purpose of
facilitating the Company's use of the technology licensed by said License
Agreement in developing improved and commercially successful endoscopes.
2. Term And Duties As A Consultant:
(1) The Company hereby retains Consultant for a term of * * * ,
commencing with the effective date hereof, as a consultant and designer for and
in relation to certain product development tasks that are listed in Appendix A
attached hereto. It is understood that the Company may amend Appendix A (by
subtraction or addition of product development tasks), but the Company may add
to the tasks listed in Appendix A only with the prior written approval of
Consultant, which approval shall not be unreasonably withheld so long as such
amendment is reasonable and in accordance with the Company's business needs and
plans for developing, making and selling endoscopes and related devices.
(2) Consultant agrees to use his best efforts in performing said product
development tasks with the purpose of improving the Company's endoscope
technology and furthering the business interests of the Company.
* * * Confidential Treatment Requested
McKinley Agreement 2
<PAGE>
(3) Consultant shall keep the Company informed on a current basis of his
efforts and progress in performing said product development tasks.
(4) Consultant agrees to promptly provide to the Company on a current
basis the items listed as "Deliverables" in Appendix A.
(5) During the term of this agreement, Consultant may engage in
noncompetitive business activities, but he shall devote to the Company on a
regular basis such time as shall be necessary to accomplish the tasks set forth
in Appendix A in accordance with the time table therefor established mutually by
Consultant and the Company.
(6) Consultant shall make available to the Company, upon request and at
the Company's expense, all of the documentation currently known to him relative
to the optical systems that are disclosed or claimed in his U.S. patent
applications Ser. No. * * * (now U.S. Pat. * * *), Ser. No. * * * (now
U.S. Pat. * * * ), Ser. No. * * * (Now U.S. Pat. * * * ) Ser. No. * * *
(now U.S. Pat. * * * ), and Ser. No. * * * (filed * * * );
and every other U.S. patent application relating to stereo lenses or systems and
failing within the purview of said License Agreement, and each and every
continuation, continuation-in-part, divisional and reissue application based on
any of the foregoing U.S. applications and all PCT and foreign applications and
patents based on or relating to any of said U.S. applications and/or patents.
* * * Confidential Treatment Requested
McKinley Agreement 3
<PAGE>
3. Work Product Of Consultant:
(1) The work products of Consultant's efforts pursuant to this Consulting
Agreement during the term thereof shall be deemed to be the sole and exclusive
property of the Company.
(2) Any and all inventions, improvements, designs, ideas and discoveries
relating to medical endoscopes or other work performed by Consultant under this
Consulting Agreement that are conceived or reduced to practice by Consultant
(whether or not patentable or protectable by copyright) during the term of this
Consulting Agreement, shall be deemed to be and become the sole and exclusive
property of the Company, and any and all patents or other rights granted or
certified thereon by any government of any state or country shall be owned
wholly and exclusively by the Company without any restrictions or reservations
by Consultant.
(3) Consultant agrees to promptly and fully disclose to the Company all
inventions, improvements, designs, ideas and discoveries (whether or not
patentable or protectable by copyright and whether or not made jointly with
others) that are reasonably related to the subject matter of this Consulting
Agreement and are or were conceived or reduced to practice in the course of
performing product development tasks pursuant to the terms of this Consulting
Agreement during the term hereof.
McKinley Agreement 4
<PAGE>
4. Compensation For Services:
(1) As compensation for consulting and design services which Consultant
may render to the Company hereunder, the Company agrees to pay, and shall pay,
to Consultant a * * * of consulting work * * *
at the rate of $* * * per day and $* * * per each half day during the term of
this Consulting Agreement and for each month of each extension thereof, with the
retainer fee for each month payable in arrears before the * * * day of
the following month. This retainer fee shall not be credited against the cost
of any product development task performed by Consultant pursuant to this
Consulting Agreement.
(2) The Company also agrees to pay, and shall pay, to Consultant an
advance services fee of $* * * within * * * days after the effective
date hereof, provided, however, that said sum shall be credited against
Consultant's charges for performing assigned product development tasks for the
Company under Paragraph 4(3) hereof.
(3) Consultant and the Company agree that all product development tasks
performed by Consultant pursuant to this Consulting Agreement are to be on a
"not-to-exceed basis". More specifically, for each product development task
undertaken by Consultant pursuant to this Consulting Agreement, Consultant shall
first provide an estimate of his charges for completing same (including the cost
of Consultant's services calculated at the rates listed in Paragraph 4(l) hereof
and Consultant's out-of-pocket expenses and disbursements), and if that
* * * Confidential Treatment Requested
McKinley Agreement 5
<PAGE>
estimate is accepted by the Company, the total cost to the Company for
Consultant's services and out-of-pocket expenses and disbursements in connection
with completion of that task shall not exceed said estimate. No product
development task shall be undertaken by Consultant without the mutual consent of
Consultant and the Company.
(4) In addition the Company agrees to reimburse, and shall reimburse,
Consultant for all expenses reasonably incurred on behalf of the Company, but
only to the extent that such expenses have been authorized in advance by the
Company.
(5) The Company agrees to reimburse Consultant for the legal fees incurred
by him solely for and in connection with the negotiation of this Consulting
Agreement and the related amendment to the License Agreement, provided, however,
that the Company's liability under this paragraph shall not exceed $* * * .
5. Loyalty, Non-Competition, Invention Assignment, Etc.:
(1) The provisions of said "Non-Compete, Invention Agreement" are hereby
incorporated into and made part of this Consulting Agreement, and the provisions
thereof are to apply except to the extent that they are limited or otherwise
modified by any paragraph of this Consulting Agreement.
(2) Consultant agrees that for a period of two (2) years from the date of
expiration or termination of this Consulting Agreement and thereafter for so
long as the license granted by said License Agreement remains exclusive, he will
not,
* * * Confidential Treatment Requested
McKinley Agreement 6
<PAGE>
either for himself or on behalf of any other person, firm, organization, or
corporation, directly or indirectly, intentionally divert or attempt to divert
from the Company or any of its affiliates any related business or business
opportunity whatsoever or attempt to influence negatively any customers or
potential customers of the Company or its affiliates or any companies with whom
Consultant may have dealings.
(3) Consultant further agrees that during the term of this Consulting
Agreement and for a period of * * * immediately following the date of
expiration or termination of this Consulting Agreement, and thereafter for so
long as the license granted by said License Agreement remains exclusive, he will
not, directly or indirectly, induce or attempt to influence any employee of the
Company or its affiliates to terminate his or her employment or to work for the
benefit of any actual or prospective competitor of the Company.
(4) Consultant agrees that in the event of any suit against third parties
instituted by the Company for the purpose of enforcing any rights acquired by or
granted to the Company pursuant to this Consulting Agreement or said License
Agreement, he will, at the Company's request and at its expense, cooperate to
the extent possible by giving testimony and making available to the Company all
relevant records, papers, information, prototypes, samples and the like in his
possession or under his control.
(5) Consultant agrees that in the event of any suit against the Company by
a third party alleging that the Company's manufacture, use, offer for sale or
* * * Confidential Treatment Requested
McKinley Agreement 7
<PAGE>
sale of endoscopes has infringed, or is infringing, any intellectual property
right of said third party, he will, at the Company's request and at its expense,
cooperate in the defense of any such suit if he is, or is alleged to be,
involved in any of the alleged infringing activities or has knowledge relevant
to the legal or fact issues raised by any of the pleadings or motions filed in
any such suit.
6. Independent Contractor:
Consultant acknowledges, warrants and agrees as follows:
(1) He is an independent contractor and is free of obligations and duties
that are or may be in conflict with his duties and obligations under this
Consulting Agreement or said License Agreement.
(2) He shall not have the status of employee and shall not be entitled to
any employee welfare or any other fringe benefits except as may be provided in
this Consulting Agreement;
(3) As an independent contractor, he must include any compensation he
receives under this Consulting Agreement in his personal income tax reporting
and is solely responsible for the payment of any tax payable thereon;
(4) He shall indemnify and hold the Company harmless from any and all
liabilities arising from or related to any failure on his part to accurately
report his income as an independent contractor or to pay such tax when due or to
his failure to perform his duties as a consultant;
McKinley Agreement 8
<PAGE>
(5) He shall indemnify and hold the Company harmless from any and all
liabilities arising from or due to his failure to perform his duties as a
Consultant to the Company or for any other breach of this Consulting Agreement.
7. Return Of Company Property:
(1) Consultant agrees that all papers and records of every kind relating
to his consultations and other work under or pursuant to this Consulting
Agreement, including but not limited to correspondence, memoranda, files,
documents, computer programs and disks, drawings, specifications, models,
prototypes, components and other material relating to the Company's business or
any of the tasks listed In Appendix A or any other assigned tasks or work
performed under this Consulting Agreement, shall be, become and remain the
exclusive property of the Company.
(2) Upon request of the Company, and in any event no later than the
expiration or termination of this Consulting Agreement, Consultant shall return
to the Company all property of the Company in his possession, including but not
limited to correspondence, memoranda, files, documents, computer programs and
disks, drawings, specifications, models, prototypes, components and other
materials.
8. Assignment:
Consultant agrees that the Company may assign this Consulting Agreement to
the successors and assigns of its business, provided, however, that the Company
shall give Consultant thirty (30) days prior notice of said
McKinley Agreement 9
<PAGE>
assignment, the proposed assignee, and a contact person for such proposed
assignee. Otherwise this Consulting Agreement may not be assigned by either
party without the prior written consent of the other party.
9. Binding Effect:
(a) This Consulting Agreement shall inure to the benefit of and be binding
upon any successor or assign of the Company, and any such successor or assign
shall be deemed substituted for the Company under the terms of this Consulting
Agreement. As used herein, the term "successor or assign" shall include but not
be limited to any person, firm, corporation, or other business entity which at
any time, whether by consolidation, merger, purchase, liquidation, dissolution,
sale, assignment or otherwise, acquires or succeeds to the ownership of all or
substantially all of the business or assets of the Company.
(b) Subject to Paragraph 8 hereof, this Consulting Agreement shall inure
to the benefit of and be binding upon the heirs, executors, administrators, next
of kin, successors, assigns, and personal representatives of Consultant and MOI.
10. Whole Agreement:
This writing contains the entire agreement of the parties concerning the
subject matter hereof and may not be modified except by a further written
agreement signed by Consultant and a duly authorized officer or representative
of the Company.
McKinley Agreement 10
<PAGE>
11. Severability:
Any provision or term of this Consulting Agreement which shall be found to
be contrary to law or otherwise unenforceable shall not affect the remaining
terms hereof which shall be construed as if any unenforceable provision were
absent herefrom.
12. Governing Law:
This Consulting Agreement shall be governed by and construed in accordance
with the internal laws of the Commonwealth of Massachusetts.
13. Term and Termination:
(1) This Consulting Agreement shall have a term of * * * commencing
with the effective date hereof.
(2) The Company may, without prejudice to any other right or remedy it may
have, terminate this Consulting Agreement if Consultant fails to perform
assigned tasks or work under this Agreement and such failure constitutes a
material breach of this Consulting Agreement, or if Consultant otherwise
breaches any of the terms hereof.
(3) If Consultant fails to perform assigned tasks or work under this
Consulting Agreement or breaches any of the other terms hereof, the Company may
send Consultant a written notice of its intention to terminate this Consulting
Agreement and, if Consultant does not cure or correct such failure or breach to
the Company's satisfaction within * * * days from the date such notice is
* * * Confidential Treatment Requested
McKinley Agreement 11
<PAGE>
mailed or faxed to Consultant, the Company may terminate this Consulting
Agreement by giving a further notice of such termination, and such termination
shall be effective as of the date said further notice is mailed or faxed to
Consultant. Termination by the Company pursuant to this paragraph shall be
without prejudice to any other right or remedy it may have.
14. Confidentiality:
(1) Consultant agrees that all information generated by him during the
term of this Consulting Agreement that relates to objective lenses or systems or
to stereo endoscopes or any of the tasks listed in Appendix A (including other
tasks that may be added thereto or assigned to him by the Company under the
terms hereof), shall be deemed to be Confidential Information of the Company.
15. The Company Defined:
For the purpose of this Consulting Agreement, the "Company" is understood
to mean and indicate Vista Medical Technologies, Inc. and each and every
affiliated entity and also its successors and assigns. As used herein, the term
"affiliated entity" means any company, firm, corporation, or other organization
that is owned or controlled by The Company or owns or controls The Company.
16. Waiver:
Any failure on the part of the Company to insist upon full and adequate
performance by Consultant in any respect or instance shall not constitute a full
or permanent waiver of the Company's rights under this Consulting Agreement.
McKinley Agreement 12
<PAGE>
17. Continuing Obligations:
Consultant agrees and covenants that the obligations and undertakings
stated in Paragraphs 3, 5, 7, and 15 shall remain in force and continue beyond
any termination of this Consulting agreement, provided, however, that
Consultant's obligations as to trade secrets and confidential information shall
remain in force only for so long as such trade secrets and confidential
information are not released to the public domain by the Company.
McKinley Agreement 13
<PAGE>
IN WITNESS WHEREOF, the Company and MOI have caused this Consulting Agreement to
be executed by one their duly authorized officers or representatives, and
Consultant has hereunto affixed his signature, as of the day and year first
above written.
Vista Medical Technologies, Inc.
(the "Company")
By: /s/ John Lyon
--------------------------
Name: John Lyon
------------------------
/s/ Harry R. McKinley
-----------------------------
Harry R. McKinley
("Consultant")
McKinley Optics, Inc.
BY: /S/ Harry R. McKinley
--------------------------
Name: Harry R. McKinley
------------------------
McKinley Agreement 14
<PAGE>
APPENDIX A
TASKS
The following product development tasks listed below are contemplated by
the Company for work for Consultant during the term of the Consulting Agreement
to which this Appendix A is attached, with the understanding that the Company
reserves the right to add or delete projects from the following list:
1. * * *
2. * * *
3. * * *
4. * * *
5. * * *
DELIVERABLES:
The following materials and information ("Deliverables") are to be supplied
by Consultant to the Company under this Consulting Agreement:
All information, including memoranda, specifications, data, sketches,
drawings, and the like, including system descriptions, ray trace data, tolerance
analysis, sensitivity studies, and other optics design information reasonably
required by the Company to enable it to reproduce within tolerance limits any or
all optical components and systems conceived, reduced to practice, designed or
developed by Consultant pursuant to this
* * * Confidential Treatment Requested
McKinley Agreement 15
<PAGE>
Consulting Agreement or relating to any of the inventions licensed under or by
said License Agreement.
McKinley Agreement 16
<PAGE>
EXHIBIT 10.18
CONSULTING AGREEMENT
BY AND BETWEEN
UROHEALTH SYSTEMS, INC.
AND
VISTA MEDICAL TECHNOLOGIES, INC.
THIS CONSULTING AGREEMENT (this "Agreement") is entered into as of December
13, 1996 (the "Effective Date"), by and between UROHEALTH Systems, Inc.
("UROHEALTH"), and Vista Medical Technologies, Inc. ("Consultant") and, with
respect to Sections 1, 4, 6, 7, 8 and 9 below, Allen Newman, Consultant's
employee ("Newman").
WITNESSETH:
WHEREAS, UROHEALTH desires to retain the medical and consultation services
of Consultant to aid in UROHEALTH's continuing mission to develop, improve, and
expand its medical product business, including those products relating to
minimally invasive surgery;
WHEREAS, Consultant possesses the medical knowledge and professional
expertise to aid UROHEALTH in its mission to develop, improve and expand its
business as referenced above;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
SECTION 1. CONSULTING SERVICES. During the term of this Agreement,
Consultant shall serve as a consultant for UROHEALTH, using its reasonable
commercial efforts to make available to Urohealth *** of the working time of
Newman. In connection herewith, Newman's duties shall include, but not be
limited to, assisting UROHEALTH in developing and obtaining regulatory approvals
for Licensed Products under the terms of that certain License Agreement, dated
the date hereof, between UROHEALTH and Consultant (the "License Agreement") and
otherwise exploiting the rights granted to UROHEALTH under the License
Agreement.
Newman shall also perform any other services as are mutually agreed upon by
the parties. Consultant shall use its reasonable commercial efforts to ensure
that Newman devotes sufficient time and best efforts as a consultant in order to
perform the responsibilities under this Agreement to the reasonable satisfaction
of UROHEALTH. Newman shall provide services under this Agreement as reasonably
requested by UROHEALTH at the times mutually agreeable to UROHEALTH and
Consultant.
* * * Confidential Treatment Requested
<PAGE>
SECTION 2. TERM. The term of this Agreement shall begin on the Effective
Date of the License Agreement and shall continue until the first Licensed
Product (as defined in the License Agreement) under the License Agreement is
commercially introduced by UROHEALTH.
SECTION 3. TERMINATION. This Agreement may be terminated by either party
immediately upon written notice of termination in the event the other party has
materially breached this Agreement and has not cured such breach within * * *
days following written notice of the breach from the non-breaching party. In
addition, this Agreement shall be terminated automatically upon the (i)
termination of the License Agreement or (ii) death or incapacity, whether mental
or physical, of Newman. UROHEALTH or its designee shall determine in good faith
whether Newman is incapacitated for the purposes of this Section 3. In addition,
UROHEALTH may in its sole discretion terminate this Agreement if Newman is
unavailable, unwilling or unable to provide the consulting services contemplated
hereby on behalf of the Company. Notwithstanding anything to the contrary
herein contained, in the event performance by either party hereto of any term,
covenant, condition or provision of this Agreement shall (i) jeopardize the
licensure of UROHEALTH, (ii) jeopardize its participation in (a) Medicare,
Medicaid, Blue Cross, or other reimbursement or payment programs, or (b) the FDA
approval process, regulatory program and guidelines, or (c) any other state or
nationally recognized accrediting organization, or (iii) be in violation of any
statute, ordinance, or be otherwise deemed illegal, or be deemed unethical by
any recognized body, agency, or association in the medical fields, UROHEALTH
may, at its option, terminate this Agreement immediately.
SECTION 4. COMPENSATION. In consideration for the services rendered by
Consultant to UROHEALTH under this Agreement, UROHEALTH shall pay to Consultant
during the term of this Agreement, an amount equal to * * *
* * * of Consultant to employ Newman; provided, that such
annualized costs shall not exceed $* * * . Such sum shall be paid in monthly
installments to cover the cost of regular salary and benefits and an additional
amount shall be paid in the month following verification that a bonus has been
paid to Newman and the amount thereof. Consultant shall be reimbursed by
UROHEALTH for all proper, necessary and reasonable business expenses incurred as
a result of the performance of services requested by UROHEALTH. Consultant
shall submit a detailed bill and documentation as deemed necessary by UROHEALTH
for expenses which shall be subject to the reasonable approval of UROHEALTH's
Chief Financial Officer. Consultant is not required to, and nothing herein nor
in any other agreement shall be construed to require Consultant to, utilize
UROHEALTH products.
SECTION 5. INDEMNIFICATION. UROHEALTH shall indemnify Consultant with
respect to all matters relating to services rendered by Consultant hereunder,
except for those caused by Consultant's willful misconduct.
* * * Confidenial Treatment Requested
-2-
<PAGE>
SECTION 6. CONFIDENTIALITY. During the term of this Agreement, UROHEALTH,
its clients, and its prospective clients may reveal to Consultant confidential
and proprietary information of UROHEALTH ("Confidential Information").
Confidential Information shall include, but not be limited to, that information
which is designated as confidential either in writing or orally, or that
information which is not generally known to the public. With respect to any
Confidential Information disclosed to Consultant, Consultant agrees to: (a) not
disclose such Confidential Information to third parties except: (i) third
parties for whom Consultant has secured the prior written approval of UROHEALTH,
and/or (ii) as required by law or by any court or governmental body, agency or
department of competent jurisdiction; (b) use at least the same degree of care
to protect the Confidential Information as used with respect to Consultant's
confidential and proprietary information, however in no event shall the degree
of care be less than holding the Confidential Information in confidence; and (c)
use the Confidential Information only for the purpose of performing its
obligations under this Agreement. Notwithstanding anything to the contrary
herein, Consultant shall not have an obligation to preserve the confidentiality
of any Confidential Information which was previously known to Consultant free of
any obligation to keep it confidential or is or becomes publicly available by
other than unauthorized disclosure. The provisions of this Section 6 shall
survive expiration or termination of this Agreement for any reason. As used
herein, "Confidential Information" shall not include anything which is not
"Confidential Information" as defined in the License Agreement.
SECTION 7. STATUS OF THE PARTIES. In the performance of this Agreement,
it is mutually understood and agreed that Consultant, Newman, its other
employees, officers, directors and agents are performing as independent
contractors with, and not as an employee, partner, or joint venturer of or with
UROHEALTH. Neither Consultant nor Newman shall have any claim under this
Agreement or otherwise against UROHEALTH for workers' compensation, unemployment
compensation, vacation pay, sick leave, disability benefits, retirement
benefits, social security benefits or any other employee benefits of any kind,
all of which shall be the sole responsibility of Consultant. UROHEALTH shall
not withhold on behalf of Consultant or Newman pursuant to this Agreement any
sums for income tax, unemployment insurance, social security or otherwise
pursuant to any law or requirement of any government agency, and all such
withholding, if any is required, shall also be the sole responsibility of
Consultant. Consultant shall indemnify and hold UROHEALTH harmless from any and
all loss or liability, if any, arising with respect to any of the foregoing
benefits or withholding requirements.
SECTION 8. GOVERNING LAW. This Agreement is being delivered and executed
in the State of California and the validity, construction, and enforcement of
this Agreement shall be governed in all respects by the laws of the State of
California. Venue shall be proper only in a court of competent jurisdiction
located in the State of California. The parties agree to be subject to personal
jurisdiction and consent to service of process issued by a court in which venue
is proper as defined in this Section 8.
-3-
<PAGE>
SECTION 9. MODIFICATION AND WAIVER. No modification of this Agreement
shall be deemed effective unless in writing and signed by each of the parties to
which it applies. Any waiver of a breach of any provision of this Agreement
shall not be deemed effective unless in writing and signed by the party against
whom enforcement of the waiver is sought.
SECTION 10. HEADINGS. The descriptive headings of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any provision hereof.
SECTION 11. ASSIGNMENT. Neither party may assign, delegate, subcontract,
or otherwise transfer its rights or obligations hereunder without the prior
written consent of the other party and any assignment or other transfer in
violation of this Section 11 shall be void; provided, however, that UROHEALTH
may assign its rights and delegate its duties pursuant to this Agreement to any
successor, subsidiary, or affiliate to the business of UROHEALTH to which this
Agreement relates without the written consent of the Consultant.
SECTION 12. SEVERABILITY. If, as a result of any valid Act of Congress or
act of any legislature or any regulation duly promulgated by the United States
or any state acting in accordance with the law, the terms and conditions of this
Agreement, or the payments made pursuant to this Agreement, are rendered illegal
or in violation of law, then the parties shall negotiate in good faith, and
shall take all steps necessary, including, but not limited to, amendment to the
terms and conditions of this Agreement or return of the compensation or any part
of the compensation paid pursuant to this Agreement, in order to reform this
Agreement such that the terms and conditions of this Agreement, or the payments
made pursuant to this Agreement, if any, shall not render any other relationship
or transaction between the parties, or any affiliate of the parties, illegal or
in violation of law.
SECTION 13. NOTICES. All notices, requests, demands, and other
communications provided for hereunder shall be in writing and shall be deemed to
been duly given if (i) delivered in person; (ii) given by prepaid telex or
telegram, or by facsimile or other instantaneous electronic transmission device;
or (iii) deposited in the United States mail, first class, registered or
certified, return receipt requested, with proper postage prepaid, as follows:
If to UROHEALTH:
UROHEALTH Systems, Inc.
5 Civic Plaza, Suite 100
Newport Beach, California 92660
Attention: General Counsel
Facsimile: (714) 668-5824
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<PAGE>
If to Consultant:
Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, California 92008
Facsimile: (619)603-9170
Attention: President
SECTION 14. ATTORNEYS' FEES. In the event any party hereto brings an
action or arbitration proceeding in connection with the performance, breach, or
interpretation of this Agreement, the prevailing party in such action or
proceeding shall be entitled to recover from the losing party all reasonable
cost and expenses of such litigation or proceeding, including attorneys' fees,
court costs, costs of investigation, and other costs, fees, and expenses
reasonably related to such action or proceeding.
SECTION 15. BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
permitted assigns.
SECTION 16. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the parties concerning the subject matter
hereof, and supersedes all prior negotiations, agreements and understandings
between the parties, whether oral or in writing, concerning the subject matter
hereof.
INTENDING TO BE LEGALLY BOUND, the parties, or their duly authorized
representatives, have executed this Agreement to be effective on the Effective
Date.
UROHEALTH SYSTEMS, INC.
By: /s/ Kevin M. Higgins
----------------------------------
Title: Senior Vice-President
VISTA MEDICAL TECHNOLOGIES, INC.
By: /s/ John Lyon
------------------------------
Title: President
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<PAGE>
With Respect to Sections
1, 4, 6, 7, 8 and 9 only:
/s/ Allen Newman
- --------------------------------
Allen Newman
-6-
<PAGE>
EXHIBIT 10.19
PROFESSIONAL SERVICES AGREEMENT
(CLINICAL ADVISORY BOARD AND CONSULTING)
THIS PROFESSIONAL SERVICES AGREEMENT ("Agreement") is entered into as of
___________, 199__ ("Effective Date"), by and between ___________________
("Advisor") and Vista Medical Technologies, Inc., a California corporation ("the
"Company"). In consideration of the retention of Advisor as a clinical and
scientific advisor and consultant to the Company, and of the compensation
received by Advisor from the Company, the Company and Advisor hereby agree as
follows:
1. DESCRIPTION OF SERVICES.
(a) CLINICAL ADVISORY BOARD AND CONSULTING. The Company hereby
retains Advisor and Advisor hereby agrees to serve as a member of the Company's
Clinical Advisory Board and as a consultant for the term of this Agreement.
Advisor will advise the Company as an independent contractor in the medical
applications of visualization technologies in cardiothoracic endosurgery. The
services to be rendered as a consultant are set forth on SCHEDULE 1 to this
Agreement.
(b) EXCLUSIVITY. Advisor will work exclusively with the Company in
the area of visualization technologies for cardiothoracic surgery. Advisor
represents that all of his/her current consulting or advisory obligations are
listed on EXHIBIT A, and agrees that he/she will not enter into any written or
oral agreement with any entity, company or person which is or may be (or the
potential to be) a competitor of the Company relating to his/her consulting or
advisory services unless the Company is notified of such agreement in advance.
Advisor understands that while he/she is an advisor to the Company he/she is not
to breach any obligation of confidentiality that he/she has to others.
2. TIME COMMITMENT.
(a) CLINICAL ADVISORY BOARD. The time commitment of Advisor will
include a minimum of two (2) formal, full-day Clinical Advisory Board meetings
per year, at the Company's request, unless the Company and Advisor otherwise
mutually agree to extend the length or number of such meetings. Advisor also
will from time to time provide scientific counsel on a reasonable basis to
personnel working on projects on behalf of the Company; such counsel, which will
consist primarily of advice on interpreting scientific or clinical data and
planning experiments or trials, will be at Advisor's convenience and will be
limited to matters that are compatible with Advisor's faculty or other
employment responsibilities and other oral and written agreements to which
Advisor is a party.
<PAGE>
(b) CONSULTING. The time commitment as a consultant will be set
forth on SCHEDULE 1.
3. COMPENSATION.
(a) CASH COMPENSATION. For all services rendered hereunder, Advisor
will be compensated at the rate of U.S. $_______.00 per ________________,
payable as follows: .
(b) OTHER COMPENSATION. At the Board of Directors' meeting
immediately following the execution of this Agreement, Advisor will be granted
such additional compensation as set forth on attached EXHIBIT B.
(c) TRAVEL EXPENSES AND OTHER DIRECT EXPENSES. Advisor will be
reimbursed for reasonable travel expenses incurred in performing his/her
advisory obligations, as authorized by the Company's expense reimbursement
policy. The Company will reimburse Advisor for all other reasonable direct
expenses actually incurred which are incidental to the services performed
hereunder and which have been approved in writing in advance by the Company.
Advisor will provide the Company with invoices detailing the expenses and
reimbursements which Advisor believes are due under this Agreement. Invoices
should specify the period for which reimbursement is claimed. Travel costs and
other expenses claimed must be itemized. All invoices must be substantiated by
receipts for transportation and lodging and all other items for expenses
amounting to more than $25.00 where receipts are normally issued. The Company
agrees to pay approved invoices within forty-five (45) days of receipt.
(d) SOLE COMPENSATION. The foregoing fees, other compensation and
reimbursement of expenses are Advisor's sole compensation for rendering services
to the Company.
4. INDEPENDENT CONTRACTOR. Advisor's relationship with the Company will
be that of an independent contractor and nothing in this Agreement will be
construed to create an employer-employee relationship between the Company and
Advisor. Advisor has no authority to act on behalf of or to enter into any
contract, incur any liability or make any representation on behalf of the
Company. The Company agrees that during the term of this Agreement, or any
extension or renewal thereof, Advisor may be employed by other persons, firms or
corporations; PROVIDED, HOWEVER, that the provisions of this Agreement will be
strictly observed by Advisor with respect to such other persons, firms, or
corporations. Since Advisor will not be an employee of the Company, it is
understood that Advisor will not be entitled to any of the benefits under the
Company's retirement or group insurance plans or any other employee benefits.
Advisor is solely responsible for all taxes, withholdings and other similar U.
S. or international statutory obligations, including, without limitation,
Workers Compensation Insurance, Social
-2-
<PAGE>
Security, federal, state or any other employee payroll taxes; and Advisor agrees
to defend, indemnify and hold the Company harmless from any and all claims made
by any entity on account of an alleged failure by Advisor to satisfy any such
tax or withholding obligations. In the performance of all services hereunder,
Advisor will comply with all applicable laws and regulations.
5. NO CONFLICT WITH EXISTING AGREEMENTS. The Company hereby acknowledges
that it does not desire to acquire from Advisor any secret or confidential know-
how or information which Advisor may have acquired from others. Accordingly,
Advisor represents and warrants that Advisor is free to divulge to the Company,
without any obligation to, or violation of any right of others, any and all
information, practice or techniques which Advisor will describe, demonstrate,
divulge or in any other manner make known to the Company during Advisor's
performance of services hereunder.
6. ADVISOR INVENTIONS. Advisor will promptly and fully disclose and
assign to the Company all Inventions made by Advisor (either alone or jointly
with others) resulting from or arising out of services hereunder. All such
Inventions will be the sole property of the Company. Advisor represents and
warrants that Advisor has no obligations to any third party which prohibit or
restrict the right to assign to the Company exclusive right, title and interest
in and to any and all Inventions made by Advisor resulting from or arising out
of services hereunder. Advisor agrees to assist the Company at Company's
expense, and to execute any further documents that are necessary or appropriate,
to obtain, maintain, or enforce patents on any Inventions described above in the
United States and elsewhere. As used in this Agreement, the term "Inventions"
means any and all inventions, discoveries, designs, formulas, technology,
improvements, trade secrets, results of experiments or clinical trials,
processes, techniques and know-how, whether or not patentable, and whether or
not related to the Company's business, which RESULT FROM OR ARISE OUT OF
SERVICES RENDERED TO THE COMPANY AND are invented, conceived, discovered,
developed or reduced to practice by Advisor, either alone or jointly with
others.
7. NON-DISCLOSURE AND NON-USE. The parties hereto acknowledge that
during the course of services to the Company pursuant to this Agreement it will
become necessary or desirable for the Company to disclose to Advisor a
substantial amount of the Company Proprietary Information. "Proprietary
Information" is information that was or will be developed, created, or
discovered by or on behalf of the Company, or which becomes or will become known
by, or was or is conveyed to the Company which has commercial value in the
Company's business. "Proprietary Information" includes, but is not limited to,
information about operations and maintenance, results of experiments or clinical
trials, trade secrets, computer programs, design, technology, ideas, know-how,
processes, formulas, compositions, data, techniques, improvements, inventions
(whether patentable or not), works of authorship, business and product
development plans, customers and other information concerning the Company's
actual or anticipated business, research or development, or which is received in
confidence by or for the
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<PAGE>
Company from any other person. "Proprietary Information" does not include
information that Advisor demonstrates to the Company's satisfaction, by written
evidence, is in the public domain by reason of prior publication not directly or
indirectly resulting from any act or omission of Advisor. Advisor fully
understands that the maintenance of such Proprietary Information in strict
confidence and the confinement of its use to the Company is of vital importance
to the Company. Advisor agrees that the Proprietary Information divulged to
Advisor by the Company or which Advisor acquires in connection with or as a
result of services hereunder will be regarded by Advisor as confidential.
Advisor will not use, nor will Advisor disclose, any Proprietary Information to
any person either during or after the period of this Agreement, except to those
employees of Advisor or the Company as may be necessary in the regular course of
Advisor's duties hereunder, or except as otherwise authorized in writing by the
President of the Company.
8. COMPANY MATERIALS. Advisor recognizes that all the Company Materials
made or received by Advisor during the period of this Agreement are and will be
the exclusive property of the Company, and Advisor will keep the same at all
times in Advisor's custody and subject to Advisor's control, and will surrender
the same to the Company immediately upon request of the Company. "Company
Materials" are documents or other media or tangible items that contain or embody
Proprietary Information or any other information concerning the business,
operations, or plans of the Company, whether such documents have been prepared
by Advisor or by others. "Company Materials" include, but are not limited to,
blueprints, drawings, photographs, charts, graphs, notebooks, customer lists,
computer disks, tapes or printouts, sound recordings and other printed,
typewritten, or handwritten documents, as well as samples, prototypes, models,
products and the like.
9. COMPANY PROPERTY. All Proprietary Information and all title, patents,
patent rights, copyrights, mask work rights, trade secret rights, and other
intellectual property and rights anywhere in the world (collectively "Rights")
in connection therewith will be the sole property of the Company. Advisor
hereby assigns to the Company any Rights Advisor may have or acquire in such
Proprietary Information. At all times, both during the term of this Agreement
and after its termination, Advisor will keep in confidence and trust and will
not use or disclose any Proprietary Information without the prior written
consent of an officer of the Company appropriate in the ordinary course of
performing the services under this Agreement.
10. TERM AND TERMINATION. The initial term of this Agreement will be for
a one (1) year period following the Effective Date; and thereafter will renew
automatically for additional one (1)-year periods unless terminated by either
party at least 90 days prior to an anniversary date. At the Company's option,
this Agreement will also terminate upon notice to Advisor in the event of
Advisor's inability for any reason to perform Advisor's services. Upon
termination of this Agreement, the Company's obligation to pay any compensation,
except for services or expenses already accrued or incurred under Section 2,
will immediately cease and terminate. Termination of this
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<PAGE>
Agreement for any reason will not affect Advisor's obligations under Sections 4,
6, 7, 8, 9 and 10.
11. REMEDIES. Advisor acknowledges and agrees that a breach of this
Agreement will result in immediate, irreparable and continuing damage to the
Company for which there will be no adequate remedy at law; and agrees that in
the event of any such breach or violation or any threatened or intended breach
or violation of this Agreement, the Company and its successors and assigns will
be entitled to temporary, preliminary and permanent injunctive relief and/or
restraining orders enjoining and restraining such breach or violation or such
threatened or intended breach or violation and/or other equitable relief
(without needing to post any bond or other security) in addition to such other
and further relief as may be proper.
12. AMENDMENTS AND WAIVERS. This Agreement may be modified, amended or
supplemented only by a written instrument duly executed by Advisor and the
President of the Company. No term or condition or the breach thereof will be
deemed waived, unless it is waived in writing and signed by the party against
whom the waiver is claimed. Any waiver or breach of any term or condition will
not be deemed to be a waiver of any preceding or succeeding breach of the same
or any other term or condition. The failure of any party to insist upon strict
performance of any term or condition hereunder will not constitute a waiver of
such party's right to demand strict compliance therewith in the future.
13. NOTICES. All payments, notices, requests, demands and other
communications required or permitted hereunder will be in writing and will be
delivered personally (which will include delivery by courier or overnight
delivery service) or sent by first class mail, postage prepaid, or sent by
telecopier or other similar facsimile transmission to the parties at their
respective address set forth below or at such other address as will be given in
writing by a party to the other parties. Items delivered personally or by
telecopier or facsimile will be deemed delivered on the date of actual delivery;
items sent by first class mail will be deemed delivered three (3) days after
mailing.
If to the Company: Vista Medical Technologies, Inc.
2752 Loker Avenue West
Carlsbad, California 92008
Attn: President
If to Advisor, the address set forth below his/her signature.
14. GOVERNING LAW; JURISDICTION AND VENUE. This Agreement will be
governed by and construed in accordance with the laws of the State of
California, without regard to principles of conflicts of law. The parties agree
that any dispute regarding the interpretation or validity of this Agreement will
be subject to the exclusive jurisdiction of the state and federal courts in and
for the County of San Diego, California, and each
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<PAGE>
party hereby agrees to submit to the personal and exclusive jurisdiction and
venue of such courts.
15. ASSIGNMENT. This Agreement will be binding upon Advisor, and inure to
the benefit of, the parties hereto and their respective heirs, successors,
assigns, and personal representatives; provided, however, that it will not be
assignable by Advisor.
16. COUNTERPARTS. This Agreement may be executed in multiple copies, each
of which will be deemed an original and all of which will constitute a single
agreement binding on all parties.
17. ENTIRE AGREEMENT. This Agreement (together with documents and
agreements entered into herewith) constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings. Each party to this
Agreement acknowledges that no representations, inducements, promises or
agreements have been made by any party, or any one acting on behalf of any
party, that are not embodied in this Agreement with respect to the subject
matter hereof.
18. REPRESENTATION. By executing this Agreement, Advisor acknowledges
that he/she understands and agrees that he/she has been encouraged, and had the
opportunity to, consult with his/her own personal attorney in connection with
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ADVISOR THE COMPANY
- ----------------------------------- VISTA MEDICAL TECHNOLOGIES,
(Signature) INC., a California corporation
- ----------------------------------- By:
(Printed Name) --------------------------------
(Signature)
-----------------------------------
(Printed Name and Title)
Address:
Dated: , 199
- ----------------------------------- ------------------ -
- -----------------------------------
Dated: , 199
-------------------- -
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<PAGE>
EXHIBIT A
A. LIST OF OTHER CONSULTING OR ADVISORY POSITIONS HELD
1.
---------------------------------------------
2.
---------------------------------------------
3.
---------------------------------------------
4.
---------------------------------------------
5.
---------------------------------------------
A-1
<PAGE>
EXHIBIT B
B-1
<PAGE>
SCHEDULE 1
DESCRIPTION OF CONSULTING SERVICES:
TIME COMMITMENT:
Schedule 1
<PAGE>
EXHIBIT 10.20
NON-DISCLOSURE AGREEMENT
FOR
PROPRIETARY OR BUSINESS CONFIDENTIAL INFORMATION
THIS AGREEMENT was made this ___ day of _______, 19__, by and between Vista
Medical Technologies, located at 134 Flanders Rd., Westborough, Massachusetts
01581 hereafter called "Vista" and ________________ located at ________________
__________________ hereafter called "________________" are parties to this
Agreement.
WHEREAS, the parties wish to disclose and exchange certain proprietary or
business confidential information or data concerning their respective products
in order to evaluate these products and related technical, engineering,
manufacturing and business information; and
WHEREAS, the parties will furnish this information to each other at their
own expense and without obligation as to any future contractual relationship
unless otherwise agreed.
NOW THEREFORE, in consideration of the following mutual promises, the
parties hereby agree:
1. Vista will disclose proprietary information concerning its Medical
Video Camera systems, Electronic Endoscope Systems and any medical
devices associated with Vista.
2. ________________ will disclose proprietary information as required by
the Consulting Agreement.
3. The parties agree that the subject of this Agreement involves
confidential business of the respective parties.
4. Any information received by either party of from the other which is
designated by the disclosing party as proprietary or business
confidential (or any proprietary information which, if disclosed
orally or visually, is reduced to writing within thirty 30 days and
designated as proprietary or confidential as provided in this
Agreement) shall be kept in confidence by the receiving party and used
only for the purposes described in this Agreement.
5. All proprietary or business confidential information or data to be
protected by this Agreement must be in writing and clearly identified
or marked as proprietary of confidential on each page or portion
thereof with a suitable restrictive legend. Neither party may
reproduce or make copies of this material without the prior written
approval of the other party.
6. Except as provided herein, the proprietary or business confidential
information or data exchanged or disclosed between the parties shall
not be used by either party in their own business or in association
with others or disclosed to any third parties without the prior
written consent of the other party.
7. The receiving party is authorized (i) to examine and evaluate the
information; and (ii) to incorporate the information in a proposal or
other report to the other party.
8. Each party shall take reasonable precautions to prevent disclosure to
the public, competitors of the parties, or any other unauthorized use
of the proprietary of confidential information received. The
obligation to retain such information in confidence will be satisfied
if the party receiving such information uses the same degree of care
it employees to avoid disclosure, publication or dissemination of its
own proprietary or confidential information. The receiving party
shall not be liable for inadvertent or accidental disclosure if such
disclosure occurs after
<PAGE>
a period of one year from receipt in spite of the exercise of the
foregoing precautions and care.
9. The obligations concerning proprietary or confidential information are
not applicable to information which:
(a) was in the receiving party's possession or knowledge prior to the
time of disclosure, which fact of prior possession shall be
provable only by documents prepared prior to the date thereof, or
(b) was in the public domain at the time of disclosure; or
(c) subsequently becomes a part of the public domain by publication
or otherwise without any wrongful act by the receiving party; or
(d) lawfully comes into either party's possession or knowledge
through lawful disclosures from third parties; or
(e) can be proven by written records to have been independently
developed; or
(f) becomes available by inspection or analysis of other products or
techniques in the market; or
(g) occurs three years after the receipt of the information.
10. Pursuant to Item 4, each party designates the following individual(s)
within its organization as the only person(s) authorized to receive
proprietary or confidential information exchanged or disclosed between
the parties pursuant to this Agreement.
Vista ______________________________
134 Flanders Rd. ________________________________________
Westborough, MA 01581 ________________________________________
Name: Martin Newman Name: _________________________________
Title: Director of Regulatory Title:_______________________
Affairs and Quality Assurance
<PAGE>
11. The parties shall, upon the written request by the other party, return
all written documents containing proprietary information covered by
this Agreement, together with any copies thereof, including any
subsidiary, derivative or equivalent documents or translation thereof
containing such proprietary or business confidential information. The
foregoing applies also upon termination or cancellation of this
Agreement.
12. This Agreement shall not be construed as an obligation to enter into a
subcontract or contract or result in a claim by either party for
reimbursement of any costs from the other party, or be construed as
granting, either expressly or by implication, estoppel or otherwise,
any license under any invention or patent now or hereafter owned or
controlled by the party furnishing the information.
13. Neither party shall make any news releases, public announcements,
advertisements, or publicity regarding this Agreement or the
proprietary or confidential information without the prior written
approval of the other party.
14. Information exchanged under this Agreement shall not be disclosed to
other divisions or subsidiaries of the respective parties for any use
adverse to the interest of the respective parties without the prior
written approval of the disclosing party.
15. This Agreement is governed by and shall be construed according to the
law of the Commonwealth of Massachusetts without regard to conflict of
laws provisions.
16. This Agreement contains the sole and entire disclosure agreement
between the parties pertaining to the item listed on Paragraphs 1 and
2 and business information and supersedes all other Disclosure
Agreements entered into prior to this Agreement.
17. This Agreement may be terminated by either party giving thirty (30)
days notice, and unless sooner terminated, shall expire on __________,
19__. Such termination does not affect the parties' respective rights
and obligations outlined in paragraphs 6 and 11 with regard to
proprietary or business confidential information or data disclosed to
the receiving party prior to the termination of the Agreement.
IN WITNESS WHEREOF, the Parties have signed this Agreement as of the
date first written above.
VISTA
By: By:
----------------- ----------------------
Title: Title:
------------------- ------------------------
WITNESS: WITNESS:
------------ -----------------
<PAGE>
EXHIBIT 10.21
NON-COMPETITION, NON-DISCLOSURE
AND
PATENT AND INVENTION ASSIGNMENT AGREEMENT
Agreement made and entered into as of the 18th day of December, 1991
between American Surgical Technologies Corporation, a Delaware corporation (the
"Company") and Harry R. McKinley (the "Consultant") and McKinley Optics, Inc., a
Massachusetts corporation ("MOI").
The Consultant and MOI have, by a License and Development Agreement of even
date herewith (the "License and Development Agreement") granted the Company a
license relating to a stereoscopic objective lens and, by a Consulting Agreement
of even date herewith (the "Consulting Agreement"), the Company has engaged the
Consultant to provide certain consulting and development services. In
consideration of the foregoing, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT NOT TO COMPETE WITH THE COMPANY:
So long as the license granted pursuant to the License and Development
Agreement is exclusive, neither the Consultant nor MOI shall, on their own
behalf, or as owner, manager, stockholder, consultant, director, officer or
employee of any business entity, participate in the development or provision of
medical products or services which the Consultant and MOI know or should know
are directly competitive with products or services developed or provided, or
under development by the Company or consistent with the Company's development
plan, without the prior written authorization of the Company; provided, however,
that the Consultant may, without the Company's prior written authorization, own
up to one percent (1%) of the issued and outstanding securities of any publicly
held corporation.
The Consultant and MOI recognize that the Company is developing highly
specialized products and services in competition with other business entities
throughout the United States and the world, which products and services are
designed to compete in regional, nation-wide and world-wide markets. In light
of the competitive nature of the Company's products and services, the Consultant
agrees that the restrictions contained in this Section 1 cannot be limited to
any geographic area.
2. UNAUTHORIZED DISCLOSURE OF CONFIDENTIAL INFORMATION:
Except as permitted hereunder or under the License and Development Agreement,
neither the Consultant nor MOI shall, directly or indirectly, use any
Confidential Information (as hereinafter defined) other than by and for the
benefit of the Company, or disclose to anyone outside of the Company any such
Confidential Information. The term "Confidential Information" as used
throughout this Agreement shall mean all trade
<PAGE>
secrets, proprietary information and other data or information (and any tangible
evidence, record or representation thereof), whether prepared, conceived or
developed by an employee or consultant of the Company or received by the Company
from an outside source, which is in the possession of the Company (whether or
not the property of the Company), which in any way relates to the present or
future business of the Company, which is maintained in confidence by the
Company, or which might permit the Company or its customers to obtain a
competitive advantage over competitors who do not have access to such trade
secrets, proprietary information, or other data or information. Without
limiting the generality of the foregoing, Confidential Information shall
include:
(a) any idea, improvement, invention, innovation, process, procedure,
development, technical data, design, drawing, prototype, formula, device,
pattern, concept, computer program, software, firmware, source code, object
code, schematic, model, diagram, flow chart, user manual, training or service
manual, product specification, plan for a new or revised product or service,
item or compilation of information, or work in process, and any and all
revisions and improvements relating to any of the foregoing (in each case
whether or not reduced to tangible form); and
(b) the name of any customer, employee, prospective customer,
supplier, sales agent or consultant, any other customer or prospective customer
information, any sale plan, marketing material, plan or survey, business plan or
opportunity, product or service development plan or specification, business
proposal, financial record, business record or other record or information
relating to the present or proposed business of the Company or any customer.
Notwithstanding the foregoing, the term Confidential Information shall
not apply to information which the Company has voluntarily disclosed to the
public without restriction, or which has otherwise lawfully entered the public
domain.
MOI and the Consultant understand that the Company from time to time
has in its possession information which is claimed by customers and others to be
proprietary and which the Company has agreed to keep confidential. MOI and the
Consultant agree that all such information shall be Confidential Information for
purposes of this Agreement.
3. ALL INVENTIONS THE PROPERTY OF THE COMPANY: The Consultant agrees
that all originals and all copies of all manuscripts, drawings, designs,
prototypes, prints, manuals, diagrams, letters, notes, notebooks, reports,
models and all other materials containing, representing, evidencing, recording
or constituting works for hire under the Consulting Agreement or the License and
Development Agreement (the "Work Product"), however and whenever produced, shall
be the sole property of the Company.
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<PAGE>
The Consultant agrees that all Work Product developed or otherwise
made by the Consultant, alone or jointly with others, whether or not patentable
or subject to copyright protection and whether or not reduced to tangible form
or reduced to practice, whether or not made during his regular working hours,
and whether or not made on the Company's premises, and whether or not disclosed
by the Consultant to the Company (hereinafter referred to as "Inventions"),
together with all products or services which embody or emulate such Inventions,
shall be the sole property of the Company. The Consultant agrees to, and hereby
does, assign to the Company all his right, title and interest throughout the
world in and to all Inventions and to anything tangible which evidences,
incorporates, constitutes, represents or records any such Inventions. The
Consultant agrees that all such Inventions shall constitute works made for hire
under the copyright laws of the United States and hereby assign and, to the
extent any such assignment cannot be made at present, the Consultant hereby
agrees to assign to the Company all copyrights, patents and other proprietary
rights the Consultant may have in any such Inventions, together with the right
to file for and/or own wholly without restriction United States an foreign
patents, trademarks and copyrights.
4. CONSULTANT'S OBLIGATION TO KEEP RECORDS: The Consultant shall make
and maintain adequate and current written records of all Inventions and the
Consultant shall disclose all Inventions promptly, fully and in writing to the
Company immediately upon production or development of the same and at any time
upon request.
5. CONSULTANT'S OBLIGATION TO COOPERATE: The Consultant will, at any
time during his engagement with the Company or after it terminates, on request
of the Company, execute all documents and perform all lawful acts which the
Company considers necessary or advisable to secure its rights hereunder an to
carry out the intent of this Agreement. It is understood that reasonable
out-of-pocket expenses of the Consultant's assistance incurred at the request of
the Company will be reimbursed by the Company. If the Consultant is required or
directed by the Company to perform work not otherwise within the scope of his
duties under the Consulting Agreement, the Company agrees to compensate the
Consultant for such work on the basis of a reasonable hourly rate, which shall
be mutually agreed upon by the Consultant and the Company.
6. RETURN OF PROPERTY: If this Consulting Agreement terminates or
expires, or at any other time upon request of the Company, the Consultant shall
return promptly any customer or prospective customer lists, other customer or
prospective customer information or related materials, computer programs,
specifications, drawings, designs, blueprints, prototypes, models, data storage
devices, reproductions, sketches, notes, reports, proposals, business plans, or
copies of them, other documents or materials, tools, equipment or other property
belonging to the Company or its customers.
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If requested to do so by the Company, the Consultant agrees to sign a
Termination Certificate in which he confirms that he has complied with the
requirements of the preceding paragraph and that he is aware that certain
restrictions imposed upon him by this Agreement continue after termination of
his employment. The Consultant understands, however, that his rights and
obligations under this Agreement will continue even if he does not sign a
Termination Certificate.
7. MISCELLANEOUS PROVISIONS: This Agreement contains the entire and only
agreement between the Consultant and MOI and the Company respecting the subject
matter hereof, except, to the extent that the Company's ownership of Work
Product may also be set forth in the Consulting Agreement and the License and
Development Agreement, and no modification, renewal, extension, waiver or
termination of this Agreement or any of the provisions herein contained shall be
binding upon either party unless made in writing and signed by the Consultant,
MOI and an authorized officer of the Company. In the event of any inconsistency
between this Agreement and any other contract between the Consultant, MOI and
the Company, the provisions of this Agreement shall prevail.
The obligations of the Consultant and MOI under this Agreement with
respect to confidentiality, non-competition and the assignment of patent and
invention rights shall survive the termination of the Consulting Agreement and
the License and Development Agreement regardless of the manner of or reasons for
such termination, and regardless of whether such termination constitutes a
breach of any other agreement he may have with the Company. The obligations of
the Consultant and MOI under this Agreement shall be binding upon their
respective successors and assigns, heirs, executors and administrators, and the
provisions of this Agreement shall inure to the benefit of and be binding on the
successors and assigns of the Company.
If the scope of any provision contained herein is too broad to permit
enforcement of such provision to its full extent, then such provision shall be
enforced to the maximum extent permitted by law, and the parties hereby consent
and agree that such scope may be judicially modified in any proceeding brought
with respect to the enforcement of such provision. Except as otherwise provided
in the previous sentence, if any provision of this Agreement shall be construed
to be illegal or invalid, the legality or validity of any other provision hereof
shall not be affected thereby, and any illegal or invalid provision of this
Agreement shall be severable, and all other provisions shall remain in full
force and effect.
The Consultant and MOI recognize that money damages alone would not
adequately compensate the Company in the event of breach by the Consultant of
this Agreement, and the Consultant and MOI therefore agree that, in addition to
all other remedies available to the Company at law or in equity, the Company
shall be entitled to injunctive relief for the enforcement hereof. Failure by
the Company to insist upon strict
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<PAGE>
compliance with any of the terms, covenants or conditions hereof shall not be
deemed a waiver of such terms, covenants or conditions.
This Agreement shall be governed and construed according to the laws
of The Commonwealth of Massachusetts, and shall be deemed to be effective as of
the date first above written. This Agreement is executed under seal.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a
sealed instrument as of the date first above written.
AMERICAN SURGICAL TECHNOLOGIES,
CORPORATION
By: /s/ illegible /s/ Harry R. McKinley
-------------------------- ------------------------------
President Harry R. McKinley
McKINLEY OPTICS, INC.
By: /s/ Harry R. McKinley
---------------------------
President
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EXHIBIT 10.22
LICENSE AND DEVELOPMENT AGREEMENT
THIS AGREEMENT, made and entered into this 18th day of December 1991 (the
"Effective Date") by and between Harry R. McKinley, an individual citizen of the
Commonwealth of Massachusetts (hereinafter referred to as "McKinley") and
McKinley Optics, Inc., a corporation duly organized and existing under the laws
of the Commonwealth of Massachusetts and having its principal office at 161
College Highway, Southampton, Massachusetts 01703 (hereinafter referred to as
"MOI", and sometimes together with McKinley, as "Licensor"), and American
Surgical Technologies Corporation, a corporation duly organized under the laws
of the State of Delaware and having its principal office at One McKinley Square,
Boston, Massachusetts 02109 (hereinafter referred to as "Licensee").
W I T N E S S E T H:
WHEREAS, Licensor is the owner of certain Technology (as defined below)
relating to a stereoscopic objective lens for use in stereoscopic endoscopes and
has the right to grant licenses thereunder;
WHEREAS, Licensor desires to have the Technology utilized by Licensee in
certain medical device products as hereinafter defined and is willing to grant a
license thereunder;
WHEREAS, Licensee has represented to Licensor, to induce Licensor to enter
into this Agreement, that the Licensee shall commit itself to a diligent program
of developing the Technology for commercial exploitation;
WHEREAS, Licensor is in the business of, and has expertise relative to
conducting research into, designing, developing, engineering and manufacturing
lenses for endoscopes and endoscopic video systems;
WHEREAS, Licensee desires to retain MOI and McKinley to conduct research
into, design, develop and engineer lenses for endoscopes and endoscopic video
systems utilizing the Technology; and
WHEREAS, in order to induce Licensor to enter into this Agreement, in
addition to the consideration set forth in this Agreement, Licensor has
previously issued to McKinley * * * shares of Licensee's Common Stock.
* * * Confidential Treatment Requested
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NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
ARTICLE 1 -- DEFINITIONS
For the purposes of this Agreement, the following words and phrases shall
have the following meanings:
1.1 "Licensee" shall mean American Surgical Technologies Corporation and
any subsidiary of American Surgical Technologies Corporation.
1.2 "Subsidiary" shall mean any corporation, division, company or other
entity more than fifty percent (50%) of whose voting stock is owned or
controlled directly or indirectly by American Surgical Technologies Corporation.
1.3 "Technology" shall mean certain existing Patent Rights (as defined
below), Licensed Processes (as defined below), Know How, copyrights, trade
secrets, inventions and other intellectual property or proprietary rights, as
more fully described in Appendix A attached hereto and made a part hereof. As
Used herein, the term "Know-How" means all unpatented scientific, engineering,
or other know-how schematic designs, computer programs, code, software,
firmware, technical data or information, all methods, processes and procedures,
all products, formulations and kits and all instruments and apparatus materially
related to the Licensed Products.
1.4 "Patent Rights" shall mean only those United States patent
applications filed which are set forth in Appendix A or corresponding foreign
patent applications to be filed (hereinafter referred to as the "Patent Rights
Patent Application(s)"), and the United States patents and foreign patents
issuing therefrom (hereinafter referred to as "Patent Rights Patent(s)") and any
continuations, continuations-in part, divisions, reissues or extensions of any
of the foregoing.
1.5 "Licensed Products" shall mean any endoscope which (a) is designed,
marketed or sold for medical purposes AND (b) incorporates a stereo objective
lens for use in endoscopes of any length, diameter or configuration, as
disclosed in the patent application filed April 16, 1991 by McKinley (a copy of
which is attached hereto).
1.6 "Licensed Process(es)" shall mean a process(es) for making any item
relating to the above Technology which (a) is covered in whole or in part by a
pending claim contained in a Patent Rights Patent Application, (b) is covered in
whole or in part by a valid and unexpired claim contained in a Patent Rights
Patent, or (c) otherwise materially incorporates any of the Technology.
1.7 "Marketing Period" shall mean any twelve (12) month period commencing
on the second or any subsequent anniversary of the date of initial marketing
release by Licensee of a Licensed Product.
<PAGE>
1.8 "Net Sales" shall be determined based on Licensee's invoiced prices
for the Licensed Product(s) produced hereunder less the sum of the following:
(a) Discounts allowed in amounts customary in the trade;
(b) Sales, excise, turnover, value added and/or use taxes or tariff
duties directly imposed and with reference to particular sales;
(c) Outbound transportation prepaid or allowed; and;
(d) Amounts allowed or credited on returns;
provided however, that no deductions shall be made for commissions paid to
individuals whether they be with independent sales agencies or regularly
employed by Licensee and on its payroll, or for cost of collections. In the
event that Licensed Product(s) are sold as part of a larger endoscopic video
system and the invoice for such system does not set forth a separate price for
the Licensed Product(s), then, for purposes of determining Net Sales as set
forth above, the deemed invoiced price for the Licensed Product(s) in the system
shall be determined by multiplying (i) the total invoiced price for the system
by (ii) a fraction, the numerator of which is the Licensee's then-current list
price for the Licensed Product which is part of the system (or which is the
total of the Licensee's then-current list prices for all Licensed Product(s)
sold as part of the system, if the system includes more than one Licensed
Product) and the denominator of which is the total of the Licensee's then-
current list prices for all components of the system (including the Licensed
Product(s) in the system).
ARTICLE 2 -- GRANT; OWNERSHIP OF MODIFICATIONS
AND DEVELOPMENTS
2.1 Licensor, jointly and severally, hereby grants to Licensee a
perpetual, exclusive worldwide license to make, have made, modify, use, lease,
markets sell and otherwise distribute the Licensed Product(s) and any other
medical products embodying the Technology, and to practice the Licensed
Process(es) in the medical field, anywhere in the world, subject to the terms
and conditions (including, under certain circumstances termination of
exclusivity or termination of the license) hereinafter set forth.
2.2 Licensor, jointly and severally hereby also grants to Licensee a
perpetual, exclusive, worldwide license and the right to develop, make, use,
sell and distribute improvements, modifications and derivative works based on
the Licensed Products, the Licensed Processes or the Technology. Licensor
claims no ownership interest in any portion of an improvement, modification or
derivative work which is not part of the Licensed Products, Licensed Processes
or the Technology.
2.3 In the event that Licensor or (in the case of MOI) its officers or
employees invents, controls, or becomes aware of any improvement to the Licensed
Products, Licensed Processes or Technology, it or he, as the case may be, shall
forthwith communicate full details thereof in its or his, as the case may be,
possession to Licensee, such improvements
<PAGE>
shall be deemed improvements, modifications or derivative works developed by the
Licensee as provided under section 2.2 above.
2.4 The license granted hereunder shall cease to be exclusive and shall
become nonexclusive upon default (continuing beyond the applicable grace period)
in payment by Licensee of the license exclusivity maintenance royalty as
hereinafter provided. Upon the termination of said exclusivity, notwithstanding
any financial obligations which Licensee shall owe to Licensor and which
Licensee shall nevertheless satisfy according to the terms of this Agreement,
any nonexclusive license shall extend to the full end of the term or terms for
which royalties are payable pursuant to Section 3.1(c)(ii) below, unless this
Agreement is sooner terminated as hereinafter provided in Sections 7.2 and 7.3
below.
2.5 Licensee shall have the right to sublicense any of the rights,
privileges and license granted hereunder only during the exclusive period of
this Agreement. The termination or expiration of this Agreement shall not
terminate or affect sublicenses previously granted by Licensee in accordance
with this Agreement.
2.6 Licensee agrees that any sublicenses granted by it shall have privity
of contract between Licensor and sublicensee such that the obligations of this
Agreement shall be binding upon the sublicensee as if it were in the place of
Licensee. Licensee further agrees to attach copies of this Agreement (from
which the royalty provisions may be deleted) to all sublicense agreements.
2.7 Licensee agrees to forward to Licensor a copy of any and all fully
executed sublicense agreements, and further agrees to forward to Licensor
promptly after the end of each calendar quarter during which any sublicense is
in effect a copy of such reports received by Licensee from its sublicensees
during the preceding calendar quarter under the sublicenses as shall be
pertinent to a royalty accounting under said sublicense agreements.
ARTICLE 3 -- ROYALTIES
3.1 For the rights, privileges and license granted hereunder and for the
services to be performed by Licensor hereunder, Licensee shall pay royalties to
Licensor (in the manner hereinafter provided) to the end of the term of this
Agreement unless it shall be terminated as hereinafter provided:
(a) A license issue royalty of * * *, which said
license issue royalty shall be deemed earned and due immediately
upon the execution of this Agreement;
(b) A license exclusivity maintenance royalty of * * *
* * * per Marketing Period during the first * * *
Marketing Periods, which amount shall increase by the amount of
* * * per Marketing Period during each
subsequent Marketing Period until such time as the license
exclusivity maintenance royalty equals * * * , and
thereafter at a rate of * * * per Marketing
Period, which said license exclusivity maintenance royalty shall
be
* * * Confidential Treatment
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Requested payable in monthly installments, in arrears, and
shall be credited in full against the royalties on sales due
for each Marketing Period pursuant to Section 3.1(c)(ii);
(c) Royalties on sales in an amount equal to:
(i) * * * upon sale of the 25th 3-D Video System (as such
term is defined in the description of Technology set forth
in Appendix A attached hereto) incorporating a Licensed
Product, and an additional * * * upon sale of each of the
* * * and *** such 3-D Video Systems incorporating a
Licensed Product;
(ii) thereafter, through the date on which the Patent Rights
Patent(s) expire (or, if no Patent Right Patents issue
within three years of the date of this Agreement, through
the fifteenth anniversary of the date of this Agreement),
* * * first * * * of Net Sales, * * * of the next
* * * of Net Sales, and * * * of all
subsequent Net Sales.
(d) From and after the date on which the Patent Rights Patent(s)
expire (or, if no Patent Right Patents issue within * * * years
of the date of this Agreement, from and after the * * *
anniversary of the date of this Agreement), the obligation of
Licensee to pay a license exclusivity maintenance royalty or any
royalties on sales hereunder shall terminate and the license
granted herein shall become perpetual, exclusive and royalty-
free.
3.2 All royalties payable to Licensor under Section 3.1 above shall be
considered earned by Licensor * * * by Licensee of
payment for the license, use or sale of Licensed Products, and shall be
payable * * * as set forth in Article 4 of this Agreement, except for
license exclusivity maintenance royalties which shall be payable * * *
immediately at the * * * in the manner as provided above.
3.3 All payments that are not paid for whatever reason when they become
due shall be subject to the addition of interest at a floating rate per annum
equal to the prime rate as published from time to time in the WALL STREET
JOURNAL, calculated from said due date to the date a negotiable payment check is
mailed by certified mail to Licensor for all monies due and owed to Licensor.
Furthermore, Licensor shall not be obligated to give notice for interest to
begin to accrue.
3.4 No multiple royalties shall be payable because the Licensed Product(s)
or Licensed Process(es) are or shall be covered by more than one patent
application or patent licensed under this Agreement, nor shall royalties be
adjusted upon the granting of any patent or the finding of invalidity of any
patent or portion thereof governed by this Agreement.
* * * Confidential Treatment Requested
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3.5 Royalty payments shall be paid in United States dollars in Boston,
Massachusetts, or at such other place as Licensor may reasonably designate
consistent with the laws and regulations controlling in any foreign country. If
any currency conversion shall be required in connection with the payment of
royalties hereunder, such conversion shall be made by using the exchange rate
prevailing at a first-class foreign exchange bank on the last business day of
the calendar quarterly reporting period to which such royalty payments relate.
ARTICLE 4 -- REPORTS AND RECORDS
4.1 Licensee shall keep full, true and accurate books of account
containing all particulars that may be necessary for the purposes of showing the
amount payable to Licensor under this Agreement as aforesaid. Said books of
account shall be kept at Licensee's principal place of business or the principal
place of business of the appropriate subsidiary of Licensee to which this
Agreement directly relates. Said books and the supporting data shall be open at
reasonable business times, for * * * years following the end of the calendar
year to which they pertain, to inspection, no more frequently than *** times
per year, by an independent certified public accountant retained by Licensor, at
Licensor's expense, for the purpose of verifying Licensee's royalty statement or
compliance in other respects with this Agreement.
4.2 Licensee, within * * * after * * *
and * * * of each calendar year shall deliver to Licensor true and
accurate reports, giving such particulars of the business conducted by Licensee
during the preceding * * * period under this Agreement as shall be
pertinent to a royalty accounting hereunder. These reports shall include at
least the following:
(a) All Licensed Products manufactured and sold;
(b) Total billings and receipts for Licensed Products sold;
(c) Accounting for all the Licensed Process(es) used or sold;
(d) Allowable deductions;
(e) Total royalties due; and
(f) List prices for the Licensee's products during such * * *
period; customer sales literature distributed during such * * *
period and press releases distributed during such * * *
period.
4.3 With each such report submitted, Licensee shall pay to Licensor the
royalties then due and payable under this Agreement. If no payments shall be
due, Licensee shall so report.
* * * Confidential Treatment Requested
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ARTICLE 5 -- DEVELOPMENT; TECHNICAL ASSISTANCE AND
RIGHT OF FIRST OFFER
5.1 Licensee hereby engages Licensor, and Licensor, jointly and severally,
accepts such engagement, for Licensor to use Licensor's best efforts to conduct
research into, design develop and engineer, at Licensee's direction, certain
improvements with respect to the Licensed Products (the "Licensed Product
Developments") and certain products relating to the Licensed Products
("Development Products"), each as specified on APPENDIX B hereto. The Licensee
and Licensor acknowledge that it is their intent to use their respective best
efforts to accomplish certain development in accordance with the following
schedule:
On or before April 5, 1992 Completion of four Prototypes (as defined in
APPENDIX B) and the related 3-D Video System
On or before September 5, 1992 Completion of four Pre-Production Products
and the related 3-D Video System
On or before October 5, 1992 Completion of Manufacturable Product (as
defined in APPENDIX B) and the related 3-D
Video System
Upon completion and delivery of the first of four Prototypes, Licensee shall pay
Licensor a one-time design fee of * * *
Any and all Licensed Product Developments, Development Products, and all
patents, patent applications,. copyrights, trade secrets, inventions know how
and other intellectual property or proprietary rights embodied in the Licensed
Product Developments and Development Products shall be owned by Licensee and
Licensee shall at all times have the exclusive title to the Licensed Product
Developments and Development Products and shall have the exclusive right to
license, sell, transfer and otherwise use and dispose of the Licensed Product
Developments, and Development Products.
5.2 In addition to the development services enumerated above, McKinley
and MOI will use their respective best efforts to assist the Company with
respect to (i) employee and customer training with respect "to the Licensed
Products and 3-D Video Systems; (ii) service and repair the Licensed Products
and 3-D Video Systems; (iii) securing adequate sources of optical lenses and
lens systems for the Licensed Products, as well as other components of 3-D
Video Systems; (iv) preparation of FDA and other regulatory submissions; and
(v) improvement and updating of the Technology in order to maintain the
Technology as the state-of-the-art.
5.3 In order to assist the Company in the development and marketing of the
Licensed Products and 3-D Video Systems, Licensor jointly and severally agrees
to loan to the Company the existing demonstration 3-D Video System until the 3-D
Video System developed in conjunction with the Prototype pursuant to subsection
5.1 above is available, so that Company may use the demonstration 3-D Video
System for purposes of testing, inspection, demonstrations, and marketing, and
other appropriate purposes, whether on its own premises, or in hospitals or
laboratories. The Licensor jointly and severally consents to any modification
and alteration of the demonstration 3-D Video System that the parties
* * * Confidential Treatment Requested
<PAGE>
agree may be necessary for such purposes. The Company agrees to indemnify and
hold harmless McKinley and MOI on account of any such use of the said
demonstration 3-D Video System, and to assume the cost of any modifications or
alterations of the demonstration 3-D Video System that may be necessary in
connection with the use of the demonstration 3-D Video System hereunder. The
Company, McKinley, and MOI will cooperate so that McKinley and MOI will also be
able to use the demonstration 3-D Video System on a reasonable basis. Upon
completion and delivery to the Company of the 3-D Video System developed in
conjunction with the first of the four Prototypes pursuant to subsection 5.1
above, the demonstration 3-D Video System will revert back to the Licensor.
5.4 McKinley and MOI each agree not to license, sublicense, assign, sell
or otherwise transfer any medical optical device (including, without limitation,
any endoscope capable of use for medical purposes) developed by either or both
of them during the period in which royalties are paid pursuant to this
Agreement, which device is not (a) otherwise the subject of an existing
agreement with the Company, or (b) developed as a work for hire for a third
party unaffiliated with MOI or McKinley pursuant to specifications provided by
such third party, (an "Option Product"), unless in each such case McKinley, MOI,
or both of them, as the case may be, have first complied with the provisions of
this subsection. McKinley, MOI or both of them, as the case may be, shall
deliver to the Company a written notice of any proposed or intended license,
sublicense, assignment, sale or other transfer of an Option Product (the
"Offer"), which Offer shall (i) identify and describe the Option Product, (ii)
describe the price and other terms upon which the Option Product is to be
licensed, sublicensed, assigned or sold and (iii) offer to license, sublicense,
assign, sell, or otherwise transfer, as the case may be, to the Company the
Option Product. The Company shall have the right, for a period of * * *
following delivery of the Offer, to license, sublicense, be assigned or
otherwise acquire, at a price and upon the other terms specified in the Offer,
the Option Product. The Offer by its terms shall remain open and irrevocable
for such * * * period. To accept an Offer, the Company must deliver a written
notice to McKinley, MOI or both, as the case may be, prior to the end of the
* * * period of the Offer (the "Notice of Acceptance"). In the event that the
Company does not deliver a Notice of Acceptance, McKinley, MOI, or both, as the
case may be, shall have * * * from the expiration of the * * * period of the
Offer to license, sublicense assign, sell or otherwise transfer the Option
Product, but only upon terms and conditions which are not more favorable to the
acquiring person or persons or less favorable to McKinley, MOI or both of them,
as the case may be, than those set forth in the Offer. In the event that the
Company determines to acquire the Option Product, the closing of such
acquisition must take place within * * * of the delivery date of the Notice of
Acceptance, subject in all cases to the preparation, execution and delivery by
the Company and McKinley, MOI or both, as the case may be, of an agreement
relating to such Option Product reasonably satisfactory in form and substance to
the Company. Any Option Product not acquired by the Company or other persons in
accordance with this subsection 5.4 may not be licensed, sublicensed, assigned,
sold or otherwise transferred, until such Option Product is again offered to the
Company under the procedures specified in this subsection 5.4.
* * * Confidential Treatment Requested
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ARTICLE 6 -- PATENT PROSECUTION
6.1 Licensor, at Licensor's sole expense, shall apply for and shall seek
prompt issuance of United States patents based upon the Patent Rights, PROVIDED
that this provision shall not be interpreted to prohibit Licensee from taking
such actions with respect to the Patent Rights if, in the reasonable judgment of
Licensee, Licensor is not diligently fulfilling its obligations under this
subsection 6.1. Unless the licenses granted hereunder have ceased to be
exclusive, the prosecution and maintenance of corresponding foreign Patent
Rights Patents and Patent Rights Applications and all expenses relating thereto,
shall be the responsibility of Licensee, PROVIDED that Licensee shall have no
obligation hereunder to reimburse Licensor for expenses incurred by Licensor to
date in connection with foreign Patent Rights Patents or Patent Rights
Applications. Licensor shall cooperate fully with Licensee in the prosecution
and maintenance of such foreign Patent Rights Patents.
6.2 Licensor agrees that upon Licensee's request and at Licensee's
expense, it shall promptly make all disclosures, execute all instruments and
documents and perform all acts whatsoever necessary or desirable to vest or
confirm in Licensee's, its successor's, assigns, and nominees, all rights
created or contemplated by Sections 2.2 and 2.3 of Article 2 above and by
Article 5 above including any and all applications, writings and documents as
may be necessary to permit Licensee to obtain any patents or copyrights or any
assignments thereof.
ARTICLE 7 -- TERMINATION
7.1 Should Licensee fail in its remittance to Licensor of license
exclusivity maintenance royalties due in accordance with Section 3.1(b) of this
Agreement, Licensor shall have the right to notify Licensee of termination of
exclusivity of the license granted under this Agreement effective * * * after
such notice unless Licensee shall pay to Licensor, within the * * * period, all
such royalties due and payable. Upon the expiration of the * * * period, if
Licensee shall not have paid all such monies due and payable, the exclusive
rights, privileges and license granted hereunder shall thereupon immediately
terminate as provided in Section 2.2, and the license granted hereunder shall
thereupon be nonexclusive as provided in said Section 2.4.
7.2 Except as is provided in Section 7.1 above with respect to failure to
remit payment of exclusivity maintenance royalties, after the second anniversary
of the date of this Agreement, and not before, upon any breach or default of
this Agreement by Licensee, Licensor shall have the right to notify Licensee of
termination of this Agreement effective * * * after mailing of such notice
unless Licensee shall have cured any breach underlying such notice within the
* * * period. Upon the expiration of the * * * period, if Licensee shall not
have cured such breach, the rights, privileges and license granted hereunder
shall thereupon immediately terminate in full, provided, however, that if there
is a dispute relating to such breach which either party has submitted to
arbitration pursuant to Article 8 below, there shall be no termination prior to
the final decision in the arbitration and the decision reached in the
arbitration shall determine whether a termination may take place.
* * * Confidential Treatment Requested
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7.3 Licensee shall have the right to terminate this Agreement at any time
upon * * * prior notice to Licensor, provided that the Licensee shall continue
to pay the license exclusivity maintenance royalty payment according to the
terms of Article 3 above for the * * * in which such termination takes effect
and for the * * * following such * * *. Upon such termination, Licensee
shall have no further rights, whether exclusive or non-exclusive, to the
Licensed Products, the Licensed Process(es) or the Technology hereunder.
7.4 Upon termination of this Agreement for any reason, Licensee and/or any
sublicensee thereof may sell all Licensed Products, and complete Licensed
Products in the process of manufacture at the time of such termination and sell
the same, provided that Licensee shall pay to Licensor the royalties therefor as
required by Article 3 of this Agreement and shall submit the reports required by
Article 4 hereof on such sales.
7.5 Upon termination of this Agreement, nothing herein shall be construed
to release either party from any obligation(s) that matured under this Agreement
prior to the effective date of such termination, which obligation(s) shall
continue until fully met by such party.
7.6 Notwithstanding the foregoing, following termination hereunder, the
provisions of Sections 2.5, 2.6, 3.1(c), 4.l, 4.2, 6.2, 10.2, 10.3, Article 11
and 12.4 shall remain in full force and effect.
ARTICLE 8 -- ARBITRATION; INJUNCTIVE RELIEF
8.1 Except as to issues relating to the validity, construction or effect
of any patent licensed hereunder, any and all claims, disputes or controversies
arising under, out of, or in connection with this Agreement, which have not been
resolved by communication between the parties, shall be resolved by final and
binding arbitration in Boston, Massachusetts under the rules of the American
Arbitration Association then obtaining. The arbitrators shall have no power to
add to, subtract from or modify any of the terms or conditions of this
Agreement. Any award rendered in such arbitration may be enforced by either
party in either the courts of the Commonwealth of Massachusetts or in the United
States District Court for the District of Massachusetts, to whose jurisdiction
for such purposes Licensor and Licensee each hereby irrevocably consents and
submits.
8.2 Claims, disputes or controversies concerning the validity,
construction or effect of any patent licensed hereunder shall be resolved in any
court having jurisdiction thereof.
8.3 In the event that, in any arbitration proceeding, any issue shall
arise concerning the validity, construction or effect of any patent licensed
hereunder, the arbitrators shall assume the validity of all claims as set forth
in such patent, and the arbitrators shall not delay the arbitration proceeding
for the purpose of obtaining or permitting either party to obtain judicial
resolution of such issue, unless an order staying such arbitration proceeding
shall be entered by a court of competent jurisdiction. Neither party shall
raise any issue concerning the validity, construction or effect of any patent
* * * Confidential Treatment Requested
<PAGE>
licensed hereunder in any proceeding to enforce any arbitration award hereunder
or in any proceeding otherwise arising out of any such arbitration award.
8.4 Notwithstanding the foregoing, nothing in this Article 8 shall be
construed to waive any rights or timely performance of any obligations existing
under this Agreement. Furthermore, nothing in this Article 8 shall be construed
to waive the right of Licensee to obtain, in addition to any and all other
remedies available to it at law or equity, injunctive relief to enforce the
exclusivity of the rights, privileges and license granted to it hereunder. In
that regard, Licensor acknowledges that any grant or attempted grant by it to
grant to any other person or entity a license or other right to use the
Technology or the Patent Rights for any medical purpose will cause irreparable
damage to Licensee and Licensor agrees that Licensee shall be entitled to
injunctive relief for the event of any such grant or attempted grant.
ARTICLE 9 -- INFRINGEMENT
9.1 Licensee and Licensor shall promptly inform each other in writing of
any alleged infringement of which it shall have notice committed by a third
party regarding any patents within the Patent Rights and shall provide each
other with any available evidence of such infringement.
9.2 During the term of this Agreement, Licensee shall have the right, but
shall not be obligated, to prosecute at its own expense any infringements of the
Patent Rights and, in furtherance of such right, Licensor hereby agrees that
Licensee may join Licensor as a party plaintiff in any infringement suit,
without expense to Licensor. The total cost of any infringement action
commenced or defended solely by Licensee shall be borne by Licensee, and
Licensee shall keep any recovery or damages for past infringement derived
therefrom.
9.3 If within * * * after having been notified of any alleged
infringement, Licensee shall not have obtained from the alleged infringer an
agreement to desist and shall not have brought and shall not be prosecuting any
infringement actions, or if Licensee shall notify Licensor at any time prior
thereto of its intention not to bring suit against any alleged infringer, then,
and in those events only, Licensor shall have the right, but shall not be
obligated, to prosecute at its own expense any infringement of the Patent
Rights, and Licensor may, for such purposes, use the name of Licensee as party
plaintiff, and shall pay Licensee's legal fees and expenses related thereto. No
settlement, consent judgment or other voluntary final disposition of the suit
may be entered into without the consent of Licensee, which consent shall not
unreasonably be withheld. Licensor shall indemnify Licensee against any order
for costs that may be made against Licensee in such proceedings.
9.4 If Licensee and Licensor agree to institute suit jointly, the suit
shall be brought in both of their names, and all expenses and recoveries
(whether by judgment, accord, decree or settlement) shall be borne equally.
Licensee shall exercise control over such suit, including employment of counsel
of its own selection at its own expense.
9.5 In any infringement suit as either party may institute to enforce the
Patent Rights pursuant to this Agreement, the other party hereto shall, at the
request and expense of the party initiating such suit, cooperate in all respects
and, to the extent possible, have
* * * Confidential Treatment Requested
<PAGE>
its employees testify when requested and make available relevant records,
papers, information, samples, specimens, and the like.
9.6 Licensee, during the exclusive period of this Agreement, shall have
the sole right in accordance with the terms and conditions of this Agreement to
sublicense any alleged infringer under the Patent Rights.
ARTICLE 10 -- WARRANTIES AND COVENANTS
10.1 Licensor hereby covenants and agrees that as and from the effective
date of this Agreement through and until the second anniversary date of this
Agreement, and thereafter so long as the license granted hereunder remains
exclusive, neither McKinley nor MOI will design (including, without limitation,
designs for objective or relay lenses for use in endoscopes as described below)
develop, consult with, or otherwise assist in any manner, directly or indirectly
any person or entity other than Licensee in the design or development of any
endoscope which (a) is designed, marketed, or sold for medical purposes, or (b)
Licensor knew or should have known is capable of use for medical purposes,
unless Licensor limits, in writing, the use of such endoscope to non-medical
purposes; or (c) is manufactured by means of a Licensed Process(es), or (d)
otherwise materially incorporates the Technology.
10.2 Licensor hereby warrants and represents that (a) to the best knowledge
of McKinley and of MOI, the Technology does not infringe or otherwise violate
any other patent, license or agreement; (b) the Technology and other rights
granted hereunder are and will be licensed exclusively to Licensee for medical
use; (c) the Technology constitutes all of McKinley's and MOI's relevant and
necessary inventions, patents, patent applications, designs, art, and Know-How
with respect to 3-D Video Systems; and (d) there are no breaches of any
warranties or covenants, or other such undisclosed or contingent liabilities
with respect to the Technology or to this Agreement.
10.3 Licensee hereby warrants and represents that (a) it is a corporation
duly organized and in good standing in the State of Delaware and that it is
qualified to do business in the Commonwealth of Massachusetts, and (b) it is not
in breach of its warranties or covenants in this Agreement.
10.4 Licensor and Licensee shall at all times during the term of this
Agreement and thereafter, indemnify, defend and hold the other, its officers,
directors, employees and affiliates, harmless against all claims and expenses,
including legal expenses and reasonable attorneys' fees, arising out of any
breach of any or all of the foregoing warranties made by Licensor or Licensee,
as the case may be.
ARTICLE 11 -- PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
Any payment, notice or other communication pursuant to this Agreement shall
be sufficiently made or given on the date of mailing if sent to such party by
certified or first
<PAGE>
class mail, postage prepaid, addressed to such party at such party's address
below (or at an address as such party shall designate by written notice given to
the other parties);
In the case of Licensor:
Mr. Harry R. McKinley
McKinley Optics, Inc.
161 College Highway
Southampton, Massachusetts 01703
With a copy to:
W. Garth Janes, Esq.
Doherty, Wallace, Pillsbury and Murphy, P.C.
One Monarch Place
1414 Main St., 19th Floor
Springfield, Massachusetts 01144-1002
In the case of Licensee:
American Surgical Technologies Corporation
One McKinley Square
Boston, Massachusetts 02109
Attention: Mr. Gerald I. Brecher
With a copy to:
William E. Kelly, Esq.
Cuddy, Lynch, Manzi & Bixby
One Financial Center
Boston, Massachusetts 02111
ARTICLE 12 -- MISCELLANEOUS PROVISIONS
12.1 This Agreement shall be construed, governed, interpreted and applied
in accordance with the laws of the Commonwealth of Massachusetts, except that
questions affecting the construction and effect of any patent shall be
determined by the law of the country in which the patent was granted.
12.2 The parties hereto acknowledge that this Agreement sets forth the
entire Agreement and understanding of the parties hereto as to the subject
matter hereof, and shall not be subject to any change or modification except by
the execution of a written instrument subscribed to by the parties hereto.
12.3 The provisions of this Agreement are severable, and in the event that
any provision of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the
<PAGE>
validity or enforceability of the remaining provisions hereof.
12.4 Licensee agrees to mark the Licensed Products sold in the United
States with all applicable United States patent numbers. All Licensed Products
shipped to or sold in other countries shall be marked in such a manner as to
conform with the patent laws and practice of the country of manufacture or sale.
12.5 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
12.6 This Agreement may not be assigned in whole or in part by Licensor
without the prior consent of Licensee. Subject to the preceding sentence, this
Agreement shall be binding upon the parties hereto and their respective
successors and assigns.
12.7 Licensee acknowledges that Licensor may be obligated to pay a fee to
* * * in connection with the transactions
contemplated by this Agreement and certain related transactions. Licensee
hereby agrees to reimburse Licensor for Licensor's payment of such fee, upon
receipt of written evidence from Licensor of payment therefor, up to a maximum
amount of * * * , provided that closing of Licensee's sale of its Series I
Preferred Stock, Common Stock and Warrants on the date hereof for an aggregate
sale price equal to or greater than * * * has occurred.
* * * Confidential Treatment Requested
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals and duly executed this License Agreement as of the day and year first
above written.
/s/ Harry R. McKinley
--------------------------------------------
Harry R. McKinley
MCKINLEY OPTICS, INC.
By: /s/ Harry R. McKinley
-----------------------------------------
Harry R. McKinley, President
AMERICAN SURGICAL TECHNOLOGIES
CORPORATION
By: /s/ illegible
----------------------------------------
<PAGE>
APPENDIX A
TECHNOLOGY
1. A stereo objective lens (the "Lens") for use in endoscopes of any
length, diameter, or configuration, as disclosed in the patent application filed
as of April 16, 1991 by McKinley (a copy of which is annexed hereto).
2. All Know-How, copyrights, trade secrets, inventions and other
intellectual property or proprietary rights relating to incorporating the Lens
into a commercially manufactured medical endoscope and connecting such endoscope
to an endoscopic video system in a manner which results in an apparent three
dimensional image of the object being viewed with the endoscope (a "3-D Video
System").
<PAGE>
APPENDIX B
LICENSED PRODUCT DEVELOPMENTS
Preparation of technical specifications and drawings for a working
prototype of the Licensed Product and design and development of such prototype
(the "Prototype"). Refinement and improvement of Prototype for pre-production
(the "Pre-Production Product"). Refinement and improvement of Pre-Production
Product for commercial manufacture (the "Manufacturable Product").
DEVELOPMENT PRODUCTS
Products required to make or connect a medical endoscope embodying the
Technology to video cameras or other electronic imaging devices.
Products and processes necessary to manufacture and market 3-D Video
Systems utilizing the Technology, which systems include (1) an endoscope
utilizing the Technology (2) a coupler or other means of attachment, alignment
and integration of the endoscope with the remainder of the system, (3) two video
cameras, (4) a suitable light source and its cables, connectors and the like,
and (5) a video display system using video switching or other appropriate
technology, resulting in the display of an apparent three-dimensional image of
the object being viewed with the endoscope.
<PAGE>
- --------------------------------------------------------------------------------
McKINLEY OPTICS, INC.
FAX: (413) 527-0753 161 COLLEGE HIGHWAY TEL: (413) 527-1829
P.O. BOX 356
SOUTHAMPTION, MASSACHUSETTS
01073-0356
- --------------------------------------------------------------------------------
June 28, 1994
AMERICAN SURGICAL TECHNOLO
300 BILLERICA ROAD
CHELMSFORD, MASSACHUSETTS
01824
ATTN: Ken Hayes
Dear Ken,
This letter constitutes an Agreement to alter the provisions of the LICENSE
AND DEVELOPMENT AGREEMENT between MCKINLEY OPTICS, Inc. and AMERICAN SURGICAL
TECHNOLOGIES CORPORATION, dated December 18, 1991.
For Paragraph 3.1(c)(i) substitute the following:
(i) * * * upon sale of the *** 3-D Video System (as such term is
defined in the description of Technology set forth in Appendix A attached
hereto) incorporating a Licensed Product, and an additional * * * upon
sale of each of the *** and *** such 3-D Video Systems incorporating a
Licensed Product, and * * * upon sale of the *** such 3-D Video Systems
incorporating a Licensed Product.
All other terms of the previous agreement shall remain in effect.
This change is hereby agreed to by the undersigned.
AMERICAN SURGICAL TECHNOLOGIES CORP.
/s/ Richard D. Fitzpatrick
- -----------------------------------
Richard D. Fitzpatrick, CFO
McKINLEY OPTICS, Inc.
/s/ Harry R. McKinley
- -----------------------------------
Harry R. McKinley, President
* * * Confidential Treatment Requested
<PAGE>
EXHIBIT 10.23
LICENSE AGREEMENT
BETWEEN
ALLEN NEWMAN
AND
VISTA MEDICAL TECHNOLOGIES, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS..................................................................... 1
Agreement.................................................................... 1
Article 1 Definitions.............................................. 1
Article 2 Grant.................................................... 2
Article 3 Vista's Undertakings..................................... 3
Article 4 Reversion Rights; Assignment Rights...................... 3
Article 5 Royalties................................................ 4
Article 6 Reports.................................................. 6
Article 7 Warranty................................................. 7
Article 8 Term and Termination..................................... 7
Article 9 Notices.................................................. 8
Schedule 1.2 Licensed Patents..........................................10
Schedule 1.5 Patents and Patent Applications...........................11
Schedule 7.1 Warranty Exclusions.......................................12
Attachment 5.4 Promissory Note...........................................13
i
<PAGE>
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is entered into as of the 2nd day of
September 1994, by Allen Newman, an individual, ("Newman" or "Licensor") and
Vista Medical Technologies, Inc., 2752 Loker Avenue West, Carlsbad, California
92008 ("Vista", or "Licensee"), referred to individually as a Party and together
as the Parties.
RECITALS
A. Newman represents that he has conceived and developed certain technology
and products in the field of procedure specific medical instruments employing
advanced optical technologies ("Visual Instruments") and that, to the best of
his knowledge, he owns rights thereto; and,
B. Newman and Vista have entered into an employment agreement under which
Newman will be an employee of Vista as a member of Vista's senior management
team with Newman's responsibilities to include, among others, directing the
development and marketing of Visual Instruments employing advanced optical
technologies; and,
C. Newman and Vista now desire to enter into this License Agreement for
medical instruments utilizing optical technology, as set forth herein.
AGREEMENT
THEREFORE, the Parties agree as follows:
ARTICLE 1 -- DEFINITIONS
As used herein, the following terms have the meanings indicated.
1
<PAGE>
1.1 "Affiliate" shall mean (i) any other division of Vista, (ii) any company
in which more than fifty percent (50%) of the voting shares or other ownership
interests are owned or controlled, directly or indirectly, by Vista, or (iii)
any company which owns or controls, directly or indirectly, more than 50% of the
voting stock of Vista.
1.2 "Licensed Products" are those identified in Schedule 1.2.
1.3 "Licensee" means Vista Medical Technologies, Inc. and its affiliates.
1.4 "Licensor" means Allen Newman, an individual, and/or Newman Medical Inc.,
a corporation, to the extent that Newman Medical may have any rights to any of
the Licensed Products.
1.5 "Licensor's Technology" shall mean inventions directly related to the
Licensed Products (whether or not patentable), ideas, design concepts,
processes, formulas and know-how owned or controlled by Licensor and used by it
as of the date of this Agreement. Patents and patent applications are
identified in Schedule 1.5.
1.6 "Licensee's Technology" shall mean inventions (whether or not
patentable), ideas, design concepts, processes, formulas and know-how directly
related to developments and improvements of the Licensed Products and Licensor's
Technology made by Licensee during the term of this Agreement.
ARTICLE 2 -- GRANT
Newman hereby grants to Vista an exclusive license to use Licensor's Technology
to develop, make, use, have made, market, Lease, and sell the Licensed Products
and derivatives of them worldwide. Newman further grants to Vista the right to
sublicense such rights to the Licensor's Technology and Licensed Products to
third parties subject to Newman's prior approval of any such sublicense as
envisioned by Article 4.2, below, which approval will not be unreasonably
withheld.
2
<PAGE>
ARTICLE 3 -- VISTA'S UNDERTAKINGS
3.1 Vista intends to develop the Licensed Products at its expense and bring
them to market by appropriate means of distribution according to the time
schedule set forth in Schedule 1.2, Licensed Products. Provided, however, that
if delays in the regulatory process delay Vista's undertakings, the two year
commitment shall be extended to take into account the effects of such delay.
3.2 Vista has the right in its sole discretion not to develop, to discontinue
to develop, or to discontinue marketing any or all of the Licensed Products at
any time.
3.3 If Vista fails to meet its obligations under 3.1, above, or elects to
discontinue as provided by 3.2, above, then Newman's sole rights will be any
applicable reversion rights set forth in Article 4.1, below.
3.4 Vista will, at its expense, pursue an appropriate level of patent
protection for the Licensed Products, under Newman's name as inventor, but
assigned to Vista.
ARTICLE 4 -- REVERSION RIGHTS; ASSIGNMENT RIGHTS
4.1 If Newman becomes entitled to reversion rights to any Licensed Product
pursuant to 3.3, above, then upon written request by Newman to Vista, Vista will
transfer its rights to such Licensed Product and directly related Licensor's
Technology to Newman, subject to any rights that may have been granted pursuant
to Article 4.2, below, prior to Newman's right to reversion and subject further
to any rights that Vista reasonably may need to retain, on a non-exclusive basis
with Newman or any of his assigns, in order to develop or market Licensed
Products not reverting to Newman. If at the time of such reversion, Newman also
wishes to acquire rights to Licensee's Technology and other Visual Instrument
technology and products developed by Vista, Vista and Newman will negotiate in
good faith arrangements for such rights including, among other provisions,
3
<PAGE>
compensation to Vista for recovering its development costs for such Licensee's
Technology and other technology and products.
4.2 If Vista elects to sell or transfer its rights to the Licensor's
Technology or to a Licensed Product, then it may do so provided that Newman's
rights are protected in the transfer (i.e., the transferee accepts the principal
terms of this Licensing Agreement as a condition of the sale or transfer).
5. ROYALTIES
5.1 Royalties will be paid by Vista as a * * * of the Licensed
Products. Royalty rates (R) will be based on the * * *
(G) of the Licensed Products as follows:
a. For the * * *
( * * * ): R = * * * where R and G are
in percent (%). If G drops below ***, no royalty will be paid.
b. For the * * *
*** : R = *** if G > ***; or R = *** if G < ***.
When total royalties due for all Licensed Products reach * * * in any
calendar year, then the royalty rate for the Licensed Products identified in
5.1(a) will change to R = * * * for subsequent sales until the end of
that year.
The above * * * are based upon sale by Vista direct to end users. In
the event of indirect sales (such as to Original Equipment Manufacturers,
stocking distributors, and similar value-adding resellers) the gross margin
levels specified in the above formulae shall be reduced by * * *
(for example, * * *
* * * Confidential Treatment Requested
4
<PAGE>
5.3 (a) Under this Agreement, each Licensed Product will be considered as
sold when finally paid for by Vista's customer(s), but royalties paid on each
Licensed Product which is not finally accepted, or for which acceptance is
revoked, or is otherwise rejected, by Licensee's customer(s), shall be credited
against royalties payable hereunder.
(b) The foregoing royalties shall be payable * * * on or before
the * * * days of * * * of each year during the term of this
Agreement.
5.4 LOAN AGREEMENT. Vista immediately upon the signing by both Parties of
this Agreement will loan to Newman an advance in the amount of * * * secured
against royalties that may become due. A copy of the loan agreement is attached
hereto, identified as Attachment 5.4, Promissory Note. Such loan agreement
shall survive termination of this License Agreement. The first * * * of all
royalties due from Vista under the terms of this License Agreement shall be
applied toward repayment of the Promissory Note.
5.5 TERMINATION OF ROYALTY OBLIGATIONS; PAID-UP LICENSE. Vista is obligated
to pay royalties as provided herein on patented Licensed Products only while a
valid patent is in effect. For all other Licensed Products, Vista's royalty
obligation shall cease * * * years after Vista first begins marketing each
such Licensed Product. At the time that Vista satisfies each royalty obligation
hereunder, Vista shall have a fully paid-up, irrevocable license to the related
Licensed Product and patent (if any) without any further payments.
5.6 ADJUSTMENTS TO ROYALTY OBLIGATION IN THE EVENT OF NEWMAN'S EMPLOYMENT
TERMINATION. If Vista terminates Newman's employment other than for cause, then
Newman and Vista will appoint a mutually acceptable third party to determine
whether or not an adjustment to the royalty obligations of this Agreement would
be equitable. Such adjustments could address, for example, the equities of
whether or not to increase the rates set forth in Article 5.1, above, and
whether or not to establish an appropriate
* * * Confidential Treatment Requested
5
<PAGE>
minimum sales level of the Licensed Products to be achieved by Vista for the
three (3) years immediately following Newman's termination.
In the event that Newman voluntarily terminates his employment with Vista, or if
he is terminated by Vista with cause, then this Article 5.6 shall be void and
shall not apply.
5.7 REDUCTION OF ROYALTY OBLIGATION. In the event that Vista's use of its
rights granted under this Agreement infringes any third party's rights, then
Vista shall have the right to set off any compensation due to such third party
(or parties) against royalties due to Newman.
ARTICLE 6 -- REPORTS
6.1 Vista agrees to send * * * statements or reports to Licensor on or
before the * * * days of * * * of each year
during the life of this Agreement stating in each such report the number and
description of each Licensed Product sold and the amount of royalties payable to
Newman thereon. The first of such reports shall include all Licensed Products
sold between the effective date of this Agreement and the expiration of the
first full calendar quarter following the execution of this Agreement. Each
subsequent report shall include all Licensed Products sold during the preceding
* * * . Simultaneously with the making of each such report, Vista
agrees to pay any royalty then due and payable.
6.2 Vista agrees to maintain complete and accurate records in sufficient
detail to enable the royalties to be paid hereunder by Vista to be determined,
and further agrees to permit its books and records to be examined from
time-to-time to the extent necessary to verify the amount of royalty due and
payable to Newman under this Agreement. Vista shall retain and make available
for audit such records for a period of * * * * * * after each Licensed
Product is sold, provided that Vista shall not be required to retain such
records beyond a period of * * * after date of termination or expiration
of this Agreement or the conversion to a fully paid license.
* * * Confidential Treatment Requested
6
<PAGE>
ARTICLE 7 -- WARRANTY
7.1 Newman warrants, to the best of his knowledge, that he is the sole owner
of the Licensed Products and Technology free of any liens, encumbrances,
restrictions, and other legal or equitable claims, except as specifically stated
in Schedule 7.1 of this Agreement.
7.2 Newman shall use his best efforts to provide Vista with accurate
technical and engineering information, drawings, and data, but Newman makes no
other warranties concerning Licensed Products manufactured under this Agreement,
except as expressly stated in this Agreement.
ARTICLE 8 -- TERM AND TERMINATION
8.1 In case Vista fails to perform any of its obligations hereunder, Newman
may notify Vista in writing of such default and Newman shall have the option of
treating this Agreement as in full force and effect and taking proper steps to
recover royalties payable hereunder or of cancelling this License and Agreement,
provided, however, that in case Newman elects to cancel this License and
Agreement, he shall first send to Vista notice of his intention together with a
statement as to the basis of the intended action. If within * * *
after the receipt of such notice, Vista shall have met the objections presented
by Newman and shall have complied with the provisions of this Agreement, then
the notice shall become null and void and of no effect; otherwise the notice
shall remain effective and this License and Agreement shall cease and terminate
at the expiration of the * * * last mentioned above.
8.2 In the event that Newman materially breaches this Agreement, including
without limitation, the Warranty made in Article 7.1, then Vista may notify
Newman of his default. If Newman fails to cure the default within * * *
of receipt of Vista's notice, then Vista, in addition to other remedies to
which it may be entitled, may offset any monetary damages suffered as a result
of any such default against royalties owed to
* * * Confidential Treatment Requested
7
<PAGE>
Newman and, depending on the circumstances, may seek to recover royalties
previously paid.
ARTICLE 9 -- NOTICES
All notices required or provided for in this Agreement shall be in writing and
served by delivering the same personally to Newman or Vista, as the case may be,
or by mailing the same certified United States mail to Newman addressed to:
MR. ALLEN NEWMAN
P.0. BOX 675583
RANCHO SANTA FE, CA 92067
and to Vista addressed to:
VISTA MEDICAL TECHNOLOGIES, INC.
2752 LOKER AVENUE WEST
CARLSBAD, CALIFORNIA 92008
ATTENTION: PRESIDENT
with a copy to:
KAISER AEROSPACE AND ELECTRONICS CORPORATION
950 TOWER LANE, SUITE 800
FOSTER CITY, CALIFORNIA 94404
ATTENTION: PRESIDENT
respectively, or to such other address as either Party hereto may designate in
writing from time-to-time.
8
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the day first above written.
ALLEN NEWMAN VISTA MEDICAL TECHNOLOGIES, INC.
/s/ Allen Newman By: /s/ John Lyon
- -------------------------------- ---------------------------------
Typed Name: Allen Newman Typed Name: John Lyon
--------------------- ---------------------
Date: 9-2-94 Title: President
------------------------- --------------------------
Date: September 2, 1994
----------------------
9
<PAGE>
SCHEDULE 1.2
LICENSED PRODUCTS
The following instruments are the Licensed Products:
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
Vista intends to bring to market in * * * regulatory delays excepted,
Products (i) (ii) and (iii).
Vista intends to begin development of within * * * and bring to market within
* * * after development begins, regulatory delays excepted, Products (iv)
through (ix).
* * * Confidential Treatment Requested
10
<PAGE>
NEWMAN-VISTA LICENSE
SCHEDULE 1.5
PATENTS AND PATENT APPLICATIONS
PATENTS: None
PATENT APPLICATIONS:
(i) U.S. patent application entitled * * * serial number
* * * filed * * * and an amendment filed * * * .
* * * Confidential Treatment Requested
11
<PAGE>
NEWMAN-VISTA LICENSE
SCHEDULE 7.1
WARRANTY EXCLUSIONS
(There are no warranty exclusions.)
12
<PAGE>
ATTACHMENT 5.4
PROMISSORY NOTE
$ * * * CARLSBAD, CALIFORNIA
- ----------- DATE: SEPTEMBER 2, 1994
For value received, the undersigned (Payee) promises to pay to Vista
Medical Technologies, Inc., at Carlsbad, California, the sum of $ * * * in
legal tender of the United States.
* * *
If this Note is not paid in full according to its terms, the undersigned
agrees to pay all costs and expenses of collection, including reasonable
attorneys' fees.
The first $ * * * of net royalty payments that become due from Vista
Medical Technologies, Inc. to the Payee under the License Agreement dated
September 2, 1994 between Payee and Vista shall be applied toward repayment of
this Note.
If not paid prior thereto, this Note shall become due and payable on such
date as the undersigned resigns voluntarily (and not through any constructive
discharge or by reason of any substantial change in employment terms or
conditions caused by Vista), if such resignation occurs prior to September 2,
1997, or if Newman is terminated with good cause (amounting to gross misconduct
injurious to the Company) by Vista, or on September 2, 1999, whichever comes
first.
/s/ Allen Newman
-------------------------
ALLEN NEWMAN, PAYEE
* * * Confidential Treatment Requested
13
<PAGE>
AMENDMENT TO
LICENSE AGREEMENT
This Amendment to License Agreement (the "Amendment") is entered into as
of the 13th day of December, 1996, by Allen Newman, an individual ("Newman" or
"Licensor") and Vista Medical Technologies, Inc., 5451 Avenida Encinas, Suite A,
Carlsbad CA 92008 ("Vista" or "Licensee"), referred to individually as a "Party"
and together as the "Parties."
RECITALS
Newman and Vista have entered into a License Agreement dated September 2,
1994 (the "License Agreement"), pursuant to which an exclusive license to use
Licensor's Technology worldwide was granted to Vista. Newman and Vista desire
to amend the License Agreement in connection with the proposed license by Vista
of certain technology to UROHEALTH Systems, Inc. ("UROHEALTH") and certain other
arrangements in connection therewith, so as to provide that to the extent the
terms of the License Agreement are inconsistent with the terms of that certain
License Agreement between Vista and UROHEALTH (the "UROHEALTH Agreement"), the
terms of the UROHEALTH Agreement shall govern. In connection with the execution
of the UROHEALTH Agreement, Vista and UROHEALTH are entering into a Consulting
Agreement pursuant to which Vista will use its commercially reasonable efforts
to provide the services of Newman to UROHEALTH as set forth in such agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings given them in the License Agreement.
NOW, THEREFORE, the Parties agree as follows:
1. APPROVAL OF SUBLICENSE. Pursuant to Article 2 of the License
Agreement, Newman hereby approves of the proposed sublicense of Licensor's
Technology and Licensed Products to UROHEALTH pursuant to the UROHEALTH
Agreement, a copy of which is attached hereto as EXHIBIT A. Newman hereby
acknowledges and agrees that, from and after the date hereof, UROHEALTH shall
pursue the development and commercialization of certain of the Licensed Products
and Vista shall no longer have any responsibility for the development and
commercialization of such Licensed Products. From and after the date hereof, to
the extent the terms of the License Agreement are inconsistent with the terms of
the terms and conditions of the UROHEALTH Agreement, the terms of the UROHEALTH
Agreement shall govern. For instance, Sections 3 and 5.5 and Exhibit 1.2 (e.g.,
the time limit for products set forth on such exhibit) of the License Agreement
contain terms contradictory to the terms and conditions of the UROHEALTH
Agreement; the terms and conditions of the UROHEALTH Agreement shall govern.
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2. PAYMENT. In consideration of the execution of this Amendment,
Vista shall pay to Newman, within * * * of the execution of this
Amendment, the sum of * * * .
3. AMENDMENT OF CERTAIN SECTIONS OF THE LICENSE AGREEMENT. Solely
with respect to Licensed Products under the UROHEALTH Agreement:
(a) Sections 5.1 and 5.3 of the License Agreement are hereby
deleted and replaced in their entirety as follows:
"5.1 Vista shall pay to Newman * * * of the
royalties received by Vista pursuant to Section 4.3 of the
UROHEALTH Agreement. Newman hereby acknowledges and agrees that
royalties are only payable by UROHEALTH to Vista on the
* * * manufactured by UROHEALTH and that no
royalties are payable by UROHEALTH to Vista on * * *
* * *
5.3 The foregoing payments shall be payable * * * on or
before the * * * day of * * * of
each year in which payments are received from UROHEALTH under the
UROHEALTH Agreement."
(b) The following sentence is hereby added Section 8.1 of the
License Agreement:
"Any notice delivered to Vista hereunder shall simultaneously be
sent to UROHEALTH at the address set forth in the UROHEALTH
Agreement. Newman shall not be entitled to terminate the license
under this Agreement unless and until UROHEALTH has been given the
same opportunity as Vista is entitled to hereunder to correct the
failure to perform."
4. This Amendment will be governed by and construed under the laws of
the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
5. This Amendment may be executed in two or more counterparts, each
of which will be deemed an original, but all of which together will constitute
one and the same instrument.
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6. This Amendment shall be binding upon, and inure to the benefit of,
the parties hereto, their respective successors and legal representatives and
their permitted assigns.
7. Except as specifically otherwise modified herein, the Agreement as
previously executed remains in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
VISTA MEDICAL TECHNOLOGIES, INC.
By: /s/ John Lyon
---------------------------------
John Lyon, President
and Chief Executive Officer
ALLEN NEWMAN
/s/ Allen Newman
------------------------------------
[SIGNATURE PAGE TO AMENDMENT TO
LICENSE AGREEMENT]
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EXHIBIT A
LICENSE AGREEMENT WITH UROHEALTH
<PAGE>
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made and entered into as of
December 13, 1996 (the "Effective Date") between Urohealth Systems, Inc., a
Delaware corporation ("Urohealth"), and Vista Medical Technologies, Inc., a
Delaware corporation ("Vista").
RECITALS
A. Vista owns all right, title and interest in the Patent Rights (as
hereinafter defined) and Related Technical Information (as hereinafter defined).
B. Vista wishes to license the Patent Rights and Related Technical
Information to Urohealth, within the Field of Use (as hereinafter defined), on
the terms and conditions set forth below and Urohealth wishes to obtain a
license on such terms.
NOW THEREFORE, for good and valuable consideration, the parties hereby
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "EFFECTIVE DATE" shall mean the date upon which both of the
following have been completed; (a) this Agreement has been executed by both
parties hereto and (b) the "closing" portion of the license fee set forth in
EXHIBIT D has been paid to Vista.
1.2 "IMPROVEMENTS" means improvements or derivations of the subject
matter covered by the Patent Rights which are developed by Vista, Urohealth or
through the joint efforts of the parties during the term of this Agreement which
would not already be included within the Patent Rights and which are applicable
to the Field of Use.
1.3 "FIELD OF USE" means gynecology, urology and general surgery.
1.4 "LICENSED PRODUCT" means Vista's Aspiroscope, those products or
potential products listed on EXHIBIT A attached hereto, any other products or
potential products utilizing or covered by the Patent Rights or the Related
Technical Information and Improvements.
1.5 "PATENT RIGHTS" means all right, title and interest in and to the
patents, patent applications and invention disclosures set forth in EXHIBIT B
attached hereto (as such exhibit may be amended by mutual agreement of the
parties) including (i) all corresponding patents, utility models, inventor
certificates, registrations or the like in any country of the world with respect
to the foregoing and (ii) all continuations, continuations-in-part, divisionals,
reissues, additions, reexaminations and extensions with respect to any of the
foregoing.
<PAGE>
1.6 "RELATED TECHNICAL INFORMATION" means any published or unpublished
research and development information, unpatented inventions, know-how, trade
secrets, copyrights, and all preclinical, clinical and other technical data in
the possession of Vista prior to the Effective Date, or during the term of this
Agreement, in each case which relates to the practice of the Patent Rights in
the Field of Use.
1.7 "VALID CLAIM" shall mean a claim of an issued and unexpired patent
included within the Patent Rights which has not been held unenforceable,
unpatentable or invalid by a court or other governmental agency of competent
jurisdiction, and which has not been admitted to be invalid or unenforceable
through reissue, disclaimer or otherwise.
ARTICLE 2
GRANT OF RIGHTS
2.1 LICENSE. In consideration of the license fees and royalties
payable by Urohealth to Vista pursuant to Article 4 below, and subject to the
terms and conditions of this Agreement, Vista hereby grants to Urohealth an
exclusive and worldwide license under the Patent Rights, Related Technical
Information and Improvements to make, use and sell Licensed Products within the
Field of Use. Urohealth shall have no right to sublicense any rights granted
hereunder except upon Vista's prior written approval (such approval to be given
in Vista's sole and absolute discretion).
2.2 DISCLOSURE OF TECHNOLOGY. Promptly after the Effective Date, and
throughout the term of this Agreement, Vista shall make available to Urohealth,
as reasonably requested by Urohealth, (i) copies of all patent applications
within the Patent Rights, all correspondence and written materials related
thereto, and all Related Technical Information; and (ii) all physical
embodiments of the Patent Rights and Related Technical Information, including,
without limitation, copies of all notebooks, drawings, diagrams, computer files,
manuscripts, patent prosecution documents and other materials created or
obtained in the course of developing the Patent Rights and/or Related Technical
Information or related to their conception, experimentation, design, fabrication
or use. Subject to Article 7 below and the licenses granted in Section 2.1
above, Urohealth may use and disclose such information and embodiments as it
deems appropriate.
2.3 RESTRICTIONS ON DISCLOSURE TO THIRD PARTIES. Vista agrees not to
disclose any Related Technical Information or any other non-public information
relating to the Patent Rights to any third party without the prior written
consent of Urohealth; PROVIDED, HOWEVER, that notwithstanding the foregoing,
Vista may disclose such information to third parties without Urohealth's consent
if (a) such disclosure is made to a third party solely for the purpose of such
third party's intended use outside of the Field of Use; and (b) such disclosure
would not, in Vista's reasonable discretion, conflict with or impair Urohealth's
rights under this Agreement; and (c) such disclosure is made by
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Vista to the third party under confidentiality restrictions at least as severe
as those contained in Article 7 of this Agreement.
2.4 IMPROVEMENTS.
(a) Vista shall, throughout the term of this Agreement, keep
Urohealth apprised of any Improvements that it has developed or is in the
process of developing. Subject to Section 6.1, Urohealth shall have the right,
but not the obligation, to file and to prosecute patent applications with
respect to any such Improvements that might reasonably constitute patentable
inventions. If Urohealth decides in its sole discretion not to file or
prosecute such patent applications with respect to any such Improvement, then
Vista shall have the right to do so for such Improvement at its expense.
(b) All Improvements shall be deemed to be part of the license
granted to Urohealth pursuant to Section 2.1 above and Vista shall own such
Improvements free and clear of any Urohealth claims. Upon Urohealth's request
for all materials reasonably necessary for Urohealth to exercise its license
with respect to such Improvements, Vista shall promptly deliver such to
Urohealth.
2.5 RIGHT OF FIRST REFUSAL TO MANUFACTURE AND SUPPLY.
(a) From the Effective Date through the date which is the
second anniversary of the cessation of Vista manufacturing a component of a
Licensed Product, Vista shall have the first right of refusal to manufacture and
supply to Urohealth Urohealth's requirements of the * * *
* * * (collectively, the "Video Equipment") for medical office use in
conjunction with a Licensed Product (the "Right of First Refusal"). Prior to
the first commercial sale of a Licensed Product, Urohealth shall notify Vista of
its requirements and specifications of the Video Equipment for such Licensed
Product (the "Requirements Notice").
(b) If such Requirements Notice is delivered prior to the ***
* * * of the Effective Date, Vista and Urohealth shall negotiate in good
faith and shall agree on the terms and conditions to be applicable to the
manufacture and supply of the Video Equipment by Vista to Urohealth; provided
that Vista shall be obligated to meet the mutually-agreed upon specifications
for the Video Equipment and shall provide Urohealth with competitive pricing for
such Video Equipment.
(c) If such Requirements Notice is delivered following the
third anniversary of the Effective Date through the termination of the Right of
First Refusal as set forth above, Vista and Urohealth shall negotiate in good
faith for a period of * * * the terms and conditions of the
manufacture and supply of the Video Equipment by Vista. The specifications and
pricing shall be mutually agreed upon by Vista and Urohealth. In the event that
a definitive manufacturing and supply agreement is not entered into within such
* * * period, Urohealth may immediately thereafter enter into
discussions with a third party regarding such Video Equipment. Urohealth shall
be permitted to enter into a definitive agreement with respect to such
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Video Equipment on terms and conditions no less favorable in the aggregate than
those last proposed by Urohealth or offered by Vista under this Section 2.4(c).
In the event that the terms and conditions offered by the third party are less
favorable in the aggregate than those last proposed by Urohealth or offered by
Vista, prior to entering into any agreement with such third party with respect
to the manufacture and supply of the specified Video Equipment, Urohealth shall
notify Vista in writing of the material terms and conditions of any such
proposed agreements. Such notice shall be deemed an offer to Vista to enter
into definitive agreements on the same proposed terms and conditions. Vista
shall have * * * to accept the offer contained in such notice.
Upon acceptance by Vista, the parties will negotiate in good faith to draft and
execute definitive agreements within * * * of acceptance. If no
definitive agreements have been executed in such * * * period, the
Right of First Refusal shall lapse with respect to the specified Video Equipment
and Urohealth shall be free to license such Video Equipment to any third party
on any terms and conditions.
(d) The obligations of Urohealth under subparagraphs (a) and
(b) above shall be subject to Vista's ability to then manufacture and provide to
Urohealth Video Equipment of a quality and design for its intended purpose equal
to or better, in the aggregate, to the quality and design of competitive video
equipment then available to Urohealth, taking into account the relative costs of
the Video Equipment and the competitive video equipment.
ARTICLE 3
OWNERSHIP AND FURTHER DEVELOPMENT
3.1 PATENTS AND TECHNOLOGY. Vista owns all right, title, and interest
in the Patent Rights and Related Technical Information. Urohealth shall have no
rights in the Patent Rights and Related Technical Information except as
expressly provided in this Agreement.
3.2 IMPROVEMENTS. Vista shall own all right, title, and interest in
any Improvements created during the term of this Agreement regardless of which
party is responsible for such Improvements, including all patent, copyright,
trade secret, and other intellectual property rights therein. Upon Vista's
reasonable request, Urohealth shall execute all documents necessary to vest
title in Vista to any such Improvements.
3.3 DEVELOPMENT OF LICENSED PRODUCTS. Urohealth shall assume and pay
all Licensed Product development costs incurred by Urohealth from and after the
Effective Date and throughout the term of this Agreement.
ARTICLE 4
LICENSE FEE AND ROYALTY
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4.1 LICENSE FEE. In consideration of the rights granted by Vista to
Urohealth pursuant to this Agreement, Urohealth shall pay Vista a license fee in
accordance with EXHIBIT D and royalties as set forth below.
4.2 ROYALTIES. For the purpose of calculating royalties due
hereunder, the following terms shall have the following meanings:
(a) "Gross Margin" shall mean 100 times (Net Revenue minus
Manufacturing Costs) divided by Net Revenue, calculated cumulatively for each
calendar year.
(b) "Net Revenue" means Urohealth's actual amounts invoiced
(exclusive of any separately itemized taxes, interest, service or maintenance
charges, finance charges, insurance and transportation costs actually paid by
Urohealth's customers) from all sales of the Licensed Products, less (i) any
customary and reasonable credits, refunds for returns or reasonable reserves for
bad debts, (ii) any customary and reasonable credits, rebates, discounts and
promotional allowances to customers and (iii) the amount of any sales, use or
other taxes required to be paid or withheld by Urohealth with respect to
payments due Vista. In the event that any particular Licensed Product is sold
by Urohealth as part of a bundle or kit, the invoiced price for that particular
product shall be determined by multiplying the net selling price of the bundle
or kit by the fraction A/A+B where A is the suggested list price for the
Licensed Product sold separately (as documented by Urohealth's records) and B is
the suggested list price for the remaining products in the bundle or kit sold
separately (as documented by Urohealth's records).
(c) "Manufacturing Costs" shall mean (i) Urohealth's
manufacturing costs for the Licensed Products, including manufacturing overhead
as determined under generally accepted accounting procedures applied
consistently by Urohealth and attributable to the production of the Licensed
Products by Urohealth, in the case that Urohealth manufactures Licensed
Products; and (ii) the purchase price to Urohealth in the case that Urohealth
purchases the Licensed Products from a third party provided that such purchase
price is subject to the prior written approval of Vista, which shall not be
unreasonably withheld.
(d) "U.S./Direct Royalty Rate" shall mean * * *
* * * and shall apply to all sales of Licensed Products to end-users located
in the United States and all direct sales of Licensed Products by Urohealth
(sales not through an independent distributor) in the rest of the world.
(e) "Foreign Indirect Royalty Rate" shall mean * * *
* * * and shall apply to all indirect sales of Licensed Products
(sales through independent distributors) to end-users located outside the United
States.
4.3 ROYALTY PAYMENT. Urohealth will pay to Vista an amount equal the
sum of the U.S./Direct Royalty Rate and Foreign Indirect Royalty Rate on a
product-by-product
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and country-by-country basis through the later of (i) the expiration of the
last-to-expire patent within the Patent Rights with claims covering such
Licensed Product or (ii) the ninth anniversary of the Effective Date (the
"Royalty Termination Date"). In no event shall either the U.S./Direct Royalty
Rate or the Foreign Indirect Royalty Rate exceed * * * or fall
below * * * for any payment period. All the foregoing amounts will
be calculated on a * * * basis and shall be paid in accordance with Section
4.4 below. Following the Royalty Termination Date, Urohealth shall a fully-paid
up license to such Patent Rights and the Related Technical Information and
Improvements for such Patent Rights, subject to termination pursuant to Article
5 below.
4.4 * * * PAYMENTS. All royalty payments owed by Urohealth to Vista
under this Agreement will be payable on a calendar * * * basis no later than
* * * * * * after the end of each * * * . Royalty reports shall
be provided by Urohealth to Vista with each royalty payment. The royalty
reports shall show (i) the number of Licensed Products invoiced during the
calendar * * * in question, (ii) the total gross sales invoiced amount, (iii)
the applicable Manufacturing Costs, (iv) an itemization of deductions, (v) the
amount of royalties due and (vi) the method of calculation of royalties for such
calendar * * * .
4.5 BOOKS AND RECORDS; AUDIT RIGHTS. Urohealth agrees to make and
maintain such books, records and accounts as are reasonably necessary to verify
the payments due Vista under this Agreement. At Vista's sole expense, an
independent certified public accountant, selected by Vista and reasonably
acceptable to Urohealth, who agrees to sign a nondisclosure agreement may, upon
reasonable notice and during normal business hours, but no more often than once
each year, inspect only those records of Urohealth on which the payments to
Vista under this Agreement are based. The accountant may report only the
accuracy of the payments, but may not disclose confidential information,
including specific customers, quantities and pricing by channel or distributor.
If any audit hereunder reveals that Urohealth has failed properly to account for
and pay royalties owing to Vista hereunder, and the amount of any royalties
which Urohealth has failed properly to account for and pay during any * * *
period exceeds by * * * or more the royalties actually accounted for
and paid to Vista for such period, Urohealth shall reimburse Vista for the cost
of the accountant. Urohealth shall also, within * * * after
notification by Vista, pay to Vista any amounts shown as due under such audit,
regardless of whether Urohealth is required to reimburse Vista for the cost of
the accountant.
ARTICLE 5
TERM AND TERMINATION
5.1 TERM. The term of this Agreement shall commence on the Effective
Date and, unless earlier terminated pursuant to this Article 5, shall continue
in full force and effect indefinitely. Notwithstanding the foregoing, the
royalty obligation set forth in
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Section 4.3 shall terminate as set forth therein and thereafter Urohealth shall
have a fully-paid up license as set forth herein.
5.2 TERMINATION FOR BREACH. In the event of a material breach of this
Agreement, the nonbreaching party shall be entitled to terminate this Agreement
by written notice to the breaching party if such breach is not cured within
* * * days after written notice is given by the nonbreaching party to the
breaching party specifying the breach. The parties agree that if: (i) * * *
royalty payments are not paid when due under Section 4.4, and Urohealth fails to
pay such royalties within the * * * days after written notification from
Vista, (ii) Urohealth fails to pay all prosecution, maintenance and infringement
costs associated with the Patent Rights within * * * days after written
notification from Vista, (iii) Urohealth fails to comply with the additional
qualifications set forth in Article 9 of this Agreement within * * *
days after written notification from Vista or (iv) fails to meet mutually-agreed
upon performance standards set forth on attached EXHIBIT C, including the
establishment of a direct sales force and a marketing plan and budget for the
United States and the rest of the world, each shall be deemed to be a material
breach by Urohealth permitting Vista to terminate this Agreement immediately.
5.3 TERMINATION FOR INSOLVENCY. This Agreement may be terminated by a
party, with notice, (i) upon the institution by or against the other party of
insolvency, receivership or bankruptcy proceedings which proceedings are not
dismissed within sixty (60) days, (ii) upon the other party's assignment for the
benefit of creditors, or (iii) upon the other party's dissolution or ceasing to
do business.
5.4 EFFECT OF TERMINATION.
(a) If Vista terminates this Agreement pursuant to Sections 5.2
or 5.3 hereof, (a) the licenses granted to Urohealth under Article 2 of this
Agreement shall terminate, (b) all rights to the Patent Rights, Related
Technical Information and Improvements shall revert to Vista and (c) all rights
to develop, make, have made, use, sell and import all Licensed Products shall
revert to Vista.
(b) If Urohealth terminates this Agreement pursuant to Sections
5.2 or 5.3 hereof, the provisions of Sections 2.1, 2.2, 2.3, 2.4, 5.4 and 5.5
and Articles 3 and 4 of this Agreement shall survive; PROVIDED, HOWEVER, if
Urohealth fails to perform or observe or otherwise breaches a material
obligations under this Agreement, which failure or breach is unremedied for a
period of * * * days after receipt by Urohealth of written notice thereof
from Vista, Vista shall have the right to terminate this Agreement with the same
effect as if Vista were to terminate this Agreement pursuant to Section 5.4(a)
hereof.
5.5 SURVIVAL.
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(a) Termination of this Agreement for any reason shall not
release either party hereto from any liability which at the time of such
termination has already accrued to the other party.
(b) In the event this Agreement is terminated for any reason,
Urohealth shall have the right to sell or otherwise dispose of its existing
stock of Licensed Products as completed products.
(c) Articles 7, 8, and 10 shall survive the expiration or
termination of this Agreement for any reason.
ARTICLE 6
PATENTS AND INFRINGEMENT
6.1 PATENT PROSECUTION. Urohealth shall have the right but not the
obligation to prosecute all patents under the Patent Rights within the Field of
Use at Urohealth's expense. If Urohealth does not prosecute a patent in a
particular country, Vista may do so, provided that Vista bears all costs and
expenses in connection with such prosecution. Vista and Urohealth agree,
throughout the term of this Agreement, to cooperate in: (i) formulation of a
general intellectual property strategy; (ii) foreign filings; and (iii)
determination of the content of each new application, divisional continuation or
continuation-in-part. Each further agrees to assist the other in any
formalities relating to the foregoing and each shall use its best efforts to
ensure that the other receives copies of all relevant correspondence.
6.2 INFRINGEMENT CLAIMS. If the production, sale or use of Licensed
Products by Urohealth results in any claim for patent infringement against
Urohealth, Urohealth shall promptly notify Vista thereof in writing. As between
the parties to this Agreement, Urohealth shall have the right at its own expense
to defend and control the defense of any such claim against Urohealth, by
counsel of its own choice. Vista shall provide such support to Urohealth as
Urohealth may reasonably request, in connection with such defense.
6.3 ENFORCEMENT OF PATENT RIGHTS. In the event that any of the Patent
Rights are infringed by a third party within the Field of Use, Urohealth shall
have the exclusive right, but not the obligation, to institute, prosecute and
control any action or proceeding with respect to such infringement, by counsel
of its choice, including any declaratory judgment action arising from such
infringement. Urohealth shall be entitled to any and all proceeds recovered
from third parties as a result of the enforcement of the Patent Rights. If
Urohealth does not take any action with respect to an infringement, then Vista
shall have the right to take action upon notice to Urohealth. In such case,
Vista shall be entitled to any and all proceeds as a result of the enforcement
of the Patent Rights. In the event both parties mutually agree to take action
against an infringer, then the proceeds as a result of the enforcement of the
Patent Rights shall be divided * * *
* * * to each party's expenditures in connection with such enforcement.
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ARTICLE 7
CONFIDENTIALITY
7.1 NONDISCLOSURE. Except as otherwise provided in this Agreement,
each party (the "Receiving Party") shall hold in confidence and not disclose to
any third party any business or technical information that is disclosed to it by
the other party in a tangible form marked "Confidential" or that is so disclosed
to it orally and confirmed in writing as confidential within * * *
after its initial disclosure ("Proprietary Information"). Proprietary
Information of a party shall not include:
(a) Information which at the time of disclosure is published or
otherwise generally available to the public;
(b) Information which, after disclosure by the other party, is
published or becomes generally available to the public through no fault of the
Receiving Party, or
(c) Information which the Receiving Party can document was or
is in its possession at the time of disclosure and was not acquired directly or
indirectly from such party.
7.2 EXCEPTIONS. The Receiving Party may disclose Proprietary
Information of the other:
(a) In connection with the order of a court of law or in
compliance with laws or regulations relating to registrations or sale of
securities, or as is reasonably necessary in connection with the prosecution,
maintenance or enforcement of the Patent Rights or obtaining product approvals
upon notice to the other party; or
(b) If such information is also rightfully acquired from a
third party who, to the best of such party's knowledge and belief, is entitled
to rightfully make such disclosure, but only to the extent such party complies
with any restrictions imposed by the third party.
ARTICLE 8
WARRANTIES
8.1 WARRANTY. Vista represents and warrants that:
(a) Vista is the owner or exclusive licensee of all of the
Patent Rights and has the full right and authority to enter into this Agreement,
to disclose any and all of the information disclosed to Urohealth hereunder, and
to grant the rights and licenses granted herein;
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(b) Vista has not previously granted and shall not grant any
rights in the Patent Rights that are inconsistent with the rights and licenses
granted to Urohealth herein;
(c) Vista has not previously entered into any agreements and
shall not in the future enter into any agreements that are inconsistent with or
conflict with this Agreement or the rights and licenses granted to Urohealth
herein;
(d) To Vista's knowledge, as of the Effective Date, the
Licensed Products do not infringe any patent rights, trade secret rights or
other proprietary rights of any third party;
(e) As of the Effective Date, there are no existing or
threatened actions, suits or claims pending against Vista with respect to the
Patent Rights or the right of Vista to enter into and perform its obligations
under this Agreement; and
(f) EXHIBIT B includes all patents and patent applications
within the Patent Rights existing as of the Effective Date, and Vista does not
own rights in any other patent or patent application, the claims of which relate
to the manufacture, sale or use of a product within the Field of Use or that
would dominate the claims of a patent or application within the Patent Rights.
8.2 DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, VISTA MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8.3 EFFECTS OF REPRESENTATIONS AND WARRANTIES. If Urohealth must pay
a third party claiming any rights to the rights granted herein royalties on a
Licensed Products pending resolution of any dispute with each third party or
subject to any injunction with the prior written consent of Vista, the royalty
payments of Urohealth due hereunder for such Licensed Product shall be reduced
by such payments, but such reduction shall be no more than * * *
of the amount due during such payment period.
ARTICLE 9
ADDITIONAL QUALIFICATIONS
9.1 CONSULTING. Concurrently with this Agreement, the parties shall
enter into a Consulting Agreement, attached hereto as EXHIBIT E (the "Consulting
Agreement").
9.2 UNITED STATES FOOD AND DRUG ADMINISTRATION APPROVAL. Urohealth
shall direct all submissions and registrations for the Licensed Products and
shall assume all costs related thereto in connection with United States Food and
Drug Administration and other foreign regulatory agencies. Urohealth shall
provide Vista with copies of all
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documentation in Urohealth's possession concerning such submissions and
registrations. In this regard, Urohealth shall be responsible for (i) the
development of a general strategy, (ii) the selection of clinical sites, and the
managing of clinical studies, and (iii) the content and timing of submissions.
ARTICLE 10
MISCELLANEOUS
10.1 PRODUCT LIABILITY INDEMNITY. Urohealth agrees to indemnify and
defend Vista and its employees and agents from and against any liability or
expense arising from any product liability claim asserted by any party as to any
Licensed Product manufactured or distributed pursuant to this Agreement or as to
the exploitation of the Patent Rights pursuant to this Agreement, including
reasonable attorneys' fees, except to the extent that such claim, liability or
expense results from the gross negligence or intentional misconduct of Vista or
its employees or agents. Such indemnity and defense obligation shall apply to
any claims made by employees, subcontractors, sublicensees or other agents of
Urohealth as well as any member of the general public.
10.2 CONFIDENTIALITY OF AGREEMENT. Both Urohealth and Vista agree that
the terms and conditions of this Agreement shall be treated as confidential
information and that no reference to the terms and conditions of this Agreement
or to activities pertaining thereto can be made in any form without the prior
written consent of the other party; PROVIDED, HOWEVER, that the general
existence of this Agreement shall not be treated as confidential information and
that either party may disclose the terms and conditions of this Agreement:
(i) as required by any court or other governmental body;
(ii) as otherwise required by law (provided that the parties
shall mutually agree on the extent of any confidential treatment to be requested
in filings with the Securities and Exchange Commission);
(iii) to legal counsel of the parties;
(iv) in confidence, to accountants, banks, proposed investors,
and financing sources and their advisors;
(v) in confidence, in connection with the enforcement of this
Agreement or rights under this Agreement; or
(vi) in confidence, in connection with a merger or acquisition
or proposed merger or acquisition, or the like.
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10.3 WAIVER. No waiver by either party hereto of any breach or default
of any of the covenants or agreements herein set forth shall be deemed a waiver
as to any subsequent and/or similar breach or default.
10.4 ASSIGNMENTS. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and the successors or assigns of the parties
hereto; PROVIDED, HOWEVER, Urohealth may assign this Agreement, and its rights
and obligations hereunder, to any business organization that succeeds to the
business of Urohealth to which this Agreement relates.
10.5 INDEPENDENT CONTRACTORS. The relationship of the parties hereto
is that of independent contractors. Neither party hereto is an agent, partner
or joint venturer of the other for any purpose.
10.6 NOTICES. Any notice required or permitted to be given to the
parties hereto shall be deemed to have been properly given if delivered in
person, when received if mailed by first-class certified mail to the other party
at the appropriate address as set forth below or to such other addresses as may
be designated in writing by the parties from time to time during the term of
this Agreement or when transmitted by electronic facsimile (with a confirmation
copy to be sent by mail).
Vista: Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, California 92008
Fax: (619) 603-9170
Attn: President
With a copy to:
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, California 92101
Fax: (619) 234-3848
Attn: Craig S. Andrews, Esq.
Urohealth: Urohealth Systems, Inc.
5 Civic Plaza
Newport Beach, California 92660
Fax: (714) 668-5824
Attn: President
-12-
<PAGE>
With a copy to:
Urohealth Systems, Inc.
5 Civic Plaza
Newport Beach, California 92660
Fax: (714) 668-5824
Attn: General Counsel
10.7 GOVERNING LAWS; JURISDICTION. This Agreement shall be interpreted
and construed in accordance with the laws of the State of California, without
regard to conflicts of law principles. All disputes arising out of this
Agreement shall be subject to the exclusive jurisdiction and venue of the
California state courts of San Diego County, California (or, if there is
exclusive federal jurisdiction, the United States District Court for the
Southern District of California), and the parties consent to the personal and
exclusive jurisdiction of these courts.
10.8 COMPLETE AGREEMENT. This Agreement constitutes the final,
exclusive and complete agreement between the parties respecting the subject
matter hereof, and supersedes any prior or contemporaneous agreements. No
amendment or change hereof or addition hereto shall be effective or binding on
either of the parties hereto unless reduced to writing and executed by the party
to be charged.
10.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, such provision shall be changed and interpreted so as to
best accomplish the objectives of the original provision to the fullest extent
allowed by law and the remaining provisions of this Agreement shall continue in
full force and effect.
10.10 FORCE MAJEURE. Nonperformance by either party (except for payment
obligations) shall be excused to the extent and for the period of time that
performance is rendered impossible by strike, fire, earthquake, flood,
governmental acts, orders or restrictions, failure of suppliers, or any other
reason where failure to perform is beyond the reasonable control and not caused
by the negligence of the nonperforming party.
10.11 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY BE
LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS
AGREEMENT OR THE EXERCISE OF RIGHTS HEREUNDER, EVEN IF NOTIFIED IN ADVANCE OF
THE POSSIBILITY OF SUCH DAMAGES.
10.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and both together shall be
deemed to be one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-13-
<PAGE>
IN WITNESS WHEREOF, both Vista and Urohealth have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, the day and year first above written.
UROHEALTH SYSTEMS, INC. VISTA MEDICAL TECHNOLOGIES, INC.
By: By:
-------------------------------- ---------------------------------
Name: Name:
----------------------------- -------------------------------
Title: Title:
---------------------------- ------------------------------
[SIGNATURE PAGE TO LICENSE AGREEMENT]
<PAGE>
EXHIBIT A
LICENSED PRODUCTS
* * *
* * *
* * *
* * *
* * *
* * * Confidential Treatment Requested
A-1
<PAGE>
EXHIBIT B
PATENT RIGHTS
1. * * * U.S. Patent No. * * * dated * * *
2. * * * U.S. Patent Application No. * * * filed
* * * .
* * * Confidential Treatment Requested
B-1
<PAGE>
EXHIBIT C
UROHEALTH PERFORMANCE STANDARDS
1. Urohealth will staff a direct (company employee) sales force in the
United States. This sales force will be adequate in number to call on
gynecologists in their office practice, and in no event will be less than
*** representatives. *** of this sales force will be in place by
December 31, 1997.
2. Urohealth will complete the development of the * * * and begin
manufacturing and distribution in the United States by * * *
Urohealth will complete development of other Licensed Products, including
the * * * , within a time scale comparable to that for
similar medical devices. Urohealth will dedicate a reasonable allocation
of development resources to the Licensed Products, consistent with the
market results of the * * *
3. Urohealth will develop and implement marketing plans and budgets for the
introduction and continued promotion of the * * * and other
Licensed Products as they are distributed in the United States and
world-wide, employing Urohealth's international distribution network.
Such marketing budgets will be at levels appropriate for reasonably
similar products marketed by equivalent companies.
4. Urohealth will seek advice regarding clinical applications of the
* * * and other Licensed Products, including relevant advocacy
from appropriate physician scientific advisors with the objective of
creating awareness of product line benefits in the medical community.
5. Urohealth will exhibit the * * * and other Licensed Products as
they are introduced, at key national and international gynecology,
urology and other appropriate surgical trade shows and conventions.
6. Urohealth will develop and implement training programs for its domestic
sales force and international distributors to provide adequate levels of
knowledge of clinical applications and sales methods for the * * *
and other Licensed Products.
7. Urohealth will maintain active sales and marketing programs for the
* * * and other Licensed Products. If Urohealth discontinues a
Licensed Product, or fails to conduct reasonable active sales and
marketing programs for * * * within the context of these
performance standards, then such Licensed Products will revert to Vista,
its successors or assigns.
* * * Confidential Treatment Requested
C-1
<PAGE>
EXHIBIT D
A license fee consisting of (i) $1,000,000 cash and (ii) 110,000 shares
of Urohealth's common stock (the "Shares") shall be tendered to Vista upon the
execution of this Agreement. Vista's rights to register the resale of the
Shares shall be as set forth in that certain Investment Representations and
Registration Rights letter dated the date hereof.
D-1
<PAGE>
EXHIBIT E
CONSULTING AGREEMENT
E-1
<PAGE>
CONSULTING AGREEMENT
BY AND BETWEEN
UROHEALTH SYSTEMS, INC.
AND
VISTA MEDICAL TECHNOLOGIES, INC.
THIS CONSULTING AGREEMENT (this "Agreement") is entered into as of
December 13, 1996 (the "Effective Date"), by and between UROHEALTH Systems, Inc.
("UROHEALTH"), and Vista Medical Technologies, Inc. ("Consultant") and, with
respect to Sections 1, 4, 6, 7, 8 and 9 below, Allen Newman, Consultant's
employee ("Newman").
WITNESSETH:
WHEREAS, UROHEALTH desires to retain the medical and consultation
services of Consultant to aid in UROHEALTH's continuing mission to develop,
improve, and expand its medical product business, including those products
relating to minimally invasive surgery;
WHEREAS, Consultant possesses the medical knowledge and professional
expertise to aid UROHEALTH in its mission to develop, improve and expand its
business as referenced above;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
SECTION 1. CONSULTING SERVICES. During the term of this Agreement,
Consultant shall serve as a consultant for UROHEALTH, using its reasonable
commercial efforts to make available to Urohealth *** of the working time of
Newman. In connection herewith, Newman's duties shall include, but not be
limited to, assisting UROHEALTH in developing and obtaining regulatory approvals
for Licensed Products under the terms of that certain License Agreement, dated
the date hereof, between UROHEALTH and Consultant (the "License Agreement") and
otherwise exploiting the rights granted to UROHEALTH under the License
Agreement.
Newman shall also perform any other services as are mutually agreed upon
by the parties. Consultant shall use its reasonable commercial efforts to
ensure that Newman devotes sufficient time and best efforts as a consultant in
order to perform the responsibilities under this Agreement to the reasonable
satisfaction of UROHEALTH. Newman shall provide services under this Agreement
as reasonably requested by UROHEALTH at the times mutually agreeable to
UROHEALTH and Consultant.
* * * Confidential Treatment Requested
<PAGE>
SECTION 2. TERM. The term of this Agreement shall begin on the
Effective Date of the License Agreement and shall continue until the first
Licensed Product (as defined in the License Agreement) under the License
Agreement is commercially introduced by UROHEALTH.
SECTION 3. TERMINATION. This Agreement may be terminated by either
party immediately upon written notice of termination in the event the other
party has materially breached this Agreement and has not cured such breach
within * * * days following written notice of the breach from the
non-breaching party. In addition, this Agreement shall be terminated
automatically upon the (i) termination of the License Agreement or (ii) death or
incapacity, whether mental or physical, of Newman. UROHEALTH or its designee
shall determine in good faith whether Newman is incapacitated for the purposes
of this Section 3. In addition, UROHEALTH may in its sole discretion terminate
this Agreement if Newman is unavailable, unwilling or unable to provide the
consulting services contemplated hereby on behalf of the Company.
Notwithstanding anything to the contrary herein contained, in the event
performance by either party hereto of any term, covenant, condition or provision
of this Agreement shall (i) jeopardize the licensure of UROHEALTH, (ii)
jeopardize its participation in (a) Medicare, Medicaid, Blue Cross, or other
reimbursement or payment programs, or (b) the FDA approval process, regulatory
program and guidelines, or (c) any other state or nationally recognized
accrediting organization, or (iii) be in violation of any statute, ordinance, or
be otherwise deemed illegal, or be deemed unethical by any recognized body,
agency, or association in the medical fields, UROHEALTH may, at its option,
terminate this Agreement immediately.
SECTION 4. COMPENSATION. In consideration for the services rendered by
Consultant to UROHEALTH under this Agreement, UROHEALTH shall pay to
Consultant during the term of this Agreement, an amount equal to * * *
* * * of Consultant to employ Newman;
provided, that such annualized costs shall not exceed * * * Such sum shall
be paid in monthly installments to cover the cost of regular salary and benefits
and an additional amount shall be paid in the month following verification that
a bonus has been paid to Newman and the amount thereof. Consultant shall be
reimbursed by UROHEALTH for all proper, necessary and reasonable business
expenses incurred as a result of the performance of services requested by
UROHEALTH. Consultant shall submit a detailed bill and documentation as deemed
necessary by UROHEALTH for expenses which shall be subject to the reasonable
approval of UROHEALTH's Chief Financial Officer. Consultant is not required to,
and nothing herein nor in any other agreement shall be construed to require
Consultant to, utilize UROHEALTH products.
SECTION 5. INDEMNIFICATION. UROHEALTH shall indemnify Consultant with
respect to all matters relating to services rendered by Consultant hereunder,
except for those caused by Consultant's willful misconduct.
* * * Confidential Treatment Requested
-2-
<PAGE>
SECTION 6. CONFIDENTIALITY. During the term of this Agreement,
UROHEALTH, its clients, and its prospective clients may reveal to Consultant
confidential and proprietary information of UROHEALTH ("Confidential
Information"). Confidential Information shall include, but not be limited to,
that information which is designated as confidential either in writing or
orally, or that information which is not generally known to the public. With
respect to any Confidential Information disclosed to Consultant, Consultant
agrees to: (a) not disclose such Confidential Information to third parties
except: (i) third parties for whom Consultant has secured the prior written
approval of UROHEALTH, and/or (ii) as required by law or by any court or
governmental body, agency or department of competent jurisdiction; (b) use at
least the same degree of care to protect the Confidential Information as used
with respect to Consultant's confidential and proprietary information, however
in no event shall the degree of care be less than holding the Confidential
Information in confidence; and (c) use the Confidential Information only for the
purpose of performing its obligations under this Agreement. Notwithstanding
anything to the contrary herein, Consultant shall not have an obligation to
preserve the confidentiality of any Confidential Information which was
previously known to Consultant free of any obligation to keep it confidential or
is or becomes publicly available by other than unauthorized disclosure. The
provisions of this Section 6 shall survive expiration or termination of this
Agreement for any reason. As used herein, "Confidential Information" shall not
include anything which is not "Confidential Information" as defined in the
License Agreement.
SECTION 7. STATUS OF THE PARTIES. In the performance of this Agreement,
it is mutually understood and agreed that Consultant, Newman, its other
employees, officers, directors and agents are performing as independent
contractors with, and not as an employee, partner, or joint venturer of or with
UROHEALTH. Neither Consultant nor Newman shall have any claim under this
Agreement or otherwise against UROHEALTH for workers' compensation, unemployment
compensation, vacation pay, sick leave, disability benefits, retirement
benefits, social security benefits or any other employee benefits of any kind,
all of which shall be the sole responsibility of Consultant. UROHEALTH shall
not withhold on behalf of Consultant or Newman pursuant to this Agreement any
sums for income tax, unemployment insurance, social security or otherwise
pursuant to any law or requirement of any government agency, and all such
withholding, if any is required, shall also be the sole responsibility of
Consultant. Consultant shall indemnify and hold UROHEALTH harmless from any and
all loss or liability, if any, arising with respect to any of the foregoing
benefits or withholding requirements.
SECTION 8. GOVERNING LAW. This Agreement is being delivered and
executed in the State of California and the validity, construction, and
enforcement of this Agreement shall be governed in all respects by the laws of
the State of California. Venue shall be proper only in a court of competent
jurisdiction located in the State of California. The parties agree to be
subject to personal jurisdiction and consent to service of process issued by a
court in which venue is proper as defined in this Section 8.
-3-
<PAGE>
SECTION 9. MODIFICATION AND WAIVER. No modification of this Agreement
shall be deemed effective unless in writing and signed by each of the parties to
which it applies. Any waiver of a breach of any provision of this Agreement
shall not be deemed effective unless in writing and signed by the party against
whom enforcement of the waiver is sought.
SECTION 10. HEADINGS. The descriptive headings of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any provision hereof.
SECTION 11. ASSIGNMENT. Neither party may assign, delegate,
subcontract, or otherwise transfer its rights or obligations hereunder without
the prior written consent of the other party and any assignment or other
transfer in violation of this Section 11 shall be void; provided, however, that
UROHEALTH may assign its rights and delegate its duties pursuant to this
Agreement to any successor, subsidiary, or affiliate to the business of
UROHEALTH to which this Agreement relates without the written consent of the
Consultant.
SECTION 12. SEVERABILITY. If, as a result of any valid Act of Congress
or act of any legislature or any regulation duly promulgated by the United
States or any state acting in accordance with the law, the terms and conditions
of this Agreement, or the payments made pursuant to this Agreement, are rendered
illegal or in violation of law, then the parties shall negotiate in good faith,
and shall take all steps necessary, including, but not limited to, amendment to
the terms and conditions of this Agreement or return of the compensation or any
part of the compensation paid pursuant to this Agreement, in order to reform
this Agreement such that the terms and conditions of this Agreement, or the
payments made pursuant to this Agreement, if any, shall not render any other
relationship or transaction between the parties, or any affiliate of the
parties, illegal or in violation of law.
SECTION 13. NOTICES. All notices, requests, demands, and other
communications provided for hereunder shall be in writing and shall be deemed to
been duly given if (i) delivered in person; (ii) given by prepaid telex or
telegram, or by facsimile or other instantaneous electronic transmission device;
or (iii) deposited in the United States mail, first class, registered or
certified, return receipt requested, with proper postage prepaid, as follows:
If to UROHEALTH:
UROHEALTH Systems, Inc.
5 Civic Plaza, Suite 100
Newport Beach, California 92660
Attention: General Counsel
Facsimile: (714) 668-5824
-4-
<PAGE>
If to Consultant:
Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, California 92008
Facsimile: (619)603-9170
Attention: President
SECTION 14. ATTORNEYS' FEES. In the event any party hereto brings an
action or arbitration proceeding in connection with the performance, breach, or
interpretation of this Agreement, the prevailing party in such action or
proceeding shall be entitled to recover from the losing party all reasonable
cost and expenses of such litigation or proceeding, including attorneys' fees,
court costs, costs of investigation, and other costs, fees, and expenses
reasonably related to such action or proceeding.
SECTION 15. BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
permitted assigns.
SECTION 16. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the parties concerning the subject matter
hereof, and supersedes all prior negotiations, agreements and understandings
between the parties, whether oral or in writing, concerning the subject matter
hereof.
INTENDING TO BE LEGALLY BOUND, the parties, or their duly authorized
representatives, have executed this Agreement to be effective on the Effective
Date.
UROHEALTH SYSTEMS, INC.
By:
-----------------------
Title: Senior Vice-President
VISTA MEDICAL TECHNOLOGIES, INC.
By:
------------------------------
Title: President
-5-
<PAGE>
With Respect to Sections
1, 4, 6, 7, 8 and 9 only:
- ------------------------------------
Allen Newman
-6-
<PAGE>
EXHIBIT 10.24
AGREEMENT TO AMEND
LICENSE AND DEVELOPMENT AGREEMENT
This agreement, made and effective this 15 day of September, 1995
(the Effective Date", by and between Harry R. McKinley of Southampton,
Massachusetts (hereinafter referred to as McKinley), McKinley Optics, Inc., a
Massachusetts corporation having a principal place of business at 161 College
Highway, Southampton, Massachusetts 01703 (hereinafter referred to as MOI), and
Vista Medical Technologies, a California corporation having a place of business
at 134 Flanders Road, Westboro, Massachusetts 01581 (hereinafter referred to as
"Vista").
Whereas on 18 December 1991 McKinley and MOI entered into a License And
Development Agreement (hereinafter the "License Agreement") whereby they
licensed certain technology to American Surgical Technologies Corporation, a
Delaware Corporation having a principal office at One McKinley Square, Boston,
Massachusetts (hereinafter referred to as "AST");
Whereas on 28 June 1994 said License Agreement was amended by
mutual agreement of McKinley, MOI and AST;
Whereas Vista has agreed to purchase the assets of AST, which
purchase includes an assignment of AST's rights and obligations as licensee
under said License Agreement; and
Whereas an inducement to purchase of the assets of AST is the transfer
of said license from AST to Vista;
Whereas, Vista desires to amend the License Agreement in order to
obtain necessary assurances and make it conform to its particular business
needs and objectives;
NOW, THEREFORE, in consideration of the premises, McKinley, MOI and Vista agree
that the License Agreement is amended as follows:
1. Subject to Vista's purchase of the assets of AST, McKinley and MOI
agree to assignment and transfer of the License Agreement from AST to Vista and
they and Vista agree that henceforth the term Licensee shall mean Vista and any
successor, assign or subsidiary thereof.
2. Article 1.7 is amended to read as follows:
"Marketing Period" shall mean any twelve (12) month period commencing
with April 1, 1995 or any subsequent anniversary of that date."
Vista/McKinley Agreement
<PAGE>
3. The following new article is added:
1.9 As used herein, the term "endoscope" means a device
that essentially consists of (1) a hollow member having a distal
end and a proximal end and a selected length and outer diameter, and
(2) an optical lens system mounted within the hollow member for
gathering light and providing an optical image of a selected area or
site in front of said distal end, with the optical lens system
comprising an objective lens with or without relay, focusing and
ocular lenses. Optionally the device may include within said hollow
member light-transmitting means for illuminating the area or site in
front of said distal end of said hollow member and electronic
photodetector means for generating electrical signals in response to
images relayed thereto by the optical imaging system. The term
"endoscope" shall not be construed to include any of the following:
video signal processing or switching equipment, video monitors, video
display equipment, head-up display devices, light sources, power
supplies, or detachable accessory devices such as cables, connectors,
and couplers.
4. Article 3.1 is amended by addition of the following clause:
(e) Royalties under 3.1 (c)(ii) shall accrue and be paid only with
respect to such Licensed Products as are covered by, or made in
accordance with or by use of methods and apparatus covered by,
at least one claim (which has not expired, lapsed, or been duly
disclaimed) of at least one patent included within the Licensed Patent
Rights which is then subsisting as a valid patent in the country where
such Licensed Products are manufactured or sold or to which they are
exported.
5. Article 10 is amended by addition of the following clauses:
10.5 McKinley and MOI represent and warrant that the MOI is the sole
and exclusive owner of the U.S. applications and patents listed in
Appendix A and that they have done nothing to limit, compromise or
condition the ownership thereof by MOI or limit or condition the
exclusive rights granted to the Licensee under said License Agreement.
10.6 McKinley and MOI confirm that Article 3.1 (c)(i) was amended
June 28, 1994 by a letter agreement and that no other
Vista/McKinley Agreement 2
<PAGE>
amendments were made to the License Agreement prior to the effective
date of this Agreement.
6. Article 11 is amended to provide that notices or other communications
made or given to Vista as Licensee shall be addressed as follows:
Vista Medical Technologies, Inc.
2752 Loker Avenue West
Carlsbad, CA 92008
Attention: Mr. John Lyon
With a copy to:
Vista Medical Technologies, Inc.
134 Flanders Road
Westboro, MA 01581
Attention: Mr. Ken Hori
7. Appendix A is replaced by the following new Appendix:
APPENDIX A
TECHNOLOGY
1. A stereo objective lens (the "Lens") for use in endoscopes of any
length, diameter or configuration, as disclosed in U.S. Application Ser. No.
* * * filed * * * by McKinley (now U.S., Patent No. * * * ).
2. A stereo objective lens (the "Lens") for use in endoscopes of any
length, diameter or configuration, as disclosed in U.S. Application Ser. No.
* * * filed * * * by McKinley (now U.S., Patent No. * * * ).
3. A stereo video endoscope objective lens system for use in endoscopes
of any length, diameter or configuration, as disclosed in U.S.
Application Ser. No. * * * , filed * * * .
4. A relay lens configuration ("Relay Lens") for endoscopes, as disclosed
in U.S. Applications Ser. Nos. * * * , filed * * * (now
U.S. Patent No. * * * ) and * * * , filed * * * (now U.S. Patent
No. * * * ).
* * * Confidential Treatment Requested
Vista/McKinley Agreement 3
<PAGE>
5. All know-how, copyrights, trade secrets, inventions and other
intellectual property or proprietary rights relating to manufacture of the Lens
and/or incorporating the Lens and/or Relay Lens into a medical endoscope
and connecting such endoscope to an endoscopic video system in a manner which
results in an apparent three dimensional image of the object being viewed with
the endoscope (a "3-D Video System").
IN WITNESS WHEREOF, McKinley has affixed his signature and MOI and Vista have
caused this agreement to be executed by a duly authorized officer
or representative thereof, as of the day and year first above written.
/s/ Harry R. McKinley
----------------------------------
Harry R. McKinley
McKinley Optics, Inc.
("MOI")
By: /s/ Harry R. McKinley
----------------------------------
Name: Harry R. McKinley
----------------------------------
Title: Pres.
----------------------------------
Vista Medical Technologies, Inc.
("Vista")
By: /s/ John Lyon
----------------------------------
Name: John Lyon
----------------------------------
Title: President
----------------------------------
Vista/McKinley Agreement 4
<PAGE>
EXHIBIT 10.25
LICENSE AGREEMENT
This agreement (the "Agreement") is entered into effective July 19,
1995 (the "Effective Date"), by and between Kaiser Aerospace and Electronics
Corporation ("Kaiser"), a California corporation, having its principal place of
business at 950 Tower Lane, Foster City, CA 94404 and Vista Medical
Technologies, Inc. ("Vista"), a California corporation, having its principal
place of business at 2752 Loker Avenue West, Carlsbad, CA 92008.
1. LICENSE; COOPERATION; COMMERCIALIZATION
1.1 In consideration of Vista's obligations hereunder, Kaiser hereby
grants to Vista an exclusive, irrevocable, fully paid-up, perpetual, worldwide,
unlimited license (the "License") in the Field under the patent ("Patent") set
forth in Exhibit A, attached hereto and incorporated herein by this reference,
to use, sell, have sold and otherwise fully exploit the optical collimating
apparatus (the "Device") covered by the Patent and to manufacture (or have
manufactured) the Device pursuant to the terms of Section 1.4 below, as well as
a non-exclusive, irrevocable, fully paid-up, perpetual, worldwide license in the
Field to any underlying or related inventions, ideas, manufacturing processes,
methods of use, techniques, know-how, data, information, improvements,
modifications or derivatives, whether or not patentable or now existing that are
necessary or useful in exploiting the Device (the "Technology"), including,
without limitation, any and all patents and patent rights, copyrights, trade
secret rights, trademarks and other rights (the "Proprietary Rights") (the
Device and the Technology, including all Proprietary Rights contained therein,
shall be referred to collectively as the "Licensed Rights"). To enable Vista to
exercise the licenses granted herein and throughout the term of this Agreement,
Kaiser will promptly disclose and provide the Technology to Vista. For the
purposes of this Agreement, the "Field" shall be defined as all applications in
or relating to medicine.
1.2 Kaiser agrees to assist Vista in every proper way (i) to evidence
and perfect the License and (ii) to apply for, obtain and maintain any
regulatory approvals for the Device as incorporated into any and all medical
products developed pursuant to the licenses granted under this Agreement (the
"Products"), all of which Vista is granted the unilateral, exclusive,
transferable right (but not obligation) to do. All such regulatory approvals
will be obtained by Vista in its name and, to the extent allowed by law, any
such existing rights or approvals (or applications therefor) are hereby assigned
to Vista and shall otherwise be for the sole benefit of Vista. Kaiser will
execute all documents Vista may reasonably request for any of the foregoing
purposes.
1.3 The License granted in Section 1.1 above shall become
non-exclusive if and only if Vista has (i) failed to develop, with the intent to
market, a
<PAGE>
functional benchmark prototype of a Product incorporating the Device within
* * * * * * following the Effective Date and (ii) has not, before the
expiration of such * * * * * * period, entered into a development program
for a Product incorporating the Device with Kaiser or a Kaiser-affiliated
company.
1.4 The parties will, in good faith, enter into a separate Device
manufacturing agreement (the "Manufacturing Agreement"), whereby Kaiser shall
exclusively manufacture the Device for Vista to fill all of Vista's Device
requirements. Nevertheless, in the event that Kaiser or a Kaiser licensee fails
to supply Vista's Device requirements or otherwise materially breaches the terms
of the Manufacturing Agreement, Vista shall have the right to manufacture, or
have manufactured, the Device and Kaiser shall provide all reasonable and
necessary assistance therefor.
2. TERM AND TERMINATION
2.1 This Agreement shall continue in effect unless and until
terminated as provided in this Section 2.
2.2 If Vista determines that it is economically or technically
impractical or disadvantageous for it to continue development or marketing
regarding the Device, Vista may terminate this Agreement at any time upon ninety
(90) days written notice.
2.3 If Vista materially breaches this Agreement and fails to commence
action to cure such breach within * * * of receipt of written notice
thereof from Kaiser, Kaiser may terminate this Agreement by written notice;
provided that if Vista in good faith disputes an allegation of breach, the cure
period will commence upon resolution of such dispute.
2.4 If termination of this Agreement occurs, all rights licensed to
Vista hereunder shall revert to Kaiser and neither party shall have any
obligations to the other party under this Agreement, except for Sections 3, 5
and 6, which still survive termination; provided, however, that in no event will
Vista or any sublicensee, transferee or assignee be precluded from disposing of
its inventory or meeting its then existing supply obligations.
3. CONFIDENTIALITY; OWNERSHIP
3.1 Each party agrees that all inventions, processes, materials,
know-how and ideas and all other business, technical and financial information
it obtains from the other are the confidential property of the disclosing party
("Confidential Information" of the disclosing party). Except as expressly
allowed in this Agreement, the receiving party will hold in confidence and not
use or disclose any Confidential Information of the disclosing party and shall
similarly bind its employees in writing. The receiving party shall not be
obligated under this Section 3 with respect to information that:
* * * Confidential Treatment Requested
2.
<PAGE>
(1) is or has become readily publicly available through no fault
of the receiving party or its employees or agents; or
(2) is received from a third party lawfully in possession of
such information and lawfully empowered to disclose such information and
provided the receiving party abides by all restrictions imposed by such third
party; or
(3) was rightfully in the possession of the receiving party
prior to its disclosure by the other party provided the receiving party abides
by all restrictions imposed on its possession of such information; or
(4) was independently developed by employees or consultants of
the receiving party without access to such Confidential Information; or
(5) is required by order of a government agency or court of
competent jurisdiction to be disclosed.
3.2 As between the parties, and subject to the rights granted to
Vista under this Agreement, ownership of the Licensed Rights is and shall remain
in Kaiser.
3.3 All right, title and interest in and to any improvements or
modifications made to the Licensed Rights by Vista during the term of this
Agreement shall vest in Vista, subject to a non-exclusive, non-transferable,
royalty-free license to Kaiser for non-Field applications.
3.4 The parties agree to execute any and all documents necessary to
effectuate the ownership provisions of Sections 3.2 and 3.3 above.
4. REPRESENTATIONS
4.1 Kaiser represents and warrants to Vista that Kaiser (i) is the
sole owner of all rights, title and interest in and to the Licensed Rights, (ii)
has not assigned, transferred, licensed, pledged or otherwise encumbered the
Licensed Rights in a manner inconsistent with the rights granted in this
Agreement, (iii) has full power and authority to enter into this Agreement and
to grant the licenses set forth in Section 1.1 hereof, (iv) is not aware of any
actual or potential violation, infringement or misappropriation of any third
party's rights (or any claim or potential claim thereof) by the Licensed Rights
and (v) except as previously disclosed to Vista in writing, is not aware of any
questions or challenges with respect to the patentability or validity of any
claims of the Patent; Kaiser will promptly notify Vista of any change in such
information or circumstances of which it becomes aware.
4.2 During the term of this Agreement, Kaiser shall diligently
protect, maintain and enforce the Licensed Rights, which shall include taking
all necessary action to prevent and terminate any third party infringement of
the Licensed Rights.
3.
<PAGE>
5. GENERAL PROVISIONS
This Agreement is not assignable or transferable by either party
without the prior written consent of the other, except to a successor of all or
substantially all of either party's assets or business or as otherwise provided
elsewhere in this Agreement. Any notice, report, approval or consent required
or permitted hereunder shall be in writing and will be deemed to have been duly
given to a party if delivered personally or by carrier with delivery receipt
required, postage prepaid to the address of that party as set forth on the first
page of this Agreement; or such other address as is provided by that party to
the other upon ten (10) days written notice. No failure to exercise, and no
delay in exercising, on the part of either party, any privilege, any power or
any rights hereunder will operate as a waiver thereof, nor will any single or
partial exercise of any right or power hereunder preclude further exercise of
any other right hereunder. If any provision of this Agreement shall be adjudged
by any court of competent jurisdiction to be unenforceable or invalid, that
provision shall be limited or eliminated to the minimum extent necessary so that
this Agreement shall otherwise remain in full force and effect and enforceable.
This Agreement shall be governed by and construed pursuant to the laws of the
State of California and the United States without regard to conflicts of laws
provisions thereof. The prevailing party in any action to enforce this
Agreement shall be entitled to recover costs and expenses including, without
limitation, attorney's fees. Any waivers or amendments shall be effective only
if made in writing and signed by authorized representatives of the parties.
Both parties agree that this Agreement is the complete and exclusive statement
of the mutual understanding of the parties and supersedes and cancels all
previous written and oral agreements and communications relating to the subject
matter of this Agreement.
KAISER AEROSPACE AND VISTA MEDICAL
ELECTRONICS CORPORATION TECHNOLOGIES, INC.
By: /s/ Edward Durbin By: /s/ John Lyon
-------------------------------- --------------------------------
Name: Edward Durbin Name: John Lyon
Title: Senior Vice President Title: President
4.
<PAGE>
EXHIBIT A
<PAGE>
UNITED STATES PATENT [19] [11]PATENT NUMBER:- 4,859,031
BERMAN ET AL. [45]DATE OF PATENT:AUG. 22, 1989
- --------------------------------------------------------------------------------
[54] OPTICAL COLLIMATING APPARATUS
[75] Inventors: Arthur L. Berman, Milpitas; James E. Melzer, San Jose, both
of Calif.
[73] Assignee: Kaiser Electronics, San Jose, Calif.
[21] Appl. No.: 80,739
[22] Filed: Aug. 3, 1987
[51] Int. Cl.(4).........................................G02B 27/14; G02B 5/30;
G02F 1/13
ATTORNEY, AGENT, OR FIRM-Townsend and Townsend
[57] ABSTRACT
An optical collimating apparatus employs a semi-reflective concave mirror and
cholesteric liquid crystal element. In one embodiment, the optical collimating
apparatus is used as a heads-up display device. Images in the line of sight of
an observer substantially pass through a transmitter/combiner, semi-reflective
concave mirror, and cholesteric liquid crystal element to an observer. Images
generated by an image source are focussed on the transmitter/combiner such that
the transmitter/ combiner reflects the images into the line of sight of the
observer. The generated images are transmitted by the primarily transmissive
(convex) side of the semi-reflective concave mirror to the cholesteric liquid
crystal element. The cholesteric liquid crystal element reflects the generated
images back toward the primarily reflective (concave) side of the
semi-reflective concave mirror, which in turn reflects the images back toward
the cholesteric liquid crystal element, which transmits the generated images to
the Observer. In an alternative embodiment, such as in a flight simulator or
similar device, an image source projects images upon the primarily transmissive
(convex) side of a semi-reflective concave mirror which transmits the images to
a cholesteric liquid crystal element. The images are reflected by the
cholesteric liquid crystal element back toward the primarily reflective
(concave) side of the semi-reflective concave mirror. The images are then
reflected by the semi-reflective concave mirror back toward the cholesteric
liquid crystal element which transmits the images to the observer.
8 CLAIMS, 2 DRAWING SHEETS
<PAGE>
[52] U.S. Cl..................................................350/174; 350/172;
350/320; 350/352; 350/370
[58] Field of Search....................................350/174, 169, 320, 352,
350/370, 379, 171, 172
[56] References Cited
U.S. PATENT DOCUMENTS
Re. 27,356 5/1972 La Russa.......................................350/157
3,848,974 11/1974 Hosking et al. ................................350/174
3,915,548 10/1975 Opittek et al. ................................350/3.5
3,940,203 2/1976 La Russa.......................................350/3.5
4,093,347 6/1978 La Russa.......................................350/174
4,589,735 5/1986 Saunders.......................................350/338
OTHER PUBLICATIONS
Xerox Disclosure Journal, vol. 1, No. 3, Mar. 1976, pp. 85-86.
Physical Review Letters, Dependence of Pitch on Composition in Cholesteric
Liquid Crystals, by Adams et al., vol. 22, Jan. 20, 1969, pp. 92-94.
James Adams et al., "Cholesteric Films as Optical Filters", J. Applied Phys.,
vol. 42, No. 10, Sep. 1971.
PRIMARY EXAMINER--John K. Corbin
ASSISTANT EXAMINER--Ronald M. Kachmarik
"PICTURE"
<PAGE>
"PICTURE"
"PICTURE"
"PICTURE"
<PAGE>
"PICTURE"
"PICTURE"
"PICTURE"
<PAGE>
4,859,031
1
OPTICAL COLLIMATING APPARATUS
BACKGROUND OF THE INVENTION
1. Field of the Invention
The present invention relates generally to the field of visual display
systems for use in aircraft, flight simulators, etc., and more particularly to
an apparatus for collimating a projected image at or near infinity, having high
transmission of images incident thereupon.
2. Description of the Prior Art
Optical collimation apparatus capable of forming an image at or near
infinity of an object or a plurality of optically superimposed objects have been
known for some time. One such apparatus is described in U.S. Pat. No. Re 27,356,
reissued May 9, 1972. As disclosed, an apparatus having a single spherically
curved combining mirror is used as an image forming element. A primary image is
directed at the convex side of the mirror, which transmits the image to a
birefringent beam splitter array, positioned on the concave side of the mirror.
The Array reflects the image back to the spherical mirror, collimating the image
for viewing by an observer. Several polarizing filters in the light path
selectively direct that part of the primary image which returns to the spherical
mirror.
The apparatus taught in Re No. 27,356 may be assembled in compact size and
light weight. However, due to the required multiple filtering and reflections of
the primary image, transmissivity of the primary image is low. For example, each
filtering and reflection of the primary image successively reduces the image's
intensity by approximately one-half. The result is an ultimate transmission in
the neighborhood of 0.5 to 10 percent of the original intensity of the primary
image.
Another system, described in U.S. Pat. No. 3,940,203, issued Feb. 24, 1976,
is a variation on the previously discussed Pat. No. Re 27, 356 which replaces
the spherical mirror with a reflection-type holographic analog of a spherical
mirror. Because the disclosed apparatus must employ a relatively large number of
reflections and transmissions to properly control light which reaches the
observer, this technique also suffer from low transmission of the primary image.
By utilizing the improved reflection and transmission characteristics of the
holographic element, efficiency on the order of 6 to 10 percent of an image's
original intensity is achieved at best.
Thus, there is a present need in the art for an optical collimation
apparatus with improved transmisivity of images. Further, since application of
such optical collimation apparatus may include helmet-mounted display systems or
other applications where size and weight are critical, there is a present need
for such an optical collimation apparatus which is both compact and
light-weight.
SUMMARY OF THE INVENTION
The present invention is directed to an optical collimation apparatus that
utilizes the properties of cholesteric liquid crystals to form, preferably at or
near infinity, an image of an object or of a plurality of objects optically
superimposed, in the line of sight of an observer.
According to a preferred embodiment of the present invention, the
collimation apparatus is formed of a semi-reflective concave mirror and a
cholesteric liquid crystal element. The semi-reflective concave mirror and
cholesteric liquid crystal element are utilized together with a
transmitter/combiner placed in the line of sight of an observer. An image
source, such as a cathode ray tube (CRT), liquid crystal display (LCD), or other
display device is provided such that images projected thereby are reflected by
the transmitter/combiner into the line of sight of the observer.
The reflected image is passed through a circular polarizing filter to the
semi-reflective concave mirror, circularly polarizing the image. The
semi-reflective concave mirror transmits the image to the cholesteric liquid
crystal element which is polarized in a rotary sense opposite that of the image,
causing the image to be reflected without reversal of its rotary sense, back to
the concave side of the semi-reflective concave mirror. The image is then
reflected (and its rotary sense reversed) by the semi-reflective concave mirror
back toward the cholesteric liquid crystal element, which now transmits the
image or images to the observer.
An image from the outside environment is transmitted through the
transmitter/combiner, through the semi-reflective concave mirror, and partially
transmitted by the cholesteric liquid crystal element to the observer, and
partially reflected by the cholesteric liquid crystal element back toward the
concave side of the semi-reflective concave mirror. That portion of the image
reflected by the cholesteric liquid crystal element is in turn reflected by the
semi-reflective concave mirror back toward the cholesteric liquid crystal
element, which transmits the image to the observer.
Transmission efficiency for this embodiment is increased over the prior art
in that fewer reflections and transmissions of the image takes place and in
<PAGE>
that the cholesteric liquid crystal element transmits and/or reflects a higher
percentage of the incident light than the reflective devices of the prior art.
The invention will now be further described with reference to the
accompanying drawings.
BRIEF DESCRIPTION OF THE DRAWINGS
FIG. 1 illustrates an embodiment of an optical collimation system according
to the present invention, in a heads-up display/image combiner application;
FIG. 2(a) illustrates the transmission characteristics of a cholesteric
liquid crystal element reflective to RHCP green light;
FIG. 2(b) is a graphical representation of transmission and polarization
efficiency of a cholesteric liquid crystal element;
FIG. 3 illustrates an alternate embodiment of an optical collimation system
according to the present invention;
FIG. 4 is a graph illustrating the angular dependence of the wavelength of
maximum reflection; and
FIGS. 5(a) and 5(b) illustrate the biasing of the reflection angle from the
cholesteric liquid crystal element through the use of surface tilt, untilted and
tilted cases respectively.
DETAILED DESCRIPTION OF THE
PREFERRED EMBODIMENT
With reference to FIG. 1, a preferred embodiment of an optical collimating
apparatus according to the present invention is shown. In such an embodiment,
optical collimating apparatus 30 is used in a heads-up display or image
combining display mode. Optical collimating apparatus 30 consists of image
generating source 34, example, relying on a property of cholesteric elements, as
demonstrated in FIG. 4, that the wavelength of maximum reflection is angular
sensitive (i.e., as the angle of incidence increases, the wavelength of maximum
reflection is shifted toward the shorter wavelenths) the wavelength of maximum
reflection of the cholesteric liquid crystal element for normally incident light
may be increased to compensate for the shift toward the shorter wavelengths of
reflection for non-normally incident light.
Another property of cholesteric elements, demonstrated in FIGS. 5(a) and
5(b), is that the separation between the angle of incidence (i) and angle of
reflection (r) is a function of the orientation, or tilt, of the helical axis of
the cholesteric layer. As the helical axis is tilted away from normal to the
surface of the cholesteric liquid crystal element the separation becomes
smaller.
Thus, positioning of the reflected image in the line-of-sight of the
observer may be controlled by the composition of the element (as opposed to
positioning of the image source).
Thus the disclosures and descriptions herein are purely illustrative and
are not intended to be in any sense limiting.
What is claimed is:
1. An optical collimating apparatus for focussing an image at or closer
than at an infinite distance from an observer, comprising the elements of:
a circular polarizing filter;
a semi-reflective concave mirror; and
a cholesteric liquid crystal element.
2. An optical collimating apparatus for focussing an image at or closer
than at an infinite distance from an observer, wherein the image is
substantially transmitted by a semi-reflective concave mirror and a first
portion of said transmitted image is further transmitted unreflected to the
observer by a cholesteric liquid crystal element and a second portion of said
transmitted image is reflected by the cholesteric liquid crystal element to the
concave mirror, which reflects the second portion of the transmitted image back
to the cholesteric liquid crystal element, which transmits the second portion of
the transmitted image to the observer, comprising the elements of:
an image source;
a circular polarizing filter;
a semi-reflective concave mirror; and
a cholesteric liquid crystal element.
3. The apparatus according to claim 2 further comprising:
a transmitter/combiner for combining a first image generated by said image
source with a second image in a line of sight plane of an observer prior to
incidence upon said semi-reflective concave mirror.
4. An optical collimating apparatus for focussing an image at or closer
than at an infinite distance from an observer, and further for combining the
focussed image with an image external to the optical collimating apparatus,
comprising the elements of:
an image source;
a circular polarizing filter;
a transmitter/combiner;
a semi-reflective concave mirror; and
a cholesteric liquid crystal element.
5. An optical collimating apparatus for focussing an image at or closer
than at an infinite distance from an observer, and further for combining the
focussed image with an image external to the optical collimating apparatus,
wherein projected images from an image source are reflected by a
transmitter/combiner acting as a combiner to combine the projected images with
the images in the line of sight of the observer and further wherein
<PAGE>
the projected images are reflected by a cholesteric liquid crystal element to
the semi-reflective concave mirror, which reflects the images back to the
cholesteric liquid crystal element, which substantially transmits the images to
the observer, and further wherein external images are substantially transmitted
by the semi-reflective concave mirror and further substantially transmitted to
the observer by the cholesteric liquid crystal element, comprising the elements
of:
an image source;
a circular polarizing filter;
a transmitter/combiner;
a semi-reflective concave mirror; and
a cholesteric liquid crystal element.
6. The apparatus according to claim 5, wherein said image source comprises
a monochrome cathode ray tube, focussing optics for focussing an image generated
by said monochrome cathode ray tube, and a circular polarizing filter for
imparting images generated by said monochrome cathode ray tube with a first
rotary sense.
7. A method for optically collimating an image at or closer than at an
infinite distance from an observer, comprising the steps of:
causing to be incident upon a semi-reflective concave mirror a primary
image, and substantially transmitting said primary image to a cholesteric
liquid crystal element, substantially transmitting a first portion of said
primary image to the observer, and reflecting a second portion of said
primary image to said semi-reflective concave mirror, said semi-reflective
concave mirror substantially reflecting said second portion of said primary
image back to said cholesteric liquid crystal element, said cholesteric
liquid crystal element transmitting said second portion of said primary
image to said observer.
8. A method for optically collimating an image at or closer than at an
infinite distance from an observer, and further for positioning said image in a
line of sight plane of an observer, comprising the steps of:
generating an image, projecting said generated image upon a
transmitter/combiner located in a line of sight plane of the observer which
acts as a combiner to combine said projected image with an image in said
line of sight of the observer, transmitting said combination of said
generated image and said image in said line of sight plane of the observer
to a semi-reflective concave mirror, said semi-reflective concave mirror
substantially transmitting said image combination to a cholesteric liquid
crystal element, said cholesteric liquid crystal element substantially
transmitting to the observer a first portion of said image combination
comprising a first portion of said image in said line of sight plane of the
observer, said cholesteric liquid crystal element substantially reflecting
a second portion of said image combination comprising a second portion of
said image in said line of sight plane of the observer together with said
generated image, to said semi-reflective concave mirror, which
substantially reflects said second portion of said image combination back
to said cholesteric liquid crystal element, said cholesteric liquid crystal
element substantially transmitting said second portion of said image
combination to the observer.
* * * * *
<PAGE>
EXHIBIT 10.26
TECHNOLOGY STRATEGIC ALLIANCE: MEMORANDUM OF UNDERSTANDING
1. This Memorandum defines the intent of Kaiser Electro-Optics (KEO) and Vista
Medical Technologies (VMT) to co-operate in advancing the technology and
application of medical head mounted displays (MHMD).
2. KEO and VMT will co-operate in joint development programs as appropriate,
both for the existing MHMD and future iterations. Such co-operation will
be determined by managements on a project by project basis. Development
programs undertaken by KEO will be paid for according to a fee structure
mutually agreed in advance of the program commencing.
3. KEO will grant VMT * * * of
independently developed new technology or devices, exercisable provided
that VMT contracts with KEO for a mutually agreed proportion of the
development work and eventual production of the resulting medical device.
4. Technology independently developed by VMT or developed by KEO under
contract to VMT (provided that the technology, idea or product
specification was an original contribution of VMT and
* * * remains the exclusive
property of VMT. KEO will have * * *
* * * to apply such technology in fields other than medicine in return for
compensation to VMT to be mutually agreed.
5. KEO recognizes that VMT will gradually build an independent technical
capability, although it will be only sensible to minimize duplication of
technological resources. For example, * * *
* * * . However, VMT acknowledges KEO'S investment in
its technical personnel and agrees not to recruit them for a period of
* * * , unless both managements agree otherwise.
6. KEO and VMT acknowledge that this memorandum represents a statement of
intent by both parties and that all resulting co-operation will be managed
on an arms length basis and on terms mutually agreed for each project.
Common sense and common interest should be the prevailing principles.
For Vista Medical Technologies: For Kaiser Electro-Optics:
/s/ John Lyon /s/ Jerry Carolio
------------------------------- --------------------------------
John Lyon, President Jerry Carollo, President
July 19, 1995 July 19, 1995
----------------- -------------------
Date Date
* * * Confidential Treatment Requested
<PAGE>
EXHIBIT 10.27
Translation of the licensing agreement of Fuji patent US * * *
Fuji Film Co. "A"
Fuji Photo Optical Co. "B"
Vista Medical Tech. "C"
1. Definition of Word
1-1. Jointly Owned Patent:
"A" and "B" jointly owned U.S. patent * * * . Imaging System
having VariFocal Lens for use in Endoscope.
1-2. Licensed Product:
Endoscope covered by the jointly owned patent.
1-3. Net Sales Price:
Revenue received by "C" from the sale of the licensed product,
excluding returns, packing, transportation fee, insurance and tax.
1-4. Computation Period for License Fee:
* * * of each
year. Computation starts the first day of commencement for the first
year and end of the licensing day for the final year.
2. Non-exclusive Licensing
"A" and "B" shall grant a license to "C" use of the patent to manufacturing
(including consigning manufacturing) and sales of the licensed product, in
the USA. "A", "B" and "C" will discuss later, when "C" desires, in future,
a third party located not in USA manufactures the licensed product as
complete product by using portion of the licensed product manufactured by
"C" using the jointly owned patent in USA, and sold by the third party.
* * * Confidential Treatment Requested
<PAGE>
3. Fee
"C" shall pay to "A" and "B" as license fee:
2-1. Up-front license fee of * * * to each party "A", and "B", total
* * *. This up-front payment shall be a prepayment of the license fee
which will be generated during the licensed period.
2-2. a) * * * of the net sales to each party "A" and "B"
starting the date agreement was signed till * * * .
b) * * *
* * * to end of the agreement.
However, "C" sold the licensed product under OEM brand.
1. Whichever higher price, if the licensed product was sold under
own brand and OEM brand.
2. Net sales price plus * * * if no own brand product was sold.
4. Payment & Report
4-1. "C" shall pay 2-1) to "A" and "B" within * * * after signing the
agreement.
4-2. "C" shall report to "A" and "B", within * * * after closing date of
the computation period, model number, quantity and fee of the licensed
product sold during the period.
4-3. "C" shall pay the reported fee to "A" and "B" within * * * .
However, the payment shall be after the up-front fee (specified in
3-1) has been exhausted.
* * * Confidential Treatment Requested
<PAGE>
4-4. "C" shall keep the record/books of the fee computation for the
effective duration of the agreement and * * * after its termination.
"C" shall agree to have audit of the record/books by CPA designated by
"A" or "B".
4-5. Applicable income tax or any other tax generated by the up front fee
and the fee by US government or other government shall be responsible
by "A" and "B". "C" shall provide proof of payment of the tax to "A"
and "B".
4-6. The up front payment specified in 3) is non-refundable unless the
jointly owned patent became invalid. The agreement becomes void when
the jointly owned patent became invalid.
4-7. "C" shall pay the up-front fee and fee thereafter by US dollars.
4-8. * * * year interest shall be added to when the payment was delayed.
5. Duration and Termination:
5-1. The duration of this agreement shall be from the signing date till end
of effective date of the jointly owned patent. However, 4), 6), 7),
8), 9) and 10) shall remain effective.
5-2. "A" and "B" may terminate this agreement when "C' violates the
agreement and "C" did not correct the violation within * * * after
"A" and "B" urge "C" for correction.
5-3. During this agreement, "A" and "B" are able to terminate this
agreement immediately when:
- "C" proceeds for bankruptcy under the law.
- Condemned bankruptcy and unable to pay.
- Start composition with creditors.
- Stop operation.
* * * Confidential Treatment Requested
<PAGE>
6. Report and payment of fee when the agreement was terminated during the
effective period or at end of the agreement.
6-1. "C" shall report and pay fee according to 4) for the duration starting
the next day of last closing of computation to the termination date
when this agreement ended or terminated middle of effective duration.
6-2. At the end of agreement or termination, finished goods or work in
process goods of the licensed product shall be computed as goods sold.
7. "A", "B" and "C" shall not leak of confidential information obtained from
the other party(ies) to any 3rd party during the agreement and after end of
the agreement, except the following:
7-1. Already public knowledge.
7-2. Known prior to obtaining information from the other party and present
proof of the fact.
7-3. Became a public knowledge by 3rd party after receiving information
from the other party.
7-4. Information disclosed by 3rd party without confidential obligation.
8. This agreement shall be governed by Japanese law.
9. "C" shall not transfer or use as a collateral the right and responsibility
generated from this non-exclusive license agreement.
10. Unless specified separately, it should NOT be understood as follows:
10-1. "C" shall obtain a right of sub-licensing to 3rd party.
<PAGE>
10-2. "A" and/or "B" shall have a responsibility to maintain the
jointly owned patent. "A" and/or "B" shall have a responsibility
to supply technical information, apply patent or obtain patent.
10-3. "A" and/or "B" guarantee non-necessity of any other industrial
property in order to manufacture, use and sale of the licensed
product.
10-4. "A" and/or "B" guarantees effectiveness of the jointly owned
patent.
10-5. "A" and/or "B" shall have a responsibility to eliminate any
infringement from 3rd party for the jointly owned patent.
11. "A", "B" and "C" shall mutually discuss and resolve amicably with good
faith, if any difficulty of understanding and operation of this agreement
or unspecified issue on this agreement arises.
3 agreements shall be signed, each party keeps one signed agreement.
"A" Fuji Film
"B" Fuji Photo Optical
"C" Vista Med. Tech.
The undersigned, an officer of Vista Medical Technologies, Inc., hereby
represents that this document is a fair and accurate English translation of
the Non-Exclusive License Agreement between Vista Medical Technologies,
Inc., Fuji Film Co. and Fuji Photo Optical Co., dated June 25, 1996.
By: /s/ Koichiro Hori
-------------------
Its: Senior Vice President, Advanced
--------------------------------
Technology
----------
<PAGE>
EXHIBIT 10.28
MEMORANDUM OF UNDERSTANDING
1. This Memorandum describes the principles and terms of a strategic
partnership between Cogent Light Technologies (CLT) and Vista Medical
Technologies (VMT) to develop and market CLT single fiber light technology
for emerging applications in cardiovascular surgery.
2. CLT and VMT recognize that minimally invasive cardiovascular surgery
represents a significant business opportunity, but is in an emerging phase
and will require specifically designed systems to ensure efficacy. VMT
has formed a CardioThoracic Endosurgery Division and is committed to
making a substantial investment in product development and marketing to
maximize market share. VMT possesses enabling proprietary technology for
this application which has been validated by leading cardiovascular
surgeons, who have joined VMT's clinical advisory board. CLT owns
proprietary single fiber light delivery systems which have substantial
potential application in this field, when integrated with instrument or
endoscope systems and marketed as a cardio-system solution.
3. CLT and VMT therefore wish to co-operate to develop products for minimally
invasive cardiac surgery which incorporate single fiber light delivery and
are based upon a uniquely defined and designed light source. Such a light
source will incorporate standard Cogent connectors and technology. The
chassis design and possibly the power configuration of output ports will
be unique. The product will be available exclusively via VMT; Cogent will
not provide customized single fiber light delivery systems to any other
companies for which the business focus is minimally invasive cardiac
surgical applications and VMT agrees to keep such know-how confidential
and use such know-how only for the purposes contemplated by this
Memorandum unless modified in writing by both parties. The VMT
cardio-system will be differentiated from standard Cogent products and
will carry the logo Cogent Connection to reference the incorporation of
CLT proprietary technology. In addition, Cogent will provide to VMT on an
exclusive basis its engineering know-how regarding the incorporation of
single fiber and related technologies into products for minimally invasive
cardiac surgery pursuant to this agreement that connect to its single
fiber optic light delivery cables. Although Cogent agrees not to solicit
actively OEM relationships with companies for which the focus of business
is the endocardio-thoracic market, it is understood, however, that CLT may
market standard Cogent systems under the CLT label, either as a Cogent
Light branded product or as a Cogent Connection branded product under a
private label, without restriction on their application, as long as the
same product is being sold either directly through its direct distribution
channels or as a standard OEM product. In the event that such systems are
sold to companies for which the business focus is the endocardiac surgical
market, Cogent will not make available to these companies its engineering
methods for incorporating into surgical products the advantages afforded
by single fiber optic light delivery systems.
<PAGE>
Memorandum of Understanding
Cogent Light
Page Two
In return for CLT's exclusive co-operation with VMT in the development of
lighted surgical instrumentation for minimally invasive cardiac
procedures, VMT agrees to incorporate only the VMT single fiber optic
light source developed by CLT as a part of the overall VMT system,
provided that this light source meets all of VMT's performance
requirements.
4. It is recognized that VMT may elect to enter into a joint-marketing
agreement with or be acquired by another company ("Third Party") with
business activity concentrated in the minimally invasive cardiac area. In
this event, it is envisaged that the substance of the CLT/VMT agreement
will also transfer, respectively, either by the creation of a three party
agreement among VMT, CLT, and the Third Party or by the creation of an
agreement between CLT and the Third Party. It is agreed that CLT will
participate in discussions prior to the finalization of such an agreement,
but will do so as part of the CLT/VMT group. In the event CLT elects not
to become a party to such an agreement, CLT technology will continue to be
available to VMT on a non-exclusive basis.
5. The strategic relationship envisages three phases of co-operation.
(i) Phase One - product definition phase. This phase will include
definition of clinical requirements and technical milestones.
During this Phase a definitive agreement will also be worked
out; it is understood that for the duration of Phase One, CLT
and VMT will work with each other exclusively on this program,
pending the definitive agreement. (Two months)
(ii) Phase Two - product development and pre-production phase. This
phase will execute the program defined in Phase One and include
ongoing clinical evaluation of prototypes and determination of
manufacturing capacity (Nine months.) During Phase Two, VMT
will make a reasonable effort to enter into a marketing
agreement with a Third Party with demonstrated leadership or
high market potential in the minimally invasive cardiac market.
Upon the signing of a mutually agreed letter of intent with
such a third party and the completion of Phase Two prototype-
verification, the parties will enter Phase Three. In the event
that such letter of intent is not signed, VMT and CLT agree to
re-examine issues associated with exclusivity and to negotiate
Phase Three requirements if continued exclusivity is mutually
agreed upon. In the event that VMT and CLT are unable to come
to agreement on the terms of continued exclusivity, CLT will
continue to make available to VMT its single fiber technology
on a non-exclusive basis and will continue to supply
<PAGE>
Memorandum of Understanding
Cogent Light
Page Three
on an exclusive basis the light source and any other products
developed for VMT specifically under Phase Two.
(iii) Phase Three - manufacturing and marketing phase. Products will
be launched at the STS meeting in San Diego in January 1997,
with shipments to begin no later than March 1997. There will
be no minimum sales requirements for 1997, but (assuming
shipments begin in March 1997), sales targets will be mutually
agreed for 1998 and subsequent years.
6. No transfer of intellectual property from one side to the other is
envisaged as a result of this agreement. Improvement to existing
technology derived from this agreement will remain the property of the
owner of the original technology. New intellectual property, if created,
will be jointly owned by CTL and VMT and cross-licensed to each other.
7. CLT and VMT will designate responsible staff members to manage each phase
of this agreement; it is the responsibility of the staff member to
co-ordinate response internally and to communicate with his/her opposite
number. For VMT during Phase One J. Lyon will be responsible for
contractual matters, A. Newman for product definition and K. Hori (or
designate) for establishment of determination of clinical requirements,
technical configuration and milestones.
8. The principles of this memorandum will be submitted to VMT's Board of
Directors on February 15, for approval to proceed with Phase One. CLT
will receive similar approval on or around March 1, 1996. It is
understood that a definitive agreement at the end of Phase One is subject
to the approval of both Boards of Directors.
Signed: /s/ John Lyon Signed: /s/ Douglas Brenner
------------------------------- ------------------------------
For Vista Medical Technologies For Cogent Light Technologies
Name: John Lyon Name: Douglas Brenner
------------------------------- -------------------------------
Title: President Title: President
------------------------------- -------------------------------
Date: March 26, 1996 Date: 27 March 1996
------------------------------- -------------------------------
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LICENSE AGREEMENT EXHIBIT 10.29
THIS LICENSE AGREEMENT ("Agreement") is made and entered into as of
December 13, 1996 (the "Effective Date") between Urohealth Systems, Inc., a
Delaware corporation ("Urohealth"), and Vista Medical Technologies, Inc., a
Delaware corporation ("Vista").
RECITALS
A. Vista owns all right, title and interest in the Patent Rights (as
hereinafter defined) and Related Technical Information (as hereinafter defined).
B. Vista wishes to license the Patent Rights and Related Technical
Information to Urohealth, within the Field of Use (as hereinafter defined), on
the terms and conditions set forth below and Urohealth wishes to obtain a
license on such terms.
NOW THEREFORE, for good and valuable consideration, the parties hereby
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "EFFECTIVE DATE" shall mean the date upon which both of the following
have been completed; (a) this Agreement has been executed by both parties hereto
and (b) the "closing" portion of the license fee set forth in EXHIBIT D has been
paid to Vista.
1.2 "IMPROVEMENTS" means improvements or derivations of the subject matter
covered by the Patent Rights which are developed by Vista, Urohealth or through
the joint efforts of the parties during the term of this Agreement which would
not already be included within the Patent Rights and which are applicable to the
Field of Use.
1.3 "FIELD OF USE" means gynecology, urology and general surgery.
1.4 "LICENSED PRODUCT" means Vista's Aspiroscope, those products or
potential products listed on EXHIBIT A attached hereto, any other products or
potential products utilizing or covered by the Patent Rights or the Related
Technical Information and Improvements.
1.5 "PATENT RIGHTS" means all right, title and interest in and to the
patents, patent applications and invention disclosures set forth in EXHIBIT B
attached hereto (as such exhibit may be amended by mutual agreement of the
parties) including (i) all corresponding patents, utility models, inventor
certificates, registrations or the like in any country of the world with respect
to the foregoing and (ii) all continuations, continuations-in-part, divisionals,
reissues, additions, reexaminations and extensions with respect to any of the
foregoing.
<PAGE>
1.6 "RELATED TECHNICAL INFORMATION" means any published or unpublished
research and development information, unpatented inventions, know-how, trade
secrets, copyrights, and all preclinical, clinical and other technical data in
the possession of Vista prior to the Effective Date, or during the term of this
Agreement, in each case which relates to the practice of the Patent Rights in
the Field of Use.
1.7 "VALID CLAIM" shall mean a claim of an issued and unexpired patent
included within the Patent Rights which has not been held unenforceable,
unpatentable or invalid by a court or other governmental agency of competent
jurisdiction, and which has not been admitted to be invalid or unenforceable
through reissue, disclaimer or otherwise.
ARTICLE 2
GRANT OF RIGHTS
2.1 LICENSE. In consideration of the license fees and royalties payable
by Urohealth to Vista pursuant to Article 4 below, and subject to the terms and
conditions of this Agreement, Vista hereby grants to Urohealth an exclusive and
worldwide license under the Patent Rights, Related Technical Information and
Improvements to make, use and sell Licensed Products within the Field of Use.
Urohealth shall have no right to sublicense any rights granted hereunder except
upon Vista's prior written approval (such approval to be given in Vista's sole
and absolute discretion).
2.2 DISCLOSURE OF TECHNOLOGY. Promptly after the Effective Date, and
throughout the term of this Agreement, Vista shall make available to Urohealth,
as reasonably requested by Urohealth, (i) copies of all patent applications
within the Patent Rights, all correspondence and written materials related
thereto, and all Related Technical Information; and (ii) all physical
embodiments of the Patent Rights and Related Technical Information, including,
without limitation, copies of all notebooks, drawings, diagrams, computer files,
manuscripts, patent prosecution documents and other materials created or
obtained in the course of developing the Patent Rights and/or Related Technical
Information or related to their conception, experimentation, design, fabrication
or use. Subject to Article 7 below and the licenses granted in Section 2.1
above, Urohealth may use and disclose such information and embodiments as it
deems appropriate.
2.3 RESTRICTIONS ON DISCLOSURE TO THIRD PARTIES. Vista agrees not to
disclose any Related Technical Information or any other non-public information
relating to the Patent Rights to any third party without the prior written
consent of Urohealth; PROVIDED, HOWEVER, that notwithstanding the foregoing,
Vista may disclose such information to third parties without Urohealth's consent
if (a) such disclosure is made to a third party solely for the purpose of such
third party's intended use outside of the Field of Use; and (b) such disclosure
would not, in Vista's reasonable discretion, conflict with or impair Urohealth's
rights under this Agreement; and (c) such disclosure is made by
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Vista to the third party under confidentiality restrictions at least as severe
as those contained in Article 7 of this Agreement.
2.4 IMPROVEMENTS.
(a) Vista shall, throughout the term of this Agreement, keep
Urohealth apprised of any Improvements that it has developed or is in the
process of developing. Subject to Section 6.1, Urohealth shall have the right,
but not the obligation, to file and to prosecute patent applications with
respect to any such Improvements that might reasonably constitute patentable
inventions. If Urohealth decides in its sole discretion not to file or
prosecute such patent applications with respect to any such Improvement, then
Vista shall have the right to do so for such Improvement at its expense.
(b) All Improvements shall be deemed to be part of the license
granted to Urohealth pursuant to Section 2.1 above and Vista shall own such
Improvements free and clear of any Urohealth claims. Upon Urohealth's request
for all materials reasonably necessary for Urohealth to exercise its license
with respect to such Improvements, Vista shall promptly deliver such to
Urohealth.
2.5 RIGHT OF FIRST REFUSAL TO MANUFACTURE AND SUPPLY.
(a) From the Effective Date through the date which is the second
anniversary of the cessation of Vista manufacturing a component of a Licensed
Product, Vista shall have the first right of refusal to manufacture and supply
to Urohealth Urohealth's requirements of the * * *
* * * (collectively, the "Video Equipment") for medical office use in
conjunction with a Licensed Product (the "Right of First Refusal"). Prior to
the first commercial sale of a Licensed Product, Urohealth shall notify Vista of
its requirements and specifications of the Video Equipment for such Licensed
Product (the "Requirements Notice").
(b) If such Requirements Notice is delivered prior to the ***
* * * of the Effective Date, Vista and Urohealth shall negotiate in good
faith and shall agree on the terms and conditions to be applicable to the
manufacture and supply of the Video Equipment by Vista to Urohealth; provided
that Vista shall be obligated to meet the mutually-agreed upon specifications
for the Video Equipment and shall provide Urohealth with competitive pricing for
such Video Equipment.
(c) If such Requirements Notice is delivered following the third
anniversary of the Effective Date through the termination of the Right of First
Refusal as set forth above, Vista and Urohealth shall negotiate in good faith
for a period of * * * the terms and conditions of the manufacture and
supply of the Video Equipment by Vista. The specifications and pricing shall be
mutually agreed upon by Vista and Urohealth. In the event that a definitive
manufacturing and supply agreement is not entered into within such * * *
period, Urohealth may immediately thereafter enter into discussions with a
third party regarding such Video Equipment. Urohealth shall be permitted to
enter into a definitive agreement with respect to such
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Video Equipment on terms and conditions no less favorable in the aggregate than
those last proposed by Urohealth or offered by Vista under this Section 2.4(c).
In the event that the terms and conditions offered by the third party are less
favorable in the aggregate than those last proposed by Urohealth or offered by
Vista, prior to entering into any agreement with such third party with respect
to the manufacture and supply of the specified Video Equipment, Urohealth shall
notify Vista in writing of the material terms and conditions of any such
proposed agreements. Such notice shall be deemed an offer to Vista to enter
into definitive agreements on the same proposed terms and conditions. Vista
shall have * * * to accept the offer contained in such notice. Upon
acceptance by Vista, the parties will negotiate in good faith to draft and
execute definitive agreements within * * * of acceptance. If no
definitive agreements have been executed in such * * * period, the
Right of First Refusal shall lapse with respect to the specified Video Equipment
and Urohealth shall be free to license such Video Equipment to any third party
on any terms and conditions.
(d) The obligations of Urohealth under subparagraphs (a) and (b)
above shall be subject to Vista's ability to then manufacture and provide to
Urohealth Video Equipment of a quality and design for its intended purpose equal
to or better, in the aggregate, to the quality and design of competitive video
equipment then available to Urohealth, taking into account the relative costs of
the Video Equipment and the competitive video equipment.
ARTICLE 3
OWNERSHIP AND FURTHER DEVELOPMENT
3.1 PATENTS AND TECHNOLOGY. Vista owns all right, title, and interest in
the Patent Rights and Related Technical Information. Urohealth shall have no
rights in the Patent Rights and Related Technical Information except as
expressly provided in this Agreement.
3.2 IMPROVEMENTS. Vista shall own all right, title, and interest in any
Improvements created during the term of this Agreement regardless of which party
is responsible for such Improvements, including all patent, copyright, trade
secret, and other intellectual property rights therein. Upon Vista's reasonable
request, Urohealth shall execute all documents necessary to vest title in Vista
to any such Improvements.
3.3 DEVELOPMENT OF LICENSED PRODUCTS. Urohealth shall assume and pay all
Licensed Product development costs incurred by Urohealth from and after the
Effective Date and throughout the term of this Agreement.
ARTICLE 4
LICENSE FEE AND ROYALTY
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4.1 LICENSE FEE. In consideration of the rights granted by Vista to
Urohealth pursuant to this Agreement, Urohealth shall pay Vista a license fee in
accordance with EXHIBIT D and royalties as set forth below.
4.2 ROYALTIES. For the purpose of calculating royalties due hereunder,
the following terms shall have the following meanings:
(a) "Gross Margin" shall mean 100 times (Net Revenue minus
Manufacturing Costs) divided by Net Revenue, calculated cumulatively for each
calendar year.
(b) "Net Revenue" means Urohealth's actual amounts invoiced
(exclusive of any separately itemized taxes, interest, service or maintenance
charges, finance charges, insurance and transportation costs actually paid by
Urohealth's customers) from all sales of the Licensed Products, less (i) any
customary and reasonable credits, refunds for returns or reasonable reserves for
bad debts, (ii) any customary and reasonable credits, rebates, discounts and
promotional allowances to customers and (iii) the amount of any sales, use or
other taxes required to be paid or withheld by Urohealth with respect to
payments due Vista. In the event that any particular Licensed Product is sold
by Urohealth as part of a bundle or kit, the invoiced price for that particular
product shall be determined by multiplying the net selling price of the bundle
or kit by the fraction A/A+B where A is the suggested list price for the
Licensed Product sold separately (as documented by Urohealth's records) and B is
the suggested list price for the remaining products in the bundle or kit sold
separately (as documented by Urohealth's records).
(c) "Manufacturing Costs" shall mean (i) Urohealth's manufacturing
costs for the Licensed Products, including manufacturing overhead as determined
under generally accepted accounting procedures applied consistently by Urohealth
and attributable to the production of the Licensed Products by Urohealth, in the
case that Urohealth manufactures Licensed Products; and (ii) the purchase price
to Urohealth in the case that Urohealth purchases the Licensed Products from a
third party provided that such purchase price is subject to the prior written
approval of Vista, which shall not be unreasonably withheld.
(d) "U.S./Direct Royalty Rate" shall mean * * *
* * * and shall apply to all sales of Licensed Products to end-users located
in the United States and all direct sales of Licensed Products by Urohealth
(sales not through an independent distributor) in the rest of the world.
(e) "Foreign Indirect Royalty Rate" shall mean * * *
* * * and shall apply to all indirect sales of Licensed Products
(sales through independent distributors) to end-users located outside the United
States.
4.3 ROYALTY PAYMENT. Urohealth will pay to Vista an amount equal the sum
of the U.S./Direct Royalty Rate and Foreign Indirect Royalty Rate on a
product-by-product
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and country-by-country basis through the later of (i) the expiration of the
last-to-expire patent within the Patent Rights with claims covering such
Licensed Product or (ii) the ninth anniversary of the Effective Date (the
"Royalty Termination Date"). In no event shall either the U.S./Direct Royalty
Rate or the Foreign Indirect Royalty Rate exceed * * * or fall below
* * * for any payment period. All the foregoing amounts will be
calculated on a * * * basis and shall be paid in accordance
with Section 4.4 below. Following the Royalty Termination Date, Urohealth shall
a fully-paid up license to such Patent Rights and the Related Technical
Information and Improvements for such Patent Rights, subject to termination
pursuant to Article 5 below.
4.4 * * * PAYMENTS. All royalty payments owed by Urohealth to Vista
under this Agreement will be payable on a calendar * * * basis no later than
* * * * * * after the end of each * * * . Royalty reports
shall be provided by Urohealth to Vista with each royalty payment. The royalty
reports shall show (i) the number of Licensed Products invoiced during the
calendar * * * in question, (ii) the total gross sales invoiced amount, (iii)
the applicable Manufacturing Costs, (iv) an itemization of deductions, (v) the
amount of royalties due and (vi) the method of calculation of royalties for such
calendar * * * .
4.5 BOOKS AND RECORDS; AUDIT RIGHTS. Urohealth agrees to make and
maintain such books, records and accounts as are reasonably necessary to verify
the payments due Vista under this Agreement. At Vista's sole expense, an
independent certified public accountant, selected by Vista and reasonably
acceptable to Urohealth, who agrees to sign a nondisclosure agreement may, upon
reasonable notice and during normal business hours, but no more often than once
each year, inspect only those records of Urohealth on which the payments to
Vista under this Agreement are based. The accountant may report only the
accuracy of the payments, but may not disclose confidential information,
including specific customers, quantities and pricing by channel or distributor.
If any audit hereunder reveals that Urohealth has failed properly to account for
and pay royalties owing to Vista hereunder, and the amount of any royalties
which Urohealth has failed properly to account for and pay during any * * *
period exceeds by * * * or more the royalties actually accounted for
and paid to Vista for such period, Urohealth shall reimburse Vista for the cost
of the accountant. Urohealth shall also, within * * * after
notification by Vista, pay to Vista any amounts shown as due under such audit,
regardless of whether Urohealth is required to reimburse Vista for the cost of
the accountant.
ARTICLE 5
TERM AND TERMINATION
5.1 TERM. The term of this Agreement shall commence on the Effective Date
and, unless earlier terminated pursuant to this Article 5, shall continue in
full force and effect indefinitely. Notwithstanding the foregoing, the royalty
obligation set forth in
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Section 4.3 shall terminate as set forth therein and thereafter Urohealth shall
have a fully-paid up license as set forth herein.
5.2 TERMINATION FOR BREACH. In the event of a material breach of this
Agreement, the nonbreaching party shall be entitled to terminate this Agreement
by written notice to the breaching party if such breach is not cured within
* * * days after written notice is given by the nonbreaching party to the
breaching party specifying the breach. The parties agree that if: (i) * * *
royalty payments are not paid when due under Section 4.4, and Urohealth fails to
pay such royalties within the * * * days after written notification from
Vista, (ii) Urohealth fails to pay all prosecution, maintenance and infringement
costs associated with the Patent Rights within * * * days after written
notification from Vista, (iii) Urohealth fails to comply with the additional
qualifications set forth in Article 9 of this Agreement within * * *
days after written notification from Vista or (iv) fails to meet mutually-agreed
upon performance standards set forth on attached EXHIBIT C, including the
establishment of a direct sales force and a marketing plan and budget for the
United States and the rest of the world, each shall be deemed to be a material
breach by Urohealth permitting Vista to terminate this Agreement immediately.
5.3 TERMINATION FOR INSOLVENCY. This Agreement may be terminated by a
party, with notice, (i) upon the institution by or against the other party of
insolvency, receivership or bankruptcy proceedings which proceedings are not
dismissed within sixty (60) days, (ii) upon the other party's assignment for the
benefit of creditors, or (iii) upon the other party's dissolution or ceasing to
do business.
5.4 EFFECT OF TERMINATION.
(a) If Vista terminates this Agreement pursuant to Sections 5.2 or
5.3 hereof, (a) the licenses granted to Urohealth under Article 2 of this
Agreement shall terminate, (b) all rights to the Patent Rights, Related
Technical Information and Improvements shall revert to Vista and (c) all rights
to develop, make, have made, use, sell and import all Licensed Products shall
revert to Vista.
(b) If Urohealth terminates this Agreement pursuant to Sections 5.2
or 5.3 hereof, the provisions of Sections 2.1, 2.2, 2.3, 2.4, 5.4 and 5.5 and
Articles 3 and 4 of this Agreement shall survive; PROVIDED, HOWEVER, if
Urohealth fails to perform or observe or otherwise breaches a material
obligations under this Agreement, which failure or breach is unremedied for a
period of * * * days after receipt by Urohealth of written notice thereof
from Vista, Vista shall have the right to terminate this Agreement with the same
effect as if Vista were to terminate this Agreement pursuant to Section 5.4(a)
hereof.
5.5 SURVIVAL.
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(a) Termination of this Agreement for any reason shall not release
either party hereto from any liability which at the time of such termination has
already accrued to the other party.
(b) In the event this Agreement is terminated for any reason,
Urohealth shall have the right to sell or otherwise dispose of its existing
stock of Licensed Products as completed products.
(c) Articles 7, 8, and 10 shall survive the expiration or termination
of this Agreement for any reason.
ARTICLE 6
PATENTS AND INFRINGEMENT
6.1 PATENT PROSECUTION. Urohealth shall have the right but not the
obligation to prosecute all patents under the Patent Rights within the Field of
Use at Urohealth's expense. If Urohealth does not prosecute a patent in a
particular country, Vista may do so, provided that Vista bears all costs and
expenses in connection with such prosecution. Vista and Urohealth agree,
throughout the term of this Agreement, to cooperate in: (i) formulation of a
general intellectual property strategy; (ii) foreign filings; and (iii)
determination of the content of each new application, divisional continuation or
continuation-in-part. Each further agrees to assist the other in any
formalities relating to the foregoing and each shall use its best efforts to
ensure that the other receives copies of all relevant correspondence.
6.2 INFRINGEMENT CLAIMS. If the production, sale or use of Licensed
Products by Urohealth results in any claim for patent infringement against
Urohealth, Urohealth shall promptly notify Vista thereof in writing. As between
the parties to this Agreement, Urohealth shall have the right at its own expense
to defend and control the defense of any such claim against Urohealth, by
counsel of its own choice. Vista shall provide such support to Urohealth as
Urohealth may reasonably request, in connection with such defense.
6.3 ENFORCEMENT OF PATENT RIGHTS. In the event that any of the Patent
Rights are infringed by a third party within the Field of Use, Urohealth shall
have the exclusive right, but not the obligation, to institute, prosecute and
control any action or proceeding with respect to such infringement, by counsel
of its choice, including any declaratory judgment action arising from such
infringement. Urohealth shall be entitled to any and all proceeds recovered
from third parties as a result of the enforcement of the Patent Rights. If
Urohealth does not take any action with respect to an infringement, then Vista
shall have the right to take action upon notice to Urohealth. In such case,
Vista shall be entitled to any and all proceeds as a result of the enforcement
of the Patent Rights. In the event both parties mutually agree to take action
against an infringer, then the proceeds as a result of the enforcement of the
Patent Rights shall be divided * * * * * * to each party's
expenditures in connection with such enforcement.
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ARTICLE 7
CONFIDENTIALITY
7.1 NONDISCLOSURE. Except as otherwise provided in this Agreement, each
party (the "Receiving Party") shall hold in confidence and not disclose to any
third party any business or technical information that is disclosed to it by the
other party in a tangible form marked "Confidential" or that is so disclosed to
it orally and confirmed in writing as confidential within * * * after
its initial disclosure ("Proprietary Information"). Proprietary Information of
a party shall not include:
(a) Information which at the time of disclosure is published or
otherwise generally available to the public;
(b) Information which, after disclosure by the other party, is
published or becomes generally available to the public through no fault of the
Receiving Party, or
(c) Information which the Receiving Party can document was or is in
its possession at the time of disclosure and was not acquired directly or
indirectly from such party.
7.2 EXCEPTIONS. The Receiving Party may disclose Proprietary Information
of the other:
(a) In connection with the order of a court of law or in compliance
with laws or regulations relating to registrations or sale of securities, or as
is reasonably necessary in connection with the prosecution, maintenance or
enforcement of the Patent Rights or obtaining product approvals upon notice to
the other party; or
(b) If such information is also rightfully acquired from a third
party who, to the best of such party's knowledge and belief, is entitled to
rightfully make such disclosure, but only to the extent such party complies with
any restrictions imposed by the third party.
ARTICLE 8
WARRANTIES
8.1 WARRANTY. Vista represents and warrants that:
(a) Vista is the owner or exclusive licensee of all of the Patent
Rights and has the full right and authority to enter into this Agreement, to
disclose any and all of the information disclosed to Urohealth hereunder, and to
grant the rights and licenses granted herein;
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(b) Vista has not previously granted and shall not grant any rights
in the Patent Rights that are inconsistent with the rights and licenses granted
to Urohealth herein;
(c) Vista has not previously entered into any agreements and shall
not in the future enter into any agreements that are inconsistent with or
conflict with this Agreement or the rights and licenses granted to Urohealth
herein;
(d) To Vista's knowledge, as of the Effective Date, the Licensed
Products do not infringe any patent rights, trade secret rights or other
proprietary rights of any third party;
(e) As of the Effective Date, there are no existing or threatened
actions, suits or claims pending against Vista with respect to the Patent Rights
or the right of Vista to enter into and perform its obligations under this
Agreement; and
(f) EXHIBIT B includes all patents and patent applications within the
Patent Rights existing as of the Effective Date, and Vista does not own rights
in any other patent or patent application, the claims of which relate to the
manufacture, sale or use of a product within the Field of Use or that would
dominate the claims of a patent or application within the Patent Rights.
8.2 DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, VISTA MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8.3 EFFECTS OF REPRESENTATIONS AND WARRANTIES. If Urohealth must pay a
third party claiming any rights to the rights granted herein royalties on a
Licensed Products pending resolution of any dispute with each third party or
subject to any injunction with the prior written consent of Vista, the royalty
payments of Urohealth due hereunder for such Licensed Product shall be reduced
by such payments, but such reduction shall be no more than * * *
of the amount due during such payment period.
ARTICLE 9
ADDITIONAL QUALIFICATIONS
9.1 CONSULTING. Concurrently with this Agreement, the parties shall enter
into a Consulting Agreement, attached hereto as EXHIBIT E (the "Consulting
Agreement").
9.2 UNITED STATES FOOD AND DRUG ADMINISTRATION APPROVAL. Urohealth shall
direct all submissions and registrations for the Licensed Products and shall
assume all costs related thereto in connection with United States Food and Drug
Administration and other foreign regulatory agencies. Urohealth shall provide
Vista with copies of all
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documentation in Urohealth's possession concerning such submissions and
registrations. In this regard, Urohealth shall be responsible for (i) the
development of a general strategy, (ii) the selection of clinical sites, and the
managing of clinical studies, and (iii) the content and timing of submissions.
ARTICLE 10
MISCELLANEOUS
10.1 PRODUCT LIABILITY INDEMNITY. Urohealth agrees to indemnify and defend
Vista and its employees and agents from and against any liability or expense
arising from any product liability claim asserted by any party as to any
Licensed Product manufactured or distributed pursuant to this Agreement or as to
the exploitation of the Patent Rights pursuant to this Agreement, including
reasonable attorneys' fees, except to the extent that such claim, liability or
expense results from the gross negligence or intentional misconduct of Vista or
its employees or agents. Such indemnity and defense obligation shall apply to
any claims made by employees, subcontractors, sublicensees or other agents of
Urohealth as well as any member of the general public.
10.2 CONFIDENTIALITY OF AGREEMENT. Both Urohealth and Vista agree that the
terms and conditions of this Agreement shall be treated as confidential
information and that no reference to the terms and conditions of this Agreement
or to activities pertaining thereto can be made in any form without the prior
written consent of the other party; PROVIDED, HOWEVER, that the general
existence of this Agreement shall not be treated as confidential information and
that either party may disclose the terms and conditions of this Agreement:
(i) as required by any court or other governmental body;
(ii) as otherwise required by law (provided that the parties shall
mutually agree on the extent of any confidential treatment to be requested in
filings with the Securities and Exchange Commission);
(iii) to legal counsel of the parties;
(iv) in confidence, to accountants, banks, proposed investors, and
financing sources and their advisors;
(v) in confidence, in connection with the enforcement of this
Agreement or rights under this Agreement; or
(vi) in confidence, in connection with a merger or acquisition or
proposed merger or acquisition, or the like.
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<PAGE>
10.3 WAIVER. No waiver by either party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as
to any subsequent and/or similar breach or default.
10.4 ASSIGNMENTS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors or assigns of the parties
hereto; PROVIDED, HOWEVER, Urohealth may assign this Agreement, and its rights
and obligations hereunder, to any business organization that succeeds to the
business of Urohealth to which this Agreement relates.
10.5 INDEPENDENT CONTRACTORS. The relationship of the parties hereto is
that of independent contractors. Neither party hereto is an agent, partner or
joint venturer of the other for any purpose.
10.6 NOTICES. Any notice required or permitted to be given to the parties
hereto shall be deemed to have been properly given if delivered in person, when
received if mailed by first-class certified mail to the other party at the
appropriate address as set forth below or to such other addresses as may be
designated in writing by the parties from time to time during the term of this
Agreement or when transmitted by electronic facsimile (with a confirmation copy
to be sent by mail).
Vista: Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, California 92008
Fax: (619) 603-9170
Attn: President
With a copy to:
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, California 92101
Fax: (619) 234-3848
Attn: Craig S. Andrews, Esq.
Urohealth: Urohealth Systems, Inc.
5 Civic Plaza
Newport Beach, California 92660
Fax: (714) 668-5824
Attn: President
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<PAGE>
With a copy to:
Urohealth Systems, Inc.
5 Civic Plaza
Newport Beach, California 92660
Fax: (714) 668-5824
Attn: General Counsel
10.7 GOVERNING LAWS; JURISDICTION. This Agreement shall be interpreted and
construed in accordance with the laws of the State of California, without regard
to conflicts of law principles. All disputes arising out of this Agreement
shall be subject to the exclusive jurisdiction and venue of the California state
courts of San Diego County, California (or, if there is exclusive federal
jurisdiction, the United States District Court for the Southern District of
California), and the parties consent to the personal and exclusive jurisdiction
of these courts.
10.8 COMPLETE AGREEMENT. This Agreement constitutes the final, exclusive
and complete agreement between the parties respecting the subject matter hereof,
and supersedes any prior or contemporaneous agreements. No amendment or change
hereof or addition hereto shall be effective or binding on either of the parties
hereto unless reduced to writing and executed by the party to be charged.
10.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, such provision shall be changed and interpreted so as to
best accomplish the objectives of the original provision to the fullest extent
allowed by law and the remaining provisions of this Agreement shall continue in
full force and effect.
10.10 FORCE MAJEURE. Nonperformance by either party (except for payment
obligations) shall be excused to the extent and for the period of time that
performance is rendered impossible by strike, fire, earthquake, flood,
governmental acts, orders or restrictions, failure of suppliers, or any other
reason where failure to perform is beyond the reasonable control and not caused
by the negligence of the nonperforming party.
10.11 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT
OR THE EXERCISE OF RIGHTS HEREUNDER, EVEN IF NOTIFIED IN ADVANCE OF THE
POSSIBILITY OF SUCH DAMAGES.
10.12 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and both together shall be deemed to
be one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, both Vista and Urohealth have executed this Agreement,
in duplicate originals, by their respective officers hereunto duly authorized,
the day and year first above written.
UROHEALTH SYSTEMS, INC. VISTA MEDICAL TECHNOLOGIES, INC.
By: /s/Kevin M. Higgins By: /s/John R. Lyon
------------------------------- -------------------------------
Name: Kevin M. Higgins Name: John R. Lyon
----------------------------- -----------------------------
Title: Senior Vice President Title: President
---------------------------- ----------------------------
[SIGNATURE PAGE TO LICENSE AGREEMENT]
<PAGE>
EXHIBIT A
LICENSED PRODUCTS
* * *
* * *
* * *
* * *
* * *
* * * Confidential Treatment Requested
A-1
<PAGE>
EXHIBIT B
PATENT RIGHTS
1. * * * U.S. Patent No. * * * dated * * *
2. * * * U.S. Patent Application No. * * * filed
* * * .
* * * Confidential Treatment Requested
B-1
<PAGE>
EXHIBIT C
UROHEALTH PERFORMANCE STANDARDS
1. Urohealth will staff a direct (company employee) sales force in the United
States. This sales force will be adequate in number to call on
gynecologists in their office practice, and in no event will be less than
*** representatives. *** of this sales force will be in place by December
31, 1997.
2. Urohealth will complete the development of the * * * and begin
manufacturing and distribution in the United States by * * *
Urohealth will complete development of other Licensed Products, including
the * * * , within a time scale comparable to that for similar
medical devices. Urohealth will dedicate a reasonable allocation of
development resources to the Licensed Products, consistent with the market
results of the * * *
3. Urohealth will develop and implement marketing plans and budgets for the
introduction and continued promotion of the * * * and other
Licensed Products as they are distributed in the United States and world-
wide, employing Urohealth's international distribution network. Such
marketing budgets will be at levels appropriate for reasonably similar
products marketed by equivalent companies.
4. Urohealth will seek advice regarding clinical applications of the * * *
and other Licensed Products, including relevant advocacy from appropriate
physician scientific advisors with the objective of creating awareness of
product line benefits in the medical community.
5. Urohealth will exhibit the * * * and other Licensed Products as
they are introduced, at key national and international gynecology, urology
and other appropriate surgical trade shows and conventions.
6. Urohealth will develop and implement training programs for its domestic
sales force and international distributors to provide adequate levels of
knowledge of clinical applications and sales methods for the * * *
and other Licensed Products.
7. Urohealth will maintain active sales and marketing programs for the
* * * and other Licensed Products. If Urohealth discontinues a
Licensed Product, or fails to conduct reasonable active sales and marketing
programs for * * * within the context of these performance
standards, then such Licensed Products will revert to Vista, its successors
or assigns.
* * * Confidential Treatment Requested
C-1
<PAGE>
EXHIBIT D
A license fee consisting of (i) $1,000,000 cash and (ii) 110,000 shares of
Urohealth's common stock (the "Shares") shall be tendered to Vista upon the
execution of this Agreement. Vista's rights to register the resale of the
Shares shall be as set forth in that certain Investment Representations and
Registration Rights letter dated the date hereof.
D-1
<PAGE>
EXHIBIT E
CONSULTING AGREEMENT
E-1
<PAGE>
CONSULTING AGREEMENT
BY AND BETWEEN
UROHEALTH SYSTEMS, INC.
AND
VISTA MEDICAL TECHNOLOGIES, INC.
THIS CONSULTING AGREEMENT (this "Agreement") is entered into as of December
13, 1996 (the "Effective Date"), by and between UROHEALTH Systems, Inc.
("UROHEALTH"), and Vista Medical Technologies, Inc. ("Consultant") and, with
respect to Sections 1, 4, 6, 7, 8 and 9 below, Allen Newman, Consultant's
employee ("Newman").
WITNESSETH:
WHEREAS, UROHEALTH desires to retain the medical and consultation services
of Consultant to aid in UROHEALTH's continuing mission to develop, improve, and
expand its medical product business, including those products relating to
minimally invasive surgery;
WHEREAS, Consultant possesses the medical knowledge and professional
expertise to aid UROHEALTH in its mission to develop, improve and expand its
business as referenced above;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
SECTION 1. CONSULTING SERVICES. During the term of this Agreement,
Consultant shall serve as a consultant for UROHEALTH, using its reasonable
commercial efforts to make available to Urohealth *** of the working time of
Newman. In connection herewith, Newman's duties shall include, but not be
limited to, assisting UROHEALTH in developing and obtaining regulatory approvals
for Licensed Products under the terms of that certain License Agreement, dated
the date hereof, between UROHEALTH and Consultant (the "License Agreement") and
otherwise exploiting the rights granted to UROHEALTH under the License
Agreement.
Newman shall also perform any other services as are mutually agreed upon by
the parties. Consultant shall use its reasonable commercial efforts to ensure
that Newman devotes sufficient time and best efforts as a consultant in order to
perform the responsibilities under this Agreement to the reasonable satisfaction
of UROHEALTH. Newman shall provide services under this Agreement as reasonably
requested by UROHEALTH at the times mutually agreeable to UROHEALTH and
Consultant.
* * * Confidential Treatment Requested
<PAGE>
SECTION 2. TERM. The term of this Agreement shall begin on the Effective
Date of the License Agreement and shall continue until the first Licensed
Product (as defined in the License Agreement) under the License Agreement is
commercially introduced by UROHEALTH.
SECTION 3. TERMINATION. This Agreement may be terminated by either party
immediately upon written notice of termination in the event the other party has
materially breached this Agreement and has not cured such breach within * * *
days following written notice of the breach from the non-breaching party. In
addition, this Agreement shall be terminated automatically upon the (i)
termination of the License Agreement or (ii) death or incapacity, whether mental
or physical, of Newman. UROHEALTH or its designee shall determine in good faith
whether Newman is incapacitated for the purposes of this Section 3. In addition,
UROHEALTH may in its sole discretion terminate this Agreement if Newman is
unavailable, unwilling or unable to provide the consulting services contemplated
hereby on behalf of the Company. Notwithstanding anything to the contrary
herein contained, in the event performance by either party hereto of any term,
covenant, condition or provision of this Agreement shall (i) jeopardize the
licensure of UROHEALTH, (ii) jeopardize its participation in (a) Medicare,
Medicaid, Blue Cross, or other reimbursement or payment programs, or (b) the FDA
approval process, regulatory program and guidelines, or (c) any other state or
nationally recognized accrediting organization, or (iii) be in violation of any
statute, ordinance, or be otherwise deemed illegal, or be deemed unethical by
any recognized body, agency, or association in the medical fields, UROHEALTH
may, at its option, terminate this Agreement immediately.
SECTION 4. COMPENSATION. In consideration for the services rendered
by Consultant to UROHEALTH under this Agreement, UROHEALTH shall pay to
Consultant during the term of this Agreement, an amount equal to * * *
* * * of Consultant to employ Newman; provided,
that such annualized costs shall not exceed * * * Such sum shall be paid in
monthly installments to cover the cost of regular salary and benefits and an
additional amount shall be paid in the month following verification that a bonus
has been paid to Newman and the amount thereof. Consultant shall be reimbursed
by UROHEALTH for all proper, necessary and reasonable business expenses incurred
as a result of the performance of services requested by UROHEALTH. Consultant
shall submit a detailed bill and documentation as deemed necessary by UROHEALTH
for expenses which shall be subject to the reasonable approval of UROHEALTH's
Chief Financial Officer. Consultant is not required to, and nothing herein nor
in any other agreement shall be construed to require Consultant to, utilize
UROHEALTH products.
SECTION 5. INDEMNIFICATION. UROHEALTH shall indemnify Consultant with
respect to all matters relating to services rendered by Consultant hereunder,
except for those caused by Consultant's willful misconduct.
* * * Confidential Treatment Requested
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<PAGE>
SECTION 6. CONFIDENTIALITY. During the term of this Agreement, UROHEALTH,
its clients, and its prospective clients may reveal to Consultant confidential
and proprietary information of UROHEALTH ("Confidential Information").
Confidential Information shall include, but not be limited to, that information
which is designated as confidential either in writing or orally, or that
information which is not generally known to the public. With respect to any
Confidential Information disclosed to Consultant, Consultant agrees to: (a) not
disclose such Confidential Information to third parties except: (i) third
parties for whom Consultant has secured the prior written approval of UROHEALTH,
and/or (ii) as required by law or by any court or governmental body, agency or
department of competent jurisdiction; (b) use at least the same degree of care
to protect the Confidential Information as used with respect to Consultant's
confidential and proprietary information, however in no event shall the degree
of care be less than holding the Confidential Information in confidence; and (c)
use the Confidential Information only for the purpose of performing its
obligations under this Agreement. Notwithstanding anything to the contrary
herein, Consultant shall not have an obligation to preserve the confidentiality
of any Confidential Information which was previously known to Consultant free of
any obligation to keep it confidential or is or becomes publicly available by
other than unauthorized disclosure. The provisions of this Section 6 shall
survive expiration or termination of this Agreement for any reason. As used
herein, "Confidential Information" shall not include anything which is not
"Confidential Information" as defined in the License Agreement.
SECTION 7. STATUS OF THE PARTIES. In the performance of this Agreement,
it is mutually understood and agreed that Consultant, Newman, its other
employees, officers, directors and agents are performing as independent
contractors with, and not as an employee, partner, or joint venturer of or with
UROHEALTH. Neither Consultant nor Newman shall have any claim under this
Agreement or otherwise against UROHEALTH for workers' compensation, unemployment
compensation, vacation pay, sick leave, disability benefits, retirement
benefits, social security benefits or any other employee benefits of any kind,
all of which shall be the sole responsibility of Consultant. UROHEALTH shall
not withhold on behalf of Consultant or Newman pursuant to this Agreement any
sums for income tax, unemployment insurance, social security or otherwise
pursuant to any law or requirement of any government agency, and all such
withholding, if any is required, shall also be the sole responsibility of
Consultant. Consultant shall indemnify and hold UROHEALTH harmless from any and
all loss or liability, if any, arising with respect to any of the foregoing
benefits or withholding requirements.
SECTION 8. GOVERNING LAW. This Agreement is being delivered and executed
in the State of California and the validity, construction, and enforcement of
this Agreement shall be governed in all respects by the laws of the State of
California. Venue shall be proper only in a court of competent jurisdiction
located in the State of California. The parties agree to be subject to personal
jurisdiction and consent to service of process issued by a court in which venue
is proper as defined in this Section 8.
-3-
<PAGE>
SECTION 9. MODIFICATION AND WAIVER. No modification of this Agreement
shall be deemed effective unless in writing and signed by each of the parties to
which it applies. Any waiver of a breach of any provision of this Agreement
shall not be deemed effective unless in writing and signed by the party against
whom enforcement of the waiver is sought.
SECTION 10. HEADINGS. The descriptive headings of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any provision hereof.
SECTION 11. ASSIGNMENT. Neither party may assign, delegate, subcontract,
or otherwise transfer its rights or obligations hereunder without the prior
written consent of the other party and any assignment or other transfer in
violation of this Section 11 shall be void; provided, however, that UROHEALTH
may assign its rights and delegate its duties pursuant to this Agreement to any
successor, subsidiary, or affiliate to the business of UROHEALTH to which this
Agreement relates without the written consent of the Consultant.
SECTION 12. SEVERABILITY. If, as a result of any valid Act of Congress or
act of any legislature or any regulation duly promulgated by the United States
or any state acting in accordance with the law, the terms and conditions of this
Agreement, or the payments made pursuant to this Agreement, are rendered illegal
or in violation of law, then the parties shall negotiate in good faith, and
shall take all steps necessary, including, but not limited to, amendment to the
terms and conditions of this Agreement or return of the compensation or any part
of the compensation paid pursuant to this Agreement, in order to reform this
Agreement such that the terms and conditions of this Agreement, or the payments
made pursuant to this Agreement, if any, shall not render any other relationship
or transaction between the parties, or any affiliate of the parties, illegal or
in violation of law.
SECTION 13. NOTICES. All notices, requests, demands, and other
communications provided for hereunder shall be in writing and shall be deemed to
been duly given if (i) delivered in person; (ii) given by prepaid telex or
telegram, or by facsimile or other instantaneous electronic transmission device;
or (iii) deposited in the United States mail, first class, registered or
certified, return receipt requested, with proper postage prepaid, as follows:
If to UROHEALTH:
UROHEALTH Systems, Inc.
5 Civic Plaza, Suite 100
Newport Beach, California 92660
Attention: General Counsel
Facsimile: (714) 668-5824
-4-
<PAGE>
If to Consultant:
Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, California 92008
Facsimile: (619)603-9170
Attention: President
SECTION 14. ATTORNEYS' FEES. In the event any party hereto brings an
action or arbitration proceeding in connection with the performance, breach, or
interpretation of this Agreement, the prevailing party in such action or
proceeding shall be entitled to recover from the losing party all reasonable
cost and expenses of such litigation or proceeding, including attorneys' fees,
court costs, costs of investigation, and other costs, fees, and expenses
reasonably related to such action or proceeding.
SECTION 15. BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
permitted assigns.
SECTION 16. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the parties concerning the subject matter
hereof, and supersedes all prior negotiations, agreements and understandings
between the parties, whether oral or in writing, concerning the subject matter
hereof.
INTENDING TO BE LEGALLY BOUND, the parties, or their duly authorized
representatives, have executed this Agreement to be effective on the Effective
Date.
UROHEALTH SYSTEMS, INC.
By:
-------------------------------
Title: Senior Vice-President
VISTA MEDICAL TECHNOLOGIES, INC.
By:
------------------------------------
Title: President
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<PAGE>
With Respect to Sections
1, 4, 6, 7, 8 and 9 only:
- ----------------------------------------
Allen Newman
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<PAGE>
EXHIBIT 10.30
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made and entered into as of the
28th day of February, 1997, by and between VISTA MEDICAL TECHNOLOGIES, INC., a
Delaware corporation, with offices at 5451 Avenida Encinas, Suite A, Carlsbad,
California 92008 ('Vista"), HEALTHCOM, INC., a Delaware corporation, with
offices at 16550 West Bernardo Drive, San Diego, California 92127-1806, and GDE
SYSTEMS, INC., a Delaware corporation, with offices at 16550 West Bernardo
Drive, San Diego, California 92127-1806 ("GDE"). (For purposes of this
Agreement, all references to "GDE" shall be deemed to include HealthCom, Inc.)
RECITALS
WHEREAS, GDE owns all right, title and interest in certain GDE technology
which includes, but is not limited to, software, documentation and other
intellectual property which it wishes to license to Vista on the terms and
conditions set forth below; and
WHEREAS, Vista desires to license on an exclusive basis certain GDE
technology for use within the Field of Use (as hereinafter defined), on the
terms and conditions set forth below and Vista desires to obtain a license on
such terms.
NOW, THEREFORE, for good and valuable consideration, the parties hereby
agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 "Effective Date" shall mean the date stated above.
1.2 "Improvements" shall mean improvements or derivations of the Licensed
Products developed by GDE during the term of this Agreement.
1.3 "Field of Use" shall mean, unless expressly stated otherwise, the entire
commercial medical market including, but not limited to, clinical, surgical,
diagnostic, educational, research, administrative and communications
applications.
1.4 "Licensed Products" shall mean the GDE technology listed on Exhibit A,
attached hereto and incorporated herein by reference, including Improvements.
The term Licensed Products shall include source code, object code, and
applicable documentation.
ARTICLE 2 - GRANT OF LICENSES
2.1 LICENSE. In consideration of the license fees and royalties payable by
Vista to GDE pursuant to Article 5 below and except as stated in Article 2.2,
and subject to the terms and
<PAGE>
conditions of this Agreement, GDE hereby grants to Vista under GDE's copyrights
and know-how an exclusive, worldwide, non-transferable, except as provided for
in Article 15.5, license for the Licensed Products to make, modify, use, prepare
derivative works, market and sublicense others for use in the Field of Use.
Vista shall have no right to sublicense any other rights granted hereunder,
unless prior written approval has been given by GDE. (Such approval to be given
in GDE's sole and absolute discretion.) GDE agrees to take reasonable actions to
protect the GDE technology being licensed hereunder to Vista from unauthorized
use and disclosure.
2.2 GDE RESERVATION OF RIGHTS. GDE shall retain the right to continue to use
the Licensed Products for its own internal purposes or for incorporation into
GDE products for sale or license to third parties for use other than in the
Field of Use. The parties agree that GDE may accept contracts from the
Department of Defense for the development and installation of medical
applications utilizing the Licensed Products. Vista agrees not to compete on
such Department of Defense contracts provided, however, that GDE will notify
Vista in the event that GDE elects not to bid on such program. Vista shall have
the right to accept contracts from the Department of Defense for the development
and installation of medical applications on a non-competition basis with GDE.
Any products resulting from such contracts between GDE and the Department of
Defense will be made available to Vista under Article 4.3 below.
2.3 RESTRICTIONS ON SOURCE CODE DISCLOSURE. Vista agrees not to disclose or
provide any source code of the Licensed Products to any other party without the
prior written consent of GDE, which consent shall not be unreasonably withheld.
2.4 IMPROVEMENTS. GDE shall, throughout the term of this Agreement, keep Vista
apprised of any Improvements to the Licensed Products that it has developed.
Vista shall have the right, but not the obligation, to obtain said Improvements
free of charge from GDE. All Improvements provided to Vista shall be considered
to be part of the Licensed Products for purposes of this Agreement.
2.5 ASPRIN TRADEMARK LICENSE. In consideration of the license fees and
royalties payable by Vista to GDE pursuant to Article 5 below, and subject to
the terms and conditions of this Agreement, GDE hereby grants to Vista an
exclusive, worldwide, nontransferable, except as provided for in Article 15.5,
license to use the registered trade mark and service mark "ASPRIN" solely for
use in conjunction with Vista's marketing efforts for the ASPRIN Licensed
Product.
2.6 LICENSE TO MARK "HEALTHCOM". In consideration of the license fees and
royalties payable by Vista to GDE pursuant to Article 5 below, and subject to
the terms and conditions of this Agreement, GDE hereby grants to Vista a non-
exclusive, worldwide, non-transferable, except as provided for in Article 15.5,
license to use the mark "HealthCom" for use in conjunction with Vista's
marketing efforts for the Licensed Products. Vista understands and acknowledges
that this license from GDE is solely based on whatever interests GDE or
HealthCom, Inc. may have in the mark "HealthCom".
-2-
<PAGE>
2.7 TRADEMARK USAGE. Except as provided for in Articles 2.5 and 2.6 above,
nothing in this Agreement shall grant Vista any right, title, license or
interest in, to or under any of GDE's trademarks including, but not limited to,
the trademarks "GDE" or "GDE Systems, Inc."
2.8 COPYRIGHT NOTICE. All copies of Licensed Products made by Vista, or made
on Vista's behalf, shall bear the copyright notices and other proprietary
markings as appearing on the Licensed, Products delivered to Vista by GDE.
ARTICLE 3 - DELIVERY OF LICENSED PRODUCTS
Upon execution of this Agreement by both parties, GDE shall within thirty (30)
days deliver to Vista the Licensed Products. Vista understands and acknowledges
that the Licensed Products may have been developed through GDE's independent
research and development funds and therefore is provided on an "AS IS" basis.
Vista further understands and acknowledges that the ability to use the Licensed
Products provided herein may be dependent upon utilizing other third party
technology, which is not being provided to Vista by GDE under the terms of this
Agreement.
ARTICLE 4 - OWNERSHIP AND FURTHER DEVELOPMENT
4.1 LICENSED PRODUCTS. GDE owns all right, title and interest in the Licensed
Products. Vista shall have no rights in the Licensed Products, except as
expressly provided for in Article 2 above.
4.2 VISTA DEVELOPMENTS.
(a) Vista will continue development of communications software for medical
applications, focusing initially on the provision of information to surgeons,
and the manipulation and management of this information. Vista intends to
market communications software packages to the medical industry, either as
independent products or as software modules of capital equipment installed and
serviced by Vista.
(b) Vista will own all right, title and interest to any new intellectual
property which is developed by Vista ("Vista Product(s)"). GDE will have the
right of first refusal to license such Vista Product(s) for non-medical markets
at a royalty rate of * * * * * *. The parties will enter into a
separate license agreement for the licensing of such Vista Product(s) by GDE
pursuant to this Article 4.2(b).
(c) Vista's ownership, right, title and interest to derivative works
extends only to the material developed by Vista, as distinguished from the
Licensed Products employed in the work, and does not imply any exclusive right
in the Licensed Products, other than those described herein. The ownership of
such derivative works is independent of, and does not
* * * Confidential Treatment Requested
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<PAGE>
affect or enlarge the scope, duration, or subsistence of, any ownership of the
Licensed Products.
4.3 GDE DEVELOPMENTS. As GDE develops new intellectual property not covered by
the license granted in Article 2.1 above, Vista will have right of first refusal
to exclusively license such intellectual property for the Field of Use on terms
to be agreed upon. GDE will own all right, title and interest in such
intellectual property. Vista's right of first refusal shall not apply to
intellectual property developed by GDE for which GDE does not retain all right,
title and interest.
ARTICLE 5 - LICENSE FEES AND ROYALTIES
5.1 LICENSE FEE. In consideration of the rights granted by GDE to Vista
pursuant to this Agreement, Vista shall pay a non-refundable license fee of
Five Hundred Thousand Dollars ($500,000.00) payable as follows:
(i) $250,000.00 in Vista stock at the price set at an IPO; this amount
shall = be considered an advance against future royalties; and
(ii) $250,000.00 by December 31, 1998, as a combination of royalty payments
made through such date and a royalty advance creditable against future
royalties due thereafter.
5.1.1 STOCK. Vista will provide the stock to GDE within ten (10) business
days of the close of Vista's IPO. If the IPO does not occur prior to June 30,
1997, then Vista shall issue said stock as soon as possible thereafter, the
price per share will be the fair market value as determined by Vista's Board of
Directors.
5.1.2 STOCK REPRESENTATIONS. GDE agrees to, and does, make the
representations and agreements as set forth in Exhibit B, attached hereto and
incorporated herein by reference.
5.2 ROYALTIES. For the purpose of calculating royalties due hereunder,
the following term shall have the following meanings:
"Sales Revenue" shall mean the net sales revenue received by Vista from
third party customers, excluding freight and similar charges. If the software
product incorporating GDE Intellectual Property is a module which is not
separately billed to the third party customer, then GDE's.royalty will be based
upon a proportion of the total price billed. Such proportion will be determined
based upon the overall price of the system and the sales value of the module if
it was separately billed, such determination to be made by GDE and Vista in good
faith and verifiable by GDE by means of normal audit rights.
5.3 ROYALTY PAYMENT. During the license exclusivity period, Vista will pay to
GDE an amount equal to * * * on Sales Revenues of software products
based upon, or derived from, any Licensed Product, or part thereof.
* * * Confidential Treatment Requested
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<PAGE>
5.4 QUARTERLY PAYMENTS. All royalty payments owed by Vista to GDE under this
Agreement will be payable on a calendar quarter basis no later than thirty (30)
days after the end of each calendar quarter. Royalty reports shall be provided
by Vista to GDE with each royalty payment. The royalty report shall show (i)
the number of Licensed Products invoiced during the calendar quarter in
question; (ii) the total gross sales invoiced amount; (iii) the Sales Revenue
amount; (tv) the amount of royalties due and (v) the method of calculation of
royalties for such calendar quarter.
5.5 BOOKS AND RECORDS: AUDIT RIGHTS. Vista agrees to make and maintain such
books, records and accounts as are reasonably necessary to verify the payments
due GDE under this Agreement. At GDE's sole expense, an independent certified
public accountant, selected by GDE and reasonably acceptable to Vista, who
agrees to sign a nondisclosure agreement may, upon reasonable notice and during
normal business hours, but no more than once each calendar year, inspect only
those records of Vista on which the payments to GDE under this Agreement are
based. The accountant may report only the accuracy of the payments, but may not
disclose confidential information, such as specific customers. If any audit
hereunder reveals that Vista has failed properly to account for and pay
royalties owing to GDE hereunder, and the amount of any royalties which Vista
has failed properly to account for and pay during any twelve (12) month period
exceeds by ten percent (10%) or more the royalties actually accounted for and
paid to GDE for such period, Vista shall reimburse GDE for the cost of the
accountant. Vista shall also, within thirty (30) days after notification by
GDE, pay to GDE any amounts shown as due under such audit, regardless of whether
Vista is required to reimburse GDE for the cost of the accountant.
ARTICLE 6 - RELEASE OF EMPLOYEES
GDE agrees to release three (3) employees to join Vista, including * * *
* * * , and two (2) engineers to be mutually
determined. It is understood that Vista must make independent arrangements with
each of the employees, although GDE agrees to facilitate the transfer to the
extent possible. Vista agrees not to solicit or recruit for hire other GDE or
HealthCom employees.
ARTICLE 7 - SERVICES AGREEMENT
GDE and Vista agree to negotiate in good faith to enter into a Services
Agreement whereby Vista may contract for consultancy services from GDE on a
project-by-project basis, on terms to be mutually agreed at the outset of each
project.
ARTICLE 8 - TERM AND TERMINATION
8.1 TERM. The term of this Agreement shall commence on the Effective Date and
shall continue in full force and effect unless terminated pursuant to Article
8.2 or 8.3 below.
8.2 TERMINATION FOR BREACH. In the event of a material breach of this
Agreement, the
* * * Confidential Treatment Requested
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non breaching party shall be entitled to terminate this Agreement by written
notice to the breaching party if such breach is not cured within * * *
days after written notice is given by the non breaching party to the breaching
party specifying the breach. The parties agree that the occurrence of either of
the following shall constitute a material breach of this Agreement: (t) two (2)
consecutive royalty payments not paid when due under Article 5, and Vista fails
to pay such royalties within the thirty (30) days after written notification
from GDE-, or (ii) Vista fails to comply with the provisions of Article 15.2 of
this Agreement within * * * days after written notification from GDE.
8.3 TERMINATION FOR INSOLVENCY. This Agreement may be terminated by a party,
with notice, (i) upon the institution by or against the other party of
insolvency, receivership or bankruptcy proceedings which proceedings are not
dismissed within sixty (60) days; or (ii) upon the other party's assignment for
the benefit of creditors; or (iii) upon the other party's dissolution or ceasing
to do business.
8.4 EFFECT OF TERMINATION.
(a) If GDE terminates this Agreement pursuant to Articles 8.2 or 8.3 hereof,
(a) the licenses granted to Vista under Article 2 of this Agreement shall
terminate-, (b) all rights to the Licensed Products shall revert to GDE; and (c)
all rights to develop, make, have made, use, market and sell all Licensed
Products shall revert to GDE. Notwithstanding anything to the contrary herein,
in the event of a termination pursuant to Article 8.2 or 8.3 above, the licenses
granted to end users by Vista pursuant to this Agreement shall remain in full
force and effect.
(b) If Vista terminates this Agreement pursuant to Articles 8.2 and 8.3 hereof,
the provisions of Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, Article 4, Article
5, 8.4 and 8.5 of this Agreement shall survive; provided, however, if Vista
fails to perform or observe or otherwise breaches a material obligation under
this Agreement, which failure or breach is unremedied for a period of thirty
(30) days after receipt by Vista of written notice thereof from GDE, GDE shall
have the right to terminate this Agreement with the same effect as if GDE were
to terminate this Agreement pursuant to Article 8.4(a) hereof.
8.5 SURVIVAL.
(a) Termination of this Agreement for any reason shall not release either party
hereto from any liability which at the time of such termination has already
accrued to the other party.
(b) In the event this Agreement is terminated for any reason, Vista shall have
the right to sell or otherwise dispose of its existing stock of Licensed
Products.
(c) Articles 10, 11, 12, 14 shall survive the expiration or termination of this
Agreement for any reason.
(d) All rights and licenses granted under or pursuant to this Agreement by GDE
to Vista
* * * Confidential Treatment Requested
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are, and shall otherwise be deemed to be, for purposes of Section 365(n) of
Title 11 of the United States Code (the "Bankruptcy Code"), licenses of rights
to "intellectual property" as defined under Section 101(56) of the Bankruptcy
Code. The parties agree that Vista as a licensee of such rights under this
Agreement, shall retain and may fully exercise all of the rights and elections
under the Bankruptcy Code. The parties further agree that, in the event of the
commencement of a bankruptcy proceeding by or against GDE under the Bankruptcy
Code, Vista shall be entitled to a complete duplicate of (or complete access to,
as appropriate) any such intellectual property and all embodiments of such
intellectual property, and the same, if not already in its possession, shall be
promptly delivered to Vista upon any such commencement of a bankruptcy
proceeding.
ARTICLE 9 - INTELLECTUAL PROPERTY INDEMNITY
GDE shall indemnify, hold harmless and defend Vista from and against any and all
suits, actions, damages, costs, losses, expenses (including reasonable
attorneys' fees) and other liabilities arising from or in connection with any
claim that the Licensed Products in the form delivered to Vista infringes or
violates any United States patent, copyright, trademark, trade secret or other
proprietary right of any third party. Vista agrees to promptly notify GDE in
writing of such claim, suit or proceeding and give GDE authority to proceed as
contemplated herein, and, at GDE's expense, give GDE proper and full information
and assistance to settle and/or defend any such claim, suit or proceeding.
Without limiting GDE's obligations as set forth herein, GDE may, at its sole
option, either procure for Vista the right to continue using the Licensed
Products in the form delivered, or, if such is not possible, replace or modify
the Licensed Products so that it becomes non-infringing. During the time when
GDE is contemplating or implementing its options, Vista shall have no obligation
to make royalty payments to GDE for such Licensed Items that are the subject of
the infringement claim. GDE shall have no liability for any above mentioned
claim based upon the use of other than the unaltered version of the Licensed
Products if such infringement would have been avoided by the use of the
unaltered version of the Licensed Products. In the event Vista becomes aware of
a potential infringer of GDE's intellectual property rights in the Licensed
Products, Vista shall promptly notify GDE, in writing, and GDE agrees to use
reasonable efforts to promptly protect GDE's intellectual property rights.
ARTICLE 10 - CONFIDENTIALITY
10.1 NONDISCLOSURE. Except as otherwise provided for in this Agreement, each
party (the "Receiving Party") shall hold in confidence and not disclose to any
third party any business or technical information that is disclosed to it by the
other party in a tangible form marked "Proprietary" or that is so disclosed to
it orally and confirmed in writing as Proprietary within thirty (30) days after
its initial disclosure ("Proprietary Information"). Proprietary Information of
a party shall not include:
(i) Information which at the time of disclosure is published or
otherwise generally available to the public: or
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(ii) Information which, after disclosure by the other party, is
published or becomes generally available to the public through no
fault of the Receiving Party; or
(iii) Information which the Receiving Party can document was or is in its
possession at the time of disclosure and was not acquired directly
or indirectly from such party.
10.2 EXCEPTIONS. The Receiving Party may disclose Proprietary Information of
the other:
(a) In connection with the order of a court of law or in compliance
with laws or regulations relating to registrations or sale of securities, or as
is reasonably necessary in connection with the prosecution, maintenance or
enforcement of the Intellectual Property Indemnity, Article 9.
(b) If such information is also rightfully acquired from a third party
who, to the best of such party's knowledge and belief, is entitled to rightfully
make such disclosure, but only to the extent such party complies with any
restrictions imposed by the third party.
ARTICLE 11 - WARRANTIES
11.1 WARRANTY. GDE represents and warrants that:
(a) GDE is the owner of, or has acquired the rights to, the Licensed
Products and has the full right and authority to enter into this Agreement, to
disclose any and all of the information disclosed to Vista hereunder, and to
grant the rights and licenses granted herein;
(b) GDE has not previously granted and shall not grant any rights in
the Licensed Products that are inconsistent with the rights and licenses granted
to Vista herein;
(c) To GDE's knowledge, as of the Effective Date, the Licensed Products
do not infringe any copyright, trade secret, or other proprietary rights of any
third party;
(d) GDE has not previously entered into any agreements and shall not in
the future enter into any agreements that are inconsistent with or conflict with
this Agreement or the rights and licenses granted to Vista herein; and
(e) As of the Effective Date, there are no existing or threatened
actions, suits, or claims pending against GDE with respect to the Licensed
Products or the right of GDE to enter into and perform its obligations under
this Agreement.
11.2 DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, GDE
MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS
OR IMPLIED, INCLUDING, BUT
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NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
ARTICLE 12 - LIMITATION OF LIABILITY
IN NO EVENT WILL EITHER PARTY BE LIABLE UNDER ANY LEGAL THEORY FOR ANY DAMAGES,
INCLUDING, BUT NOT LIMITED TO, ANY INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS) ARISING OUT
OF THIS AGREEMENT, EVEN IF EITHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
ARTICLE 13 - FORCE MAJEURE
If the performance of this Agreement or any obligations hereunder is prevented,
restricted or interfered with by reason of fire or other casualty or accident,
supplier delay, strikes or labor disputes, war or other violence, any law,
order, proclamation, regulations, ordinances, demand or requirement of any
government agency, or any other act or condition beyond the reasonable control
of the parties hereto, the party so affected upon giving prompt notice to the
other party shall be excused from such performance to the extent of such
prevention, restriction or interference on a day for day basis. If such force
majeure event continues for more than thirty (30) days then the non affected
party may terminate this Agreement upon written notice to the other party.
ARTICLE 14 - MEDIATION/ARBITRATION
If a dispute arises out of or relates to this Agreement, or the breach thereof,
and if said dispute cannot be settled through direct discussions, the parties
agree to first endeavor to settle the dispute in an amicable manner by mediation
under the Commercial Mediation Rules of the American Arbitration Association,
before resorting to arbitration. Thereafter, any unresolved controversy or
claim arising out of or relating to this contract, or breach thereof, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, and judgment upon the award rendered by
arbitrator may be entered in any court having jurisdiction thereof.
ARTICLE 15 - MISCELLANEOUS
15.1 PRODUCT LIABILITY INDEMNITY. Vista agrees to indemnify and defend GDE and
its employees and agents from and against any liability or expense arising from
any product liability claim asserted by any party as to any Licensed Product
Vista manufactured or distributed pursuant to this Agreement or as to the
exploitation of the Licensed Products pursuant to this Agreement, including
reasonable attorneys' fees, except to the extent that such claim, liability or
expense results from the gross negligence or intentional misconduct
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<PAGE>
of GDE or its employees or agents. Such indemnify and defense obligation shall
apply to any claims made by employees, subcontractors, sublicensees, customers,
or other agents of Vista as well as any member of the general public.
15.2 U.S. EXPORT CONTROLS. Vista acknowledges and gives GDE its assurances that
it will not export, or cause to be re-exported, any of the Licensed Products or
any direct products thereof, to any country unless such export, or re-export, is
expressly authorized and approved by the U.S. Department of Commerce Export
Administration Regulations.
15.3 CONFIDENTIALITY OF AGREEMENT. Both GDE and Vista agree that the terms and
conditions of this Agreement shall be treated as confidential information and
that no reference to the terms and conditions of this Agreement or to activities
pertaining thereto can be made in any form without the prior written consent of
the other party; provided, however, that the general existence of this Agreement
shall not be treated as confidential information and that either party may
disclose the terms and conditions of this Agreement:
(i) as required by any court or other governmental body;
(ii) as otherwise required by law (provided that GDE shall have the
right to review and comment on the extent of any confidential
treatment to be requested in filings with the Securities and
Exchange Commission);
(iii) to legal counsel of the parties;
(iv) in confidence, to accountants, banks, proposed investors, and
financing sources and their advisors;
(v) in confidence, in connection with the enforcement of this Agreement
or rights under this Agreement; or
(vi) in confidence, in connection with a merger or acquisition or
proposed merger or acquisition, or the like.
15.4 WAIVER. No waiver by either party hereto of any breach or default of any
of the covenants or agreements herein set forth shall be deemed a waiver as to
any subsequent and/or similar breach or default.
15.5 ASSIGNMENTS. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and the successors or assigns of the parties hereto:
provided however, that either party may assign this Agreement, and its rights
and obligations hereunder, to any business organization that succeeds to the
business of such party to which this Agreement relates.
15.6 INDEPENDENT CONTRACTORS. The relationship of the parties hereto is that of
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independent contractors. Neither party hereto is an agent, partner or joint
venture of the other for any purpose.
15.7 NOTICES. Any notice required or permitted to be given to the parties
hereto shall be deemed to have been properly given if delivered in person, when
received if mailed by first-class certified mail to the other party at the
appropriate address as set forth below or to such other addresses as may be
designated in writing by the parties from time to time during the term of this
Agreement or when transmitted by electronic facsimile (with a confirmation copy
to be sent by mail).
Vista: Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, California 92008
Fax (619) 603-9170
Attn: President
With a copy to:
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, California 92101
Fax: (619) 234-3848
Attn: Craig S. Andrews, Esq.
GDE: GDE Systems, Inc.
16550 West Bernardo Drive
San Diego, California 92127-1806
Fax: (619) 675-1920
Attn: General Counsel
15.8 GOVERNING LAW: JURISDICTION. This Agreement shall be interpreted and
construed in accordance with the laws of the State of California, without regard
to conflicts of law principles. All disputes arising out of this Agreement
shall be subject to the exclusive jurisdiction and venue of the California state
courts of San Diego County, California (or, if there is exclusive federal
jurisdiction, the United States District Court for the Southern District of
California), and the parties consent to the personal and exclusive jurisdiction
of these courts.
15.9 COMPLETE AGREEMENT. This Agreement constitutes the final, exclusive and
complete agreement between the parties respecting the subject matter hereof, and
supersedes any prior or contemporaneous agreements. No amendment or change
hereof or addition hereto shall be effective or binding on either of the parties
hereto unless reduced to writing and executed by the party to be charged.
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15.10 SEVERABILITY. In the event that any provision of this Agreement becomes
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, such provision shall be changed and interpreted so as to best
accomplish the objectives of the original provision to the fullest extent
allowed by law and the remaining provisions of this Agreement shall continue in
full force and effect.
15.11 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original and both together shall be deemed to be
one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, both GDE and Vista have executed this Agreement, in
duplicate originals, by their respective officers hereunto duly authorized, the
day and year first above written.
VISTA MEDICAL
TECHNOLOGIES, INC. GDE SYSTEMS, INC.
By: /s/ John Lyon By: /s/ Terry A. Straeter
--------------------------- --------------------------------
Name: John Lyon Name: Terry A. Straeter
------------------------- ------------------------------
Title: President & CEO Title: President & CEO
------------------------ -----------------------------
HEALTHCOM, INC.
By: /s/ R. A. Parra
--------------------------------
Name: R. A. Parra
------------------------------
Title: Secretary
-----------------------------
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EXHIBIT A
LICENSED PRODUCTS
GDE SHALL DELIVER VERSIONS OF THE FOLLOWING LICENSED PRODUCTS WHICH DO NOT
CONTAIN U.S. GOVERNMENT "CLASSIFIED" INFORMATION:
* * *
* * * Confidential Treatment Requested
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EXHIBIT B
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF GDE:
GDE hereby represents, warrants and agrees that:
(a) The shares of Common Stock of Vista issued in connection with the
License Agreement (the "Shares") will be "restricted securities" as such term is
used in the rules and regulations under the Securities Act of 1933, as amended
(the "Securities Act") and that such securities have not been and will not be
registered under the Securities Act or any state securities law, and that such
securities must be held indefinitely unless registration is effected or transfer
can be made pursuant to appropriate exemptions under the Securities Act (such as
Rule 144);
(b) GDE is purchasing the Shares for investment for its own account and
not with a view to or for sale in connection with any distribution thereof and
it has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws; provided that nothing contained herein will prevent GDE from selling or
transferring such securities in compliance with the terms of applicable federal
and state securities laws;
(c) GDE is an "accredited investor" within the meaning of paragraph (a)
of Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission (the "Commission") and an "excluded purchaser" within the meaning of
Section 25102(f) of the California Corporate Securities Law of 1968; and
(d) Vista will affix the following legend (in addition to any other
legend(s), if any, required by applicable state corporate and/or securities
laws) to certificates for the Shares:
"These securities have not been registered under the
Securities Act of 1933, or any state securities laws.
They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration
statement in effect with respect to the securities
under all applicable federal and state securities laws
or an opinion of counsel satisfactory to the
Corporation that such registration is not required or
unless sold pursuant to Rule 144 of such Act."
(e) Prior to any proposed sale or transfer of any of the Shares, unless
(i) pursuant to and in compliance with Rule 144 or (ii) there is in effect a
registration statement under the Securities Act covering the proposed transfer,
GDE shall give written notice to Vista of GDE's intention to effect such sale or
transfer. Each such notice shall describe the manner and circumstances of the
proposed sale or transfer in sufficient detail, and shall be
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accompanied by either (i) a written opinion of legal counsel who shall be
reasonably satisfactory to Vista addressed to Vista and reasonably satisfactory
in form and substance to Vista's counsel, to the effect that the proposed sale
or transfer of the Common Stock may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the sale or transfer of such securities without registration will not
result in a recommendation by the staff of the Commission that enforcement
action be taken with respect thereto, whereupon GDE shall be entitled to sell or
transfer such securities in accordance with the terms of the notice delivered by
GDE to Vista. Each new certificate evidencing the Common Stock so sold or
transferred shall bear the appropriate restrictive legends set forth above,
except that such certificate shall not bear such restrictive legend if, in the
opinion of counsel for Vista, such legend is not required in order to establish
or assist in compliance with any provisions of the Securities Act or any
applicable state securities laws.
(f) GDE hereby agrees that, during the period of duration specified by
Vista and an underwriter of common stock or other securities of Vista, following
the effective date of a registration statement of Vista filed under the
Securities Act, it shall not, to the extent requested by Vista 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 Vista by it at any time during such period; PROVIDED,
HOWEVER, that:
i) such agreement shall not exceed 180 days for the first such
registration statement of Vista which covers Common Stock (or other securities)
to be sold on its behalf to the public in an underwritten offering;
ii) such agreement shall not exceed 90 days for any subsequent
registration statement of Vista which covers Common Stock (or other securities)
to be sold on its behalf to the public in an underwritten offering; and
iii) all execution officers and directors of Vista enter into
similar agreements.
In order to enforce the foregoing covenant, GDE agrees and acknowledges
that Vista may impose stop-transfer instructions with respect to the Shares
until the end of such period. Notwithstanding the foregoing, the obligations
described in this section shall not apply to a registration relating solely to
employee benefit plans on Form S-8 or similar forms which may be promulgated in
the future, or a registration relating solely to a SEC Rule 145 transaction on
form S-4 or similar forms which may be promulgated in the future.
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EXHIBIT 10.31
LEASE OF
134 FLANDERS ROAD
WESTBOROUGH, MASSACHUSETTS
TABLE OF CONTENTS
ARTICLE
NUMBER PAGE
I DEFINITIONS AND EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . 1
II PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
III BASE RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
IV COMMENCEMENT DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
V USE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
VI ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . 11
VII RESPONSIBILITY FOR REPAIRS AND CONDITION OF PREMISES;
SERVICES TO BE FURNISHED BY LANDLORD. . . . . . . . . . . . . . . . . . 13
VIII OPERATING AND TAX EXPENSES. . . . . . . . . . . . . . . . . . . . . . . 16
IX INDEMNITY AND PUBLIC LIABILITY INSURANCE. . . . . . . . . . . . . . . . 19
X FIRE, EMINENT DOMAIN, ETC.. . . . . . . . . . . . . . . . . . . . . . . 21
XI DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
XII MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 27
XIII TENANT CANCELLATION OPTION. . . . . . . . . . . . . . . . . . . . . . . 35
Revised 3/31/94
<PAGE>
L E A S E
THIS INSTRUMENT IS A LEASE, dated as of April __, 1994, in which the
Landlord and the Tenant are the parties hereinafter named, and which relates to
space in the building located at 134 Flanders Road, Westborough, Massachusetts.
The parties to this instrument hereby agree with each other as follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
1.1 DEFINITION OF BASIC LEASE TERMS. The following constitute definitions
of the basic terms used in this Lease.
Landlord: Robert F. Tambone as Trustee of MAT Realty Trust, u/d/t
dated June 4, 1986 and recorded with the Worcester County Registry of
Deeds in Book 9569, Page 286.
Landlord's original Address: c/o Atlantic Realty and Development
Inc., 24 New England Executive Park, Burlington, Massachusetts 01803.
Tenant: OKTAS, a Massachusetts general partnership of which
OKTAS, Inc. and VISTA are the sole general partners.
Tenant's Original Address:
OKTAS
134 Flanders Road, Westborough, MA
Base Rent: Sixty Nine Thousand Eight Hundred Sixty Four Dollars
($69,864.00) per year ($8.00 per square foot of Rentable Area), as the
same may be adjusted and/or abated pursuant to this Lease.
Building: The existing building owned by Landlord at 134
Flanders Road, Westborough, Massachusetts.
Building Rentable Area: 57,000 square feet measured in
accordance with the Measurement Method.
Premises: 8,733 rentable square feet (the "Premises Rentable
Area") of the Building which is agreed to be as shown on Exhibit FP
annexed hereto.
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Permitted Uses: General business office and light manufacturing
use of the type generally found in first-class office space in the
greater metropolitan Boston area.
Term: The period commencing on the Commencement Date and expiring at
5:00 p.m. on the day immediately preceding the fifth (5th) anniversary of
the Commencement Date except that if the Commencement Date shall be other
than the first day of a calendar month, the expiration day shall be at the
close of the day on the last day of the calendar month in which such
anniversary shall occur.
Broker: Hunneman
Business Days: All days except Saturday, Sunday, New Year's Day,
Martin Luther King's Birthday, Washington's Birthday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Thanksgiving Day, Christmas Day
(and the following day when any such day occurs on Sunday) and such other
days and only such other days that tenants occupying at least 50% of
Building Rentable Area recognize as holidays for their general office
staff.
Commencement Date: As defined in Section 4.1.
Common Areas: The Building entrances, the ground floor lobby,
passenger and freight elevators, stairways located in the "core" of the
Building, loading dock(s) serving the Building, and that portion of any
sidewalks included in the Property.
Default of Tenant: As defined in Section 11.1.
Force Majeure: Collectively and individually, strike or other labor
trouble, fire and other casualty, governmental pre-emption of priorities or
other controls in connection with a national or other public emergency or
shortages of fuel, supplies of labor resulting therefrom or any other
causes, whether similar or dissimilar, beyond Landlord's reasonable
control.
Guarantor: Kaiser Aerospace and Electronics Corporation, a Nevada
corporation
Initial Public Liability Insurance: $2,000,000 per occurrence
(combined single limit) for property damage, bodily injury or death.
Land Parcel: The parcel of land upon which the Building is situated,
shown on a certain map entitled "Plan of Land in Westborough, Mass., Owner:
Robert W. Briggs, Scale: 1" = 40', September 16, 1985, Updated: June 18,
1986", recorded
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in the Worcester County Registry of Deeds in Plan Book 557 as Plan No. 32
of 1986.
Lease Year: Each period of one year during the Term commencing on the
Commencement Date or on any anniversary thereof, i.e. Lease Year Two shall
commence on the first anniversary of the Commencement Date.
Measurement Method: The area of the Building or any portion
thereof determined by measuring in accordance with the American
National Standard (Z265.1-1980 Method for Measuring Floor Space in
office Buildings, Approved July 1980).
Premises Usable Area: The Rentable Area of the Premises less all
building core elements.
Rentable Area: The Net Rentable Area (as such term conforms to
the terms used by the Building owners and Managers Association
International (BOMA)) of all or any portion of the Building measured
in accordance with the Measurement Method and as determined by
Landlord's architect.
Operating and Tax Expenses: The operating and tax expenses
relating to the Property as further defined in Article VIII.
Property: The Building and the Land Parcels on which it is
located (including adjacent sidewalks).
Target Commencement Date: April 1, 1994.
Tenant's Proportionate Share: The quotient derived by dividing
the Premises Rentable Area by the Building Rentable Area which as of
the execution date of this Lease is 15.32%.
Tenant's Share of operating and Tax Expenses: Tenant's
Proportionate Share of the Operating and Tax Expenses.
1.2 EXHIBITS.
EXHIBIT FP (Floor Plan)
EXHIBIT CS (Cleaning Specifications)
EXHIBIT OC (Operating Expenses)
EXHIBIT TP (Tenant's Layout Plan)
3
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ARTICLE II
PREMISES
2.1 LEASE OF PREMISES. Landlord hereby demises and leases to Tenant for the
Term of this Lease and upon the terms and conditions hereinafter set
forth, and Tenant hereby accepts from Landlord, the Premises.
2.2 APPURTENANT RIGHTS AND RESERVATIONS.(a) Tenant shall have, as appurtenant
to the Premises, the non-exclusive right to use, and permit its invitees
to use, in common with others, the Common Areas, and common walkways
necessary for access to the Building and if at any time any portion of
the Premises includes less than an entire floor, the common toilets,
corridors and elevator lobby on such floor and any other common area
provided by Landlord on such floor; but such rights shall always be
subject to reasonable rules and regulations from time to time established
by Landlord for the proper and efficient operation of the Building
pursuant to Section 12.7.
(b) Excepted and excluded from the Premises are the ceiling,
floor, perimeter walls and exterior windows (except the inner.
surfaces of each thereto), and any space in the Premises used for
shafts, stacks, pipes, conduits, fan rooms, ducts, electric or
other utilities, janitorial closets, sinks or other Building
facilities. Landlord shall have the right to place in the
Premises (but in such manner as to reduce to a minimum any
interference with Tenant's use of the Premises) utility lines,
equipment, stacks, pipes, conduits, ducts and the like, provided
that any such installation shall be boxed and decorated in a
manner consistent to the remainder of the area in which it is
located, and provided installations shall not materially interfere
with Tenant's use of the Premises for the ordinary conduct of its
business. To the extent reasonably practicable, any such
installation shall be located above hung ceilings, beneath the
floor or behind walls.
(c) Landlord shall have the right to enter the Premises with
reasonable advance notice, (except in the case of an emergency,
when no notice shall be required) for the purpose of making
repairs to the same, and Landlord shall also have the right to
enter the Premises during normal business hours and with
reasonable advance notice for the purpose of inspecting the same
and to make access available to prospective or existing
mortgagees, purchasers, partners, investors, insurers or tenants.
Landlord agrees to use reasonable efforts (excluding any
obligation to incur overtime labor costs) to minimize any
inconvenience, annoyance or interruption to Tenant's business
operations, and to recognize any reasonable security requirements
of Tenant in exercising such rights of entry.
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ARTICLE III
BASE RENT
3.1 PAYMENT. (a) Tenant agrees to pay the Base Rent to Landlord, or as
directed by Landlord, commencing on the Rent Commencement Date, without
offset, abatement (except as otherwise expressly provided in this Lease),
deduction or demand. Such Base Rent shall be payable in equal monthly
installments, in advance, on the first day of each and every calendar
month during the Term of this Lease, at Landlord's original Address, or
at such other place as Landlord shall from time to time designate by
notice.
(b) Base Rent for any partial month shall be pro-rated on a daily
basis, and if Base Rent commences on a day other than the first
day of a calendar month, the first payment which Tenant shall make
to Landlord shall be payable on the date Base Rent commences and
shall be equal to a proportionate part of the monthly installment
of Base Rent for the partial month in which Base Rent commences.
ARTICLE IV
COMMENCEMENT DATE
4.1 COMMENCEMENT DATE: The Commencement Date hereunder shall be the earliest
of (i) the date upon which Tenant's personnel occupy all or any part of
the Premises for the conduct of its business; or (ii) the Substantial
Completion Date (as hereinafter defined).
4.2 PREPARATION OF THE PREMISES. (a) Landlord shall exercise all reasonable
efforts to complete the work (Landlord's Work) necessary to prepare the
Premises for Tenant's use and occupancy pursuant to the plans and
specifications attached hereto as Exhibit TP (the "Buildout Plan") and in
accordance with Landlord's building standard except as so noted on the
Buildout Plan, but Tenant shall have no claim against Landlord for
failure so to complete such work except the right to terminate this Lease
in accordance with Section 4.2(c). Landlord shall pay for all costs
associated with the completion of Landlord's Work pursuant to the
Buildout Layout Plan, except for such costs as are specifically noted as
Tenant Costs, if any. Any costs associated with any changes made by
Tenant (the "Tenant Change Costs") to any part of the Buildout Tenant's
Layout Plan shall be paid entirely by Tenant, plus interest at the rate
of twelve percent (12%), by adding to the amount of Base Rent an
additional payment to be made to Landlord with each monthly payment of
Base Rent due hereunder. Each such additional payment shall be equal to
an amount which, if
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paid in equal monthly installments over the remainder of the Term,
applied first to interest and the remainder to principal would fully
amortize a loan in the amount of the Tenant Change Costs plus interest at
a rate of twelve percent (12%) per annum.
(b) The Premises shall be deemed ready for occupancy on the first
day (the "Substantial Completion Date") as of which all of the
following conditions have occurred: (1) Landlord's Work has been
completed except for items of work (and, if applicable, adjustment
of equipment and fixtures) which can be completed after occupancy
has been taken without causing undue interference with Tenant's
use of the Premises (i.e., so-called "punch list" items), and (2)
Tenant has been given notice of the substantial completion of
Landlord's Work, and (3) if required, Landlord has received a
certificate of occupancy for the Premises. Landlord shall
complete as soon as conditions permit all "punch list" items and
Tenant shall afford Landlord access to the Premises for such
purposes.
4.3 CONCLUSIVENESS OF LANDLORD'S PERFORMANCE. Except to the extent to which
Tenant shall have given Landlord notice, not later than the end of the
second full calendar month next beginning after the completion of the so-
called "punch list" items, of respects in which Landlord has not
performed Landlord's Work, and except in the case of latent defects as to
which Tenant shall notify Landlord not later than the end of the twelfth
(12th) full calendar month following the completion of the punch list
items, Tenant shall have no claim that Landlord has failed to perform any
of Landlord's Work. Except for Landlord's Work, the Premises are being
leased in their condition as is without representation or warranty by
Landlord. Tenant acknowledges that it has inspected the Premises and
common areas of the Building and, except for Landlord's Work, have found
the same satisfactory.
4.4 TENANT'S DELAYS. (a) If a delay shall occur in the Substantial Completion
Date as the result of:
(i) any request by Tenant that Landlord delay in the
commencement or completion of Landlord's Work for any reason;
(ii) any change by Tenant in any of Tenant's Layout Plan;
(iii) any special requirement of Tenant's Layout Plan not in
conformity with Landlord's building standards;
(iv) any other act or omission of Tenant or its officers,
agents, servants or contractors; or
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(v) any reasonably necessary displacement of any of
Landlord's Work from its place in Landlord's construction
schedule resulting from any of the causes for delay referred
to in clauses (i), (ii), (iii) and (iv) of this paragraph and
the fitting of such work back into such schedule; then the
term of this Lease shall be correspondingly extended by the
number of days of delay; provided, however, that in the event
the delay in the Substantial Completion Date is equal to or
exceeds twenty (20) days ("Substantial Delay") , then the
Landlord shall give Tenant prompt notice of any such
Substantial Delay and Tenant shall, within ten (10) days
after receipt of such notice and demand therefor, pay to
Landlord for each day of such delay the amount of Basic Rent
and other charges that would have been payable hereunder had
the Commencement Date occurred immediately prior to such
delay.
(b) If a delay in the Substantial Completion Date, or if any
substantial portion of such delay, is the result of Force Majeure,
and such delay would not have occurred but for a delay described
in paragraph (a), such delay shall be deemed. added to the delay
described in that paragraph.
(c) The delays referred to in paragraphs (a) and (b) are herein
referred to collectively and individually as "Tenant's Delay".
(d) If, as a result of Tenant's Delay(s), the Substantial
Completion Date is delayed in the aggregate for more than sixty
(60) days, Landlord may (but shall not be required to) at any time
prior to the Commencement Date terminate this Lease by giving
written notice of such termination to Tenant and thereupon this
Lease shall terminate without further liability or obligation on
the part of either party, except that Tenant shall pay to Landlord
the cost theretofore incurred by Landlord in performing Landlord's
Work, plus an amount equal to Landlord's out-of-pocket expenses
incurred in connection with this Lease, including, without
limitation, brokerage and legal fees, together with any amount
required to be paid pursuant to paragraph (a) through the
effective termination date.
ARTICLE V
USE OF PREMISES
5.1 PERMITTED USE. (a) Tenant agrees that the Premises shall be used and
occupied by Tenant only for Permitted Uses and for no other purpose.
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(b) Tenant agrees to conform to the following provisions during
the Term of this Lease:
(i) Tenant shall cause all freight to be delivered to or
removed from the Building and the Premises in accordance with
reasonable rules and regulations established by Landlord therefor
and Tenant shall be able to use such freight elevators at the end
of the Term for its move out of the Premises, at no extra cost,
provided advance notice is provided;
(ii) Tenant will not place on the exterior of the Premises
(including both interior and exterior surfaces of doors and
interior surfaces of windows) or on any part of the Building
outside the Premises, any signs, symbol, advertisement or the
like. Landlord shall provide a reasonable amount of signage for
Tenant's use in the tenant directory in the lobby of the Building;
(iii) Tenant shall not perform any act or carry on any practice
which may damage the Premises, or any other part of the Building,
or cause any offensive odors or unreasonably loud noises or
constitute a nuisance or a menace to, or otherwise interfere with
the business of, any other tenant in the Building;
(iv) As hereinafter used, the term "Hazardous Material" shall
mean any substance or material which has been determined by any
state, federal or local governmental authority to be capable of
posing a risk of injury to health, safety or property, including
all of those materials and substances designated as hazardous or
toxic by the city in which the Premises are located, the U.S.
Environmental Protection Agency, the Consumer Product Safety
Commission, the Food and Drug Administration, and any federal
agencies that have overlapping jurisdiction with such state
agencies, or any other governmental agency now or hereafter
authorized to regulate materials and substances in the
environment;
(v) Tenant agrees not to introduce any Hazardous Material in,
on or adjacent to the Premises without complying with all
applicable federal, state and local laws, rules, regulations,
policies and authorities relating to the storage, use or disposal,
and clean-up of Hazardous Materials, including, but not limited
to, the obtaining of proper permits;
(vi) Tenant shall immediately notify Landlord of any inquiry,
test, investigation, or enforcement proceeding by or against
Landlord or the Premises concerning a Hazardous Material. Tenant
acknowledges that Landlord, as the owner of the Premises, shall
have the right, at its election, in its own name or as Landlord's
agent, to negotiate, defend, approve, and
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appeal, at the expense of the responsible party, any action taken or
order issued with regard to a Hazardous Material by an applicable
governmental authority;
(vii) If Tenant's storage, use or disposal of any Hazardous Material in,
on or adjacent to the Premises results in any contamination of the
Premises, the soil or surface or groundwater requiring remediation under
federal, state or local statutes, ordinances, regulations or policies,
Tenant agrees to clean-up the contamination. Tenant further agrees to
indemnify, defend and hold Landlord harmless from and against any claims,
suits, causes of action, costs, fees, including reasonable attorneys'
fees and costs, arising out of or in connection with any clean-up work,
inquiry or enforcement proceeding arising from any acts or omissions of
the Tenant or its agents, employees, contractors or invitees, and any
Hazardous Materials currently or hereafter used, stored or disposed of by
Tenant or its agents, employees, contractors or invitees on or about the
Premises;
(viii) Notwithstanding any other right of entry granted to
Landlord under this Lease, Landlord shall have the right to enter
the Premises or to have consultants enter the Premises throughout
the term of this Lease for the purpose of determining: (1) whether
the Premises are in conformity with federal, state and local
statutes, regulations, ordinances, and policies including those
pertaining to the environmental condition of the Premises, (2)
whether Tenant has complied with this paragraph, and (3) the
corrective measures, if any, required of Tenant to ensure the safe
use, storage and disposal of Hazardous Materials, or to remove
Hazardous Materials. Tenant agrees to provide access and
reasonable assistance for such inspections. Such inspections may
include, but are limited to, entering the Premises or adjacent
property with drill rigs or other machinery for the purpose of
obtaining laboratory samples. Landlord shall not be limited in
the number of such inspections during the term of this Lease. If
such consultants determine that the Premises are contaminated with
Hazardous Materials caused by Tenant, or its agents, employees,
contractors or invitees, Tenant shall, in a timely manner, at its
expense, remove such Hazardous Materials or otherwise comply with
the recommendations of such consultants or Licensed Site
Professionals as the Landlord hires pursuant to Massachusetts
General Laws Chapter 21E, and the regulations promulgated
thereunder, and any applicable governmental agencies. The right
granted to Landlord herein to inspect the Premises shall not
create a duty on Landlord's part to inspect the Premises, or
liability of Landlord for Tenant's use, storage or disposal of
Hazardous Materials, it being understood that Tenant shall be
solely responsible for all liability in connection therewith;
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(ix) Tenant shall surrender the Premises to Landlord upon the
expiration or earlier termination of this Lease free of Hazardous
Materials and in a condition which complies with all governmental
statutes, ordinances, regulations and policies, recommendations of
consultants hired by Landlord pursuant to paragraph (viii) (above), and
such other reasonable requirements as may be imposed by Landlord;
(x) Tenant's obligations under this paragraph shall survive
termination of this Lease; and
(xi) Tenant shall, in its use of the Premises, comply with the
requirements of all applicable governmental laws, rules and
regulations.
5.2 INSTALLATIONS AND ALTERATIONS BY TENANT.(a) Tenant shall make no
alterations, additions or improvements in or to the Premises during the
Term of this Lease without the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed provided that
Tenant fully complies with the provisions of this Section 5.2. Any such
alterations, additions or improvements shall (i) (except as hereinafter
provided) be in accordance with complete construction plans and
specifications approved by Landlord, (ii) be made only in accordance with
construction rules and regulations of Landlord in effect from time to
time and only by Landlord's contractors or by contractors or mechanics
approved by Landlord, (iii) be made at Tenant's sole expense and, if the
same would unreasonably disturb other tenants of the Building, at times
other than during normal business hours and (v) except for Tenant's
Removable Property, as defined below, become part of the Premises and the
property of Landlord.
(b) All articles of personal property and all business
fixtures, machinery and equipment and furniture owned or installed
by Tenant solely at its expense in the Premises ("Tenant's
Removable Property") shall remain the property of Tenant and may
be removed by Tenant at any time prior to the expiration of this
Lease, provided that Tenant, at its expense, shall repair any
damage to the Building caused by such removal.
(c) Notice is hereby given that Landlord shall not be liable
for any labor or materials furnished or to be furnished by
contractors, mechanics or suppliers to Tenant upon credit, and
that no mechanic's or other lien for any such labor or materials
shall attach to or affect the reversion or other estate or
interest of Landlord in and to the Premises. To the maximum
extent permitted by law, at such time as any contractor commences
to perform work on behalf of Tenant, or any supplier commences to
provide materials to Tenant, such contractor (and any
subcontractors) or supplier shall furnish a written statement
acknowledging the provisions set forth in the prior clause.
Whenever and as often as any mechanic's lien shall have
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been filed Against the Property based upon any act or interest of Tenant
or of anyone claiming through Tenant, Tenant shall forthwith take such
action by bonding, deposit or Payment as will remove or satisfy the lien.
(d) In the course of any work being performed by Tenant,
including without limitation the "field installation" of any
Tenant Removable Property, Tenant agrees to use labor compatible
with that being employed by Landlord for work in or to the
Building or other buildings owned by Landlord or its affiliates,
and not to employ or permit the use of any labor or otherwise take
any action which might result in a labor dispute involving
personnel providing services in the Building pursuant to
arrangements made by Landlord.
ARTICLE VI
ASSIGNMENT AND SUBLETTING
6.1 PROHIBITION.(a) Except as hereinafter provided, Tenant covenants and
agrees that neither this Lease nor the term and estate hereby granted,
nor any interest herein or therein, will be assigned, mortgaged, pledged,
encumbered or otherwise transferred and that neither the Premises nor any
part thereof will be encumbered in any manner by reason of any act or
omission on the part of Tenant, or used or occupied or permitted to be
used or occupied, by anyone other than Tenant, or for any use or purpose
other than a Permitted Use, or be sublet (which term, without limitation,
shall include granting of concessions, licenses and the like) in whole or
in part, or be offered or advertised for assignment or subletting, in
each case without first obtaining the written approval of Landlord, which
approval shall not be unreasonably withheld or delayed.
(b) Except as provided below, the provisions of paragraph (a)
of this Section shall apply to (i) a single transfer or an
orchestrated series of transfers of a majority of the stock or
partnership interests or other evidences of ownership of or
interest in Tenant as if such transfer were an assignment of this
Lease and (ii) to any transfer of such stock or interests the
effect of which would be to constitute an assignment of this
Lease. Notwithstanding the foregoing, the provisions of paragraph
(a) of this Section shall not apply to any transactions by Tenant
with an entity into or with which Tenant is merged or consolidated
or with an entity to which substantially all of Tenant's assets
are transferred or with any entity which controls or is controlled
by Tenant or is under common control with Tenant or with which
Tenant, directly or indirectly, has a fifty percent (50%) or
greater ownership interest, or which directly or indirectly, has a
fifty percent (50%) or greater interest in Tenant, provided that
in any of
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such events (x) Landlord is provided with evidence satisfactory to it
that the successor to Tenant has a net worth computed in accordance with
generally accepted accounting principles at least equal to the net worth
of Tenant immediately prior to such merger, consolidation or transfer,
and (y) in the case of any assignment of this Lease, the assignee agrees
directly with Landlord, by written instrument in form reasonably
satisfactory to Landlord, to be bound by all the obligations of Tenant
hereunder including, without limitation, the covenant against further
assignment and subletting except in accordance with the express
provisions of this Lease.
(c) If this Lease be assigned, or if the Premises or any part
thereof be sublet or occupied by anyone other than Tenant,
Landlord may, if Tenant is not paying timely the Base Rent,
Tenant's share of operating and Tax Expenses, or any other charges
due under this Lease, collect rent and other charges from the
assignee, subtenant or occupant, and apply the net amount
collected to the rent and other charges herein reserved, but no
such assignment, subletting, occupancy, collection or modification
of any provisions of this Lease shall be deemed a waiver of this
covenant, or the acceptance of the assignee, subtenant or occupant
as a tenant or a release of the original named Tenant from the
further performance by the original named Tenant hereunder. No
assignment or subletting hereunder shall relieve Tenant from its
obligations hereunder and Tenant shall remain fully and primarily
liable therefor. No such assignment, subletting, or occupancy
shall affect Permitted Uses.
6.2 SUBLEASE RIGHTS. Notwithstanding the prohibition set forth in Section
6.1, Landlord shall not withhold its consent to a subletting or
sublettings requested by Tenant, provided that: (i) in Landlord's
reasonable judgment, the business of the proposed subtenant or the
proposed use of the sublet premises will not adversely affect the
reputation or image of the Building (subleases for governmental uses, for
medical or dental offices or for health or fitness facilities being
examples of businesses or uses which may adversely affect the Building's
reputation or image as a first class office building); (ii) the total
number of tenants (including Tenant) occupying any floor within the
Premises at any one time shall not exceed four (4), which number shall be
prorated for partial floors; (iii) such sublease(s) shall not, in the
aggregate, cover more than 50% of the Rentable Area of the Premises; (iv)
the rent to be derived by such sublease is payable monthly at a fixed
rate or at a rate which is determinable from the terms of the sublease
and not based on the net or gross income or profits derived by such
subtenant from the Premises; and (v) Landlord has been furnished with
information sufficient to make a determination as to each of the
foregoing requirements. If Landlord shall withhold such consent, it
shall set forth in writing the reasons therefor.
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6.3 FIRST OFFER RIGHT. In the event that Tenant shall desire to enter into a
sublease otherwise permitted under the foregoing provisions of this
Article 6, then Tenant shall give Landlord notice thereof and Landlord
may elect to sublease such space from Tenant on the same terms and
conditions stated in such notice by giving notice to Tenant of such
election not later than fifteen (15) days after receiving notice of such
offer from Tenant. In the event that Landlord shall not elect so to
sublease such space for any reason, then Tenant may enter into such
sublease within one hundred eighty (180) days after Landlord has elected
not to sublease such space on terms and conditions no more favorable to
the subtenant than those offered to Landlord. If Tenant shall not so
enter into such sublease, or if, after Landlord has elected not to
sublease such space, Tenant shall materially alter the terms and
conditions thereof, Tenant shall again notify Landlord and Landlord shall
have an additional fifteen (15) days within which to elect to enter into
such sublease. In the event that Landlord so subleases such space from
Tenant, Landlord shall be entitled to sub-sublease such space (or any
portion thereof) without restriction or consent by Tenant.
6.4 SHARING OF SUBLEASE PROFITS. If the rent and other sums received by
Tenant on account of a permitted sublease exceed the sum of (i) the Base
Rent and Tenant's Share of operating and Tax Expenses allocable to the
Premises subject to the sublease (in the proportion of the Rentable Area
of such space to the entire Premises), (ii) reasonable legal fees and
brokerage commissions incurred by Tenant in connection with such
subleasing, and (iii) an amortization factor for the undepreciated value
(computed consistently with generally accepted accounting principles, and
amortized in equal monthly payments over the then remainder of the Term
of this Lease) of any improvements installed in the portion of the
Premises affected by such sublease at the sole cost and expense of
Tenant, Tenant shall pay to Landlord, as additional rent, 100% of such
excess, as received by Tenant.
ARTICLE VII
RESPONSIBILITY FOR REPAIRS AND CONDITION OF PREMISES;
SERVICES TO BE FURNISHED BY LANDLORD
7.1 LANDLORD REPAIRS.(a) Except as otherwise provided in this Lease, Landlord
agrees to keep in good order, condition and repair, and to provide
security, in a manner generally commensurate with other first-class
office buildings in the metropolitan Boston area, the roof, public areas,
exterior walls and structure of the Building (including all fire and life
safety, plumbing, mechanical and electrical or other Building systems
installed by Landlord), all insofar as they affect the Premises or Common
Areas, except that Landlord shall in no event be responsible for (i) the
repair of glass (excepting exterior Building glass) in the
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Premises or (ii) any condition in the Premises or the Building caused by
any act or omission of Tenant,, or its employees invitees, agents or
contractors.
(b) Landlord shall not be liable for any failure to make
repairs which, under the provisions of this Section 7.1 or
elsewhere in this Lease, Landlord has undertaken to make with
respect to any portion of the Building within the Premises or
under the control of Tenant unless Tenant has given notice to
Landlord of the need to make such repairs, and Landlord has failed
to commence to take appropriate actions and/or make such repairs
(as the case may be) within a reasonable time after receipt of
such notice based upon the nature of the repairs or thereafter
fails to proceed with reasonable diligence to complete such
repairs. Landlord shall notify Tenant promptly if Landlord
disagrees that the repairs set forth in Tenant's notice need to be
made.
7.2 TENANT'S AGREEMENT.(a) Tenant will keep neat and clean and maintain in
good order, condition and repair the Premises and every part thereof,
excepting only that maintenance and those repairs for which Landlord is
responsible under the terms of this Lease and excepting also reasonable
wear and tear of the Premises, and damage by fire or other casualty and
as a consequence of the exercise of the power of eminent domain; and
shall surrender the Premises, at the end of the Term, in such condition.
Without limitation, Tenant shall continually during the Term of this
Lease maintain the Premises in accordance with all laws, codes and
ordinances from time to time in effect and all directions, rules and
regulations of the proper officers of governmental agencies having
jurisdiction, and the standards recommended by the Boston Board of Fire
Underwriters, and shall, at Tenant's expense, obtain all permits,
licenses and the like required by applicable law provided that Tenant
shall not be required to make any alterations or improvements to the
Premises to comply with such requirements if such requirements are
applicable to the Building in general and not specifically because of
Tenant's occupancy thereof.
(b) if repairs are required to be made by Tenant pursuant to
the terms hereof, Landlord may demand that Tenant make the same
forthwith, and if Tenant refuses or neglects to commence such
repairs and complete the same with reasonable dispatch, after such
demand, Landlord may (but shall not be obligated to do so) make or
cause such repairs to be made and the costs thereof shall be paid
solely by Tenant.
7.3 FLOOR LOAD - HEAVY MACHINERY. Tenant shall not place a load upon any
floor in the Premises exceeding 70 lbs. per square foot or the maximum
which is otherwise allowed by law except within any area so designated in
Exhibit FP, in which event the maximum floor load shall be 125 lbs. per
square foot. Business machines and mechanical equipment shall be placed
and maintained by Tenant at
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Tenant's expense in settings sufficient, in Landlord's reasonable
judgment, to absorb and prevent vibration, noise and annoyance. Tenant
shall not move any safe, heavy machinery, heavy equipment, freight, bulky
matter or fixtures within, into or out of the Building without the prior
consent of Landlord, which consent will not be unreasonably withheld or
delayed.
7.4 BUILDING SERVICES. Landlord is obligated to provide:
(i) Passenger elevator service in common with Landlord and other
tenants in the Building which service is to be available 24 hours a day,
365 days a year.
(ii) Cleaning and janitorial services including rubbish
removal, to the Premises, provided the same are kept in
reasonable order by Tenant, in accordance with the cleaning
standards set forth in Schedule CS attached hereto. If extra
services are necessary by reason of any special installations
made by Tenant, Tenant shall pay Landlord the cost thereof as
an additional charge promptly after receipt of a bill therefor.
(iii) Free access to the Premises on Business Days from 7:00 a.m. to
6:00 p.m. and on Saturdays from 9:00 a.m. to 12:00 p.m. and access
at all other times subject to reasonable security restrictions from
time to time in effect, and subject always to restrictions based on
emergency conditions. Landlord shall provide, at Tenant's expense,
keys or other security device which will permit such access outside
of the hours and days above specified.
(iv) Cleaning and janitorial services to the Common Areas, the
other public areas of the Building and Property and the exterior
walls of the Buildings (including the exterior glass) and removal of
snow and ice from the driveways and parking areas, sidewalks and
walkways included in the Property, all so as to maintain such areas
in a clean and neat condition commensurate with other first class
office buildings in the metropolitan Boston area.
7.5 UTILITIES.(a) To the extent utility services to the Premises are
separately metered, the Tenant shall pay when due, directly to the
supplier of such utilities, all charges for utility services provided to
the Premises including, without limitation, electricity, gas, water,
telephone, and the facilities to heat or air-condition the Premises; If
such utility services are not separately metered, or if such utility
services serve Common Areas, Tenant shall promptly pay Tenant's
Proportionate Share of same upon being billed therefor by the Landlord.
If water consumed by the Tenant is not metered separately from water
consumed by the
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remainder of the Building, Tenant shall pay to Landlord, upon being
billed therefor by Landlord, Tenant's Proportionate Share of the
aforesaid. The aforementioned share is based on the assumption that
water in the Premises will be used only for ordinary drinking and
lavatory purposes. If water is consumed in the Premises for other
purposes or in excessive quantities, then Tenant shall pay to Landlord,
on demand from time to time, charges for said additional water as
reasonably estimated by Landlord. Landlord reserves the right to install
a water meter to measure water consumption in the Premises if not
installed at the Commencement Date. If any other utility is not
separately metered for the Premises, or serves common areas of the
Building or Land Parcel, Tenant shall pay Tenant's Proportionate Share in
accordance herewith.
(b) The Landlord shall be responsible for the effecting
maintenance and repair of all heating, ventilation, and air-
conditioning equipment directly serving the Tenant, and Tenant
shall pay to Landlord within thirty (30) days of invoice therefor
all costs connected with such maintenance and repair.
(c) The Landlord shall not be liable for any interruption of
electricity, gas, water, telephone, sewage and/or septic system,
heating, air conditioning or other utility service supplied to the
Premises unless caused by the gross negligence of Landlord and
Landlord reserves the right to stop any service or utility to the
Premises, when in Landlord's judgment it is deemed necessary by
reason of accident, emergency or repair work. No such
interruption or stoppage of utility service shall be deemed to be
an eviction of the Tenant or relieve Tenant from any of the
Tenant's obligations under this lease.
ARTICLE VIII
OPERATING AND TAX EXPENSES
8.1 DEFINITIONS. For the purposes of this Article, the following terms shall
have the following respective meanings:
Operating Year: Each calendar year (or other twelve-month
period as determined by Landlord) in which any part of the Term of
the Lease shall fall.
Operating Expenses: The aggregate costs or expenses
reasonably incurred by Landlord with respect to the operation,
cleaning, repair, maintenance and management of the Property as
more particularly enumerated in Exhibit OC attached hereto,
provided that, if during any
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portion of the Operating Year for which Operating Expenses are being
computed, the Building is not operated or less than all of Building
Rentable Area is occupied by tenants or if Landlord is not supplying all
tenants with the services being supplied hereunder, actual Operating
Expenses incurred shall be reasonably and equitably projected by Landlord
to be the estimated Operating Expenses that would have been incurred if
all of Building Rentable Area were occupied for such Year and such
services were being supplied to all tenants, and such projected amount
shall, for the purposes hereof, be deemed to be the Operating Expenses
for such Year. In no event, however, shall Tenant's share of Operating
Expenses exceed its Proportionate Share of a fully occupied building.
Taxes: The real estate taxes assessed with respect to the
Property and/or any other tax if the same replaces the current
method of assessment of real estate taxes in whole or in part or
is additionally imposed on the Property or upon Landlord relating
to the Property and is generally applicable to owners of similar
properties.
Operating and Tax Expenses: The aggregate of the Operating
Expenses and Taxes.
8.2 TENANT'S PAYMENTS.(a) During the Term, Tenant shall pay to Landlord As
Additional Rent Tenant's Proportionate Share of Operating and Tax
Expenses, which amount shall be apportioned for any operating Year in
which the Commencement Date falls or the Term of this Lease ends. Tenant
shall also pay to Landlord in twelve (12) equal monthly installments
commencing on the Commencement Date and payable in advance on the first
(1st) day of each calendar month during the Term, a management fee equal
to three percent (3%) of Base Rent (as the same is adjusted as provided
herein) owed by Tenant to Landlord under the terms of this Lease. Such
fee shall be due on the first (1st) of each month by check made payable
to Atlantic Realty and Development, Inc. at 24 New England Executive
Park, Burlington, Massachusetts 01803. The management fee shall be pro-
rated for any partial month.
(b) Estimated payments by Tenant on account of Operating and Tax
Expenses shall be made monthly on the first day of each and every
calendar month during the Term of this Lease and otherwise in the manner
herein provided for the payment of Base Rent. The monthly amount so to
be paid to Landlord shall be sufficient to provide Landlord by the end of
each Operating Year a sum equal to Tenant's required payments, as
reasonably estimated by Landlord (based on the budget supplied to Tenant
by Landlord) from time to time during each operating Year, on account of
Operating and Tax Expenses for such Operating Year. Within 180 days
after the end of each operating Year, Landlord shall submit to Tenant a
reasonably detailed accounting of Operating and Tax Expenses for such
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Operating Year prepared in accordance with generally accepted accounting
practices and principles and certified by a representative of Landlord.
If estimated payments theretofor made for such Operating Year by Tenant
exceed Tenant's required payment on account thereof for such Operating
Year, according to such statement, Landlord shall credit the amount of
overpayment against the next following monetary obligations of Tenant to
Landlord under this Lease, and thereafter against Tenant's subsequent
monetary obligations until such overpayment is fully applied against such
monetary obligations (or promptly refund such overpayment if the Term of
this Lease has ended and Tenant has no further obligation to Landlord);
and, if the required payments on account thereof for such year are
greater than the estimated payments (if any) theretofor made on account
thereof for such Operating Year, Tenant shall promptly make payment to
Landlord within twenty-five (25) days after being so advised by Landlord.
(c) Landlord shall at all times keep proper books of record and
account in accordance with generally accepted accounting
principles and practices, applied on a consistent basis, in which
full, true and accurate entries shall be made of all operating and
Tax Expenses for each Operating Year, and shall maintain for the
same periods all contracts, instruments and other records with
respect to Operating and Tax Expenses for each such Year.
Landlord shall permit Tenant and Tenant's agent, at Tenant's
expense, by appointment and during normal business hours, to
review Landlord's records, books and accounts of the Building and
any audited statements thereof relating to Operating and Tax
Expenses for such Operating Year for the purpose of verifying
operating and Tax Expenses and any accounting which Landlord is
required to provide hereunder. Such books of record shall be
retained by Landlord for two (2) years after Landlord delivers the
accounting for the applicable Operating Year.
8.3 ABATEMENT.(a) If Landlord shall receive any tax abatement refund or
reimbursement of Taxes, then after deducting Landlord's unpaid expenses
reasonably incurred in obtaining the same, Landlord shall pay to Tenant
Tenant's Proportionate Share of such refund or reimbursement; provided
that Landlord shall have the right to deduct from any such amount the
amount of any payments which are then due and payable from Tenant.
(b) Provided that tenants who occupy not less than fifty percent
(50%) of the Building Rentable Area including Tenant request
Landlord in writing so to do (which requests are received not less
than seven (7) days prior to the last date on which real estate
tax abatement proceedings for a particular year may be commenced),
Landlord will institute and prosecute proceedings for an abatement
of Taxes for such year. The manner and method of conducting such
proceedings shall be solely within the reasonable judgment of
Landlord provided that the obligation of Landlord
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to prosecute such proceedings shall not be applicable to any proceeding
beyond the Appellate Tax Board. From time to time, within ten (10) days
of Landlord's notice, Tenant shall pay to Landlord, as an additional
charge, Tenant's Proportionate Share of the reasonable cost and expense
of such proceedings. If Tenant, or any other tenant, shall fail to make
any such payment within such ten (10) days period, Landlord shall
thereafter be free from any further obligations under this paragraph. In
the event that Landlord is successful in obtaining an abatement, any
costs theretofore advanced by Tenant shall (to the extent of the amount
of the refund) be repaid to Tenant and shall be deemed a cost of Landlord
in obtaining such refund for the purposes of paragraph (a) hereof.
ARTICLE IX
INDEMNITY AND PUBLIC LIABILITY INSURANCE
9.1 TENANT'S INDEMNITY. To the maximum extent this agreement may be made
effective according to law, Tenant agrees to indemnify and save harmless
Landlord from and against all claims of whatever nature arising (i) from
any accident, injury or damage whatsoever to any person, or to the
property of any person, occurring on or about the Premises or (ii) from
any accident, injury or damage occurring outside of the Premises but on
the Property, in each case where such accident, damage or injury results
from an act or omission on the part of Tenant or Tenant's agents or
employees or independent contractors or visitors and, in either case,
occurring after the date of this Lease until the end of the Term of this
Lease and thereafter so long as Tenant is in occupancy of any part of the
Premises unless such accident, damage or injury is caused by the
negligence or misconduct of Landlord or its employees, agents or
contractors or assigns. This indemnity and hold harmless agreement shall
include indemnity against all costs, expenses and liabilities incurred in
or in connection with any such claim or proceeding brought thereon, and
the defense thereof, including, without limitation, reasonable attorneys'
fees at both the trial and appellate levels.
9.2 PUBLIC LIABILITY INSURANCE. Tenant agrees to maintain in full force from
the date upon which Tenant first enters the Premises for any reason,
throughout the Term of this Lease, and thereafter so long as Tenant is in
occupancy of any part of the Premises, a policy of general liability and
property damage insurance (including broad form contractual liability,
independent contractor's hazard and completed operations coverage) under
which Tenant is named as an insured and Landlord (and such other persons
as are in privity of estate with Landlord as may be set forth in
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a notice from time to time) is named as an additional insured, and under
which the insurer agrees to indemnify and hold Landlord, and those in
privity of estate with Landlord (as may be set forth in a notice from
time to time), harmless from and against all cost, expense and/or
liability arising out of or based upon any and all claims, accidents,
injuries and damages set forth in Section 9.1. Each such policy shall be
non-cancellable and non-amendable with respect to Landlord and Landlord's
said designees without thirty (30) days' prior notice and shall be in at
least the amounts of the Initial Public Liability Insurance specified in
Section 1.1 or such greater amounts as Landlord shall from time to time
reasonably request, and a duplicate original or certificate thereof shall
be delivered to Landlord.
9.3 TENANT'S RISK. To the maximum extent this agreement may be made
effective according to law, Tenant agrees that all of the furnishings,
fixtures, equipment, effects and property of every kind, nature and
description of Tenant and all persons claiming by, through or under
tenant which, during the term of this Lease or any occupancy of the
Premises by Tenant or anyone claiming under Tenant, may be on the
Premises or elsewhere on the Property, shall be at the sole risk and
hazard of Tenant, and if the whole or any part thereof shall be destroyed
or damaged by fire, water or otherwise, or by the leakage or bursting of
water pipes or sprinklers, by theft or from any other cause, no part of
said loss of damage is to be charged to or be borne by Landlord unless
due to the negligence or misconduct of Landlord, its employees, agents,
or contractors. Tenant shall carry "all-risk" property insurance
(including so-called improvements and betterments) covering such
furnishings, fixtures, equipment, effects and property, and the policies
evidencing such insurance shall provide for a waiver of subrogation as
required in section 9.5.
9.4 INJURY CAUSED BY THIRD PARTIES. To the maximum extent this agreement may
be made effective according to law, Tenant agrees that Landlord shall not
be responsible or liable to Tenant, or to those claiming by, through or
under Tenant, for any loss or damage that may be occasioned by or through
the acts or omissions of persons other than Landlord and Landlord's
employees, agents and contractors.
9.5 WAIVER OF SUBROGATION. Insofar as, and to the extent that, the following
provision shall not make it impossible to secure insurance coverage
obtainable from responsible insurance companies doing business in the
locality in which the Property is located (even though extra premium may
result therefrom) Landlord and Tenant mutually agree that any property
damage insurance, carried by either shall provide for the waiver by the
insurance carrier of any right of subrogation against the other, and they
further mutually agree that, with respect to any damage to property, the
loss from which is covered by insurance then being carried by them,
respectively, the one carrying such insurance and suffering such loss
releases the other of and from any and all claims with respect to such
loss to the extent of the insurance proceeds paid with respect thereto.
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ARTICLE X
FIRE, EMINENT DOMAIN, ETC.
10.1 ABATEMENT OF RENT. If the Premises shall be damaged by fire or other
casualty, Base Rent and Tenant's Share of operating and Tax Expenses
payable by Tenant shall abate proportionately for the period in which, by
reason of such damage, there is material interference with Tenant's use
of the Premises, having regard to the extent to which Tenant may be
required to discontinue Tenant's use of all or a portion of the Premises,
but such abatement or reduction shall end if and when Landlord shall have
substantially restored the Premises (excluding any alterations, additions
or improvements made or to be made by Tenant) to the condition in which
they were prior to such damage. If the Premises shall be affected by any
exercise of the power of eminent domain, Base Rent and Tenant's Share of
Operating and Tax Expenses payable by Tenant shall be justly and
equitably abated and reduced according to the nature and extent of the
loss of use thereof suffered by Tenant. In no event shall Landlord have
any liability for damages to Tenant for inconvenience, annoyance or
interruption of business arising from such fire, casualty or eminent
domain.
10.2 RIGHTS OF TERMINATION. Within thirty (30) days from the date of damage
by fire or other casualty, Landlord shall notify Tenant whether or not
the Premises can be materially restored within one hundred and eighty
(180) days from the date of such damage, and Landlord's reasonable
determination shall be binding on Tenant. For purposes hereof, the
Building or Premises shall be deemed "materially restored" if they are in
such condition as would not prevent or materially interfere with Tenant's
use of the Premises for the purpose for which it was then being used. If
such repairs cannot, in Landlord's reasonable estimation, be made within
one hundred and eighty (180) days, Landlord and Tenant shall each have
the option of giving the other, at any time after giving such notice,
notice terminating this Lease as of the date of such damage. In the
event of the giving of such notice, this Lease shall expire and all
interest of the Tenant in the Premises shall terminate as of the date of
such notice as if such date had been originally fixed in this Lease for
the expiration of the Term.
10.3 RESTORATION. In the event that neither Landlord nor Tenant exercises the
above set forth option to terminate this Lease in the event of damage by
fire or other casualty then Landlord shall repair or restore such damage
to the extent Landlord receives insurance proceeds for such repair or
restoration, this Lease continuing in full force and effect, with the
Rent hereunder to be equitably abated as herein above provided. In the
event that Landlord notifies Tenant that the Premises can be materially
restored within one hundred eighty days (180) from the date of damage by
fire or other casualty pursuant to Section 10.2 and Landlord fails to
materially restore the Premises within such one hundred eighty
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(180) day period, then Tenant shall be entitled to terminate this Lease
by giving Landlord thirty (30) days prior written notice of such
termination. In the event that Landlord fails to complete such material
restoration of the Premises within thirty (30) days of receipt of
Tenant's notice to terminate as set forth above, then this Lease shall
expire at the end of such thirty (30) days and all interest of the Tenant
in the Premises shall terminate as of such date as if such date had been
originally fixed in this Lease for the expiration of the Term. Landlord
shall not be required to repair any damage by fire or other cause, or to
make any repairs or replacements of any alterations, additions or
improvements installed in the Premises by Tenant. Notwithstanding
anything to the contrary contained in this Article, (a) Landlord shall
not have any obligation whatsoever to repair, reconstruct, or restore the
Premises when the damages resulting from any casualty covered by the
provisions of this Article occur during the last twelve (12) months of
the Term, and (b) in the event the holder of any, indebtedness secured by
a mortgage or deed of trust covering the Premises or Building or any
superior Lessor, as defined in Section 12.14 hereof, requires that any
insurance proceeds be applied to such indebtedness or to amounts owing to
such Superior Lessor, then Landlord shall have the right to terminate
this Lease by delivering written notice of termination to Tenant within
thirty (30) days after such requirement is made by any such holder,
whereupon this Lease shall end on the date of such notice as if the date
of such notice were the date originally fixed in this Lease for the
expiration of the Term.
10.4 EMINENT DOMAIN. If possession of all or any substantial part of the
Premises shall be taken by any public or quasi-public authority under the
power of eminent domain, or conveyance in lieu thereof, either party
hereto shall have the right, at its option, of giving the other, at any
time within thirty (30) days after such taking, notice terminating this
Lease. If neither party hereto shall so elect to terminate this Lease,
Rent shall be adjusted equitably. Before Tenant may terminate this Lease
by reason of taking or appropriation as above provided, such taking or
appropriation shall be so substantial as to materially interfere with
Tenant's use and occupancy thereof or shall make unusable for Tenant's
purposes more than twenty five percent of the Premises. In addition to
the rights of Landlord above, if any substantial part of the Building
shall be taken or appropriated by any public or quasi-public authority
under the power of eminent domain, or conveyance in lieu thereof, and
regardless of whether the Premises or any part thereof are so taken or
appropriated, Landlord shall have the right at its sole option, to
terminate this Lease.
10.5 AWARD. Landlord shall have and hereby reserves and expects, and Tenant
hereby grants and assigns to Landlord, all rights to recover for damages
to the Property and the leasehold interest hereby created, and to
compensation accrued or hereafter to accrue by reason of such taking,
damage or destruction, and by way of confirming the foregoing, Tenant
hereby grants and assigns, and covenants
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with Landlord to grant and assign to Landlord, all rights to such damages
or compensation; provided, however, if any such damages or compensation
award expressly includes an amount for Tenant's Removable Property or
Tenant's moving expenses, Landlord shall pay such amount to Tenant
promptly after its receipt thereof. Nothing contained herein shall be
construed to prevent Tenant from prosecuting in any condemnation
proceedings a claim for the value of any of Tenant's Removable Property
installed in the Premises by Tenant at Tenant's expense and for
relocation expenses, provided that such action shall not affect the
amount of compensation otherwise recoverable by Landlord from the taking
authority.
ARTICLE XI
DEFAULT
11.1 TENANT'S DEFAULT. (a) If at any time subsequent to the date of this Lease
any one or more of the following events (herein referred to as a "Default
of Tenant") shall happen:
(i) Tenant shall fail to pay the Base Rent when due and such
failure shall continue for five (5) full Business Days after notice
to Tenant from Landlord;
(ii) Tenant shall fail to pay Tenant's Proportionate Share of
operating and Tax Expenses or other charges hereunder when due and
such failure shall continue for ten (10) full Business Days after
notice to Tenant from Landlord; or
(iii) Tenant shall neglect or fail to perform or observe any other
covenant herein contained on Tenant's part to be performed or
observed and Tenant shall fail to remedy the same as soon as
practicable and in any event within thirty (30) days after notice to
Tenant specifying such neglect or failure, or if such failure is of
such a nature that Tenant cannot reasonably remedy the same within
such thirty (30) day period, Tenant shall fail to commence promptly
(and in any event within such thirty (30) day period) to remedy the
same and to prosecute such remedy to completion with diligence and
continuity; or
(iv) Tenant's leasehold interest in the Premises shall be taken on
execution or by other process of law directed against Tenant; or
(v) Tenant shall make an assignment for the benefit of creditors
or shall file a voluntary petition in bankruptcy or shall be
adjudicated bankrupt or
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insolvent, or shall file any petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future
Federal, State or other statute, law or regulation for the relief of
debtors, or shall seek or consent to or acquiesce in the appointment
of any trustee, receiver or liquidator of Tenant or of all or any
substantial part of its properties, or shall admit in writing its
inability to pay its debts generally as they become due; or
(vi) A petition shall be filed against Tenant in bankruptcy or
under any other law seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar
relief under any present or future Federal, State or other statute,
law or regulation and shall remain undismissed or unstayed for an
aggregate of sixty (60) days (whether or not consecutive), or if any
debtor in possession (whether or not Tenant) trustee, receiver or
liquidator of Tenant or of all or any substantial part of its
properties or of the Premises shall be appointed without the consent
or acquiescence of Tenant and such appointment shall remain
unvacated or unstayed for an aggregate of ninety (90) days (whether
or not consecutive); or
(vii) If a Default of Tenant of the kind set forth in clauses (i)
and (ii) above shall occur and Tenant shall cure such Default within
the applicable grace period and an event which would constitute a
similar Default after the applicable grace period shall occur more
than twice within the next 365 days, whether or not such similar
Default is cured within the applicable grace period;
then, in any such case, Landlord may terminate this Lease by notice to
Tenant, specifying a date not less than ten (10) full Business Days after
the giving of such notice on which this Lease shall terminate and this
Lease shall come to an end on the date specified therein as fully and
completely as if such date were the date herein originally fixed for the
expiration of the Term of this Lease (Tenant hereby waiving any rights of
redemption under Massachusetts General Laws c. 186 11) , and Tenant will
then quit and surrender the Premises to Landlord, but Tenant shall remain
liable as hereinafter provided.
(b) If this Lease shall have been terminated as provided in this
Article, or if any execution or attachment shall be issued against Tenant
or any Tenant's property whereupon the Premises shall be taken or
occupied by someone other than Tenant, then Landlord may, without notice,
re-enter the Premises, either by force, summary proceedings, ejectment or
otherwise, and remove and dispossess Tenant and all other persons and any
and all property from the same, as if this Lease had not been made, and
Tenant hereby waives the service of notice of intention to re-enter or to
institute legal proceedings to that end.
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(c) In the event of any termination as provided in this Article, Tenant
shall pay the Base Rent, Tenant's Share of operating and Tax Expenses and
other sums payable hereunder up to the time of such termination, and
thereafter Tenant, until the end of what would have been the Term of this
Lease in the absence of such termination, and whether or not the Premises
shall have been relet, shall be liable to Landlord for, and shall pay to
Landlord, as liquidated current damages, the Base Rent, Tenant's Share of
Operating and Tax Expenses and other sums which would be payable
hereunder if such termination had not occurred, less the net proceeds, if
any, of any reletting of the Premises, after deducting all reasonable
expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, legal
expenses, attorneys' fees, advertising, expenses of employees, alteration
costs and expenses of preparation for such reletting. Tenant shall pay
such current damages to Landlord monthly on the dates which the Base Rent
would have been payable hereunder if this Lease had not been terminated.
(d) At any time after such termination, whether or not Landlord shall
have collected any current damages as set forth in paragraph (c), as
liquidated final damages and in lieu of all such current damages beyond
the date of such demand, at Landlord's election Tenant shall pay to
Landlord an amount equal to the excess, if any, of the Base Rent,
Tenant's Share of Operating and Tax Expenses and other sums as
hereinbefore provided which would be payable hereunder from the date of
such demand (assuming that, for the purposes of this paragraph, annual
payments by Tenant on account of operating and Tax Expenses would be the
same as the payments required for the Operating Year immediately
preceding such demand) for what would be the then unexpired Term of this
Lease if the same remained in effect, discounted to present value at a
rate of 8% per year, over the then fair net rental value of the Premises
for the same period, also discounted to present value at a rate of 8% per
year.
(e) With respect to the remedies set forth in the foregoing paragraphs
(c) and (d), if such termination occurs prior to the date by which the
Tenant is obligated to provide the Termination Notice as set forth in
paragraph 13.1 hereof describing the Tenant Cancellation Option, such
termination shall be deemed to occur on the Termination Date (as that
term is defined in said paragraph 13.1), provided Tenant pays to Landlord
the Termination Fee set forth in paragraph 13.1 within fifteen (15) days
of Tenant's receipt of Landlord's Notice of termination as set forth in
paragraph 11.1(a). If Tenant fails to pay the Termination Fee, or if
such termination occurs after the Termination Date and Tenant had not
exercised its Cancellation option in the manner and upon the time frames
established in said paragraph 13.1, such termination shall be deemed to
occur on the date specified for expiration of the Lease in paragraph 1.1
hereof, without regard to the Tenant Cancellation Option.
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(f) In case of any Default by Tenant, re-entry, expiration and
dispossession by summary proceedings or otherwise, Landlord may (i) re-
let the Premises or any part or parts thereof, either in the name of
Landlord or otherwise, for a term or terms which may at Landlord's option
be equal to or less than or exceed the period which would otherwise have
constituted the balance of the Term of this Lease and may grant
concessions or free rent to the extent that Landlord considers advisable
and necessary for the purpose of reletting the Premises; and such actions
and the making of any alterations, repairs and decorations to the
Premises in connection therewith shall not operate or be construed to
release Tenant from liability hereunder as aforesaid. Landlord shall in
no event be liable in any way whatsoever for failure to re-let the
Premises, or, in the event that the Premises are re-let, for failure to
collect the rent under such re-letting. Tenant hereby expressly waives
any and all rights of redemption granted by or under any present or
future laws in the event of Tenant being evicted or dispossessed, or in
the event of Landlord obtaining possession of the Premises, by reason of
the violation by Tenant of any of the covenants and conditions of this
Lease.
(g) The specified remedies to which Landlord may resort hereunder are
not intended to be exclusive of any remedies or means of redress to which
Landlord may at any time be entitled lawfully, and Landlord may invoke
any remedy (including the remedy of specific performance) allowed at law
or in equity as if specific remedies were not herein provided for.
(h) All costs and expenses incurred by or on behalf of Landlord
(including, without limitation, reasonable attorneys' fees and expenses
at both the trial and appellate levels) in enforcing its rights hereunder
in connection with any Default of Tenant shall be paid by Tenant;
provided, however, if any legal proceeding is required to be brought to
enforce the terms of this paragraph, or to challenge such enforcement,
the prevailing party shall be entitled to reasonable attorneys' fees and
expenses of litigation or arbitration in addition to any other relief to
which it may be entitled.
(i) If a Guarantor of this Lease is named in Section 1.1, the happening
of any of the events described in paragraphs (a)(v) or (a)(vi) of this
Section 11.1 with respect to the Guarantor shall constitute a Default of
Tenant hereunder.
11.2 LANDLORD'S DEFAULT. Landlord shall in no event be in default in the
performance of any of Landlord's obligations hereunder unless and until
Landlord shall have failed to perform such obligations within thirty (30)
days, or such additional time as is reasonably required to correct any
such default or, in the event of an emergency as soon as reasonably
possible, after notice by Tenant to Landlord specifying wherein Landlord
has failed to perform any such obligations. All costs and expenses
incurred by or on behalf of Tenant (including, without limitation,
reasonable attorneys' fees and expenses at both the trial and appellate
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levels) in enforcing its rights hereunder in connection with any Default
of Landlord shall be paid by Landlord; provided, however, if any legal
proceeding is required to be brought to enforce the terms of this
paragraph or to challenge such enforcement, the prevailing party shall be
entitled to reasonable attorneys' fees and expenses of litigation or
arbitration in addition to any other relief to which it may be entitled.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 EXTRA HAZARDOUS USE. Tenant covenants and agrees that Tenant will not do
or permit anything to be done in or upon the Premises, or bring in
anything or keep anything therein, which shall increase the rate of
property or liability insurance on the Premises or the Property above the
standard rate applicable to Premises being occupied for Permitted Uses;
and Tenant further agrees that, in the event that Tenant shall do any of
the foregoing, Tenant will promptly pay to Landlord, on demand, any such
increase resulting therefrom, which shall be due and payable as an
additional charge hereunder.
12.2 WAIVER. (a) Except as otherwise expressly provided for in this Lease,
failure on the part of Landlord or Tenant to complain of any action or
non-action on the part of Tenant or Landlord, no matter how long the same
may continue, shall never be a waiver by Landlord or by Tenant of any
rights hereunder. Further, no waiver at any time of any of the
provisions hereof by Landlord or by Tenant shall be construed as a waiver
of any of the other provisions hereof, and a waiver at any time of any of
the provisions hereof shall not be construed as a waiver at any
subsequent time of the same provisions. The consent or approval of
Landlord or Tenant to or of any action requiring such consent or approval
shall not be construed to waive or render unnecessary Landlord's or
Tenant's consent or approval to or of any subsequent similar act by the
other.
(b) No payment by Tenant, or acceptance by Landlord, of a lesser amount
than shall be due from Tenant to Landlord shall be treated otherwise than
as a payment on account of the earliest installment of any payment due
from Tenant under the provisions hereof. The acceptance by Landlord of a
check for a lesser amount with an endorsement or statement thereon, or
upon any letter accompanying such check, that such lesser amount is
payment in full, shall be given no effect, unless agreed upon in writing
between Landlord and Tenant, and Landlord may accept such check without
prejudice to any other rights or remedies which Landlord may have against
Tenant.
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12.3 COVENANT OF QUIET ENJOYMENT. Tenant, subject to the terms and provisions
of this Lease, on payment of the Base Rent and Tenant's Share of
operating and Tax Expenses and observing, keeping and performing all of
the other terms and provisions of this Lease on Tenant's part to be
observed, kept and performed, all within any applicable grace period
allowed in this Lease, shall lawfully, peaceably and quietly have, hold,
occupy and enjoy the Premises during the term hereof without hindrance or
ejection by Landlord or persons lawfully claiming by, through or under
Landlord. The foregoing covenant of quiet enjoyment is in lieu of any
other covenant, express or implied.
12.4 LANDLORD'S LIABILITY. (a) Tenant specifically agrees to look solely to
Landlord's then equity interest in the Property at the time owned for
recovery of any judgment from Landlord; it being specifically agreed that
(i) Landlord shall have no liability for any claims accruing other than
during the period of Landlord's ownership of the Property and (ii)
neither Landlord (original or successor) nor any partner, trustee, agent,
consultant, officer, stockholder, director, employee, or beneficiary of
Landlord, nor any constituent person or entity of Landlord, shall ever be
personally liable for any such judgment, or for the payment of any
monetary obligation to Tenant. The provision contained in the foregoing
sentence is not intended to, and shall not, limit any right that Tenant
might otherwise have to obtain injunctive relief against Landlord or
Landlord's successors in interest, or to take any action not involving
the personal liability of Landlord (original or successor).
(b) With respect to any services or utilities to be furnished by
Landlord to Tenant, Landlord shall in no event be liable for failure to
furnish the same when prevented from doing so by strike, lockout,
breakdown, accident, order or regulation of or by any governmental
authority, or failure of supply or failure whenever and for so long as
may be necessary by reason of the making of necessary or emergency
repairs or changes which Landlord is required or is permitted by this
Lease or by law to make or in good faith deems necessary, or inability by
the exercise of reasonable diligence to obtain supplies, parts or
employees necessary to furnish such services, or because of war or other
emergency, or for any other cause beyond Landlord's reasonable control,
or for any cause due to any act or neglect of Tenant or Tenant's
servants, agents, employees, licensees or any person claiming by, through
or under Tenant.
(c) In no event shall Landlord ever be liable to Tenant for any loss of
business or any other indirect or consequential damages suffered by
Tenant from whatever cause.
(d) With respect to any repairs or restoration which are required or
permitted to be made by Landlord, the same may be made during normal
business hours
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and Landlord shall not have any liability for damages to Tenant for
inconvenience, annoyance or interruption of business arising therefrom.
12.5 NOTICE TO AND RIGHTS OF MORTGAGEE OR GROUND LESSOR. After receiving
notice from any person, firm or other entity that it holds a mortgage or
a ground lease which includes the Premises, no notice from Tenant to
Landlord shall be effective unless and until a copy of the same is given
to such holder or ground lessor (provided Tenant shall have been
furnished with the name and address of such holder or ground lessor), and
the curing of any of Landlord's defaults by such holder or ground lessor
shall be treated as performance by Landlord. Tenant agrees that if
Landlord shall have failed to cure any default of Landlord within the
time provided for in this Lease, then such holder or ground lessor shall
have an additional thirty (30) days within which to cure such default or,
if such default cannot be cured within that time, then such additional
time as may be necessary provided that within such thirty (30) days such
holder or ground lessor has commenced and is diligently pursuing the
remedies necessary to cure such default, (including but not limited to
commencement of foreclosure proceedings, if necessary to effect such
cure) in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.
12.6 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE. In the event of a transfer of
Landlord's interest in the Property by Landlord, Landlord shall from the
date of such transfer be entirely freed and relieved from the performance
and observance of all covenants and obligations hereunder accruing
thereafter.
12.7 RULES AND REGULATIONS. Tenant shall abide by reasonable rules and
regulations from time to time established by Landlord (provided that the
same do not diminish Tenant's rights under this Lease), and of which
Tenant has been given notice, it being agreed that such rules and
regulations will be applied by Landlord in a non-discriminatory fashion,
such that all rules and regulations shall be generally applicable to
other office tenants of the Building. Landlord agrees to use reasonable
efforts to insure that any such rules and regulations are so uniformly
enforced, but Landlord shall not be liable to Tenant for violation of the
same by any other tenant or occupant of the Building, or persons having
business with them. In the event that there shall be a conflict between
such rules and regulations and this Lease, the provisions of this Lease
shall prevail.
12.8 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this
Lease, or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of this Lease, or
the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall
not be affected thereby, and
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each term and provision of this Lease shall be valid and be enforced to
the fullest extent permitted by law.
12.9 PROVISIONS BINDING, ETC. Except as herein otherwise provided, the terms
hereof shall be binding upon and shall inure to the benefit of the
successors and assigns, respectively, of Landlord and Tenant and, if
Tenant shall be an individual, upon and to his heirs, executors,
administrators, successors and assigns. Each term and each provision of
this Lease to be performed by Tenant shall be construed to be both a
covenant and a condition. The reference contained to successors and
assigns of Tenant is not intended to constitute a consent to assignment
by Tenant.
12.10 RECORDING. Tenant agrees not to record this Lease, but, if the Term of
this Lease (including any extended term) is seven (7) years or longer,
each party hereto agrees, on the request of the other, to execute a so-
called notice of lease in recordable form, complying with applicable law
and reasonably satisfactory to Landlord's attorneys. In no event shall
such document set forth the rent or other charges payable by Tenant under
this Lease; and any such document shall expressly state that it is
executed pursuant to the provisions contained in this Lease, and is not
intended to vary the terms and conditions of this Lease. if this Lease is
terminated prior to the Lease expiration date set forth in such notice of
lease, each party hereto agrees, on the request of the other, to execute
and deliver a recordable certificate documenting such earlier termination
date.
12.11 NOTICES. Whenever, by the terms of this Lease, notices shall or may be
given either to Landlord or to Tenant, such notice shall be in writing.
All such notices shall be delivered in hand, sent by registered mail,
postage prepaid, return receipt requested, or sent by an overnight
express courier service which provides evidence of delivery or attempted
delivery.:
if intended for Landlord, delivered or addressed to Landlord at
Landlord's original Address (or to such other address or addresses as may
from time to time hereafter be designated by Landlord by like notice)
with a copy to: James D. Sperling, Esq., Kassler & Feuer, P.C., 101 Arch
Street, Boston, Massachusetts 02110.
If intended for Tenant, delivered or addressed to Tenant at Tenant's
original Address until the Commencement Date and thereafter to the
Premises (or to such other address or addresses as may from time to time
hereafter be designated by Tenant by like notice) with a copy to
Secretary, Kaiser Aerospace and Electronics Corporation, 950 Tower Lane,
Suite 800, Foster City, California 94404.
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All notices shall be effective on the day delivered provided the same is
delivered on or before 5:00 p.m. on such day or on the following Business
Day if not delivered on or before 5:00 P.M.
12.12 WHEN LEASE BECOMES BINDING. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Premises, and this document shall
become effective and binding only upon the execution and delivery hereof
by both Landlord and Tenant. All negotiations, considerations,
representations and understandings between Landlord and Tenant are
incorporated herein and this Lease expressly supersedes any proposals or
other written documents relating hereto. This Lease may be modified or
altered only by written agreement between Landlord and Tenant, and no act
or omission of any employee or agent of Landlord shall alter, change or
modify any of the provisions hereof.
12.13 PARAGRAPH HEADINGS. The paragraph headings throughout this instrument
are for convenience and reference only, and the words contained therein
shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction or meaning of the provisions of this Lease.
12.14 RIGHTS OF MORTGAGEE OR GROUND LESSOR. (a) This Lease, and all rights of
Tenant hereunder, are and shall be subject and subordinate to all
mortgages and/or ground leases which may now or hereafter affect the
Property whether or not such mortgages or leases shall also cover other
lands and/or buildings, to each and every advance made or hereafter to be
made under such mortgages, and to all renewals, modifications,
replacements and extensions of such mortgages and leases and all
consolidations of such mortgages, provided that, with respect to any such
mortgage or lease hereafter placed on the Property, Landlord shall
deliver to Tenant an agreement by such holder or lessor to the effect
that, subject to qualifications of the type set forth in the second
sentence of paragraph (b) hereof, all of Tenant's rights and Landlord's
obligations hereunder shall be recognized by such holder or lessor. Such
subordination shall be automatic and without need for any additional
action or documentation. Without derogating from the foregoing, in
confirmation of such subordination, and subject to the foregoing
condition, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the holder of any such mortgage or the lessor
under any such lease or any of their respective successors in interest
may reasonably request to evidence such subordination. Landlord agrees
to request the holder of the existing mortgage on the Property to deliver
an agreement by such holder to the effect that, subject to the
qualifications of the type set forth in the second sentence of paragraph
(b) hereof, that such holder recognizes all of Tenant's rights hereunder.
Any mortgage to which this Lease is, at the time referred to, subject and
subordinate, is herein called "Superior Mortgage" and the holder of a
Superior Mortgage is herein called "Superior Mortgagee"; and any lease to
which
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this Lease is at the time referred to, subject and subordinate is herein
called "Superior Lease" and the lessor of a Superior Lease or its
successor in interest, at the time referred to, is herein called
"Superior Lessor".
(b) If any Superior Mortgagee or Superior Lessor or the nominee or
designee of any Superior Mortgagee or Superior Lessor shall succeed to
the rights of Landlord (for the purposes of this paragraph (b), the
"Preceding Landlord") under this Lease, whether through possession or
foreclosure action or delivery of a new lease or deed, or otherwise, then
Tenant shall attorn to and recognize such party (herein called "Successor
Landlord") so succeeding to the Preceding Landlord's rights as Tenant's
landlord under this Lease and, upon such Successor Landlord's request,
Tenant shall promptly execute and deliver any instrument that such
Successor Landlord may reasonably request to evidence such attornment
provided that such Successor Landlord gives Tenant a written agreement to
accept Tenant's attornment and recognizes Tenant's rights under this
Lease (subject to the qualifications hereinafter set forth). Upon such
attornment, this Lease shall continue in full force and effect as a
direct lease between the Successor Landlord and Tenant upon all of the
terms, conditions and covenants as are set forth in this Lease, except
that the Successor Landlord (unless formerly the landlord under this
Lease or its nominee or designee) shall not be (a) liable in any way to
Tenant for any act or omission, neglect or default on the part of the
Preceding Landlord under this Lease, (b) responsible for any monies owing
by or on deposit with the Preceding Landlord to the credit of Tenant;
provided, however, that Tenant shall be entitled to a credit for payments
in advance of any Additional Rent as required hereunder, (c) subject to
any counterclaim or setoff which theretofore accrued to Tenant against
the Preceding Landlord, unless the same is specifically permitted under
this Lease, (d) bound by any modification of this Lease subsequent to
such Superior Mortgage or Lease which was not approved in writing by the
Superior Mortgagee or Superior Lessor, or by any previous prepayment of
Base Rent for more than one (1) month which was not approved in writing
by the Superior Mortgagee or Superior Lessor thereto, (e) liable to the
Tenant beyond the Successor Landlord's interest in the Property and the
rents, income, receipts, revenues, issues and profits issuing from such
Property, (f) responsible for the performance of any work to be done by
the Preceding Landlord under this Lease to render the Premises ready for
occupancy by the Tenant, (g) required to remove any person occupying the
Premises or any part thereof, except if such person claims by, through or
under the Successor Landlord.
12.15 ESTOPPEL CERTIFICATES. Within fifteen (15) days following any written
request which Landlord or Tenant (the "Requesting Party") may make from
time to time to the other party hereto (the "Responding Party"), the
Responding Party shall execute and deliver to the Requesting Party, any
prospective purchaser, mortgagee or prospective mortgagee, ground lessor
or prospective ground lessor, a sworn statement certifying as to: (a) the
Commencement Date of this Lease,
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(b) the fact that this Lease is unmodified or, if this Lease has been
modified, the extent of such modification, was duly authorized and
properly executed and delivered by the Responding Party and is in full
force and effect (or, if there have been modifications hereto, that this
Lease is in full force and effect, as modified (and attaching a copy of
such modifications), that the Lease represents the entire agreement
between Landlord and Tenant with respect to the Premises, (c) the date to
which the Base Rent has been paid, the amount of such Base Rent, Tenant's
Proportionate Share and Tenant's current monthly payments on account of
estimated operating and Tax Expenses, (d) the fact that there are no
current defaults under this Lease nor any events or conditions which,
with the giving of notice or the lapse of time or both, would constitute
a default, by the Responding Party or, to the best of the Responding
Party's knowledge, the Requesting Party, except as specified in the
Responding Party's statement, and that the Responding Party, to the best
of the Responding Party's knowledge, has no existing defense, offsets,
liens, claims or credits under this Lease or against any amounts payable
under this Lease, (e) the extent to which any options to extend the Term
or expand the Premises have been exercised by Tenant, (f) the amount of
any Security Deposit held by Landlord, (g) the fact that Tenant has not
assigned, pledged or transferred any interest in the Lease or sublet any
portion of the Premises or, if Tenant has so assigned, pledged,
transferred or sublet, the extent of such assignment, pledge, transfer or
subletting, (h) to the best of the Requesting Party's knowledge, all of
Landlord's obligations with respect to the installation of improvements
to the Premises to prepare them for Tenant's use have been satisfied (or
the extent to which they have not been satisfied), (i) that (if the
Responding Party is Tenant) no actions, whether voluntary or otherwise,
are pending against Tenant under any bankruptcy laws of the United States
or any state thereof, and (j) such other matters reasonably requested by
the Requesting Party. Tenant and Landlord acknowledge that any statement
delivered pursuant to this Article may be relied upon by any such party,
and the Responding Party shall be liable for all loss, cost or expense
resulting from or caused by any material misstatement contained in such
estoppel certificate, or the failure to deliver the estoppel certificate.
12.16 REMEDYING DEFAULTS. Landlord shall have the right, but shall not be
required, to pay such sums or do any act which requires the expenditure
of monies which may be necessary or appropriate by reason of the failure
or neglect of Tenant to perform any of the provisions of this Lease, and
in the event of the exercise of such right by Landlord, Tenant agrees to
pay to Landlord forthwith upon demand all such sums, together with
interest thereon at a rate equal to three percent (3%) over the so-called
"Base Rate" in effect from time to time at the First National Bank of
Boston, but in no event less than ten percent (10%) per annum, as an
additional charge; provided, however, if such interest rate exceeds the
highest interest rate then allowed under applicable law, such interest
rate shall be reduced automatically to the then highest interest rate
allowed under
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law. In addition to its other remedies, Landlord shall have the right
without notice or demand to add to the amount of any payment of Base
Rent, Tenant's Share of operating and Tax Expenses or any other payment
required to be made by Tenant hereunder, and which is not paid on or
before the date the same is due, a late charge in an amount equal to five
percent (5%) of the delinquent amounts and, if such amount remains
delinquent for more than thirty (30) days, Landlord shall have the right
without notice or demand to collect interest from Tenant on such
delinquent amount at a rate equal to three percent (3%) over the so-
called "Base Rate" in effect from time to time at The First National Bank
of Boston, but in no event less than ten percent (10%) per annum, to
compensate Landlord for the loss of the use of the amount not paid and
the administrative costs caused by the delinquency, Tenant hereby
agreeing that Landlord's damage by virtue of such delinquencies would be
difficult to compute and acknowledging that the amount stated herein
represents a reasonable estimate thereof.
12.17 HOLDING OVER. Any holding over by Tenant after the expiration of the
term of this Lease shall be treated as a daily tenancy at sufferance at a
rate equal to 1-1/2 times the Base Rent then in effect plus Tenant's
Share of operating and Tax Expenses and other charges herein provided
(prorated on a daily basis) and shall otherwise be on the terms and
conditions set forth in this Lease as far as applicable.
12.18 SURRENDER OF PREMISES. Upon the expiration or earlier termination of the
Term of this Lease, Tenant shall peaceably quit and surrender to Landlord
the Premises in neat and clean condition and in good order, condition and
repair, together with all alterations, additions and improvements which
may have been made or installed in, on or to the Premises prior to or
during the Term of this Lease, excepting only ordinary wear and Use and
damage by fire or other casualty for which, under other provisions of
this Lease, Tenant has no responsibility of repair or restoration.
Tenant shall remove all of Tenant's Removable Property and, to the extent
specified by Landlord, all alterations, additions and improvements made
by Tenant; and shall repair any damages to the Premises or the Building
caused by such removal. Any Tenant's Removable Property which shall
remain in the Building or on the Premises after the expiration or
termination of the Term of this Lease shall be deemed conclusively to
have been abandoned, and either may be retained by Landlord as its
property or may be disposed of in such manner as Landlord may see fit, at
Tenant's sole cost and expense.
12.19 BROKERAGE. Landlord and Tenant each mutually warrants and represents to
the other that they have dealt with no broker in connection with the
consummation of this Lease other than Broker. Landlord and Tenant hereby
each agree to indemnify, defend and hold the other harmless from any
claim arising from the breach of such representation and warranty.
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12.20 GOVERNING LAW. This Lease shall be governed exclusively by the
provisions hereof and by the laws of the Commonwealth of Massachusetts,
as the same may from time to time exist.
ARTICLE XIII
TENANT CANCELLATION OPTION
13.1 CANCELLATION OPTION. Tenant shall have the right and option (the
"Termination Option") to terminate this Lease at the end of the thirty-
sixth (36th) month, the forty-second (42nd) month, the forty-eighth
(48th) month, the fifty-fourth (54th) month, and the fifty-ninth (59th)
month of the Term (the "Termination Dates"). Tenant shall exercise its
Termination Option by giving written notice (the "Termination Notice") to
Landlord of its desire to terminate the Lease at least two hundred
seventy (270) days prior to the applicable Termination Date. In
conjunction with its Termination Notice, if Tenant terminates at the end
of the thirty-sixth month, Tenant shall pay Landlord a Termination Fee of
Thirty Five Thousand Dollars ($35,000.00) ; provided, however if Tenant
elects to exercise its Termination Option at one of the later Termination
Dates, the amount of the Termination Fee shall be reduced by One Thousand
Four Hundred Fifty Eight and 33/100 Dollars ($1,458.33) per month for
each month the Tenant occupies the Premises after the thirty-sixth month.
Tenant's failure to pay the Termination Fee at the time the Termination
Notice is given shall render the Termination Notice null and void and of
no effect whatsoever, time being of the essence of this paragraph.
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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly
executed, under seal, by persons hereunto duly authorized, in multiple copies,
each to be considered an original hereof, as of the date first set forth above.
LANDLORD:
/s/ Robert F. Tambone
-------------------------------
Robert F. Tambone, Trustee as aforesaid and
not individually
TENANT:
OKTAS, a Massachusetts general partnership,
by all of its general partners
VISTA
By: /s/ John Lyon
---------------------------
Name: John Lyon
Title: President
OKTAS, INC.
By: /s/ Ken Hori
---------------------------
Name: Ken Hori
Title: President
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FLANDERS ROAD EXHIBIT CS
JANITORIAL SPECIFICATIONS
I. LOBBY AND COMMON AREAS
A. DAILY
1. Clean glass doors and frames
2. Spot clean surrounding entrance glass
3. Spot clean interior partition glass
4. Dust lobby furniture and fixtures
5. Dust sills and ledges
6. Spot clean walls, doors, and frames
7. Sweep and damp mop tiled areas
8. Vacuum carpeted areas
9. Spot clean carpets
10. Clean and sanitize water fountain
B. WEEKLY
1. Dust high ledges and corners of atrium
C. AS NEEDED
1. Replace light bulbs
II. EXECUTIVE OFFICES AND CONFERENCE ROOMS
A. Daily
1. Remove trash and replace liners
2. Empty and clean ashtrays
3. Dust furniture, fixtures, sills and ledges
4. Vacuum carpeted areas
5. Spot clean carpets
6. Wipe down telephones
7. Spot clean walls, doors, and frames
8. Replace light tubes as necessary
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III. OFFICES AND ADMINISTRATIVE AREAS
A. DAILY
1. Remove trash and replace liners
2. Empty and clean ashtrays
3. Dust furniture, fixtures, sills, and ledges
4. Vacuum carpeted areas
5. Spot clean carpets
6. Wipe down telephones
7. Spot clean walls, doors, and frames
8. Replace light tubes as necessary
IV. CAFETERIA AND COFFEE SERVICE AREA
A. DAILY
1. Remove trash and replace liners
2. Empty and clean ashtrays
3. Sweep and damp mop floors
4. Spot clean walls
5. Wipe down food prep areas
6. Wipe down tables and chairs
7. Wipe down vending machines and microwaves
B. WEEKLY
1. Spray buff tiled floor
C. ANNUALLY (OR MORE OFTEN IF REQUIRED)
1. Strip and re-finish tiled floor
V. REST ROOMS
A. DAILY
1. Remove trash and replace liners
2. Empty and clean sanitary dispensers
3. Clean and sanitize toilets, urinals, and sinks
4. Clean shower stalls
5. Spot clean walls and partitions
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6. Clean mirrors and chrome work
7. Sweep and mop floor with germicidal solution
8. Replace paper and dispenser products
VI. ELEVATOR AND STAIRWELLS
A. DAILY
1. Vacuum / sweep elevator floor
2. Polish interior of elevator
3. Polish exterior call buttons
4. Vacuum carpeted stairwells
5. Sweep and mop non-carpeted stairwells
6. Spot clean walls and exit doors
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EXHIBIT OC
(Operating Expenses)
Operating Expenses shall include:
1. All expenses reasonably incurred by Landlord or Landlord's agents which
shall be directly related to employment of personnel, including amounts
incurred for wages, salaries and other compensation for services, payroll,
social security, unemployment and similar taxes, workmen's compensation
insurance, disability benefits, pensions, hospitalization, retirement plans
and group insurance, uniforms and working clothes and the cleaning thereof,
and expenses imposed on Landlord or Landlord's agents pursuant to any
collective bargaining agreement for the services of employees of Landlord
or Landlord's agents in connection with the operation, repair, maintenance,
cleaning, management and protection of the Property, and its mechanical
systems including, without limitation, day and night Building supervisors,
the Property manager, janitors, carpenters, engineers, mechanics,
electricians and plumbers but excluding any expenses for any executive
employees.
2. The cost reasonably incurred by Landlord for services, materials and
supplies furnished or used in the operation, repair, maintenance, cleaning,
management and protection of the Property.
3. The cost of replacements for tools and other similar equipment used in the
repair, maintenance, cleaning and protection of the Property, provided that
such costs shall be suitably prorated, over the generally accepted useful
life of such tools.
4. Reasonable expenses incurred by Landlord in any real estate tax abatement
proceeding.
5. Premiums incurred by Landlord for insurance against damage or loss to the
Building from such hazards as shall from time to time be generally required
by institutional mortgagees in the Boston area for similar properties,
including, but not by way of limitation, insurance covering loss of rent
attributable to any such hazards, and public liability insurance and
premiums for fidelity bonds covering persons having custody or control over
funds or other property of Landlord relating to the Property.
6. If, during the Term of this Lease, Landlord shall make a capital
expenditure which is necessary to meet the requirements of applicable laws,
regulations or ordinances or which is designed to increase the operating
efficiency of the Building (which for purposes hereof, shall mean that the
aggregate cost savings
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related to such capital improvement can reasonably be expected to equal the
amount of such capital expenditure (plus the interest factor hereinafter
referred to) within the generally accepted useful life of such
improvement), the total cost of which is not properly includable in
Operating Expenses for the Operating Year in which it was made, there shall
nevertheless be included in such operating Expenses for the Operating Year
in which it was made and in operating Expenses for each succeeding
operating Year the annual charge-off of such capital expenditure. Annual
charge-off shall be determined by dividing the original capital expenditure
by the number of years of useful life of the improvement made with the
capital expenditure, and adding thereto a reasonable interest factor
(taking into account the rate then being charged by institutional lenders
for loans to finance the item over its useful life) on the unamortized
portion of the capital expenditure; and the useful life shall be determined
reasonably by Landlord in accordance with generally accepted accounting
principles and practices in effect at the time of making such expenditure.
7. Costs incurred by Landlord for electricity, fuel, water and sewer use
charges, and all other utilities supplied to the Property and fees for any
public services rendered to the Property, except for those actually paid or
reimbursed to Landlord by tenants of the Property.
8. Betterment assessments provided the same are apportioned equally over the
longest period permitted by law, and all sales and use taxes relating to
any items includable in Operating Expenses.
9. Notwithstanding the foregoing, Operating Expenses shall not include the
following: (a) the cost of repairs or replacements (i) resulting from
casualty losses or eminent domain takings (other than the amount of any
deductible) or (ii) correcting defects in design or construction of the
Building; (b) costs incurred due to violation by Landlord of the terms and
conditions of any lease, (c) depreciation or amortization of the Building
or any part thereof; (d) replacement or contingency reserves; (e) ground
lease rents or payment of any debt or equity obligations; (f) legal and
other professional fees relating to negotiations with tenants, leasing,
financing or other services not related to the normal operation,
maintenance, cleaning, repair and protection of the Property; (g) brokerage
fees and commissions; (h) the cost of special services rendered to Building
tenants which are directly chargeable to such tenants; (i) expenses for
renovating tenant space or incurred for the sole benefit of a particular
tenant; and (j) Tax service fees. Operating Expenses shall be reduced by
the amount of any proceeds, awards, payments, guarantees, credits or
reimbursements which Landlord actually receives and which are applicable to
Operating Expenses, less the cost reasonably incurred in recovering such
amount.
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GUARANTY
This GUARANTY is made as of the 14th day of April, 1994 by, Kaiser
Aerospace and Electronics Corporation, a Nevada corporation, having an address
of 950 Tower Lane, Suite 800, Foster City, California, 94404 (the "Guarantor"),
for the purpose of inducing Robert F. Tambone, Trustee of MAT Realty Trust u/d/t
dated June 4, 1986 and recorded with the Worcester County Registry of Deeds in
Book 9569, Page 286, having a principal place of business at c/o Atlantic Realty
and Development, Inc. . 24 New England Executive Park, Burlington, MA 01803 (the
"Landlord"), to enter into a Lease (the "Lease") with OKTAS (the "Tenant"), a
Massachusetts general partnership, for 8,733 square feet of space in the
premises known as and numbered 134 Flanders Road, Westborough, Massachusetts
(the "Leased Premises"), upon the terms and conditions set forth in the Lease
which is attached hereto as Exhibit "A".
In consideration of the foregoing, each of the undersigned agrees:
1. GUARANTY. Subject to the terms and conditions of this Guaranty, the
Guarantor unconditionally guarantees to the Landlord prompt and full payment and
performance when due of all of the present and future amounts due from Tenant
under the Lease. All such amounts due are referred to in this Guaranty as the
"Obligations." The Guarantor's liability hereunder is direct and unconditional
and may be enforced after nonpayment or nonperformance by the Tenant of any of
the obligations without requiring Landlord to resort to any other person or
entity (including, without limitation, the Tenant) or any other right, remedy or
collateral.
2. RIGHTS OF LANDLORD. The Guarantor authorizes the Landlord to alter at
any time, in accordance with the terms of Lease, any of the terms of the
Obligations, to take and to hold any security for the obligations and to accept
additional or substituted security, to subordinate, compromise or release any
security, to release the Tenant from its liability for all or any part of the
Obligations, to release the Guarantor hereunder or to substitute or add one or
more guarantors or endorsers hereunder, and to assign this Guaranty in whole or
in part. Landlord may take any and all of the foregoing actions upon such terms
and conditions as Landlord may elect, without obtaining the consent of the
Guarantor and without affecting the liability of the Guarantor to Landlord.
Landlord shall give Guarantor notice as required under paragraph 12.11 of the
Lease.
3. JOINT, SEVERAL AND INDEPENDENT LIABILITY. The obligations of the
Guarantor under this Guaranty are joint and several and independent of the
obligations of the Tenant. Landlord may release or settle with the Tenant or
any other guarantor at any time without affecting the continuing liability of
the Guarantor. Landlord may proceed against the Guarantor under this Guaranty
without first proceeding against the Tenant, against any other Guarantor or any
other person or any security held by Landlord and without pursuing any other
remedy. Landlord's rights under this Guaranty will not be
42
<PAGE>
altered or exhausted by any action by Landlord until all of the Obligations have
been paid, performed and satisfied in full.
4. WAIVER OF INDULGENCE. The Guarantor waives notice of acceptance of
this Guaranty and all presentment, demand, protest, notice of protest and
notices of default or dishonor of any obligation guaranteed hereby and all other
suretyship defenses generally. No extension of time or other indulgence or
release of liability or collateral granted by Landlord to the Tenant or to the
Guarantor will release or affect the obligations of the Guarantor hereunder and
no act, omission or delay on the part of Landlord in exercising any rights
hereunder or in taking any action to collect or enforce payment or performance
of any of the obligations shall be a waiver of any such right or release or
affect the Obligations. This Guaranty shall not be impaired by any bankruptcy,
insolvency, arrangement, assignment for the benefit of creditors, reorganization
or other debtor relief proceedings under any federal or state law, whether
now existing or hereafter enacted, with respect to Tenant, or if for any other
reason Tenant or any other guarantor has no legal obligation to discharge any of
the obligations.
5. SUBORDINATION OF RIGHTS. The Guarantor covenants and agrees that any
indebtedness of the Tenant to the Guarantor, whether arising from payments made
by the Guarantor pursuant to this Guaranty or otherwise, is hereby subordinated
to the Obligations and that after any default under the Lease, the Guarantor
shall hold any funds received from Tenant in trust for Landlord to satisfy the
Obligations. This subordination of the indebtedness and other Obligations shall
continue until all of the Obligations have been paid, performed and satisfied in
full. Nothing in this Section shall prevent the Guarantor from enforcing and
collecting any obligation owed to the Guarantor by the Tenant prior to a default
under the Lease or after the Obligations have been paid, performed and satisfied
in full.
6. DEFAULT. Landlord may declare the Guarantor in default under this
Guaranty if the Guarantor fails to perform any of its obligations under this
Guaranty or under any other guaranty given to Landlord in connection with the
Lease.
7. DELAY; CUMULATIVE REMEDIES. No delay or failure by the Landlord to
exercise any right or remedy against the Tenant or the Guarantor will be
construed as a waiver of that right or remedy. All remedies of Landlord against
the Tenant and the Guarantor are cumulative.
8. EXPENSES OF COLLECTION. The Guarantor shall pay to Landlord on demand
any and all expenses paid or incurred by Landlord, including reasonable
attorneys' fees and disbursements, in connection with the collection or
enforcement of the obligations or this Guaranty. Until paid to Landlord, such
sums will bear interest at the default rate set forth in the Lease. Provided,
however, if a legal proceeding is initiated to either collect or enforce the
Obligations, or to challenge such collection or enforcement, the
43
<PAGE>
prevailing party shall be entitled to reasonable attorneys' fees and expenses of
litigation or arbitration in addition to any other relief to which it may be
entitled.
9. ENTIRE AGREEMENT. The whole of this Guaranty is set forth herein, and
there is no verbal or other written agreement, and no understanding or custom
affecting the terms hereof. This Guaranty can be modified only be a written
instrument signed by the parties to be charged.
10. INTERPRETATION AND BINDING EFFECT. If any provision of this Guaranty
shall be held to be prohibited or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Guaranty. This Guaranty shall be governed and construed pursuant to
laws of The Commonwealth of Massachusetts and shall take effect as a sealed
instrument and shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto.
KAISER AEROSPACE AND ELECTRONICS
CORPORATION
/s/ illegible By:/s/ illegible
- --------------------------- --------------------------------
Witness its
duly authorized Senior V.P.
44
<PAGE>
FIRST AMENDMENT TO LEASE
This First Amendment to Lease (the "Amendment") is made as of this 29th day
of March, 1996, by and between Robert F. Tambone, as Trustee of MAT Realty
Trust, u/d/t dated June 4, 1986 and recorded with the Worcester County Registry
of Deeds in Book 9569, Page 286 (the "Landlord") and OKTAS, a Massachusetts
general partnership of which OKTAS, Inc., a Massachusetts corporation and VISTA
Medical Technologies, Inc., a California corporation, are the sole general
partners (the "Tenant").
Reference is hereby made to a certain lease the ("Lease") dated as of April
14, 1994 by and between Landlord and Tenant, relating to, certain space in the
building located at 134 Flanders Road, Westborough, Massachusetts. The Guaranty
of Kaiser Aerospace and Electronics Corporation, a Nevada corporation, will
remain with respect to the obligations arising from the 8,733 square feet
originally leased under the Lease (the "Original Premises"), but the obligations
of Tenant under this Amendment will be secured by a security deposit in lieu of
a guaranty. Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Lease.
WHEREAS, Landlord and Tenant desire to add 4,663 rentable square feet of
space on the ground floor of the Building (the "Additional Premises') to the
Premises leased under the Lease and to amend the Lease in the manner hereinafter
provided;
NOW, THEREFORE, in consideration of the agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Landlord and Tenant hereby amend the Lease as of the
earlier of April 30,1996 and Substantial Completion of the Tenant Improvements
(as hereinafter defined) installed by Tenant (the "Effective Date") as follows:
1. In addition to the Base Rent described in Section 1.1 of the Lease,
the following is inserted therewith and added thereto:
Additional Premises Base Rent: The sums set forth below, as the same
may be adjusted and/or abated pursuant to this Lease:
Forty One Thousand Nine Hundred Sixty Seven Dollars ($41,967) annually
throughout the Term ($9.00 per square foot of Premises Rentable Area).
2. The definition of "Premises" contained in Section 1.1 of the Lease is
hereby deleted and the following is inserted therefor:
8,733 square feet until the Effective Date and, then, 13,396 square
feet (the "Premises Rentable Area") of the Building which is agreed to be
as shown on EXHIBIT FP annexed hereto."
<PAGE>
3. The definition of "Premises Usable Area" contained in Section 1.1 of
the Lease is hereby deleted in its entirety.
4. The definition of "Tenant's Proportionate Share" contained in Section
1.1 of the Lease is hereby deleted and the following is inserted therefor:
"The quotient derived by dividing the Premises Rentable Area by the
Building Rentable Area which as of the execution date of this Lease
Amendment is 15.32% and, as of the Effective Date, will become 23.50%."
5. EXHIBIT FP of the Lease is hereby deleted and the plan attached hereto
as EXHIBIT FP is hereby incorporated into the Lease as EXHIBIT FP.
6. The definition of "Landlord's Original Address" contained in Section
1.1 of the Lease is hereby deleted and the following inserted therefor:
c/o Atlantic Realty & Development, Inc.
24 New England Executive Park
Burlington, Massachusetts 01803
7. The Term for the Additional Premises shall extend from the Effective
Date through the expiration date of the Term for the original Premises, which is
agreed to be May 1, 1999.
8. A definition for "Security Deposit" shall be added to Section 1.1 of
the Lease as follows: $10,491.75.
9. Article XIII, Tenant's Cancellation Option, is hereby deleted from the
Lease for all purposes and the following Article XIII, Security Deposit, shall
be inserted therefor:
ARTICLE XIII
SECURITY DEPOSIT
13.1 Tenant has deposited with Landlord the Security Deposit which shall be
held by Landlord as security for the faithful performance by Tenant of all the
terms, covenants and conditions of this Lease to be kept and performed by Tenant
and, except as hereinafter stated, not as an advance rental deposit or as a
measure of Landlord's damage in case of Tenant's Default. If a Default of
Tenant occurs Landlord may use any part of the Security Deposit for the payment
of any Base Rent, Tenant's Proportionate Share of Operating and Tax Expenses, or
other sum owing to Landlord, or for the payment of any amount which Landlord may
spend or become obligated to spend by reason of a Default of Tenant or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of a Default of Tenant. If any portion is so used, Tenant shall within
five (5) days after written demand therefore, deposit with Landlord an amount
sufficient to restore the Security Deposit to its original
2
<PAGE>
amount. Tenant's failure to do so shall be a material breach of this Lease.
Landlord shall not be required to keep this Security Deposit separate from its
general funds, and Tenant shall not be entitled to interest on such deposit. If
Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it, the Security Deposit or any balance thereof shall be returned
to Tenant within 60 days after termination of this Lease unless Landlord shall
have reasonably determined that Tenant's obligations under this Lease have not
been fulfilled. Within 60 days after Landlord's reasonable determination of
Tenant's obligations under this Lease, Landlord shall return the Security
Deposit to Tenant to the extent not used to fully discharge Tenant's obligations
under Lease. Notwithstanding anything in the foregoing to the contrary, in the
event no Default exists as of or after the date two (2) months prior to the
expiration date of the Term, upon written request of Tenant an amount equal to
no more than two months of Base Rent due under this Lease may be applied by
Tenant from the Security Deposit towards Tenant's remaining Base Rent
obligations.
10. Except as otherwise expressly stated herein, the Additional Premises
shall be delivered to Tenant by Landlord in its "AS IS" condition on the
Effective Date and thereupon shall become part of the Premises. Landlord shall
not be obligated to install any tenant improvements. Any work done by Tenant in
the Additional Premises shall be done in full compliance with all applicable
laws and regulations, with Section 5.2 of the Lease, and with all other
applicable provisions of the Lease. "Substantial Completion of the Tenant
Improvements" shall be deemed to be the earlier of (a) Tenant's occupancy of the
Additional Premises for Tenant's business purposes; (b) issuance of a
Certificate of Occupancy for the Additional Premises by the Town of Westborough;
or (c) completion of the Tenant Improvements to the extent that the Additional
Premises are in an operating condition usable by Tenant for the Permitted Uses
except for minor items of work which can be completed after occupancy has been
taken by Tenant without causing material interference with Tenant's use of the
Premises for the Permitted Uses (i.e. so-called "punch list" items).
11. Landlord and Tenant agree that Tenant shall be obligated to pay, in
the manner specified in Section 8.2 of the Lease, a management fee of three (3%)
percent of Base Rent relative to the Premises and the Additional Premises.
12. Landlord agrees to expeditiously construct a shipping/receiving area
(the "Shipping Area") serving Tenant and other space on the ground floor of the
Building. Such area shall include a bell and associated nameplate for each
tenant served by the Shipping Area, each of which bells to ring only in the area
of the specified tenant. Tenant agrees to share on a pro rata basis with other
tenants authorized by the Landlord to utilize the Shipping Area all Operating
Expenses arising with respect to the Shipping/Receiving Area, including without
limitation, Electricity Expenses, cleaning, maintenance and any additional
3
<PAGE>
insurance expense directly attributable to such Shipping Area or the use
thereof, all payable at times and in the manner specified in Section 8.2(b) of
the Lease.
Except as expressly set forth herein, the Lease shall remain unmodified and
in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be
duly executed, under seal, by persons hereunto duly authorized, in multiple
copies, each to be considered an original hereof, as of the date first set forth
above.
LANDLORD:
/s/ Robert F. Tambone
---------------------------------------
Robert F. Tambone, Trustee as aforesaid
and not individually
TENANT:
OKTAS, a Massachusetts general
partnership
By: Oktas, Inc., a Massachusetts
corporation
By: /s/ Ken Hori
------------------------------
Name: Ken Hori
------------------------------
Title: President
-----------------------------
By: Vista Medical Technologies, Inc., a
California corporation, its general
partner
By: /s/ John Lyon
------------------------------
Name: John Lyon
------------------------------
Title: President
-----------------------------
4
<PAGE>
CLERK'S CERTIFICATE
I, /s/ KEN HORI, do hereby certify that I am the Clerk of Oktas, Inc. (the
"Corporation), a Massachusetts corporation with its principal place of business
in Westborough, Massachusetts, and that I have been duly elected and am
presently serving in that capacity in accordance with the Bylaws of the
Corporation.
I further certify that by unanimous written consent of the directors of the
Corporation, votes in the form of EXHIBIT A attached hereto were duly adopted by
all present at a meeting of said directors duly called and as to which notice
was duly given as required by law and the By-laws of the Corporation. The votes
as specified are presently in full force and effect and have not been revoked or
rescinded as of the date hereof.
I further certify that as of this date the following is the current duly
elected and acting officer of the Corporation who is authorized pursuant to the
attached votes.
Name Title
---- -----
Ken Hori President
- ------------------------------ ------------------------------
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of the
Corporation this 29TH day of MARCH , 1996.
Ken Hori
------------------------------
, Clerk
[CORPORATE SEAL]
5
<PAGE>
EXHIBIT A
VOTED: That the Corporation be authorized on the signature of its President,
Ken Hori, to enter into a leasing arrangement as general partner of
Oktas, a Massachusetts general partnership with Robert F. Tambone, as
Trustee of MAT Realty Trust (the "Landlord") in respect of the
Building known as 134 Flanders Road, Westborough, Massachusetts, as
evidenced by a lease and amendment (together, the "Lease") for same.
VOTED: That the Lease in the form submitted by the Landlord be and is hereby
approved, and that the named President is hereby authorized to
execute, seal, and deliver such document on behalf of the Corporation
with such changes therein as such officer so acting may deem necessary
or desirable, the execution and delivery thereof to be conclusive
evidence that the same have been separately authorized by the
Directors of the Corporation.
VOTED: That the President of the Corporation is hereby authorized to execute
and deliver such other documents, instruments, and certificates and to
do such other acts as may be necessary or desirable to consummate the
leasing arrangement approved above, the execution and delivery thereof
or the doing of any such act to be the conclusive evidence that such
has been separately approved by the Directors of the Corporation.
6
<PAGE>
CLERK'S CERTIFICATE
I, Larry Osterink, do hereby certify that I am the Clerk of Vista Medical
Technologies, Inc., (the "Corporation), a California corporation with its
principal place of business in Carlsbad, California, and that I have been duly
elected and am presently serving in that capacity in accordance with the Bylaws
of the Corporation.
I further certify that by unanimous written consent of the directors of the
Corporation, votes in the form of EXHIBIT A attached hereto were duly adopted by
all present at a meeting of said directors duly called and as to which notice
was duly given as required by law and the By-laws of the Corporation. The votes
as specified are presently in full force and effect and have not been revoked or
rescinded as of the date hereof.
I further certify that as of this date the following is the current duly
elected and acting officer of the Corporation who is authorized pursuant to the
attached votes.
Name Title
---- -----
John Lyon President
- ------------------------------ ------------------------------
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of the
Corporation this 29th day of MARCH, 1996.
/s/ Larry M. Osterink
------------------------------
, Clerk
[CORPORATE SEAL]
7
<PAGE>
EXHIBIT A
VOTED: That the Corporation be authorized on the signature of its President,
John Lyon, to enter into a leasing arrangement as general partner of
Oktas, a Massachusetts general partnership, with Robert F. Tambone, as
Trustee of the MAT Realty Trust (the "Landlord") in respect of the
Building known as 134 Flanders Road, Westborough, Massachusetts, as
evidenced by a lease (the "Lease") for same.
VOTED: That the Lease in the form submitted by the Landlord be and is hereby
approved, and that the named President is hereby authorized to
execute, seal, and deliver such document on behalf of the Corporation
with such changes therein as such officer so acting may deem necessary
or desirable, the execution and delivery thereof to be conclusive
evidence that the same have been separately authorized by the
Directors of the Corporation.
VOTED: That the President of the Corporation is hereby authorized to execute
and deliver such other documents, instruments, and certificates and to
do such other acts as may be necessary or desirable to consummate the
leasing arrangement approved above, the execution and delivery thereof
or the doing of any such act to be the conclusive evidence that such
has been separately approved by the Directors of the Corporation.
8
<PAGE>
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease (the "Amendment") is made as of this 28th
day of October, 1996, by and between Robert F. Tambone, as Trustee of MAT Realty
Trust, u/d/t dated June 4, 1986 and recorded with the Worcester County Registry
of Deeds in Book 9569, Page 286 (the "Landlord") and OKTAS, a Massachusetts
general partnership of which OKTAS, Inc., a Massachusetts corporation and VISTA
Medical Technologies, Inc., a California corporation, are the sole general
partners (the "Tenant").
Reference is hereby made to a certain lease the (as amended, the "Lease")
dated as of April 14, 1994 by and between Landlord and Tenant, and a certain
First Amendment to Lease dated as of March 1 1996 (the "First Amendment"),
relating to certain space in the building located at 134 Flanders Road,
Westborough, Massachusetts. The Guaranty of Kaiser Aerospace and Electronics
Corporation, a Nevada corporation, will remain with respect to the obligations
arising from the 8,733 square feet originally leased under the Lease (the
"Original Premises"), but the obligations of Tenant under the First Amendment
will be secured by a security deposit in lieu of a guaranty. Capitalized terms
used herein and not otherwise defined shall have the meanings set forth in the
Lease.
WHEREAS, Landlord and Tenant desire to add 9,128 rentable square feet of
space on the second floor of the Building (the "Second Amendment Additional
Premises') to the Premises leased under the Lease and First Amendment, and to
amend the Lease in the manner hereinafter provided;
NOW, THEREFORE, in consideration of the agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Landlord and Tenant hereby amend the Lease as of November
1, 1996 (the "Effective Date") as follows:
1. In addition to the Base Rent described in Section 1.1 of the Lease,
and in addition to the Base Rent described in the First Amendment, the following
is inserted therewith and added thereto:
Second Amendment Additional Premises Base Rent: The sums set forth
below, as the same may be adjusted and/or abated pursuant to this Lease:
One Hundred Thousand Four Hundred Eight Dollars ($100,408) annually
($8,367.33 monthly) for the first year of the Term ($11.00 per square
foot of Premises Rentable Area).
For the second year of the Term, One Hundred Four Thousand Nine
Hundred Seventy Two Dollars ($104,972) annually ($8,747.67 monthly)
(11.50 per square foot of Premises Rentable Area).
<PAGE>
For the third and fourth years of the Term, One Hundred Nine Thousand
Five Hundred Thirty Six Dollars ($109,536) annually ($9,128 monthly)
(12.00 per square foot of Premises Rentable Area).
For the fifth year of the Term, One Hundred Fourteen Thousand, One
Hundred Dollars ($114,100) annually ($9,508.33 monthly) (12.50 per
square foot of Premises Rentable Area).
2. The definition of "Premises" contained in Section 1. 1 of the Lease is
hereby deleted and the following is inserted therefor:
13,396 square feet until the Effective Date and, then, 22,524 square
feet (the "Premises Rentable Area") of the Building which is agreed to be
as shown on EXHIBIT FP annexed hereto.
3. The definition of "Tenant's Proportionate Share" contained in Section
1.1 of the Lease is hereby deleted and the following is inserted therefor:
"The quotient derived by dividing the Premises Rentable Area by the
Building Rentable Area which as of the execution date of this Lease
Amendment is 23.50% and, as of the Effective Date, will become 39.52%."
4. EXHIBIT FP of the Lease is hereby deleted and the plan attached hereto
as EXHIBIT FP is hereby incorporated into the Lease as EXHIBIT FP.
5. The definition of "Landlord's Original Address" contained in Section
1.1 of the Lease is hereby deleted and the following inserted therefor:
c/o Atlantic Realty & Development, Inc.
24 New England Executive Park
Burlington, Massachusetts 01803
6. The Term for the Second Amendment Additional Premises shall extend
from the Effective Date through October 31, 2001. The Term for the original
premises and the Additional Premises leased pursuant to the Lease and the First
Amendment shall be unchanged by this Second Amendment.
7. Except as otherwise expressly stated herein, the Additional Premises
shall be delivered to Tenant by Landlord in its "AS IS" condition on the
Effective Date and thereupon shall become part of the Premises. Landlord shall
not be obligated to install any tenant improvements. Any work done by Tenant in
the Additional Premises shall be done in full compliance with all applicable
laws and regulations, with Section 5.2 of the Lease, and with all other
applicable provisions of the Lease.
2
<PAGE>
8. Landlord and Tenant agree that Tenant shall be obligated to pay, in
the manner specified in Section 8.2 of the Lease, a management fee of three (3%)
percent of Base Rent relative to the Premises, the Additional Premises, and the
Second Amendment Additional Premises.
Except as expressly set forth herein, the Lease shall remain unmodified and
in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be
duly executed, under seal, by persons hereunto duly authorized, in multiple
copies, each to be considered an original hereof, as of the date first set forth
above.
LANDLORD:
/s/ Robert F. Tambone
-----------------------------------
Robert F. Tambone, Trustee as aforesaid
and not individually
TENANT:
OKTAS, a Massachusetts general
partnership
By: Oktas, Inc., a Massachusetts
corporation
By: /s/ Ken Hori
---------------------------
Name: Ken Hori
-------------------------
Title: President
-----------------------------
By: Vista Medical Technologies, Inc., a
California corporation, its general
partner
By: /s/ John Lyon
---------------------------
Name: John Lyon
-------------------------
Title: President
------------------------
3
<PAGE>
CLERK'S CERTIFICATE
I, Ken Hori, do hereby certify that I am the Clerk of Oktas, Inc. (the
"Corporation), a Massachusetts corporation with its principal place of business
in Westborough, Massachusetts, and that I have been duly elected and am
presently serving in that capacity in accordance with the Bylaws of the
Corporation.
I further certify that by unanimous written consent of the directors of the
Corporation, votes in the form of EXHIBIT A attached hereto were duly adopted by
all present at a meeting of said directors duly called and as to which notice
was duly given as required by law and the By-laws of the Corporation. The votes
as specified are presently in full force and effect and have not been revoked or
rescinded as of the date hereof.
I further certify that as of this date the following is the current duly
elected and acting officer of the Corporation who is authorized pursuant to the
attached votes.
Name Title
---- -----
Ken Hori President
- ------------------------------ ------------------------------
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of the
Corporation this 22 day of October, 1996.
Ken Hori
------------------------------
, Clerk
[CORPORATE SEAL]
4
<PAGE>
EXHIBIT A
VOTED: That the Corporation be authorized on the signature of its President,
Ken Hori, to enter into a leasing arrangement as general partner of
Oktas, a Massachusetts general partnership with Robert F. Tambone, as
Trustee of MAT Realty Trust (the "Landlord") in respect of the
Building known as 134 Flanders Road, Westborough, Massachusetts, as
evidenced by a lease and amendment (together, the "Lease") for same.
VOTED: That the Second Amendment to Lease in the form submitted by the
Landlord be and is hereby approved, and that the named President is
hereby authorized to execute, seal, and deliver such document on
behalf of the Corporation with such changes therein as such officer so
acting may deem necessary or desirable, the execution and delivery
thereof to be conclusive evidence that the same have been separately
authorized by the Directors of the Corporation.
VOTED: That the President of the Corporation is hereby authorized to execute
and deliver such other documents, instruments, and certificates and to
do such other acts as may be necessary or desirable to consummate the
leasing arrangement approved above, the execution and delivery thereof
or the doing of any such act to be the conclusive evidence that such
has been separately approved by the Directors of the Corporation.
5
<PAGE>
CLERK'S CERTIFICATE
I, Robert DeVaere, do hereby certify that I am the Clerk of Vista Medical
Technologies, Inc. (the "Corporation), a California corporation with its
principal place of business in Carlsbad, California, and that I have been duly
elected and am presently serving in that capacity in accordance with the Bylaws
of the Corporation.
I further certify that by unanimous written consent of the directors of the
Corporation, votes in the form of EXHIBIT A attached hereto were duly adopted by
all present at a meeting of said directors duly called and as to which notice
was duly given as required by law and the By-laws of the Corporation. The votes
as specified are presently in full force and effect and have not been revoked or
rescinded as of the date hereof.
I further certify that as of this date the following is the current duly
elected and acting officer of the Corporation who is authorized pursuant to the
attached votes.
Name Title
---- -----
John Lyon President
- ------------------------------ ------------------------------
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of the
Corporation on this 22 day of October, 1996.
Robert DeVaere
------------------------------
, Clerk
[CORPORATE SEAL]
6
<PAGE>
EXHIBIT A
VOTED: That the Corporation be authorized on the signature of its President,
John Lyon to enter into a leasing arrangement as general partner of
Oktas, a Massachusetts general partnership, with Robert F. Tambone, as
Trustee of the MAT Realty Trust (the "Landlord") in respect of the
Building known as 134 Flanders Road, Westborough, Massachusetts, as
evidenced by a lease (the "Lease") for same.
VOTED: That the Second Amendment to Lease in the form submitted by the
Landlord be and is hereby approved, and that the named President is
hereby authorized to execute, seal, and deliver such document on
behalf of the Corporation with such changes therein as such officer so
acting may deem necessary or desirable, the execution and delivery
thereof to be conclusive evidence that the same have been separately
authorized by the Directors of the Corporation.
VOTED: That the President of the Corporation is hereby authorized to execute
and deliver such other documents, instruments, and certificates and to
do such other acts as may be necessary or desirable to consummate the
leasing arrangement approved above, the execution and delivery thereof
or the doing of any such act to be the conclusive evidence that such
has been separately approved by the Directors of the Corporation.
7
<PAGE>
EXHIBIT 10.32
STANDARD SUBLEASE
American Industrial Real Estate Association
1. PARTIES. This sublease, dated, for reference purposes only, January 13,
1996, is made by and between Quintiles Pacific, Inc. (formerly known as SDCRA,
Inc.) (herein called "Sublessor") and VISTA MEDICAL TECHNOLOGIES, INC.
(herein called "Sublessee").
2. PREMISES. Sublessor hereby subleases to Sublessee and Sublessee hereby
subleases from Sublessor for the term, at the rental, and upon all of the
conditions set forth herein, that certain real property situated in the
County of SAN DIEGO State of California, commonly known as 5451 Avenida
Encinas, Suites A, B, C, J & K, Carlsbad, CA 92008 and described as
Approximately 6,500 rentable square feet.
Said real property, including the land and all improvements thereon, is
hereinafter called the "Premises".
3. TERM.
3.1 TERM. The term of this Sublease shall be for 33 1/2 months (the
"Commencement Date") commencing on February 15, 1996 and ending on November 30,
1998 unless sooner terminated pursuant to any provision hereof.
3.2 DELAY IN COMMENCEMENT. Notwithstanding said commencement date, if for
any reason Sublessor cannot deliver possession of the Premises to Sublessee on
said date, Sublessor shall not be subject to any liability therefore, nor shall
such failure affect the validity of this Lease or the obligations of Sublessee
hereunder or extend the term hereof, but in such case Sublessee shall not be
obligated to pay rent until possession of the Premises is tendered to Sublessee;
provided, however, that if Sublessor shall not have delivered possession of the
Premises within sixty (60) days from said commencement date, Sublessee may, at
Sublessee's option, by notice in writing to Sublessor within ten (10) days
thereafter, cancel this Sublease, in which event the parties shall be discharged
from all obligations thereunder. If Sublessee occupies the Premises prior to
said commencement date, such occupancy shall be subject to all provisions
hereof, such occupancy shall not advance the termination date and Sublessee
shall pay rent for such period at the initial monthly rates set forth below.
4. RENT. Sublessee shall pay to Sublessor as rent for the Premises equal
monthly payments of $6,171.00, in advance, on the 1st day of each month of the
term hereof. Sublessee shall pay Sublessor upon the execution hereof $6,171.00
as rent for the first month's rent. Commencing February 15, 1997, rent shall
increase as shown in paragraph 13 hereof.
Rent for any period during the term hereof which is for less than one month
shall be a prorata portion of the monthly installment. Rent shall be payable in
lawful money of the United States to Sublessor at the address stated herein or
to such other persons or at such other places as Sublessor may designate in
writing.
5. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor upon execution
hereof $6,171.00 as security for Sublessee's faithful performance of Sublessee's
obligations hereunder, if Sublessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Sublease,
Sublessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any other
sum to which Sublessor may become obligated by reason of Sublessee's default, or
to compensate Sublessor for any loss or damage which Sublessor may suffer
thereby. If Sublessor so uses or applies all or any portion of said deposit,
Sublessee shall within ten (10) days after written demand therefore deposit cash
with Sublessor in an amount sufficient to restore said deposit to the full
amount hereinabove stated and Sublessee's failure to do so shall be a material
breach of this Sublease. Sublessor shall not be required to keep said deposit
separate from its general accounts. If Sublessee performs all of Sublessee's
obligations hereunder, said deposit, or so much thereof as has not theretofore
been applied by Sublessor, shall be returned, without payment of Interest or
other Increment for its use to Sublessee (or at Sublessor's option, to the last
assignee, if any, of Sublessee's Interest hereunder) at the expiration of the
term hereof, and after Sublessee has vacated the Premises. No trust relationship
is created herein between Sublessor and Sublessee with respect to said Security
Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied only for general offices,
research and development of computer systems and like products and any other
legally permitted use with and for no other purpose
6.2 COMPLIANCE WITH LAW. Sublessor's prior written consent, which shall
not be unreasonably withheld,
*Except as provided in Section 20 hereof,
(b)* Sublessee shall, at Sublessee's expense, comply promptly with all
applicable statutes, ordinances, rules, regulations, orders, restrictions of
record, and requirements in effect during the term or any part of the term
hereof regulating the use by Sublessee of the Premises. Sublessee shall not use
or permit the use of the Premises in any manner that will tend to create waste
or a nuisance or, if there shall be more than one tenant of the building
containing the Premises, which shall lend to disturb such other tenants.
6.3 CONDITION OF PREMISES. Sublessee hereby accepts the Premises in their
condition existing as of the date of the execution hereof, subject to all
applicable zoning, municipal, county and state laws, ordinances, and regulations
governing and regulating the use of the Premises, and accepts this Sublease
subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto Sublessee acknowledges that neither Sublessor nor Sublessor's
agents have made any representation or warranty as to the suitability of the
Premises for the conduct of Sublessee's business.
7. MASTER lEASE
7.1 Sublessor is the lessee of the Premises by virtue of a lease,
hereinafter referred to as the "Master Lease", a copy of which is attached
hereto marked Exhibit 1, dated July 2, 1992 wherein Ocean Point Tech Centre is
the lessor, hereinafter referred to as the "Master Lessor"
7.2 This Sublease is and shall be at all times subject and subordinate to
the Master Lease.
7.3 The terms, conditions and respective obligations of Sublessor and
Sublessee to each other under this Sublease shall be the terms and conditions of
the Master Lease except for those provisions of the Master Lease which are
directly contradicted by this Sublease in which event the terms of this Sublease
document shall control over the Master Lease. Therefore, for the purposes of
this Sublease, wherever in the Master Lease the word "Lessor" is used it shall
be deemed to mean the Sublessor herein and wherever in the Master Lease the word
"Lessee" is used it shall be deemed to mean the Sublessee herein.
7.4 During the term of this Sublease and for all periods subsequent for
obligations which have arisen prior to the termination of this Sublease.
Sublessee does hereby expressly assume and agree to perform and comply with,
for the benefit of Sublessor and Master Lessor, each and every obligation of
Sublessor under the Master Lease EXCEPT for the following paragraphs which
are excluded therefrom:1.12 (a), 3.01 December 23, 1992 Rent Schedule, 1.05
(Lease Term), 1.07 (Tenant's Guarantor), 1.08 (Brokers), 1.09 (Commission
Payable to Landlord's Brokers), 1.10 (Security Deposit) and Article 14
(Brokers). Sublessee shall be entitled to all rights of the Tenant under the
Master Lease, except as provided herein.
<PAGE>
7.5 The obligations that Sublessee has assumed under paragraph 7.4 hereof
are hereinafter referred to as the "Sublessee's Assumed Obligations". The
obligations that Sublessee has NOT assumed under paragraph 7.4 hereof are
hereinafter referred to as the "Sublessor's Remain Obligations".
7.6 Sublessee shall hold Sublessor free and harmless of and from all
liability, judgments, costs, damages, claims or demands, including reasonable
attorneys fees, arising out of Sublessee's failure to comply with or perform
Sublessee's Assumed Obligations.
7.7 Sublessor agrees to maintain the Master Lease during the entire term of
this Sublease, subject, however, to any earlier termination of the Master Lease
without the fault of the Sublessor, and to comply with or perform Sublessor's
Remaining Obligations and to hold Sublessee free and harmless of and from all
liability, judgments, costs, damages, claims or demands arising out of
Sublessor's failure to comply with or perform Sublessor's Remaining Obligations.
7.8 Sublessor represents to Sublessee that the Master Lease is in full
force and effect and that no default exists on the part of any party to the
Master Lease.
8. ASSIGNMENT OF SUBLEASE AND DEFAULT.
8.1 Sublessor hereby assigns and transfers to Master Lessor the Sublessor's
interest in this Sublease and all rentals and income arising therefrom, subject
however to terms of Paragraph 8.2 hereof.
8.2 Master Lessor, by executing this document, agrees that until a default
shall occur in the performance of Sublessor's Obligations under the Master
Lease, that Sublessor may receive, collect and enjoy the rents accruing under
this Sublease. However, if Sublessor shall default in the performance of its
obligations to Master Lessor then Master Lessor may, at its option, receive and
collect, directly from Sublessee, all rent owning and to be owed under this
Sublease. Master Lessor shall not, by reason of this assignment of the Sublease
nor by reason of the collection of the rent from the Sublessee, be deemed liable
to Sublessee for any failure of the Sublessor to perform and comply with
Sublessor's Remaining Obligations.
8.3 Sublessor hereby irrevocably authorizes and directs Sublessee, upon
receipt of any written notice from the Master Lessor stating that default exists
in the performance of Sublessor's obligations under the Master Lease, to pay to
Master Lessor the rents due and to become due under the Sublease. Sublessor
agrees that Sublessee shall have the right to rely upon any such statement and
request from Master Lessor, and that Sublessee shall pay such rents to Master
Lessor without any obligation or right to inquire as to whether such default
exists and notwithstanding and notice from or claim from Sublessor to the
contrary and Sublessor shall have no right or claim against Sublessee for any
such rents so paid by Sublessee.
8.4 No changes or modifications shall be made to this Sublease without the
consent of Master Lessor.
9. CONSENT OF MASTER LESSOR.
9.1 In the event that the Master Lease requires that Sublessor obtain the
consent of Master Lessor to any subletting by Sublessor then, this Sublease
shall not be effective unless, within 10 days of the date hereof, Master Lessor
signs this Sublease thereby giving its consent to this Subletting.
9.2 In the event that the obligations of the Sublessor under the Master
Lease have been guaranteed by third parties then this Sublease, nor the Master
Lessor's consent, shall not be effective unless, within 10 days of the date
hereof, said guarantors sign this Sublease thereby giving guarantors consent to
this Sublease and the terms thereof.
9.3 In the event that Master Lessor does give such consent then:
(a) Such consent will not release Sublessor of its obligations or alter
the primary liability of Sublessor to pay the rent and perform and comply with
all of the obligations of Sublessor to be performed under the Master Lease.
(b) The acceptance of rent by Master Lessor from Sublessee or any one
else liable under the Master Lease shall not be deemed a waiver by Master Lessor
of any provisions of the Master Lease.
(c) The consent to this Sublease shall not constitute a consent to any
subsequent subletting or assignment.
(d) In the event of any default of Sublessor under the Master Lease,
Master Lessor may proceed directly against Sublessor, any guarantors or any one
else liable under the Master Lease or this Sublease without first exhausting
Master Lessor's remedies against any other person or entity liable thereon to
Master Lessor.
(e) Master Lessor may consent to subsequent sublettings and assignments
of the Master Lease or this Sublease or any amendments or modifications thereto
without notifying Sublessor nor any one else liable under the Master Lease and
without obtaining their consent and such action shall not relieve such persons
from liability.
(f) In the event that Sublessor shall default in its obligations under
the Master Lease, then Master Lessor, at its option and without being obligated
to do so, may require Sublessee to attorn to Master Lessor in which event Master
Lessor shall undertake the obligations of Sublessor under this Sublease from the
time of the exercise of said option to termination of this Sublease but Master
Lessor shall not be liable for any prepaid rents nor any security deposit paid
by Sublessee, nor shall Master Lessor be liable for any other defaults of the
Sublessor under the Sublease.
9.4 The signatures of the Master Lessor and any Guarantors of Sublessor at
the end of this document shall constitute their consent to the terms of this
Sublease.
9.5 Master Lessor acknowledges that, to the best of Master Lessor's
knowledge, no default presently exists under the Master Lease of obligations to
be performed by Sublessor and that the Master Lease is in full force and effect.
9.6 In the event that Sublessor defaults under its obligations to be
performed under the Master Lease by Sublessor, Master Lessor agrees to deliver
to Sublessee a copy of any such notice of default. Sublessee shall have the
right to cure any default of Sublessor described in any notice of default within
ten days after service of such notice of default on Sublessee. If such default
is cured by Sublessee then Sublessee shall have the right of reimbursement and
offset from and against Sublessor.
10. BROKERS FEE.
10.1 Upon execution hereof by all parties, Sublessor shall pay to Voit
Commercial Brokerage & CB Commercial, a licensed real estate broker, (herein
called "Broker"), a fee as set forth in a separate agreement between Sublessor
and Broker, or in the event there is no separate agreement between Sublessor and
Broker, the sum of $14,505.12 for brokerage services rendered by Broker to
Sublessor in this transaction.
10.2 Sublessor agrees that if Sublessee exercises any option or right of
first refusal granted by Sublessor herein, or any option or right substantially
similar thereto, either to extend the term of this Sublease, to renew this
Sublease, to purchase the Premises, or to lease or purchase adjacent property
which Sublessor may own or in which Sublessor has an interest, or if Broker is
the procuring cause of any lease, sublease, or sale pertaining to the Premises
or any adjacent property which Sublessor may own or in which Sublessor has an
interest, then as to any of said transactions Sublessor shall pay to Broker a
fee, in cash, in accordance with the schedule of Broker in effect at the time of
the execution of this Sublease. Notwithstanding the foregoing, Sublessor's
obligation under this Paragraph 10.2 is limited to a transaction in which
Sublessor is acting as a sublessor, lessor or seller.
10.3 Master Lessor agrees, by its consent to this Sublease, that if
Sublessee shall exercise any option or right of first refusal granted to
Sublessee by Master Lessor in connection with this Sublease, or any option or
right substantially similar thereto, either to extend the Master Lease, to renew
the Master Lease, to purchase the Premises or any part thereof, or to lease or
purchase adjacent property which Master Lessor may own or in which Master Lessor
has an interest, or if Broker is the procuring cause of any other lease or sale
entered into between Sublessee and Master Lessor pertaining to the Premises, any
part thereof, or any adjacent property which Master Lessor owns or in which it
has an interest, then as to any of said transactions Master Lessor shall pay to
Broker a fee, in cash, in accordance with the schedule of Broker in effect at
the time of its consent to this Sublease.
10.4 Any fee due from Sublessor or Master Lessor hereunder shall be due and
payable upon the exercise of any option to extend or renew, as to any extension
or renewal; upon the execution of any new lease, as to a new lease transaction
or the exercise of a right of first refusal to lease; or at the close of escrow,
as to the exercise of any option to purchase or other sale transaction.
10.5 Any transferee of Sublessor's interest in this Sublease, or of Master
Lessor's interest in the Master Lease, by accepting an assignment thereof, shall
be deemed to have assumed the respective obligations of Sublessor or Master
Lessor under this Paragraph 10. Broker shall be deemed to be a third-party
beneficiary of this paragraph 10.
11. ATTORNEY'S FEES. If any party or the Broker named herein brings an action to
enforce the terms hereof or to declare rights hereunder, the prevailing party in
any such action, on trial and appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the Court. The
provision of this paragraph shall inure to the benefit of the Broker named
herein who seeks to enforce a right hereunder.
<PAGE>
12. ADDITIONAL PROVISIONS. [If there are no additional provisions draw a line
from this point to the next printed word after the space left here. If there are
additional provisions place the same here.]
13. Sublessee's monthly rent shall be as scheduled below:
February 15, 1996 - March 14, 1996 - Rent Free
March 15, 1996 - February 14, 1997: $6,171.00
February 15, 1997 - February 14, 1998: $6,480.00
February 15, 1998 - November 30, 1998: $6,804.00
14. For additional provisions, see EXHIBIT A, attached hereto and
incorporated herein by reference.
If this Sublease has been filled in it has been prepared for
submission to your attorney for his approval. No representation or
recommendation is made by the real estate broker or its agents or
employees as to the legal sufficiency, legal effect, or tax
consequences of this Sublease or the transaction relating thereto.
Executed at Carlsbad, California QUINTILES PACIFIC, INC. (formerly
--------------------------- -----------------------------------
known as SDCRA, Inc.)
on January 23, 1996 By /s/ illegible
------------------------------------ ---------------------------------
address 5451 Avenida Encinas, Suite A By
-------------------------------- -----------------------------------
Carlsbad, CA 92008
- --------------------------------------- "Sublessor" (Corporate Seal)
Executed at Encinitas, California VISTA MEDICAL TECHNOLOGIES, INC
--------------------------- -------------------------------------
on January 20, 1996 By /s/ John Lyon, President
------------------------------------ -----------------------------------
address 531 Encinitas Blvd., #114 By
------------------------------- -----------------------------------
Encinitas, CA 92024
------------------------------- "Sublessor" (Corporate Seal)
Executed at Carlsbad OCEAN POINTE TECH CENTRE
--------------------------- ------------------------------------
on 1-23-96 By /s/ W.H. Adair
------------------------------------ -----------------------------------
address By
------------------------------- -----------------------------------
- --------------------------------------- "Master Lessor" (Corporate Seal)
Executed at
---------------------------- -----------------------------------
on
------------------------------------- -----------------------------------
address
-------------------------------- -----------------------------------
- --------------------------------------- "Guarantors"
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing
the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 345
So. Figueroa St., M-1, Los Angeles, CA 90071. (213) 687-8777.
<PAGE>
EXHIBIT A
15. BROKER'S FEES. (a) Sublessor warrants that Sublessor's sole contact
with Sublessee and the Premises has been through the Broker. Sublessor warrants
that no other brokers or finders can properly claim a right or commission or
finder's fee based on contracts between such claimant and Sublessor with
respect to Sublessee or the Premises. Sublessor hereby protects, defends,
indemnifies and agrees to hold Sublessee harmless from and against any loss,
cause, or expense, including reasonable attorney's fees and court costs,
resulting from any claim for a fee or commission by any broker or finder other
than the Broker arising out of or resulting from any agreement, arrangement, or
understanding alleged to have been made by such party or on its behalf with
Sublessor in connection with this Sublease or the transaction contemplated
hereby.
(b) Sublessee warrants that Sublessee's sole contact with Sublessor
and the Premises has been through the Broker. Sublessee warrants that no other
brokers or finders can properly claim a right or commission or finder's fee
based on contracts between such claimant and Sublessee with respect to Sublessor
or the Premises. Sublessee hereby protects, defends, indemnifies and agrees to
hold Sublessor harmless from and against any loss, cost, or expense, including
reasonable attorney's fees and court costs, resulting from any claim for a fee
or commission by any broker or finder other than the Broker arising out of or
resulting from any arrangement, agreement, or understanding alleged to have been
made by such party or on its behalf with Sublessee in connection with this
Sublease or the transaction contemplated hereby.
16. ADDITIONAL RENT. All Additional Rent (as defined in the Master Lease)
shall be paid by Sublessee to Sublessor upon the terms and provisions of the
Master Lease. Sublessor shall promptly deliver to Sublessee any notices
provided from Master Lessor of sums payable pursuant to Sections 4.02, 4.03,
4.04, and 4.05 and Article 6 of the Master Lease. Sublessor shall also
promptly deliver to Sublessee copies of all statements of Common Area (as
defined in the Master Lease) costs and utilities received from Master Lessor.
Sublessee shall have the same rights as Sublessor (if any) to inspect Master
Lessor's books, records, and supporting documents regarding Common Area costs
and utilities.
17. SUBLESSOR'S EXCLUDED DUTIES. Notwithstanding anything herein or in
the Master Lease to the contrary, Sublessor shall have no obligation or duty
to provide Sublessee with any tenant improvement allowance or other funds
for tenant improvements and Sublessor shall have no duty to furnish utilities or
services to the Project (as defined in the Master Lease) or the Premises as
required of the landlord under the Master Lease, obtain any insurance
required of the landlord under the Master Lease, perform any maintenance or
restoration or repair of the Premises, the Project, or the Building as required
of the landlord under the Master Lease, or perform any tenant improvement work
or painting required of the landlord under the Master Lease. The parties
hereto agree that such duties regarding utilities, services, insurance,
maintenance, restoration or repair, tenant improvement work, and painting shall
be, or has been, performed by Master Lessor upon the terms and conditions set
forth in the Master Lease; provided, however, that Sublessor upon written
notice from Sublessee, shall diligently enforce all unsatisfied obligations of
Master Lessor under the Master Lease for the benefit of Sublessee.
18. NON-DISTURBANCE AND ATTORNMENT AGREEMENT. A non-disturbance and
attornment agreement providing that in the event Sublessor as tenant under the
Master Lease defaults thereunder, Master Lessor shall not disturb the
possession of Sublessee provided that Sublessee attorns to Master Lessor is a
condition precedent to this Sublease, subject to waiver by Sublessee. Such non-
disturbance and attornment agreement shall be substantially in the form set
forth on Exhibit B, attached hereto and incorporated herein by reference (the
"Non-disturbance Agreement"). Occupancy
<PAGE>
of the Premises by Sublessee shall be deemed to constitute a waiver of such
condition precedent.
19. INFORMATION. Prior to the execution of this Sublease, Sublessor
shall furnish to Sublessee the following, to the extent such items are within
Sublessor's possession: (a) a copy of the Inspection Record issued by the City
of Carlsbad for the Premises; (b) a copy of the "as-built" plans and Certificate
of Compliance; (c) documentation, as required by Section 6.05 of the Master
Lease, documenting alterations, additions, and improvements, if any; (d) any
notices of discrepancy issued by any governmental agency regarding tenant
improvements within the Premises; and (e) copies of any correction notices the
Sublessor has provided to the Master Lessor for which Master Lessor has not
implemented the necessary corrective action. Sublessor represents that it
has no documentation described under Sections 19(c), (d), and (e) hereof.
20. CONDITION OF THE PREMISES. (a) Sublessor hereby assigns to Sublessee
the warranties of Master Lessor set forth in Section 6.01 of the Addendum to
the Master Lease, including, without limitation, the right to all available
remedies and relief from Master Lessor under the Master Lease. By executing
this Sublease, Master Lessor hereby consents to such assignment.
(b) Sublessor hereby represents to Sublessee that as of the
Commencement Date:
(i) Sublessor is not aware of any condition occurring
since December 17, 1992, that causes the Premises or any portion thereof
to fail to comply with the laws, statutes, rules, or ordinances
affecting the Premises, including, without limitation, the failure to
comply with any environmental laws, statutes, ordinances, rules, or
regulations governing Hazardous Materials (as defined in the Master
Lease) or contaminants in, on, under, or about the Project, including,
without limitation, the Premises.
(ii) Sublessor has maintained the Premises in accordance
with Section 6.04 of the Master Lease since December 17, 1992, and the
Premises is in good working order and free from defect, except that the
cubicle adjacent to the southwest door does not have electricity.
(iii) Sublessor has not constructed any improvements in
the Premises not in compliance with the laws, statutes, rules, or other
ordinances applicable to the Premises.
(c) Notwithstanding anything herein to the contrary, Sublessee shall
not be liable for any Hazardous Materials or contaminants (i) located in,
on, or under the Project prior to the Commencement Date, or (ii) which were not
caused by Sublessee or Sublessee's officers, directors, employees, agents, or
invitees.
21. INDEMNITY. Master Lessor, Sublessor, and Sublessee agree that pursuant
to Section 7.3 of this Sublease: (a) Section 5.05, Indemnity of the Lease, as
modified by Section 5.05(a) making all of Section 5.05 reciprocal and (b)
Section 12.01, Legal Proceedings, as modified by Section 12.01(a) making
the indemnification provision of Section 12.01 reciprocal, apply in full to the
Sublease.
22. EXECUTION IN COUNTERPART. This Sublease may be executed in multiple
counterparts, each of which shall be deemed to be an original.
-2-
<PAGE>
EXHIBIT B
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
This Non-Disturbance and Attornment Agreement ("Agreement"), dated this
_____ day of_________, 1996, is executed by and between OCEAN POINTE TECH
CENTRE ("Master Lessor"), QUINTILES PACIFIC, INC. (formerly known as SDCRA,
Inc.) ("Sublessor"), and VISTA MEDICAL TECHNOLOGIES, INC. ("Sublessee"), with
reference to the following facts:
RECITALS
A. Master Lessor (as Landlord) and Sublessor (as Tenant) are parties to a
Master Lease ("Master Lease") dated as of July 2, 1992 for the lease of the
premises commonly known as 5451 Avenida Encinas, Suites A, B, C, J & K,
Carlsbad, CA 92008 ("Premises").
B. Sublessor (as Landlord) and Sublessee (as Tenant) have executed a
certain Standard Sublease ("Sublease") dated as of December 14, 1995, by and
between for the lease of the Premises.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
covenants and promises contained herein, the parties hereto agree as follows:
1. Master Lessor agrees to recognize Sublessee's Sublease and its right
to peaceful possession of the Premises during the term of the Sublease. In the
event of a default under the Master Lease by the Sublessor, Master Lessor
agrees not to disturb or cause to be disturbed Sublessee's peaceful
possession of the Premises during the term of the Sublease or any
renewal or extension thereof, as long as there is not in existence a default on
the part of Sublessee or its assigns which would permit Sublessor to
terminate the Sublease. Upon termination or expiration of the Master
Lease or termination of Sublessor's right to possession of the Premises: (a) the
Sublease will be recognized as a direct lease between Master Lessor and
sublessee, and rent and all other monetary charges payable thereunder shall be
paid to Master Lessor from and after the date Sublessee receives written notice
from Master Lessor of such termination or expiration; (b) Master Lessor shall be
bound to Sublessee and Sublessee shall be bound to Master Lessor under all of
the terms, covenants and conditions of the sublease; and (c) Sublessee shall
attorn to Master Lessor upon all the terms, covenants and conditions of the
Sublease.
2. Notwithstanding the execution of this Agreement, Master Lessor shall
have no obligation to Sublessee under the terms of the Sublease until
termination or expiration of the Master Lease, or termination by Master Lessor
of Sublessor's right to possession of
<PAGE>
the Premises; provided, however, this Agreement does not modify, change or
affect Sublessor's rights under the Master Lease. In addition, Master Lessor
shall not be liable for any act or omission of Sublessor.
3. The foregoing provisions shall be self-operative and effective
without the execution of any further instrument on the part of either party
hereto.
4. This Agreement shall run with the land and inure to the benefit
of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall automatically terminate upon
expiration or earlier termination of the Sublease, and Sublessee shall execute,
within ten (10) days after demand, any documents reasonably required to evidence
such termination.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on the day and year shown below.
OCEAN POINTE TECH CENTRE VISTA MEDICAL TECHNOLOGIES, INC.
By:________________________________ By:________________________________
Title:_____________________________ Title:_____________________________
QUINTILES PACIFIC, INC.
By:________________________________
Title:_____________________________
-2-
<PAGE>
MESSAGE SENT 8/28/95 17:40:56 11704 TELEX PORT EXHIBIT 10.33
MCI TELEX GA 7
78122272+
0040112 2037 08/28
BANKDAM J22272
GA TEXT ?
67325678VB TF
FROM: SILICON VALLEY BANK
3003 TASMAN DR.
SANTA CLARA, CA 95054
TELEX NO. 6732567
TO: BANK OF AMERICA
TOKYO, JAPAN
DATE: AUGUST 28, 1995
AMOUNT: USD 150,000.00
TEST
ATTENTION: LETTERS OF CREDIT DEPT.
PLEASE ADVISE THRU: SUMITOMO BANK LTD., HEAD OFFICE, OSAKA
9-6-5 KITAHAMA, CHUO-KU
OSAKA, 542 JAPAN
WE ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. SVB95IS0206 FOR USD
150,000.00 (ONE HUNDRED FIFTY THOUSAND AND 00/100 US DOLLARS)
IN FAVOR OF THE BENEFICIARY:
MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
CENTRAL P.O. BOX 288
OSAKA, 530-91 JAPAN
FOR ACCOUNT OF: VISTA MEDICAL TECHNOLOGY, INC.
2752 LOKER AVENUE WEST
CARLSBAD, CA 92008
U.S.A.
EXPIRY DATE: AUGUST 28, 1996 IN JAPAN
AVAILABLE BY NEGOTIATION WITH THE ADVISING BANK BY BENEFICIARY'S DRAFTS DRAWN AT
SIGHT ON US MARKED "DRAWN UNDER SILICON VALLEY BANK CREDIT NO. SUB95IS0206
ISSUED ON AUGUST 28, 1995" AND ACCOMPANIED BY DOCUMENTS SPECIFIED BELOW:
1- BENEFICIARY'S SIGNED STATEMENT STATING THAT VISTA MEDICAL TECHNOLOGIES,
INC. IS IN DEFAULT OF PAYMENT OF ITS CERTAIN
<PAGE>
INVOICE(S) WHICH IS/ARE UNPAID AND IS/ARE THIRTY (30) DAYS OR MORE
OUTSTANDING FROM INVOICE(S) DATE.
2- COPY(IES) OF ABOVE MENTIONED INVOICE(S) MARKED "UNPAID".
ADDITIONAL CONDITION:
1- INVOICE(S) DATED PRIOR TO THE DATE OF THIS LETTER OF CREDIT ARE NOT
ACCEPTABLE.
2- T.T. REIMBURSEMENT IS NOT ACCEPTABLE.
3- THIS STANDBY LETTER OF CREDIT IS RESTRICTED TO THE ADVISING BANK FOR
NEGOTIATION.
4- ALL CHARGES OUTSIDE U.S.A. ARE FOR BENEFICIARY'S ACCOUNT.
WE HEREBY ENGAGE WITH DRAWERS AND/OR BONAFIDE HOLDERS THAT DRAFT(S) DRAWN UNDER
AN NEGOTIATED IN CONFORMANCE WITH THE TERMS AND CONDITIONS OF THE SUBJECT CREDIT
WILL BE DULY HONORED ON PRESENTATION.
INSTRUCTION TO THE NEGOTIATING BANK:
1- UPON OUR RECEIPT OF DOCUMENTS IN STRICT CONFORMANCE WITH THE TERMS AND
CONDITIONS OF THE SUBJECT LETTER OF CREDIT WE WILL REIMBURSE YOU PER YOUR
INSTRUCTION.
2- ALL DOCUMENTS MUST BE MAILED BY COURIER (DHL) IN ONE LOT TO OUR ADDRESS AT:
SILICON VALLEY BANK
3003 TASMAN DRIVE
SANTA CLARA, CA 95054
ATTN: INT'L DIVISION
EXCEPT AS OTHERWISE STATED HEREIN, THIS CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS
AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), ICC PUBLICATION NO. 500.
THIS IS A FULL TEXT CABLE TELEX, NO MAIL CONFIRMATION WILL FOLLOW.
REGARDS
SILICON VALLEY BANK
SANTA CLARA, CA
INT'L DIVISION
TELEX NO. 673257 SVB TF
BANKDAM J22278
LLLLL
007.8 MIN
<PAGE>
EXHIBIT 10.34
VISTA MEDICAL TECHNOLOGIES, INC.
1995 STOCK OPTION PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option Plan is intended to promote the interests of
Vista Medical Technologies, Inc., a California corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options as it may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Plan or any option or shares issued thereunder.
III. ELIGIBILITY
A. The persons eligible to receive option grants under the Plan are
as follows:
(i) Employees,
<PAGE>
(ii) non-employee members of the Board or the
non-employee members of the board of directors of any Parent or
Subsidiary, and
(iii) consultants who provide services to the
Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine
which eligible persons are to receive option grants under the Plan, the time or
times when such option grants are to be made, the number of shares to be covered
by each such grant, the status of the granted option as either an Incentive
Option or a Non-Statutory Option, the time or times at which each option is to
become exercisable, the vesting schedule (if any) applicable to the option
shares and the maximum term for which the option is to remain outstanding.
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 896,208
shares.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. All shares issued under the Plan, whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan.
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan and (ii) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive. In no event
shall any such adjustments be made in connection with the conversion of one or
more outstanding shares of the Corporation's preferred stock into shares of
Common Stock.
2.
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise price per share shall not be less than
eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the option grant date.
(ii) If the person to whom the option is granted is a 10%
Shareholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Three and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. Should the Common Stock be registered
under Section 12(g) of the 1934 Act at the time the option is exercised, then
the exercise price may also be paid as follows:
(i) in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(ii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all
3.
<PAGE>
applicable Federal, state and local income and employment taxes required to
be withheld by the Corporation by reason of such exercise and (b) to the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option grant. However, no option shall have a term in excess of
ten (10) years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time of cessation
of Service or death:
(i) Should the Optionee cease to remain in Service for
any reason other than Disability or death, then the Optionee shall
have a period of three (3) months following the date of such cessation
of Service during which to exercise each outstanding option held by
such Optionee.
(ii) Should such Service terminate by reason of
Disability, then the Optionee shall have a period of six (6) months
following the date of such cessation of Service during which to
exercise each outstanding option held by such Optionee. However,
should such Disability be deemed to constitute Permanent Disability,
then the period during which each outstanding option held by the
Optionee is to remain exercisable shall be extended by an additional
six (6) months so that the exercise period shall be the twelve
(12)-month period following the date of the Optionee's cessation of
Service by reason of such Permanent Disability.
(iii) Should the Optionee die while holding one or more
outstanding options, then the personal representative of the
Optionee's estate or the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution shall have a period of twelve (12)
months following the date of the Optionee's death during which to
exercise each such option.
(iv) Under no circumstances, however, shall any such
option be exercisable after the specified expiration of the option
term.
4.
<PAGE>
(v) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the
extent it is not exercisable for vested shares on the date of such
cessation of Service.
D. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. UNVESTED SHARES. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock under the Plan. Should the Optionee cease Service while holding such
unvested shares, the Corporation shall have the right to repurchase, at the
exercise price paid per share, all or (at the discretion of the Corporation and
with the consent of the Optionee) any of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right. The Plan Administrator may not
impose a vesting schedule upon any option grant or any shares of Common Stock
subject to the option which is more restrictive than twenty percent (20%) per
year vesting, with the initial vesting to occur one (1) year after the option
grant date. However, this minimum vesting requirement shall not be applicable
with respect to any option granted to a Highly-Compensated Person.
F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is
first registered under Section 12(g) of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Optionee (or any successor in interest) of any shares of Common Stock issued
under the Plan. Such right of first refusal shall be exercisable in accordance
with the terms established by the Plan Administrator and set forth in the
document evidencing such right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option
may be assigned in whole or in part during Optionee's lifetime in accordance
with the terms of a Qualified Domestic Relations Order. The assigned portion
may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to such Qualified Domestic Relations Order. The
terms applicable to the assigned portion shall be the same as those in effect
for the
5.
<PAGE>
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
H. WITHHOLDING. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of any options granted under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of the Plan shall be applicable to Incentive Options. Options which
are specifically designated as Non-Statutory Options shall NOT be subject to the
terms specified in this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% SHAREHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Shareholder, then the option term shall not exceed five (5)
years measured from the option grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with such
Corporate Transaction. In addition, all outstanding repurchase rights under the
Plan shall terminate automatically in the event of any Corporate Transaction,
except to the extent the repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction.
6.
<PAGE>
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in the consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
C. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.
ARTICLE THREE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee to pay the option
exercise price by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. Promissory notes may be authorized with or without
security or collateral. However, any promissory notes delivered by a consultant
must be secured by property other than the purchased shares of Common Stock. In
all events, the maximum credit available to each Optionee may not exceed the SUM
of (i) the aggregate option exercise price payable for the purchased shares plus
(ii) any Federal, state and local income and employment tax liability incurred
by the Optionee in connection with the option exercise.
7.
<PAGE>
II. ADDITIONAL AUTHORITY
A. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding:
(i) to extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of Service
or death from the limited period otherwise in effect for that option
to such greater period of time as the Plan Administrator shall deem
appropriate; PROVIDED, that in no event shall such option be
exercisable after the specified expiration of the option term, and/or
(ii) to permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service or
death but also with respect to one or more additional installments in
which the Optionee would have vested under the option had the Optionee
continued in Service.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised until the Plan is approved by the
Corporation's shareholders. If such shareholder approval is not obtained within
twelve (12) months after the date of the Board's adoption of the Plan, then all
options previously granted under the Plan shall terminate and cease to be
outstanding, and no further options shall be granted. Subject to such
limitation, the Plan Administrator may grant options under the Plan at any time
after the effective date of the Plan and before the date fixed herein for
termination of the Plan.
B. The Plan shall terminate upon the EARLIEST of (i) the expiration
of the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued or (iii) the termination of all outstanding options in
connection with a Corporate Transaction. Upon such Plan termination, all
options and unvested stock issuances outstanding under the Plan shall continue
to have full force and effect in accordance with the provisions of the documents
evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall, without the consent of the Optionees, adversely affect
their rights and obligations under their outstanding options. In addition, the
Board shall not, without the
8.
<PAGE>
approval of the Corporation's shareholders, (i) increase the maximum number of
shares issuable under the Plan, except for permissible adjustments in the event
of certain changes in the Corporation's capitalization, (ii) materially modify
the eligibility requirements for Plan participation or (iii) materially increase
the benefits accruing to Plan participants.
B. Options may be granted under the Plan to purchase shares of
Common Stock in excess of the number of shares then available for issuance under
the Plan, provided any such options actually granted may not be exercised until
there is obtained shareholder approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such shareholder approval is not obtained within twelve (12) months after the
date the excess grants are first made, then any options granted on the basis of
such excess shares shall terminate and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option hereunder
and the issuance of any shares of Common Stock upon the exercise of any option
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options granted under it and the shares of Common Stock issued pursuant to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of the Optionee, which rights are
hereby expressly reserved by each, to terminate the Optionee's Service at any
time for any reason, with or without cause.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding option under the
Plan, unless such individual is a key Employee whose duties in connection with
the Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.
9.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Vista Medical Technologies, Inc., a California
corporation.
G. DISABILITY shall mean the inability of an individual to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
A-1.
<PAGE>
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on
any Stock Exchange nor traded on the Nasdaq National Market, then the
Fair Market Value shall be determined by the Plan Administrator after
taking into account such factors as the Plan Administrator shall deem
appropriate.
L. HIGHLY-COMPENSATED PERSON shall mean an Optionee (i) whose
compensation per calendar year from the Corporation (or any Parent or
Subsidiary) equals or exceeds Sixty Thousand Dollars ($60,000) in the aggregate
and (ii) who has previously received one or more option grants under the Plan.
M. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
A-2.
<PAGE>
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
P. OPTIONEE shall mean any person to whom an option is granted under the
Plan.
Q. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
R. PLAN shall mean the Corporation's 1995 Stock Option Plan, as set forth
in this document.
S. PLAN ADMINISTRATOR shall mean either the Board or the Committee, to
the extent the Committee is at the time responsible for the administration of
the Plan.
T. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
U. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant, except to the
extent otherwise specifically provided in the documents evidencing the option
grant.
V. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
W. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
X. 10% SHAREHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
A-3.
<PAGE>
EXHIBIT 10.35
Grant No._____________________
VISTA MEDICAL TECHNOLOGIES, INC.
NOTICE OF GRANT OF STOCK OPTION
--------------------------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Vista Medical Technologies, Inc. (the
"Corporation"):
OPTIONEE: ______________________________________
GRANT DATE:______________________________________
VESTING COMMENCEMENT DATE: _____________________
EXERCISE PRICE: $_________ per share
NUMBER OF OPTION SHARES: ________________ shares
EXPIRATION DATE: _______________________________
TYPE OF OPTION: ___________________ Stock Option
DATE EXERCISABLE: Immediately Exercisable
VESTING SCHEDULE: The Option Shares shall be unvested and subject to
repurchase by the Corporation at the Exercise Price paid per share.
Optionee shall acquire a vested interest in, and the Corporation's
repurchase right will accordingly lapse with respect to, (i) twenty
percent (20%) of the Option Shares upon Optionee's completion of one
(1) year of Service measured from the Vesting Commencement Date and
(ii) the balance of the Option Shares in equal successive monthly
installments upon Optionee's completion of each of the next forty-
eight (48) months of Service measured from and after the first
anniversary of the Vesting Commencement Date. In no event shall any
additional Option Shares vest after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Vista Medical Technologies, Inc. 1995
Stock Option Plan (the "Plan"). Optionee further agrees to be bound by the
terms of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as Exhibit A. Optionee understands that any Option
Shares purchased under the Option will be subject to the terms set forth in the
Stock Purchase Agreement attached hereto as Exhibit B.
<PAGE>
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit C.
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS. THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE
AGREEMENT.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or in the
attached Stock Option Agreement or Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
DEFINITIONS. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
________________________, 199__
Date
VISTA MEDICAL TECHNOLOGIES, INC.
By: ___________________________________
Title: _________________________________
________________________________________
[Optionee]
Address: ______________________________
________________________________________
ATTACHMENTS
- -----------
Exhibit A - Stock Option Agreement
Exhibit B - Stock Purchase Agreement
Exhibit C - 1995 Stock Option Plan
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants who provide services to
the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may also be assigned
in whole or in part during Optionee's lifetime in accordance with the terms of a
Qualified Domestic Relations Order. The assigned position shall be exercisable
only by the person or persons who acquire a proprietary interest in the option
pursuant to such Qualified Domestic Relations Order. The terms applicable to
the assigned portion shall be the same as those in effect for this option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes
<PAGE>
exercisable for such installments, those installments shall accumulate and the
option shall remain exercisable for the accumulated installments until the
Expiration Date or sooner termination of the option term under Paragraph 5, 6 or
17.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason
(other than death or Disability) while this option is outstanding, then Optionee
shall have a period of three (3) months (commencing with the date of such
cessation of Service) during which to exercise this option, but in no event
shall this option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance with
the laws of descent and distribution shall have the right to exercise this
option. Such right shall lapse and this option shall cease to be outstanding
upon the EARLIER of (i) the expiration of the twelve (12)- month period measured
from the date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Disability while
this option is outstanding, then Optionee shall have a period of six (6) months
(commencing with the date of such cessation of Service) during which to exercise
this option. However, should such Disability be deemed to constitute Permanent
Disability, then the period during which this option is to remain exercisable
shall be extended by an additional six (6) months so that the exercise period
shall be the twelve (12)-month period following the date of Optionee's cessation
of Service by reason of such Permanent Disability. In no event shall this
option be exercisable at any time after the Expiration Date.
NOTE: Exercise of this option on a date later than three
(3) months following cessation of Service due to Disability
will result in loss of favorable Incentive Option treatment,
UNLESS such Disability constitutes Permanent Disability. In
the event that Incentive Option treatment is not available,
this option will be taxed as a Non-Statutory Option upon
exercise.
(d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
vested Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited exercise
period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any vested Option Shares for which the option has
not been exercised. To the extent Optionee is not vested in the
2.
<PAGE>
Option Shares at the time of Optionee's cessation of Service, this option shall
immediately terminate and cease to be outstanding with respect to those shares.
6. SPECIAL TERMINATION OF OPTION.
(a) In the event of a Corporate Transaction, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or parent thereof in connection with such Corporate
Transaction.
(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, PROVIDED the aggregate Exercise Price shall remain the same.
(c) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. SHAREHOLDER RIGHTS. The holder of this option shall not have any
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a
Purchase Agreement for the Option Shares for which the option is
exercised.
3.
<PAGE>
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation; or
(B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 14.
Should the Common Stock be registered under Section 12(g) of
the 1934 Act at the time the option is exercised, then the
Exercise Price may also be paid as follows:
(C) in shares of Common Stock held by Optionee
(or any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or
(D) to the extent the option is exercised for
vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable written instructions (a) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus
all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage
firm in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Purchase Agreement delivered to
the Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(iv) Execute and deliver to the Corporation such
written representations as may be requested by the Corporation in
order
4.
<PAGE>
for it to comply with the applicable requirements of Federal and state
securities laws.
(v) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee)
for the satisfaction of all Federal, state and local income and
employment tax withholding requirements applicable to the option
exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE
OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered
5.
<PAGE>
to Optionee shall be in writing and addressed to Optionee at the address
indicated below Optionee's signature line on the Grant Notice. All notices
shall be deemed effective upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.
14. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a promissory note.
The terms of any such promissory note (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.(1)
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
16. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL.
(a) The grant of this option is subject to approval of the Plan
by the Corporation's shareholders within twelve (12) months after the adoption
of the Plan by the Board. NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO
THE CONTRARY, THIS OPTION MAY NOT BE EXERCISED IN WHOLE OR IN PART UNTIL SUCH
SHAREHOLDER APPROVAL IS OBTAINED. In the event that such shareholder approval
is not obtained, then this option shall terminate in its entirety and Optionee
shall have no further rights to acquire any Option Shares hereunder.
(b) If the Option Shares covered by this Agreement exceed, as of
the Grant Date, the number of shares of Common Stock which may without
shareholder approval be issued under the Plan, then this option shall be void
with respect to such excess shares, unless shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of the Plan.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
- -----------------------
(1) Authorization of payment of the Exercise Price by a promissory note may,
under currently proposed Treasury Regulations, result in the loss of incentive
stock option treatment under the Federal tax laws.
6.
<PAGE>
(a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (i) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (ii) more than twelve (12) months after the date Optionee ceases
to be an Employee by reason of Permanent Disability.
(b) This option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which this option would
otherwise first become exercisable in such calendar year would, when added to
the aggregate value (determined as of the respective date or dates of grant) of
the Common Stock and any other securities for which one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. To the extent the exercisability of this
option is deferred by reason of the foregoing limitation, the deferred portion
shall become exercisable in the first calendar year or years thereafter in which
the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(b)
would not be contravened, but such deferral shall in all events end immediately
prior to the effective date of a Corporate Transaction in which this option is
not to be assumed, whereupon the option shall become immediately exercisable as
a Non-Statutory Option for the deferred portion of the Option Shares.
(c) Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
7.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following shareholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a person
or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Vista Medical Technologies, Inc., a California
corporation.
G. DISABILITY shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
A-1.
<PAGE>
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
K. EXERCISE PRICE shall mean the exercise price per share as specified in
the Grant Notice.
L. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
M. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
the price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after
taking into account such factors as the Plan Administrator shall deem
appropriate.
N. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
A-2.
<PAGE>
O. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
P. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
S. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
T. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
U. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PLAN shall mean the Corporation's 1995 Stock Option Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of Board
members, to the extent the committee is at the time responsible for the
administration of the Plan.
X. PURCHASE AGREEMENT shall mean the stock purchase agreement in
substantially the form of Exhibit B to the Grant Notice.
Y. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
Z. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or a consultant.
AA. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
A-3.
<PAGE>
AB. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-4.
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
<PAGE>
STANDARD VERSION
VISTA MEDICAL TECHNOLOGIES, INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this ___ day of ________ 19____, by and among
Vista Medical Technologies, Inc., a California corporation, ___________________,
Optionee under the Corporation's 1995 Stock Option Plan, and __________________,
Optionee's spouse.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
AC. EXERCISE OF OPTION
1. EXERCISE. Optionee hereby purchases ____________ shares of
Common Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on ____________________, 199__ (the "Grant Date") to
purchase up to _______________ shares of Common Stock under the Plan at the
exercise price of $______ per share (the "Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.
3. DELIVERY OF CERTIFICATES. The certificates representing any
Purchased Shares which are subject to the Repurchase Right shall be held in
escrow in accordance with the provisions of this Agreement.
4. SHAREHOLDER RIGHTS. Until such time as the Corporation exercises
the Repurchase Right, the First Refusal Right or the Special Purchase Right,
Optionee (or any successor in interest) shall have all the rights of a
shareholder (including voting, dividend and liquidation rights) with respect to
the Purchased Shares, including the Purchased Shares held in escrow hereunder,
subject, however, to the transfer restrictions of Articles B and C.
<PAGE>
AD. SECURITIES LAW COMPLIANCE
1. RESTRICTED SECURITIES. The Purchased Shares have not been
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
2. RESTRICTIONS ON DISPOSITION OF PURCHASED SHARES. Optionee shall
make no disposition of the Purchased Shares (other than a Permitted Transfer)
unless and until there is compliance with all of the following requirements:
(i) Optionee shall have provided the Corporation with a
written summary of the terms and conditions of the proposed
disposition.
(ii) Optionee shall have complied with all requirements of
this Agreement applicable to the disposition of the Purchased Shares.
(iii) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that (a) the proposed disposition does not require
registration of the Purchased Shares under the 1933 Act or (b) all
appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
(iv) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that the proposed disposition will not result in the
contravention of any transfer restrictions applicable to the Purchased
Shares pursuant to the provisions of the Rules of the California
Corporations Commissioner identified in Paragraph B.4.
The Corporation shall NOT be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement OR (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
2.
<PAGE>
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
Shares shall be endorsed with one or more of the following restrictive legends:
(i) "The shares represented by this certificate have not
been registered under the Securities Act of 1933. The shares may not
be sold or offered for sale in the absence of (a) an effective
registration statement for the shares under such Act, (b) a 'no
action' letter of the Securities and Exchange Commission with respect
to such sale or offer or (c) satisfactory assurances to the
Corporation that registration under such Act is not required with
respect to such sale or offer."
(ii) "It is unlawful to consummate a sale or transfer of
this security, or any interest therein, or to receive any
consideration therefor, without the prior written consent of the
Commissioner of Corporations of the State of California, except as
permitted in the Commissioner's Rules."
(iii) "The shares represented by this certificate are subject
to certain repurchase rights and rights of first refusal granted to
the Corporation and accordingly may not be sold, assigned,
transferred, encumbered, or in any manner disposed of except in
conformity with the terms of a written agreement dated ____________,
199__ between the Corporation and the registered holder of the shares
(or the predecessor in interest to the shares). A copy of such
agreement is maintained at the Corporation's principal corporate
offices."
4. RECEIPT OF COMMISSIONER RULES. Optionee hereby acknowledges
receipt of a copy of Section 260.141.11 of the Rules of the California
Corporations Commissioner, a copy of which is attached as Exhibit II to this
Agreement.
AE. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Optionee shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right, the Market Stand-Off or the Special Purchase Right.
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Optionee.
3.
<PAGE>
3. MARKET STAND-OFF.
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters. In no event, however, shall such period exceed one hundred
eighty (180) days and the Market Stand-Off shall in all events terminate two (2)
years after the effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off PROVIDED AND
ONLY IF the officers and directors of the Corporation are also subject to
similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation
may impose stop-transfer instructions with respect to the Purchased Shares until
the end of the applicable stand-off period.
AF. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date Optionee ceases for any reason to remain in Service or (if
later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Exercise Price all or (at the discretion of the
Corporation and with the consent of Optionee) any portion of the Purchased
Shares in which Optionee is not, at the time of his or her cessation of Service,
vested in accordance with the Vesting Schedule set forth in the Notice of Grant
or as otherwise provided in paragraph D.6 (such shares to be hereinafter
referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates
4.
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representing the Unvested Shares to be repurchased shall be delivered to the
Corporation prior to the close of business on the date specified for the
repurchase. Concurrently with the receipt of such stock certificates, the
Corporation shall pay to Owner, in cash or cash equivalents (including the
cancellation of any purchase-money indebtedness), an amount equal to the
Exercise Price previously paid for the Unvested Shares which are to be
repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Optionee vests in accordance with the Vesting Schedule set forth
in the Notice of Grant or as otherwise provided in Paragraph D.6. All Purchased
Shares as to which the Repurchase Right lapses shall, however, remain subject to
(i) the First Refusal Right, (ii) the Market Stand-Off and (iii) the Special
Purchase Right.
4. AGGREGATE VESTING LIMITATION. If the Option is exercised in more
than one increment so that Optionee is a party to one or more other Stock
Purchase Agreements (the "Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which Optionee would otherwise at the time be
vested, in accordance with the Vesting Schedule, had all the Purchased Shares
(including those acquired under the Prior Purchase Agreements) been acquired
exclusively under this Agreement.
5. RECAPITALIZATION. Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right, but only
to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Purchased Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Corporation's capital
structure; PROVIDED, however, that the aggregate purchase price shall remain the
same.
6. CORPORATE TRANSACTION.
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety,
except to the extent the Repurchase Right is to be assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.
5.
<PAGE>
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payment) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; PROVIDED, however, that
the aggregate purchase price shall remain the same.
AG. RIGHT OF FIRST REFUSAL
1. GRANT. The Corporation is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Optionee has vested in accordance with
the Vesting Schedule. For purposes of this Article E, the term "transfer" shall
include any sale, assignment, pledge, encumbrance or other disposition of the
Purchased Shares intended to be made by Owner, but shall not include any
Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
Purchased Shares in which Optionee has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Corporation written notice
(the "Disposition Notice") of the terms of the offer, including the purchase
price and the identity of the third-party offeror, and (ii) provide satisfactory
proof that the disposition of the Target Shares to such third-party offeror
would not be in contravention of the provisions set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for
a period of twenty-five (25) days following receipt of the Disposition Notice,
have the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those specified therein or upon such
other terms (not materially different from those specified in the Disposition
Notice) to which Owner consents. Such right shall be exercisable by delivery of
written notice (the "Exercise Notice") to Owner prior to the expiration of the
twenty-five (25)-day exercise period. If such right is exercised with respect
to all the Target Shares, then the Corporation shall effect the repurchase of
such shares, including payment of the purchase price, not more than five (5)
business days after delivery of the Exercise Notice; and at such time the
certificates representing the Target Shares shall be delivered to the
Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If Owner and the Corporation
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an
6.
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appraiser of recognized standing selected by Owner and the Corporation or, if
they cannot agree on an appraiser within twenty (20) days after the
Corporation's receipt of the Disposition Notice, each shall select an appraiser
of recognized standing and the two (2) appraisers shall designate a third
appraiser of recognized standing, whose appraisal shall be determinative of such
value. The cost of such appraisal shall be shared equally by Owner and the
Corporation. The closing shall then be held on the LATER of (i) the fifth (5th)
business day following delivery of the Exercise Notice or (ii) the fifth (5th)
business day after such valuation shall have been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Exercise Notice is not given to Owner prior to the expiration of the twenty-five
(25)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; PROVIDED, however, that any such sale or
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares free and clear
of the Repurchase Right and the First Refusal Right, but the acquired shares
shall remain subject to the provisions of Article B and Paragraph C.3. In the
event Owner does not effect such sale or disposition of the Target Shares within
the specified thirty (30)-day period, the First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:
(i) sale or other disposition of all the Target Shares to
the third-party offeror identified in the Disposition Notice, but in
full compliance with the requirements of Paragraph E.4, as if the
Corporation did not exercise the First Refusal Right; or
(ii) sale to the Corporation of the portion of the Target
Shares which the Corporation has elected to purchase, such sale to be
effected in substantial conformity with the provisions of Paragraph
E.3. The First Refusal Right shall continue to be applicable to any
subsequent disposition of the remaining Target Shares until such right
lapses.
Failure of Owner to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
7.
<PAGE>
6. RECAPITALIZATION/REORGANIZATION.
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.
7. LAPSE. The First Refusal Right shall lapse upon the EARLIEST to
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
AH. MARITAL DISSOLUTION OR LEGAL SEPARATION
1. GRANT. In connection with the dissolution of Optionee's marriage
or the legal separation of Optionee and Optionee's spouse, the Corporation shall
have the right (the "Special Purchase Right") to purchase from Optionee's
spouse, in accordance with the provisions of Paragraph F.3, all or any portion
of the Purchased Shares which would otherwise be awarded to such spouse in
settlement of any community property or other marital property rights such
spouse may have in such shares.
2. NOTICE OF DECREE OR AGREEMENT. Optionee shall promptly provide
the Corporation with written notice (the "Dissolution Notice") of (i) the entry
of any judicial decree or order resolving the property rights of Optionee and
Optionee's spouse in connection with their marital dissolution or legal
separation or (ii) the execution of any contract or agreement relating to the
distribution or division of such property rights. The Dissolution Notice shall
be accompanied by a copy of the actual decree or order of dissolution or
contract or agreement between Optionee and Optionee's spouse which provides for
the award to the spouse of one or more Purchased Shares in settlement of any
community property or other marital property rights such spouse may have in such
shares.
3. EXERCISE OF THE SPECIAL PURCHASE RIGHT. The Special Purchase
Right shall be exercisable by delivery of written notice (the "Purchase Notice")
to Optionee and Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the
8.
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Corporation, the date such purchase is to be effected (such date to be not less
than five (5) business days, nor more than ten (10) business days, after the
date of the Purchase Notice) and the Fair Market Value to be paid for such
Purchased Shares. Optionee (or Optionee's spouse, to the extent such spouse has
physical possession of the Purchased Shares) shall, prior to the close of
business on the date specified for the purchase, deliver to the Corporation the
certificates representing the shares to be purchased. The Corporation shall,
concurrently with the receipt of the stock certificates, pay to Optionee's
spouse (in cash or cash equivalents) an amount equal to the Fair Market Value
specified for such shares in the Purchase Notice.
If Optionee's spouse does not agree with the Fair Market Value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market value
of such shares shall thereupon be determined by an appraiser of recognized
standing selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the date of the Purchase Notice, each
shall select an appraiser of recognized standing, and the two (2) appraisers
shall designate a third appraiser of recognized standing whose appraisal shall
be determinative of such value. The cost of the appraisal shall be shared
equally by the Corporation and Optionee's spouse. The closing shall then be
held on the fifth (5th) business day following the completion of such appraisal;
PROVIDED, however, that if the appraised value is more than twenty-five percent
(25%) greater than the Fair Market Value specified for the shares in the
Purchase Notice, the Corporation shall have the right, exercisable prior to the
expiration of such five (5) business-day period, to rescind the exercise of the
Special Purchase Right and thereby revoke its election to purchase the shares
awarded to the spouse. In the event the Corporation so revokes its election,
the Corporation shall bear the entire cost of the appraisal.
4. LAPSE. The Special Purchase Right shall lapse upon the EARLIER
to occur of (i) the lapse of the First Refusal Right or (ii) the expiration of
the exercise period specified in Paragraph F.3, to the extent the Special
Purchase Right is not timely exercised in accordance with such paragraph.
AI. ESCROW
1. DEPOSIT. Upon issuance, the certificates for the Purchased
Shares which are subject to the Repurchase Right shall be deposited in escrow
with the Corporation to be held in accordance with the provisions of this
Article G. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
deposited with the Corporation pursuant to the requirements of this Agreement,
shall remain in escrow until such time or times as the certificates (or other
assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Paragraph G.3. Upon delivery of the
certificates (or other assets and securities) to the
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<PAGE>
Corporation, Owner shall be issued a receipt acknowledging the number of
Purchased Shares (or other assets and securities) delivered in escrow.
2. RECAPITALIZATION/REORGANIZATION. Any new, substituted or
additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Purchased
Shares shall be immediately delivered to the Corporation to be held in escrow
under this Article G, but only to the extent the Purchased Shares are at the
time subject to the escrow requirements hereunder. However, all regular cash
dividends on the Purchased Shares (or other securities at the time held in
escrow) shall be paid directly to Owner and shall not be held in escrow.
3. RELEASE/SURRENDER. The Purchased Shares, together with any other
assets or securities held in escrow hereunder, shall be subject to the following
terms relating to their release from escrow or their surrender to the
Corporation for repurchase and cancellation:
(i) Should the Corporation elect to exercise the Repurchase
Right with respect to any Unvested Shares, then the escrowed
certificates for those Unvested Shares (together with any other assets
or securities attributable thereto) shall be surrendered to the
Corporation concurrently with the payment to Owner of an amount equal
to the aggregate Exercise Price for such Unvested Shares, and Owner
shall cease to have any further rights or claims with respect to such
Unvested Shares (or other assets or securities attributable thereto).
(ii) Should the Corporation elect to exercise the First
Refusal Right with respect to any Target Shares held at the time in
escrow hereunder, then the escrowed certificates for those Target
Shares (together with any other assets or securities attributable
thereto) shall be surrendered to the Corporation concurrently with the
payment of the Paragraph E.3 purchase price for such Target Shares to
Owner, and Owner shall cease to have any further rights or claims with
respect to such Target Shares (or other assets or securities
attributable thereto).
(iii) Should the Corporation elect NOT to exercise the
Repurchase Right with respect to any Unvested Shares or the First
Refusal Right with respect to any Target Shares held at the time in
escrow hereunder, then the escrowed certificates for those shares
(together with any other assets or securities attributable thereto)
shall be released to Owner.
(iv) As the Purchased Shares (or any other assets or
securities attributable thereto) vest in accordance with the Vesting
Schedule, the certificates for those vested shares (as well as all
other vested assets and
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securities) shall be released from escrow upon Owner's request, but not
more frequently than once every six (6) months.
(v) All Purchased Shares which vest (and any other vested
assets and securities attributable thereto) shall be released within
thirty (30) days after the EARLIER to occur of (a) Optionee's
cessation of Service or (b) the lapse of the First Refusal Right.
(vi) All Purchased Shares (or other assets or securities)
released from escrow shall nevertheless remain subject to (a) the
First Refusal Right, to the extent such right has not otherwise
lapsed, (b) the Market Stand-Off, until such restriction terminates,
and (c) the Special Purchase Right, to the extent such right has not
otherwise lapsed.
AJ. SPECIAL TAX ELECTION
The acquisition of the Purchased Shares may result in adverse tax
consequences which may be mitigated by filing an election under Code Section
83(b). Such election must be filed within thirty (30) days after the date of
this Agreement. A description of the tax consequences applicable to the
acquisition of the Purchased Shares and the form for making the Code Section
83(b) election are set forth in Exhibit III. OPTIONEE SHOULD CONSULT WITH HIS
OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED
SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(b)
ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND
NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS OR HER BEHALF.
AK. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign the Repurchase Right, the
First Refusal Right and/or the Special Purchase Right to any person or entity
selected by the Board, including (without limitation) one or more shareholders
of the Corporation.
If the assignee of the Repurchase Right is other than (i) a wholly
owned subsidiary of the Corporation or (ii) the parent corporation owning one
hundred percent (100%) of the Corporation's outstanding capital stock, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the Fair
Market Value of the Purchased Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Purchased Shares.
11.
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2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon Optionee any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Optionee) or of Optionee, which rights are hereby expressly reserved
by each, to terminate Optionee's Service at any time for any reason, with or
without cause.
3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
exercise the Repurchase Right, the First Refusal Right or the Special Purchase
Right shall not constitute a waiver of any other repurchase rights and/or rights
of first refusal that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Optionee or
Optionee's spouse. No waiver of any breach or condition of this Agreement shall
be deemed to be a waiver of any other or subsequent breach or condition, whether
of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
AL. MISCELLANEOUS PROVISIONS
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
12.
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3. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Optionee, Optionee's assigns and the legal representatives,
heirs and legatees of Optionee's estate, whether or not any such person shall
have become a party to this Agreement and have agreed in writing to join herein
and be bound by the terms hereof.
6. POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee
his or her true and lawful attorney in fact, for him or her and in his or her
name, place and stead, and for his or her use and benefit, to agree to any
amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
13.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
VISTA MEDICAL TECHNOLOGIES, INC.
By: ____________________________________
Title: _________________________________
Address: ______________________________
________________________________________
________________________________________
OPTIONEE
Address: ______________________________
________________________________________
14.
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SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement, including (without limitation) the
right of the Corporation (or its assigns) to purchase any Purchased Shares in
which Optionee is not vested and the right of the Corporation (or its assigns)
to purchase any and all interest or right the undersigned may otherwise have in
the Purchased Shares pursuant to community property laws or other marital
property rights.
_________________________________________________
OPTIONEE'S SPOUSE
Address: _______________________________________
_________________________________________________
15.
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto Vista Medical Technologies, Inc. (the "Corporation"),
___________________________(____________) shares of the Common Stock of the
Corporation standing in his or her name on the books of the Corporation
represented by Certificate No. ___________________ herewith and do hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: ________________
Signature ___________________________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Optionee.
<PAGE>
EXHIBIT II
SECTION 260.141.11
TITLE 10, CALIFORNIA ADMINISTRATIVE CODE
260.141.11 Restriction on Transfer. (a) The issuer of any
security upon which a restriction on transfer has been imposed pursuant to
Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to
be delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein, without
the prior written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
II-1.
<PAGE>
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or Subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this section.
(c) The certificates representing all such securities subject to
such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently stamped or
printed thereon in capital letters of not less than 10-point size, reading as
follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
II-2.
<PAGE>
EXHIBIT III
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(B) TAX ELECTION
I. FEDERAL INCOME TAX CONSEQUENCES AND SECTION 83(b) ELECTION FOR
EXERCISE OF NON-STATUTORY OPTION. If the Purchased Shares are acquired pursuant
to the exercise of a Non-Statutory Option, as specified in the Grant Notice,
then under Code Section 83, the excess of the Fair Market Value of the Purchased
Shares on the date any forfeiture restrictions applicable to such shares lapse
over the Exercise Price paid for such shares will be reportable as ordinary
income on the lapse date. For this purpose, the term "forfeiture restrictions"
includes the right of the Corporation to repurchase the Purchased Shares
pursuant to the Repurchase Right. However, Optionee may elect under Code
Section 83(b) to be taxed at the time the Purchased Shares are acquired, rather
than when and as such Purchased Shares cease to be subject to such forfeiture
restrictions. Such election must be filed with the Internal Revenue Service
within thirty (30) days after the date of the Agreement. Even if the Fair
Market Value of the Purchased Shares on the date of the Agreement equals the
Exercise Price paid (and thus no tax is payable), the election must be made to
avoid adverse tax consequences in the future. The form for making this election
is attached as part of this exhibit. FAILURE TO MAKE THIS FILING WITHIN THE
APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY
INCOME BY OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE.
II. FEDERAL INCOME TAX CONSEQUENCES AND CONDITIONAL SECTION 83(b)
ELECTION FOR EXERCISE OF INCENTIVE OPTION. If the Purchased Shares are acquired
pursuant to the exercise of an Incentive Option, as specified in the Grant
Notice, then the following tax principles shall be applicable to the Purchased
Shares:
(i) For regular tax purposes, no taxable income will
be recognized at the time the Option is exercised.
(ii) The excess of (a) the Fair Market Value of the
Purchased Shares on the date the Option is exercised or (if later) on
the date any forfeiture restrictions applicable to the Purchased
Shares lapse over (b) the Exercise Price paid for the Purchased Shares
will be includible in Optionee's taxable income for alternative
minimum tax purposes.
(iii) If Optionee makes a disqualifying disposition
of the Purchased Shares, then Optionee will recognize ordinary income
in the year of such disposition equal in amount to the excess of (a)
the Fair Market Value of the Purchased Shares on the date the Option
is exercised or (if later) on the date any forfeiture restrictions
applicable to the Purchased Shares lapse over (b) the Exercise Price
paid for the Purchased Shares. Any additional gain recognized upon
the disqualifying disposition will be either short-term or long-term
capital gain depending upon the period for which the Purchased Shares
are held prior to the disposition.
III-1.
<PAGE>
(iv) For purposes of the foregoing, the term
"forfeiture restrictions" will include the right of the Corporation to
repurchase the Purchased Shares pursuant to the Repurchase Right. The
term "disqualifying disposition" means any sale or other disposition(2)
of the Purchased Shares within two (2) years after the Grant Date or within
one (1) year after the exercise date of the Option.
(v) In the absence of final Treasury Regulations
relating to Incentive Options, it is not certain whether Optionee may,
in connection with the exercise of the Option for any Purchased Shares
at the time subject to forfeiture restrictions, file a protective
election under Code Section 83(b) which would limit (a) Optionee's
alternative minimum taxable income upon exercise and (b) Optionee's
ordinary income upon a disqualifying disposition to the excess of the
Fair Market Value of the Purchased Shares on the date the Option is
exercised over the Exercise Price paid for the Purchased Shares.
Accordingly, such election if properly filed will only be allowed to
the extent the final Treasury Regulations permit such a protective
election. Page 2 of the attached form for making the election should
be filed with any election made in connection with the exercise of an
Incentive Option.
- ---------------------
(2) Generally, a disposition of shares purchased under an Incentive Option
includes any transfer of legal title, including a transfer by sale, exchange or
gift, but does not include a transfer to the Optionee's spouse, a transfer into
joint ownership with right of survivorship if Optionee remains one of the joint
owners, a pledge, a transfer by bequest or inheritance or certain tax free
exchanges permitted under the Code.
III-2
<PAGE>
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is ______
shares of the common stock of Vista Medical Technologies, Inc.
(3) The property was issued on _____________, 199__.
(4) The taxable year in which the election is being made is the calendar year
199__.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of annual and monthly
installments over a four (4)-year period ending on ___________, 199__.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $ ___________ per share.
(7) The amount paid for such property is $ ___________ per share.
(8) A copy of this statement was furnished to Vista Medical Technologies, Inc.
for whom taxpayer rendered the services underlying the transfer of
property.
(9) This statement is executed on _____________________ , 199__.
____________________________ ___________________________________________
Spouse (if any) Taxpayer
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH WHICH
TAXPAYER FILES HIS OR HER FEDERAL INCOME TAX RETURNS AND MUST BE MADE WITHIN
THIRTY (30) DAYS AFTER THE EXECUTION DATE OF THE STOCK PURCHASE AGREEMENT. THIS
FILING SHOULD BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED.
OPTIONEE MUST RETAIN TWO (2) COPIES OF THE COMPLETED FORM FOR FILING WITH HIS OR
HER FEDERAL AND STATE TAX RETURNS FOR THE CURRENT TAX YEAR AND AN ADDITIONAL
COPY FOR HIS OR HER RECORDS.
<PAGE>
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code").
Accordingly, it is the intent of the Taxpayer to utilize this election to
achieve the following tax results:
1. The purpose of this election is to have the alternative
minimum taxable income attributable to the purchased shares measured by the
amount by which the fair market value of such shares at the time of their
transfer to the Taxpayer exceeds the purchase price paid for the shares. In the
absence of this election, such alternative minimum taxable income would be
measured by the spread between the fair market value of the purchased shares and
the purchase price which exists on the various lapse dates in effect for the
forfeiture restrictions applicable to such shares. The election is to be
effective to the full extent permitted under the Code.
2. Section 421(a)(1) of the Code expressly excludes from income
any excess of the fair market value of the purchased shares over the amount paid
for such shares. Accordingly, this election is also intended to be effective in
the event there is a "disqualifying disposition" of the shares, within the
meaning of Section 421(b) of the Code, which would otherwise render the
provisions of Section 83(a) of the Code applicable at that time. Consequently,
the Taxpayer hereby elects to have the amount of disqualifying disposition
income measured by the excess of the fair market value of the purchased shares
on the date of transfer to the Taxpayer over the amount paid for such shares.
Since Section 421(a) presently applies to the shares which are the subject of
this Section 83(b) election, no taxable income is actually recognized for
regular tax purposes at this time, and no income taxes are payable, by the
Taxpayer as a result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS.
2.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Purchase Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean and include each of the
following if approved by the shareholders of the Corporation:
(i) any merger or consolidation in which the Corporation is
not the surviving entity,
(ii) any sale, transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) any merger, sale or other transaction (other than an
issuance of shares by the Corporation for cash) by means of which one or
more persons acting in concert acquire beneficial ownership, in the
aggregate, of more than securities of the Corporation possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities.
F. CORPORATION shall mean Vista Medical Technologies, Inc., a
California corporation.
G. DISPOSITION NOTICE shall have the meaning assigned to such term
in Paragraph E.2.
H. DISSOLUTION NOTICE shall have the meaning assigned to such term
in Paragraph F.2.
I. EXERCISE NOTICE shall have the meaning assigned to such term in
Paragraph E.3.
J. EXERCISE PRICE shall have the meaning assigned to such term in
Paragraph A.1.
A-1.
<PAGE>
K. FAIR MARKET VALUE of a share of Common Stock on any relevant
date, prior to the initial public offering of the Common Stock, shall be
determined by the Plan Administrator after taking into account such factors as
it shall deem appropriate.
L. FIRST REFUSAL RIGHT shall mean the right granted to the
Corporation in accordance with Article E.
M. GRANT DATE shall have the meaning assigned to such term in
Paragraph A.1.
N. GRANT NOTICE shall mean the Notice of Grant of Stock Option
pursuant to which Optionee has been informed of the basic terms of the Option.
O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
P. MARKET STAND-OFF shall mean the market stand-off restriction
specified in Paragraph C.3.
Q. 1933 ACT shall mean the Securities Act of 1933, as amended.
R. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
S. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
T. OPTION shall have the meaning assigned to such term in Paragraph
A.1.
U. OPTION AGREEMENT shall mean all agreements and other documents
evidencing the Option.
V. OPTIONEE shall mean the person to whom the Option is granted
under the Plan.
W. OWNER shall mean Optionee and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Optionee.
X. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Y. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to
A-2.
<PAGE>
such transfer, (ii) a transfer of title to the Purchased Shares effected
pursuant to Optionee's will or the laws of intestate succession following
Optionee's death or (iii) a transfer to the Corporation in pledge as security
for any purchase-money indebtedness incurred by Optionee in connection with the
acquisition of the Purchased Shares.
Z. PLAN shall mean the Corporation's 1995 Stock Option Plan.
AA. PLAN ADMINISTRATOR shall mean either the Board or a committee of
Board members, to the extent the committee is at the time responsible for
administration of the Plan.
AB. PRIOR PURCHASE AGREEMENT shall have the meaning assigned to such
term in Paragraph D.4.
AC. PURCHASE NOTICE shall have the meaning assigned to such term in
Paragraph F.3.
AD. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.
AE. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
AF. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to a person or persons
different from the persons holding those securities immediately prior
to the merger, or
(iv) any transaction effected primarily to change the state
in which the Corporation is incorporated or to create a holding
company structure.
AG. REPURCHASE RIGHT shall mean the right granted to the Corporation
in accordance with Article D.
AH. SEC shall mean the Securities and Exchange Commission.
A-3.
<PAGE>
AI. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or a consultant.
AJ. SPECIAL PURCHASE RIGHT shall mean the right granted to the
Corporation in accordance with Article F.
AK. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
AL. TARGET SHARES shall have the meaning assigned to such term in
Paragraph E.2.
AM. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice, pursuant to which Optionee is to vest in the Purchased Shares in a
series of installments over his or her period of Service.
AN. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph D.1.
A-4.
<PAGE>
EXHIBIT C
1995 STOCK OPTION PLAN
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
1995 STOCK OPTION PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option Plan is intended to promote the interests
of Vista Medical Technologies, Inc., a California corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any
or all administrative functions otherwise exercisable by the Board may be
delegated to the Committee. Members of the Committee shall serve for such
period of time as the Board may determine and shall be subject to removal by the
Board at any time. The Board may also at any time terminate the functions of
the Committee and reassume all powers and authority previously delegated to the
Committee.
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options as it may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Plan or any option or shares issued thereunder.
III. ELIGIBILITY
A. The persons eligible to receive option grants under the Plan
are as follows:
(i) Employees,
<PAGE>
(ii) non-employee members of the Board or the non-
employee members of the board of directors of any Parent or
Subsidiary, and
(iii) consultants who provide services to the
Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to
determine which eligible persons are to receive option grants under the Plan,
the time or times when such option grants are to be made, the number of shares
to be covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
option is to become exercisable, the vesting schedule (if any) applicable to the
option shares and the maximum term for which the option is to remain
outstanding.
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. The maximum number of
shares of Common Stock which may be issued over the term of the Plan shall not
exceed 896,208 shares.
B. Shares of Common Stock subject to outstanding options shall
be available for subsequent issuance under the Plan to the extent (i) the
options expire or terminate for any reason prior to exercise in full or (ii) the
options are cancelled in accordance with the cancellation-regrant provisions of
Article Two. All shares issued under the Plan, whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan.
C. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan and (ii) the number and/or class of securities and the
exercise price per share in effect under each outstanding option in order to
prevent the dilution or enlargement of benefits thereunder. The adjustments
determined by the Plan Administrator shall be final, binding and conclusive. In
no event shall any such adjustments be made in connection with the conversion of
one or more outstanding shares of the Corporation's preferred stock into shares
of Common Stock.
2.
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; PROVIDED, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise price per share shall not be less
than eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the option grant date.
(ii) If the person to whom the option is granted is a
10% Shareholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Three and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. Should the Common Stock be registered
under Section 12(g) of the 1934 Act at the time the option is exercised, then
the exercise price may also be paid as follows:
(i) in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(ii) to the extent the option is exercised for
vested shares, through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable
written instructions (a) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all
3.
<PAGE>
applicable Federal, state and local income and employment taxes required to
be withheld by the Corporation by reason of such exercise and (b) to the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option grant. However, no option shall have a term in
excess of ten (10) years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE. The following provisions
shall govern the exercise of any options held by the Optionee at the time of
cessation of Service or death:
(i) Should the Optionee cease to remain in
Service for any reason other than Disability or death, then the
Optionee shall have a period of three (3) months following the date of
such cessation of Service during which to exercise each outstanding
option held by such Optionee.
(ii) Should such Service terminate by reason of
Disability, then the Optionee shall have a period of six (6) months
following the date of such cessation of Service during which to
exercise each outstanding option held by such Optionee. However,
should such Disability be deemed to constitute Permanent Disability,
then the period during which each outstanding option held by the
Optionee is to remain exercisable shall be extended by an additional
six (6) months so that the exercise period shall be the twelve (12)-
month period following the date of the Optionee's cessation of Service
by reason of such Permanent Disability.
(iii) Should the Optionee die while holding one or
more outstanding options, then the personal representative of the
Optionee's estate or the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution shall have a period of twelve (12)
months following the date of the Optionee's death during which to
exercise each such option.
(iv) Under no circumstances, however, shall any
such option be exercisable after the specified expiration of the
option term.
4.
<PAGE>
(v) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the
extent it is not exercisable for vested shares on the date of such
cessation of Service.
D. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. UNVESTED SHARES. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock under the Plan. Should the Optionee cease Service while holding such
unvested shares, the Corporation shall have the right to repurchase, at the
exercise price paid per share, all or (at the discretion of the Corporation and
with the consent of the Optionee) any of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right. The Plan Administrator may not
impose a vesting schedule upon any option grant or any shares of Common Stock
subject to the option which is more restrictive than twenty percent (20%) per
year vesting, with the initial vesting to occur one (1) year after the option
grant date. However, this minimum vesting requirement shall not be applicable
with respect to any option granted to a Highly-Compensated Person.
F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock
is first registered under Section 12(g) of the 1934 Act, the Corporation shall
have the right of first refusal with respect to any proposed disposition by the
Optionee (or any successor in interest) of any shares of Common Stock issued
under the Plan. Such right of first refusal shall be exercisable in accordance
with the terms established by the Plan Administrator and set forth in the
document evidencing such right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of
the Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option
may be assigned in whole or in part during Optionee's lifetime in accordance
with the terms of a Qualified Domestic Relations Order. The assigned portion
may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to such Qualified Domestic Relations Order. The
terms applicable to the assigned portion shall be the same as those in effect
for the
5.
<PAGE>
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
H. WITHHOLDING. The Corporation's obligation to deliver shares
of Common Stock upon the exercise of any options granted under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of the Plan shall be applicable to Incentive Options. Options which
are specifically designated as Non-Statutory Options shall NOT be subject to the
terms specified in this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
B. EXERCISE PRICE. The exercise price per share shall not be
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one (1) calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To
the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
D. 10% SHAREHOLDER. If any Employee to whom an Incentive
Option is granted is a 10% Shareholder, then the option term shall not exceed
five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with such
Corporate Transaction. In addition, all outstanding repurchase rights under the
Plan shall terminate automatically in the event of any Corporate Transaction,
except to the extent the repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction.
6.
<PAGE>
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in the consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
C. The grant of options under the Plan shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.
ARTICLE THREE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee to pay the option
exercise price by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. Promissory notes may be authorized with or without
security or collateral. However, any promissory notes delivered by a consultant
must be secured by property other than the purchased shares of Common Stock. In
all events, the maximum credit available to each Optionee may not exceed the SUM
of (i) the aggregate option exercise price payable for the purchased shares plus
(ii) any Federal, state and local income and employment tax liability incurred
by the Optionee in connection with the option exercise.
7.
<PAGE>
II. ADDITIONAL AUTHORITY
A. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding:
(i) to extend the period of time for which the
option is to remain exercisable following the Optionee's cessation of
Service or death from the limited period otherwise in effect for that
option to such greater period of time as the Plan Administrator shall
deem appropriate; PROVIDED, that in no event shall such option be
exercisable after the specified expiration of the option term, and/or
(ii) to permit the option to be exercised, during
the applicable post-Service exercise period, not only with respect to
the number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service or
death but also with respect to one or more additional installments in
which the Optionee would have vested under the option had the Optionee
continued in Service.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective when adopted by the Board,
but no option granted under the Plan may be exercised until the Plan is approved
by the Corporation's shareholders. If such shareholder approval is not obtained
within twelve (12) months after the date of the Board's adoption of the Plan,
then all options previously granted under the Plan shall terminate and cease to
be outstanding, and no further options shall be granted. Subject to such
limitation, the Plan Administrator may grant options under the Plan at any time
after the effective date of the Plan and before the date fixed herein for
termination of the Plan.
B. The Plan shall terminate upon the EARLIEST of (i) the
expiration of the ten (10)-year period measured from the date the Plan is
adopted by the Board, (ii) the date on which all shares available for issuance
under the Plan shall have been issued or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such Plan
termination, all options and unvested stock issuances outstanding under the Plan
shall continue to have full force and effect in accordance with the provisions
of the documents evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall, without the consent of the Optionees, adversely
affect their rights and obligations under their outstanding options. In
addition, the Board shall not, without the
8.
<PAGE>
approval of the Corporation's shareholders, (i) increase the maximum number of
shares issuable under the Plan, except for permissible adjustments in the event
of certain changes in the Corporation's capitalization, (ii) materially modify
the eligibility requirements for Plan participation or (iii) materially increase
the benefits accruing to Plan participants.
B. Options may be granted under the Plan to purchase shares of
Common Stock in excess of the number of shares then available for issuance under
the Plan, provided any such options actually granted may not be exercised until
there is obtained shareholder approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such shareholder approval is not obtained within twelve (12) months after the
date the excess grants are first made, then any options granted on the basis of
such excess shares shall terminate and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option
hereunder and the issuance of any shares of Common Stock upon the exercise of
any option shall be subject to the Corporation's procurement of all approvals
and permits required by regulatory authorities having jurisdiction over the
Plan, the options granted under it and the shares of Common Stock issued
pursuant to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of the Optionee, which rights are
hereby expressly reserved by each, to terminate the Optionee's Service at any
time for any reason, with or without cause.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income
statement at least annually to each individual holding an outstanding option
under the Plan, unless such individual is a key Employee whose duties in
connection with the Corporation (or any Parent or Subsidiary) assure such
individual access to equivalent information.
9.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following shareholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean Vista Medical Technologies, Inc., a California
corporation.
G. DISABILITY shall mean the inability of an individual to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
A-1.
<PAGE>
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
L. HIGHLY-COMPENSATED PERSON shall mean an Optionee (i) whose
compensation per calendar year from the Corporation (or any Parent or
Subsidiary) equals or exceeds Sixty Thousand Dollars ($60,000) in the aggregate
and (ii) who has previously received one or more option grants under the Plan.
M. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
A-2
<PAGE>
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
P. OPTIONEE shall mean any person to whom an option is granted under the
Plan.
Q. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
R. PLAN shall mean the Corporation's 1995 Stock Option Plan, as set forth
in this document.
S. PLAN ADMINISTRATOR shall mean either the Board or the Committee, to
the extent the Committee is at the time responsible for the administration of
the Plan.
T. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
U. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant, except to the extent
otherwise specifically provided in the documents evidencing the option grant.
V. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
W. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
X. 10% SHAREHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
A-3.
<PAGE>
EXHIBIT 10.36
VISTA MEDICAL TECHNOLOGIES, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants who provide services to
the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may also be assigned
in whole or in part during Optionee's lifetime in accordance with the terms of a
Qualified Domestic Relations Order. The assigned position shall be exercisable
only by the person or persons who acquire a proprietary interest in the option
pursuant to such Qualified Domestic Relations Order. The terms applicable to
the assigned portion shall be the same as those in effect for this option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
<PAGE>
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5, 6 or 17.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason
(other than death or Disability) while this option is outstanding, then Optionee
shall have a period of three (3) months (commencing with the date of such
cessation of Service) during which to exercise this option, but in no event
shall this option be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance with
the laws of descent and distribution shall have the right to exercise this
option. Such right shall lapse and this option shall cease to be outstanding
upon the EARLIER of (i) the expiration of the twelve (12)- month period measured
from the date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Disability while
this option is outstanding, then Optionee shall have a period of six (6) months
(commencing with the date of such cessation of Service) during which to exercise
this option. However, should such Disability be deemed to constitute Permanent
Disability, then the period during which this option is to remain exercisable
shall be extended by an additional six (6) months so that the exercise period
shall be the twelve (12)-month period following the date of Optionee's cessation
of Service by reason of such Permanent Disability. In no event shall this
option be exercisable at any time after the Expiration Date.
NOTE: Exercise of this option on a date later than three (3) months
following cessation of Service due to Disability will result in loss
of favorable Incentive Option treatment, UNLESS such Disability
constitutes Permanent Disability. In the event that Incentive Option
treatment is not available, this option will be taxed as a
Non-Statutory Option upon exercise.
(d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
vested Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited exercise
period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any vested Option Shares for
2.
<PAGE>
which the option has not been exercised. To the extent Optionee is not vested
in the Option Shares at the time of Optionee's cessation of Service, this option
shall immediately terminate and cease to be outstanding with respect to those
shares.
6. SPECIAL TERMINATION OF OPTION.
(a) In the event of a Corporate Transaction, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or parent thereof in connection with such Corporate
Transaction.
(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, PROVIDED the aggregate Exercise Price shall remain the same.
(c) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. SHAREHOLDER RIGHTS. The holder of this option shall not have any
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Purchase
Agreement for the Option Shares for which the option is exercised.
3.
<PAGE>
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation; or
(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in accordance
with Paragraph 14.
Should the Common Stock be registered under Section 12(g) of the
1934 Act at the time the option is exercised, then the Exercise Price
may also be paid as follows:
(C) in shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(D) to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Purchase Agreement delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other
than Optionee) have the right to exercise this option.
(iv) Execute and deliver to the Corporation such
written representations as may be requested by the Corporation in order
4.
<PAGE>
for it to comply with the applicable requirements of Federal and state
securities laws.
(v) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE
OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered
5.
<PAGE>
to Optionee shall be in writing and addressed to Optionee at the address
indicated below Optionee's signature line on the Grant Notice. All notices
shall be deemed effective upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.
14. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a promissory note.
The terms of any such promissory note (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.(1)
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
16. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL.
(a) The grant of this option is subject to approval of the Plan
by the Corporation's shareholders within twelve (12) months after the adoption
of the Plan by the Board. NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO
THE CONTRARY, THIS OPTION MAY NOT BE EXERCISED IN WHOLE OR IN PART UNTIL SUCH
SHAREHOLDER APPROVAL IS OBTAINED. In the event that such shareholder approval
is not obtained, then this option shall terminate in its entirety and Optionee
shall have no further rights to acquire any Option Shares hereunder.
(b) If the Option Shares covered by this Agreement exceed, as of
the Grant Date, the number of shares of Common Stock which may without
shareholder approval be issued under the Plan, then this option shall be void
with respect to such excess shares, unless shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of the Plan.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
- ---------------
(1) Authorization of payment of the Exercise Price by a promissory note may,
under currently proposed Treasury Regulations, result in the loss of incentive
stock option treatment under the Federal tax laws.
6.
<PAGE>
(a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (i) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (ii) more than twelve (12) months after the date Optionee ceases
to be an Employee by reason of Permanent Disability.
(b) This option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which this option would
otherwise first become exercisable in such calendar year would, when added to
the aggregate value (determined as of the respective date or dates of grant) of
the Common Stock and any other securities for which one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. To the extent the exercisability of this
option is deferred by reason of the foregoing limitation, the deferred portion
shall become exercisable in the first calendar year or years thereafter in which
the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(b)
would not be contravened, but such deferral shall in all events end immediately
prior to the effective date of a Corporate Transaction in which this option is
not to be assumed, whereupon the option shall become immediately exercisable as
a Non-Statutory Option for the deferred portion of the Option Shares.
(c) Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
7.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
F. CORPORATION shall mean Vista Medical Technologies, Inc., a California
corporation.
G. DISABILITY shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
A-1.
<PAGE>
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
K. EXERCISE PRICE shall mean the exercise price per share as specified in
the Grant Notice.
L. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
M. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as the price is reported by
the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any Stock
Exchange nor traded on the Nasdaq National Market, then the Fair Market
Value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
N. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
A-2.
<PAGE>
O. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
P. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
S. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
T. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
U. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PLAN shall mean the Corporation's 1995 Stock Option Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of Board
members, to the extent the committee is at the time responsible for the
administration of the Plan.
X. PURCHASE AGREEMENT shall mean the stock purchase agreement in
substantially the form of Exhibit B to the Grant Notice.
Y. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
Z. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant.
AA. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
A-3.
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AB. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-4.
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EXHIBIT 10.37
STANDARD VERSION
VISTA MEDICAL TECHNOLOGIES, INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this ___ day of _________ 19___, by and among
Vista Medical Technologies, Inc., a California corporation,
________________________________, Optionee under the Corporation's 1995 Stock
Option Plan, and _____________________________, Optionee's spouse.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
1. EXERCISE. Optionee hereby purchases _____________ shares of
Common Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on ____________________, 199__ (the "Grant Date") to
purchase up to _______________ shares of Common Stock under the Plan at the
exercise price of $______ per share (the "Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.
3. DELIVERY OF CERTIFICATES. The certificates representing any
Purchased Shares which are subject to the Repurchase Right shall be held in
escrow in accordance with the provisions of this Agreement.
4. SHAREHOLDER RIGHTS. Until such time as the Corporation exercises
the Repurchase Right, the First Refusal Right or the Special Purchase Right,
Optionee (or any successor in interest) shall have all the rights of a
shareholder (including voting, dividend and liquidation rights) with respect to
the Purchased Shares, including the Purchased Shares held in escrow hereunder,
subject, however, to the transfer restrictions of Articles B and C.
<PAGE>
B. SECURITIES LAW COMPLIANCE
1. RESTRICTED SECURITIES. The Purchased Shares have not been
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
2. RESTRICTIONS ON DISPOSITION OF PURCHASED SHARES. Optionee shall
make no disposition of the Purchased Shares (other than a Permitted Transfer)
unless and until there is compliance with all of the following requirements:
(i) Optionee shall have provided the Corporation with a
written summary of the terms and conditions of the proposed
disposition.
(ii) Optionee shall have complied with all requirements of
this Agreement applicable to the disposition of the Purchased Shares.
(iii) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that (a) the proposed disposition does not require
registration of the Purchased Shares under the 1933 Act or (b) all
appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
(iv) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that the proposed disposition will not result in the
contravention of any transfer restrictions applicable to the Purchased
Shares pursuant to the provisions of the Rules of the California
Corporations Commissioner identified in Paragraph B.4.
The Corporation shall NOT be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement OR (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
2.
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3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
Shares shall be endorsed with one or more of the following restrictive legends:
(i) "The shares represented by this certificate have not
been registered under the Securities Act of 1933. The shares may not
be sold or offered for sale in the absence of (a) an effective
registration statement for the shares under such Act, (b) a 'no
action' letter of the Securities and Exchange Commission with respect
to such sale or offer or (c) satisfactory assurances to the
Corporation that registration under such Act is not required with
respect to such sale or offer."
(ii) "It is unlawful to consummate a sale or transfer of
this security, or any interest therein, or to receive any
consideration therefor, without the prior written consent of the
Commissioner of Corporations of the State of California, except as
permitted in the Commissioner's Rules."
(iii) "The shares represented by this certificate are
subject to certain repurchase rights and rights of first refusal
granted to the Corporation and accordingly may not be sold, assigned,
transferred, encumbered, or in any manner disposed of except in
conformity with the terms of a written agreement dated ____________,
199__ between the Corporation and the registered holder of the shares
(or the predecessor in interest to the shares). A copy of such
agreement is maintained at the Corporation's principal corporate
offices."
4. RECEIPT OF COMMISSIONER RULES. Optionee hereby acknowledges
receipt of a copy of Section 260.141.11 of the Rules of the California
Corporations Commissioner, a copy of which is attached as Exhibit II to this
Agreement.
C. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Optionee shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right, the Market Stand-Off or the Special Purchase Right.
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Optionee.
3.
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3. MARKET STAND-OFF.
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters. In no event, however, shall such period exceed one hundred
eighty (180) days and the Market Stand-Off shall in all events terminate two (2)
years after the effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off PROVIDED AND
ONLY IF the officers and directors of the Corporation are also subject to
similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation
may impose stop-transfer instructions with respect to the Purchased Shares until
the end of the applicable stand-off period.
D. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date Optionee ceases for any reason to remain in Service or (if
later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Exercise Price all or (at the discretion of the
Corporation and with the consent of Optionee) any portion of the Purchased
Shares in which Optionee is not, at the time of his or her cessation of Service,
vested in accordance with the Vesting Schedule set forth in the Notice of Grant
or as otherwise provided in paragraph D.6 (such shares to be hereinafter
referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates
4.
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representing the Unvested Shares to be repurchased shall be delivered to the
Corporation prior to the close of business on the date specified for the
repurchase. Concurrently with the receipt of such stock certificates, the
Corporation shall pay to Owner, in cash or cash equivalents (including the
cancellation of any purchase-money indebtedness), an amount equal to the
Exercise Price previously paid for the Unvested Shares which are to be
repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Optionee vests in accordance with the Vesting Schedule set forth
in the Notice of Grant or as otherwise provided in Paragraph D.6. All Purchased
Shares as to which the Repurchase Right lapses shall, however, remain subject to
(i) the First Refusal Right, (ii) the Market Stand-Off and (iii) the Special
Purchase Right.
4. AGGREGATE VESTING LIMITATION. If the Option is exercised in more
than one increment so that Optionee is a party to one or more other Stock
Purchase Agreements (the "Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which Optionee would otherwise at the time be
vested, in accordance with the Vesting Schedule, had all the Purchased Shares
(including those acquired under the Prior Purchase Agreements) been acquired
exclusively under this Agreement.
5. RECAPITALIZATION. Any new, substituted or additional securities
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right, but only
to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Purchased Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Corporation's capital
structure; PROVIDED, however, that the aggregate purchase price shall remain the
same.
6. CORPORATE TRANSACTION.
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety,
except to the extent the Repurchase Right is to be assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.
5.
<PAGE>
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payment) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; PROVIDED, however, that
the aggregate purchase price shall remain the same.
E. RIGHT OF FIRST REFUSAL
1. GRANT. The Corporation is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Optionee has vested in accordance with
the Vesting Schedule. For purposes of this Article E, the term "transfer" shall
include any sale, assignment, pledge, encumbrance or other disposition of the
Purchased Shares intended to be made by Owner, but shall not include any
Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
Purchased Shares in which Optionee has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Corporation written notice
(the "Disposition Notice") of the terms of the offer, including the purchase
price and the identity of the third-party offeror, and (ii) provide satisfactory
proof that the disposition of the Target Shares to such third-party offeror
would not be in contravention of the provisions set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for
a period of twenty-five (25) days following receipt of the Disposition Notice,
have the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those specified therein or upon such
other terms (not materially different from those specified in the Disposition
Notice) to which Owner consents. Such right shall be exercisable by delivery of
written notice (the "Exercise Notice") to Owner prior to the expiration of the
twenty-five (25)-day exercise period. If such right is exercised with respect
to all the Target Shares, then the Corporation shall effect the repurchase of
such shares, including payment of the purchase price, not more than five (5)
business days after delivery of the Exercise Notice; and at such time the
certificates representing the Target Shares shall be delivered to the
Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If Owner and the Corporation
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an
6.
<PAGE>
appraiser of recognized standing selected by Owner and the Corporation or, if
they cannot agree on an appraiser within twenty (20) days after the
Corporation's receipt of the Disposition Notice, each shall select an appraiser
of recognized standing and the two (2) appraisers shall designate a third
appraiser of recognized standing, whose appraisal shall be determinative of such
value. The cost of such appraisal shall be shared equally by Owner and the
Corporation. The closing shall then be held on the LATER of (i) the fifth (5th)
business day following delivery of the Exercise Notice or (ii) the fifth (5th)
business day after such valuation shall have been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Exercise Notice is not given to Owner prior to the expiration of the twenty-five
(25)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; PROVIDED, however, that any such sale or
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares free and clear
of the Repurchase Right and the First Refusal Right, but the acquired shares
shall remain subject to the provisions of Article B and Paragraph C.3. In the
event Owner does not effect such sale or disposition of the Target Shares within
the specified thirty (30)-day period, the First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:
(i) sale or other disposition of all the Target Shares to
the third-party offeror identified in the Disposition Notice, but in
full compliance with the requirements of Paragraph E.4, as if the
Corporation did not exercise the First Refusal Right; or
(ii) sale to the Corporation of the portion of the Target
Shares which the Corporation has elected to purchase, such sale to be
effected in substantial conformity with the provisions of Paragraph
E.3. The First Refusal Right shall continue to be applicable to any
subsequent disposition of the remaining Target Shares until such right
lapses.
Failure of Owner to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
7.
<PAGE>
6. RECAPITALIZATION/REORGANIZATION.
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.
7. LAPSE. The First Refusal Right shall lapse upon the EARLIEST to
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
F. MARITAL DISSOLUTION OR LEGAL SEPARATION
1. GRANT. In connection with the dissolution of Optionee's marriage
or the legal separation of Optionee and Optionee's spouse, the Corporation shall
have the right (the "Special Purchase Right") to purchase from Optionee's
spouse, in accordance with the provisions of Paragraph F.3, all or any portion
of the Purchased Shares which would otherwise be awarded to such spouse in
settlement of any community property or other marital property rights such
spouse may have in such shares.
2. NOTICE OF DECREE OR AGREEMENT. Optionee shall promptly provide
the Corporation with written notice (the "Dissolution Notice") of (i) the entry
of any judicial decree or order resolving the property rights of Optionee and
Optionee's spouse in connection with their marital dissolution or legal
separation or (ii) the execution of any contract or agreement relating to the
distribution or division of such property rights. The Dissolution Notice shall
be accompanied by a copy of the actual decree or order of dissolution or
contract or agreement between Optionee and Optionee's spouse which provides for
the award to the spouse of one or more Purchased Shares in settlement of any
community property or other marital property rights such spouse may have in such
shares.
3. EXERCISE OF THE SPECIAL PURCHASE RIGHT. The Special Purchase
Right shall be exercisable by delivery of written notice (the "Purchase Notice")
to Optionee and Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the
8.
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Corporation, the date such purchase is to be effected (such date to be not less
than five (5) business days, nor more than ten (10) business days, after the
date of the Purchase Notice) and the Fair Market Value to be paid for such
Purchased Shares. Optionee (or Optionee's spouse, to the extent such spouse has
physical possession of the Purchased Shares) shall, prior to the close of
business on the date specified for the purchase, deliver to the Corporation the
certificates representing the shares to be purchased. The Corporation shall,
concurrently with the receipt of the stock certificates, pay to Optionee's
spouse (in cash or cash equivalents) an amount equal to the Fair Market Value
specified for such shares in the Purchase Notice.
If Optionee's spouse does not agree with the Fair Market Value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market value
of such shares shall thereupon be determined by an appraiser of recognized
standing selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the date of the Purchase Notice, each
shall select an appraiser of recognized standing, and the two (2) appraisers
shall designate a third appraiser of recognized standing whose appraisal shall
be determinative of such value. The cost of the appraisal shall be shared
equally by the Corporation and Optionee's spouse. The closing shall then be
held on the fifth (5th) business day following the completion of such appraisal;
PROVIDED, however, that if the appraised value is more than twenty-five percent
(25%) greater than the Fair Market Value specified for the shares in the
Purchase Notice, the Corporation shall have the right, exercisable prior to the
expiration of such five (5) business-day period, to rescind the exercise of the
Special Purchase Right and thereby revoke its election to purchase the shares
awarded to the spouse. In the event the Corporation so revokes its election,
the Corporation shall bear the entire cost of the appraisal.
4. LAPSE. The Special Purchase Right shall lapse upon the EARLIER
to occur of (i) the lapse of the First Refusal Right or (ii) the expiration of
the exercise period specified in Paragraph F.3, to the extent the Special
Purchase Right is not timely exercised in accordance with such paragraph.
G. ESCROW
1. DEPOSIT. Upon issuance, the certificates for the Purchased
Shares which are subject to the Repurchase Right shall be deposited in escrow
with the Corporation to be held in accordance with the provisions of this
Article G. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
deposited with the Corporation pursuant to the requirements of this Agreement,
shall remain in escrow until such time or times as the certificates (or other
assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Paragraph G.3. Upon delivery of the
certificates (or other assets and securities) to the
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Corporation, Owner shall be issued a receipt acknowledging the number of
Purchased Shares (or other assets and securities) delivered in escrow.
2. RECAPITALIZATION/REORGANIZATION. Any new, substituted or
additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Purchased
Shares shall be immediately delivered to the Corporation to be held in escrow
under this Article G, but only to the extent the Purchased Shares are at the
time subject to the escrow requirements hereunder. However, all regular cash
dividends on the Purchased Shares (or other securities at the time held in
escrow) shall be paid directly to Owner and shall not be held in escrow.
3. RELEASE/SURRENDER. The Purchased Shares, together with any other
assets or securities held in escrow hereunder, shall be subject to the following
terms relating to their release from escrow or their surrender to the
Corporation for repurchase and cancellation:
(i) Should the Corporation elect to exercise the
Repurchase Right with respect to any Unvested Shares, then the
escrowed certificates for those Unvested Shares (together with any
other assets or securities attributable thereto) shall be surrendered
to the Corporation concurrently with the payment to Owner of an amount
equal to the aggregate Exercise Price for such Unvested Shares, and
Owner shall cease to have any further rights or claims with respect to
such Unvested Shares (or other assets or securities attributable
thereto).
(ii) Should the Corporation elect to exercise the First
Refusal Right with respect to any Target Shares held at the time in
escrow hereunder, then the escrowed certificates for those Target
Shares (together with any other assets or securities attributable
thereto) shall be surrendered to the Corporation concurrently with the
payment of the Paragraph E.3 purchase price for such Target Shares to
Owner, and Owner shall cease to have any further rights or claims with
respect to such Target Shares (or other assets or securities
attributable thereto).
(iii) Should the Corporation elect NOT to exercise the
Repurchase Right with respect to any Unvested Shares or the First
Refusal Right with respect to any Target Shares held at the time in
escrow hereunder, then the escrowed certificates for those shares
(together with any other assets or securities attributable thereto)
shall be released to Owner.
(iv) As the Purchased Shares (or any other assets or
securities attributable thereto) vest in accordance with the Vesting
Schedule, the certificates for those vested shares (as well as all
other vested assets and
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securities) shall be released from escrow upon Owner's request, but not
more frequently than once every six (6) months.
(v) All Purchased Shares which vest (and any other vested
assets and securities attributable thereto) shall be released within
thirty (30) days after the EARLIER to occur of (a) Optionee's
cessation of Service or (b) the lapse of the First Refusal Right.
(vi) All Purchased Shares (or other assets or securities)
released from escrow shall nevertheless remain subject to (a) the
First Refusal Right, to the extent such right has not otherwise
lapsed, (b) the Market Stand-Off, until such restriction terminates,
and (c) the Special Purchase Right, to the extent such right has not
otherwise lapsed.
H. SPECIAL TAX ELECTION
The acquisition of the Purchased Shares may result in adverse tax
consequences which may be mitigated by filing an election under Code Section
83(b). Such election must be filed within thirty (30) days after the date of
this Agreement. A description of the tax consequences applicable to the
acquisition of the Purchased Shares and the form for making the Code Section
83(b) election are set forth in Exhibit III. OPTIONEE SHOULD CONSULT WITH HIS
OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED
SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(b)
ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND
NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS OR HER BEHALF.
I. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign the Repurchase Right, the
First Refusal Right and/or the Special Purchase Right to any person or entity
selected by the Board, including (without limitation) one or more shareholders
of the Corporation.
If the assignee of the Repurchase Right is other than (i) a wholly
owned subsidiary of the Corporation or (ii) the parent corporation owning one
hundred percent (100%) of the Corporation's outstanding capital stock, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the Fair
Market Value of the Purchased Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Purchased Shares.
11.
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2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon Optionee any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Optionee) or of Optionee, which rights are hereby expressly reserved
by each, to terminate Optionee's Service at any time for any reason, with or
without cause.
3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
exercise the Repurchase Right, the First Refusal Right or the Special Purchase
Right shall not constitute a waiver of any other repurchase rights and/or rights
of first refusal that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Optionee or
Optionee's spouse. No waiver of any breach or condition of this Agreement shall
be deemed to be a waiver of any other or subsequent breach or condition, whether
of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
J. MISCELLANEOUS PROVISIONS
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
12.
<PAGE>
3. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Optionee, Optionee's assigns and the legal representatives,
heirs and legatees of Optionee's estate, whether or not any such person shall
have become a party to this Agreement and have agreed in writing to join herein
and be bound by the terms hereof.
6. POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee
his or her true and lawful attorney in fact, for him or her and in his or her
name, place and stead, and for his or her use and benefit, to agree to any
amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
13.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
VISTA MEDICAL TECHNOLOGIES, INC.
By:
-----------------------------------
Title:
---------------------------------
Address:
------------------------------
----------------------------------------
----------------------------------------
OPTIONEE
Address:
------------------------------
----------------------------------------
14.
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement, including (without limitation) the
right of the Corporation (or its assigns) to purchase any Purchased Shares in
which Optionee is not vested and the right of the Corporation (or its assigns)
to purchase any and all interest or right the undersigned may otherwise have in
the Purchased Shares pursuant to community property laws or other marital
property rights.
----------------------------------------
OPTIONEE'S SPOUSE
Address:
------------------------------
----------------------------------------
15.
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s), assign(s)
and transfer(s) unto Vista Medical Technologies, Inc. (the "Corporation"),
___________________________(____________) shares of the Common Stock of the
Corporation standing in his or her name on the books of the Corporation
represented by Certificate No. ___________________ herewith and do hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated:
-------------
Signature
---------------------------------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Optionee.
<PAGE>
EXHIBIT II
SECTION 260.141.11
TITLE 10, CALIFORNIA ADMINISTRATIVE CODE
260.141.11 Restriction on Transfer. (a) The issuer of any security
upon which a restriction on transfer has been imposed pursuant to Sections
260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to be
delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate
a sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such securities
is not in violation of any securities law of the foreign state, territory or
country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
II-1.
<PAGE>
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or Subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or Subdivision (a)
of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries
who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law
or to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law
or by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this section.
(c) The certificates representing all such securities subject to
such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently stamped or
printed thereon in capital letters of not less than 10-point size, reading as
follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
II-2.
<PAGE>
EXHIBIT III
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. FEDERAL INCOME TAX CONSEQUENCES AND SECTION 83(b) ELECTION FOR
EXERCISE OF NON-STATUTORY OPTION. If the Purchased Shares are acquired pursuant
to the exercise of a Non-Statutory Option, as specified in the Grant Notice,
then under Code Section 83, the excess of the Fair Market Value of the Purchased
Shares on the date any forfeiture restrictions applicable to such shares lapse
over the Exercise Price paid for such shares will be reportable as ordinary
income on the lapse date. For this purpose, the term "forfeiture restrictions"
includes the right of the Corporation to repurchase the Purchased Shares
pursuant to the Repurchase Right. However, Optionee may elect under Code
Section 83(b) to be taxed at the time the Purchased Shares are acquired, rather
than when and as such Purchased Shares cease to be subject to such forfeiture
restrictions. Such election must be filed with the Internal Revenue Service
within thirty (30) days after the date of the Agreement. Even if the Fair
Market Value of the Purchased Shares on the date of the Agreement equals the
Exercise Price paid (and thus no tax is payable), the election must be made to
avoid adverse tax consequences in the future. The form for making this election
is attached as part of this exhibit. FAILURE TO MAKE THIS FILING WITHIN THE
APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY
INCOME BY OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE.
II. FEDERAL INCOME TAX CONSEQUENCES AND CONDITIONAL SECTION 83(b) ELECTION
FOR EXERCISE OF INCENTIVE OPTION. If the Purchased Shares are acquired pursuant
to the exercise of an Incentive Option, as specified in the Grant Notice, then
the following tax principles shall be applicable to the Purchased Shares:
(i) For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
(ii) The excess of (a) the Fair Market Value of the
Purchased Shares on the date the Option is exercised or (if later) on
the date any forfeiture restrictions applicable to the Purchased
Shares lapse over (b) the Exercise Price paid for the Purchased Shares
will be includible in Optionee's taxable income for alternative
minimum tax purposes.
(iii) If Optionee makes a disqualifying disposition of the
Purchased Shares, then Optionee will recognize ordinary income in the
year of such disposition equal in amount to the excess of (a) the Fair
Market Value of the Purchased Shares on the date the Option is
exercised or (if later) on the date any forfeiture restrictions
applicable to the Purchased Shares lapse over (b) the Exercise Price
paid for the Purchased Shares. Any additional gain recognized upon
the disqualifying disposition will be either short-term or long-term
capital gain depending upon the period for which the Purchased Shares
are held prior to the disposition.
III-1.
<PAGE>
(iv) For purposes of the foregoing, the term
"forfeiture restrictions" will include the right of the Corporation to
repurchase the Purchased Shares pursuant to the Repurchase Right. The
term "disqualifying disposition" means any sale or other
disposition(1) of the Purchased Shares within two (2) years after the
Grant Date or within one (1) year after the exercise date of the
Option.
(v) In the absence of final Treasury Regulations relating
to Incentive Options, it is not certain whether Optionee may, in
connection with the exercise of the Option for any Purchased Shares at
the time subject to forfeiture restrictions, file a protective
election under Code Section 83(b) which would limit (a) Optionee's
alternative minimum taxable income upon exercise and (b) Optionee's
ordinary income upon a disqualifying disposition to the excess of the
Fair Market Value of the Purchased Shares on the date the Option is
exercised over the Exercise Price paid for the Purchased Shares.
Accordingly, such election if properly filed will only be allowed to
the extent the final Treasury Regulations permit such a protective
election. Page 2 of the attached form for making the election should
be filed with any election made in connection with the exercise of an
Incentive Option.
- ------------------------------
(1) Generally, a disposition of shares purchased under an Incentive Option
includes any transfer of legal title, including a transfer by sale, exchange or
gift, but does not include a transfer to the Optionee's spouse, a transfer into
joint ownership with right of survivorship if Optionee remains one of the joint
owners, a pledge, a transfer by bequest or inheritance or certain tax free
exchanges permitted under the Code.
III-2.
<PAGE>
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
shares of the common stock of Vista Medical Technologies, Inc.
(3) The property was issued on , 199 .
(4) The taxable year in which the election is being made is the calendar year
199 .
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The
issuer's repurchase right lapses in a series of annual and monthly
installments over a four (4)-year period ending on , 199 .
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $ per share.
(7) The amount paid for such property is $ per share.
(8) A copy of this statement was furnished to Vista Medical Technologies, Inc.
for whom taxpayer rendered the services underlying the transfer of
property.
(9) This statement is executed on , 199 .
- ------------------------------ ----------------------------------------
Spouse (if any) Taxpayer
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH WHICH
TAXPAYER FILES HIS OR HER FEDERAL INCOME TAX RETURNS AND MUST BE MADE WITHIN
THIRTY (30) DAYS AFTER THE EXECUTION DATE OF THE STOCK PURCHASE AGREEMENT. THIS
FILING SHOULD BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED.
OPTIONEE MUST RETAIN TWO (2) COPIES OF THE COMPLETED FORM FOR FILING WITH HIS OR
HER FEDERAL AND STATE TAX RETURNS FOR THE CURRENT TAX YEAR AND AN ADDITIONAL
COPY FOR HIS OR HER RECORDS.
<PAGE>
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code").
Accordingly, it is the intent of the Taxpayer to utilize this election to
achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS.
2.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Purchase Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean and include each of the following if
approved by the shareholders of the Corporation:
(i) any merger or consolidation in which the Corporation is not
the surviving entity,
(ii) any sale, transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) any merger, sale or other transaction (other than an
issuance of shares by the Corporation for cash) by means of which one or
more persons acting in concert acquire beneficial ownership, in the
aggregate, of more than securities of the Corporation possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities.
F. CORPORATION shall mean Vista Medical Technologies, Inc., a California
corporation.
G. DISPOSITION NOTICE shall have the meaning assigned to such term in
Paragraph E.2.
H. DISSOLUTION NOTICE shall have the meaning assigned to such term in
Paragraph F.2.
I. EXERCISE NOTICE shall have the meaning assigned to such term in
Paragraph E.3.
J. EXERCISE PRICE shall have the meaning assigned to such term in
Paragraph A.1.
A-1.
<PAGE>
K. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
L. FIRST REFUSAL RIGHT shall mean the right granted to the Corporation in
accordance with Article E.
M. GRANT DATE shall have the meaning assigned to such term in Paragraph
A.1.
N. GRANT NOTICE shall mean the Notice of Grant of Stock Option pursuant
to which Optionee has been informed of the basic terms of the Option.
O. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
P. MARKET STAND-OFF shall mean the market stand-off restriction specified
in Paragraph C.3.
Q. 1933 ACT shall mean the Securities Act of 1933, as amended.
R. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
S. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
T. OPTION shall have the meaning assigned to such term in Paragraph A.1.
U. OPTION AGREEMENT shall mean all agreements and other documents
evidencing the Option.
V. OPTIONEE shall mean the person to whom the Option is granted under the
Plan.
W. OWNER shall mean Optionee and all subsequent holders of the Purchased
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.
X. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Y. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to
A-2.
<PAGE>
such transfer, (ii) a transfer of title to the Purchased Shares effected
pursuant to Optionee's will or the laws of intestate succession following
Optionee's death or (iii) a transfer to the Corporation in pledge as security
for any purchase-money indebtedness incurred by Optionee in connection with the
acquisition of the Purchased Shares.
Z. PLAN shall mean the Corporation's 1995 Stock Option Plan.
AA. PLAN ADMINISTRATOR shall mean either the Board or a committee of Board
members, to the extent the committee is at the time responsible for
administration of the Plan.
AB. PRIOR PURCHASE AGREEMENT shall have the meaning assigned to such term
in Paragraph D.4.
AC. PURCHASE NOTICE shall have the meaning assigned to such term in
Paragraph F.3.
AD. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.
AE. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
AF. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation is not
the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities
are transferred in whole or in part to a person or persons different
from the persons holding those securities immediately prior to the
merger, or
(iv) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company
structure.
AG. REPURCHASE RIGHT shall mean the right granted to the Corporation in
accordance with Article D.
AH. SEC shall mean the Securities and Exchange Commission.
A-3.
<PAGE>
AI. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or a consultant.
AJ. SPECIAL PURCHASE RIGHT shall mean the right granted to the Corporation
in accordance with Article F.
AK. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AL. TARGET SHARES shall have the meaning assigned to such term in
Paragraph E.2.
AM. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice, pursuant to which Optionee is to vest in the Purchased Shares in a
series of installments over his or her period of Service.
AN. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph D.1.
A-4.
<PAGE>
EXHIBIT 10.38
AS AMENDED MARCH 3, 1997
VISTA MEDICAL TECHNOLOGIES, INC.
1997 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1997 Stock Option/Stock Issuance Plan is intended to promote the
interests of Vista Medical Technologies, Inc., a Delaware corporation, by
providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
- the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and
- the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
<PAGE>
A. Prior to the Section 12 Registration Date, the Discretionary
Option Grant and Stock Issuance Programs shall be administered by the Board.
Beginning with the Section 12 Registration Date, the Primary Committee shall
have sole and exclusive authority to administer the Discretionary Option Grant
and Stock Issuance Programs with respect to Section 16 Insiders.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under this program.
IV. ELIGIBILITY
-2-
<PAGE>
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
D. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to non-employee Board members
who are elected or appointed to the Board after the Effective Date. A non-
employee Board member who has previously been in the employ of the Corporation
(or any Parent or Subsidiary) shall not be eligible to receive an option grant
under the Automatic Option Grant Program at the time he or she first becomes a
non-employee Board member, but shall be eligible to receive periodic option
grants under the Automatic Option Grant Program while he or she continues to
serve as a non-employee Board member.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed
2,820,000 shares.
-3-
<PAGE>
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 50,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1997 calendar year.
C. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.
Notwithstanding the above, no additional adjustment shall be made to any shares
or class of shares with respect to any transaction occurring prior to the
completion of an offering of shares of the Common Stock of the Company to the
public pursuant to an effective registration statement.
D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under this Plan per calendar year, (iii) the number
and/or class of securities for which grants are subsequently to be made under
the Automatic Option Grant Program to new and continuing non-employee Board
members, (iv) the number and/or class of securities and the exercise price per
share in effect under each outstanding option under the Plan and (v) the number
and/or class of securities and price per share in effect under each outstanding
option incorporated into this Plan from the Predecessor Plan. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
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I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date, provided that
the Plan Administrator may fix the exercise price at less than 85% if the
optionee, at the time of the option grant, shall have made a payment to the
Company (including payment made by means of a salary reduction) equal to the
excess of the Fair Market Value of the Common Stock on the option grant date
over such exercise price.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no
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option shall have a term in excess of ten (10) years measured from the option
grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service
from the limited exercise period otherwise in effect for that option
to such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
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(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but
also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may be assigned in whole or in part during the Optionee's lifetime. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall NOT be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
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C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent
the Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof), (ii) such option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
those option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
The determination of option comparability under clause (i) above shall be made
by the Plan Administrator, and its determination shall be final, binding and
conclusive.
B. All outstanding repurchase rights shall terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
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D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.
E. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those options are assumed or replaced and do not
otherwise accelerate. Any options so accelerated shall remain exercisable for
fully-vested shares until the EARLIER of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination. In addition, the Plan Administrator may
provide that one or more of the Corporation's outstanding repurchase rights with
respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate, and the shares subject to those
terminated repurchase rights shall accordingly vest in full.
F. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control. Each option so accelerated shall remain exercisable for fully-
vested shares until the EARLIER of (i) the expiration of the option term or (ii)
the expiration of the one (1)-year period measured from the effective date of
the Involuntary Termination. In addition, the Plan Administrator may provide
that one or more of the Corporation's outstanding repurchase rights with respect
to shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate, and the shares subject to those terminated repurchase
rights shall accordingly vest in full.
G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
H. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business
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structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish,
to elect between the exercise of the underlying option for shares of
Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of
(a) the Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (b) the
aggregate exercise price payable for such shares.
(ii) No such option surrender shall be effective unless
it is approved by the Plan Administrator, either at the time of the
actual option surrender or at any earlier time. If the surrender is
so approved, then the distribution to which the Optionee shall be
entitled may be made in shares of Common Stock valued at Fair Market
Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion
deem appropriate.
(iii) If the surrender of an option is not approved by
the Plan Administrator, then the Optionee shall retain whatever rights
the Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the LATER of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the
option is otherwise exercisable in
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accordance with the terms of the documents evidencing such option, but in
no event may such rights be exercised more than ten (10) years after the
option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for
a thirty (30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation, to the extent the
option is at the time exercisable for vested shares of Common Stock.
In return for the surrendered option, the Optionee shall receive a
cash distribution from the Corporation in an amount equal to the
excess of (A) the Take-Over Price of the shares of Common Stock which
are at the time vested under each surrendered option (or surrendered
portion thereof) over (B) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5)
days following the option surrender date.
(iii) Neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such
option surrender and cash distribution.
(iv) The balance of the option (if any) shall remain
outstanding and exercisable in accordance with the documents
evidencing such option.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
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A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Five,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the shares are
to vest,
(iii) the interval or intervals (if any) which are to
lapse between installments, and
(iv) the effect which death, Permanent Disability or
other event designated by the Plan Administrator is to have upon the
vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock
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by reason of any stock dividend, stock split, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration shall be
issued subject to (i) the same vesting requirements applicable to the
Participant's unvested shares of Common Stock and (ii) such escrow arrangements
as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase/cancellation
rights under the Stock Issuance Program shall terminate automatically, and all
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase/cancellation rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed in the
Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance
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Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase/cancellation rights are assigned
to the successor corporation (or parent thereof).
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT/ISSUANCE PROGRAM
I. OPTION TERMS
A. GRANT DATES. On the date of each Annual Stockholders Meeting
held after the Effective Date, option grants shall be made to (i) each new
Eligible Director who is elected to the Board at that particular Annual Meeting
and (ii) each continuing Eligible Director who is elected to the Board at that
particular Annual Meeting. Each automatic option grant shall be a Non-Statutory
Option. Each Eligible Director shall be granted an option to purchase 15,000
shares of Common Stock at the Annual Meeting at which he or she is first elected
to the Board and an option to purchase 5,000 shares of Common Stock at each
Annual Meeting thereafter at which he or she is elected to the Board. There
shall be no limit on the number of such automatic option grants any one Eligible
Director may receive over his or her period of Board service, and non-employee
Board members who have previously been in the employ of the Corporation (or any
Parent or Subsidiary) or who have otherwise received a stock option grant from
the Corporation prior to the Effective Date shall be eligible to receive one or
more such annual option grants over their period of continued Board service.
B. EXERCISE PRICE FOR OPTION SHARES.
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1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the date of
the Annual Stockholders Meeting with respect to which the option is granted.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
exercisable only with respect to option shares with respect to which the
automatic option grant has become vested. Provided that the non-employee
director continues to be a Member of the Board, the 15,000 share option grant
shall vest over four years in successive equal monthly installments from the
date of grant and the 5,000 share option grants shall vest at the end of each
additional year of Service completed by the optionee. No portion of the
automatic option grant shall vest after the optionee has ceased to be a member
of the Board.
E. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number
of vested shares of Common Stock for which the option is exercisable
at the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following
such cessation of Board service, be exercised for all or any portion
of those shares as fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the
twelve
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(12)-month exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for any
vested shares for which the option has not been exercised. However, the
option shall, immediately upon the Optionee's cessation of Board service
for any reason other than death or Permanent Disability, terminate and
cease to be outstanding to the extent the option is not otherwise at that
time exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as fully-
vested shares of Common Stock. Immediately following the consummation of the
Corporate Transaction, each automatic option grant shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the shares of Common Stock at the time subject to such option and may
be exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. No approval or
consent of the Board or any Plan Administrator shall be required in connection
with such option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be
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made to the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same.
E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their
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shares. Such right may be provided to any such holder in either or both of the
following formats:
STOCK WITHHOLDING: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
STOCK DELIVERY: The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan
Effective Date. Options may be granted under the Discretionary Option Grant or
Automatic Option Grant Program at any time on or after the Plan Effective Date.
However, no options granted under the Plan may be exercised, and no shares shall
be issued under the Plan, until the Plan is approved by the Corporation's
stockholders. If such stockholder approval is not obtained within twelve (12)
months after the Plan Effective Date, then all options previously granted under
this Plan shall terminate and cease to be outstanding, and no further options
shall be granted and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plan after the Section 12 Registration Date. All options
outstanding under the Predecessor Plan on the Section 12 Registration Date shall
be incorporated into the Plan at that time and shall be treated as outstanding
options under the Plan. However, each outstanding option so incorporated shall
continue to be governed solely by the terms of the documents evidencing such
option, and no provision of the Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the EARLIEST of (i) the tenth
anniversary of the Plan Effective Date, (ii) the date on which all shares
available for issuance under the
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Plan shall have been issued as fully-vested shares or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon such
plan termination, all outstanding option grants and unvested stock issuances
shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
if so determined by the Board or pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and shares of Common Stock may be issued under
the Stock Issuance Program that are in each instance in excess of the number of
shares then available for issuance under the Plan, provided any excess shares
actually issued under those programs shall be held in escrow until there is
obtained any required approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan. If such
approval is not obtained within twelve (12) months after the date the first such
excess issuances are made, then (i) any unexercised options granted on the basis
of such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
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B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
[Remainder of This Page Intentionally Left Blank]
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APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person
or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation), of beneficial ownership (within
the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A)
have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board
approved such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
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(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
G. CORPORATION shall mean Vista Medical Technologies, Inc., a Delaware
corporation, and its successors.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
I. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
J. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to
the closing selling price per share of Common Stock on the date in
question, as such price is reported on the Nasdaq National Market or
any successor system. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(iii) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal
to the
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price per share at which the Common Stock is to be sold in the initial
public offering pursuant to the Underwriting Agreement.
(iv) For purposes of any option grants made prior to the
Underwriting Date, the Fair Market Value shall be determined by the
Plan Administrator, after taking into account such factors as it deems
appropriate.
M. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
N. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially
reduces his or her level of responsibility, (B) a reduction in his or
her level of compensation (including base salary, fringe benefits and
participation in any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
such individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.
P. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
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<PAGE>
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
S. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant or the Automatic Option Grant Program.
T. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
W. PLAN shall mean the Corporation's 1997 Stock Option/Stock Issuance
Plan, as set forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Y. PLAN EFFECTIVE DATE shall mean the date on which the Plan was adopted
by the Board.
Z. PREDECESSOR PLAN shall mean the Corporation's pre-existing Stock
Option Plan in effect immediately prior to the Plan Effective Date hereunder.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-
employee Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders.
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<PAGE>
AB. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
AC. SECTION 12 REGISTRATION DATE shall mean the date on which the Common
Stock is first registered under Section 12(g) or Section 15 of the 1934 Act.
AD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
AE. SERVICE shall mean the performance of services for the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
AF. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
AG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
AH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.
AI. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AJ. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
AK. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
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AL. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
AM. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
AN. UNDERWRITING DATE shall mean the date on which the Underwriting
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
<PAGE>
EXHIBIT 10.39
VISTA MEDICAL TECHNOLOGIES, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Vista Medical Technologies, Inc. (the
"Corporation"):
OPTIONEE: _________________________________________________________
GRANT DATE: _______________________________________________________
VESTING COMMENCEMENT DATE: _________________________________________
EXERCISE PRICE: $ _______________________________________ per share
NUMBER OF OPTION SHARES: ____________________________________ shares
EXPIRATION DATE: ____________________________________________________
TYPE OF OPTION: _______ Incentive Stock Option
_______ Non-Statutory Stock Option
EXERCISE SCHEDULE:
The Option Shares shall vest in accordance with the following vesting
schedule:
(i) No Option Shares shall vest unless and until the Optionee has
completed twelve (12) months of Service (as defined in the Plan) measured from
the Vesting Commencement Date.
(ii) Upon the completion of the twelve (12)-month Service period
specified in subparagraph (i) above, the Option Shares shall vest in a series of
successive equal monthly installments over each of the next thirty-six (36)
months of Service completed by the Optionee after the initial twelve (12)-month
Service period specified in subparagraph (i) above.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Vista Medical Technologies, Inc. 1997
Stock Option/Stock Issuance Plan (the "Plan"). Optionee further agrees to be
bound by the terms of the Plan and the terms of the Option as set forth in the
Stock Option Agreement attached hereto as Exhibit A.
<PAGE>
Optionee hereby acknowledges receipt of a copy of the official
copy of the Plan in the form attached hereto as Exhibit B. A copy of the
Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or in the
attached Stock Option Agreement or in the Plan shall confer upon Optionee any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining Optionee) or of Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason, with or without cause.
DEFINITIONS. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED: _______________________, 199
VISTA MEDICAL TECHNOLOGIES, INC.
By: ______________________________________
Title: ___________________________________
__________________________________________
OPTIONEE
Address: ________________________________
__________________________________________
ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - 1997 STOCK OPTION/STOCK ISSUANCE PLAN
2.
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EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE>
VISTA MEDICAL TECHNOLOGIES, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. If this option is designated an
Incentive Option in the Grant Notice, then this option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may also be assigned
in whole or in part during Optionee's lifetime. The assigned portion shall be
exercisable only by the person or persons who acquire a proprietary interest in
the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes
<PAGE>
exercisable for such installments, those installments shall accumulate and the
option shall remain exercisable for the accumulated installments until the
Expiration Date or sooner termination of the option term under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while
this option is outstanding, then Optionee shall have a period of three
(3) months (commencing with the date of such cessation of Service)
during which to exercise this option, but in no event shall this
option be exercisable at any time after the Expiration Date.
(ii) Should Optionee die while this option is
outstanding, then the personal representative of Optionee's estate or
the person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and
distribution shall have the right to exercise this option. Such right
shall lapse, and this option shall cease to be outstanding, upon the
EARLIER of (A) the expiration of the twelve (12)- month period
measured from the date of Optionee's death or (B) the Expiration Date.
(iii) Should Optionee cease Service by reason of
Permanent Disability while this option is outstanding, then Optionee
shall have a period of twelve (12) months (commencing with the date of
such cessation of Service) during which to exercise this option. In
no event shall this option be exercisable at any time after the
Expiration Date.
(iv) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for
more than the number of vested Option Shares for which the option is
exercisable at the time of Optionee's cessation of Service. Upon the
expiration of such limited exercise period or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be
outstanding for any vested Option Shares for which the option has not
been exercised. However, this option shall, immediately upon
Optionee's cessation of Service for any reason, terminate and cease to
be outstanding with respect to any Option Shares in which Optionee is
not otherwise at that time vested or for which this option is not
otherwise at that time exercisable.
2.
<PAGE>
(v) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to
remain outstanding.
6. SPECIAL ACCELERATION OF OPTION.
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
the Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully-vested shares of Common Stock. No such acceleration of
this option, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof) or (ii) this option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
Option Shares at the time of the Corporate Transaction (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent pay-out in accordance with the
option exercise/vesting schedule set forth in the Grant Notice. The
determination of option comparability under clause (i) shall be made by the Plan
Administrator, and such determination shall be final, binding and conclusive.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by
the successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, PROVIDED the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be
3.
<PAGE>
made to (i) the total number and/or class of securities subject to this option
and (ii) the Exercise Price in order to reflect such change and thereby preclude
a dilution or enlargement of benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a
Notice of Exercise for the Option Shares for which the option is
exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation;
(B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;
(C) shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or
(D) to the extent the option is exercised for
vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable written instructions (I) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus
all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (II) to the Corporation to deliver the
certificates for the purchased
4.
<PAGE>
shares directly to such brokerage firm in order to complete the sale
transaction.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to
the Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee)
for the satisfaction of all Federal, state and local income and
employment tax withholding requirements applicable to the option
exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
5.
<PAGE>
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
- This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is
exercised for one or more Option Shares: (A) more than three (3)
months after the date Optionee ceases to be an Employee for any reason
other than death or Permanent Disability or (B) more than twelve (12)
months after the date Optionee ceases to be an Employee by reason of
Permanent Disability.
6.
<PAGE>
- No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent)
the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which such installment first becomes exercisable
hereunder would, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other
securities for which this option or any other Incentive Options
granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate. Should such One
Hundred Thousand Dollar ($100,000) limitation be exceeded in any
calendar year, this option shall nevertheless become exercisable for
the excess shares in such calendar year as a Non-Statutory Option.
- Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for
favorable tax treatment as an Incentive Option only to the extent the
aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which this option first becomes exercisable in the
calendar year in which the Corporate Transaction occurs does not, when
added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this
option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. Should the applicable One
Hundred Thousand Dollar ($100,000) limitation be exceeded in the
calendar year of such Corporate Transaction, the option may
nevertheless be exercised for the excess shares in such calendar year
as a Non-Statutory Option.
- Should Optionee hold, in addition to this option, one
or more other options to purchase Common Stock which become
exercisable for the first time in the same calendar year as this
option, then the foregoing limitations on the exercisability of such
options as Incentive Options shall be applied on the basis of the
order in which such options are granted.
18. LEAVE OF ABSENCE. The following provisions shall apply upon the
Optionee's commencement of an authorized leave of absence:
(a) The exercise schedule in effect under the Grant Notice
shall be frozen as of the first day of the authorized leave, and this
option shall not become exercisable for any additional installments of
the Option Shares during the period Optionee remains on such leave.
7.
<PAGE>
(b) Should Optionee resume active Employee status within
sixty (60) days after the start date of the authorized leave, Optionee
shall, for purposes of the exercise schedule set forth in the Grant
Notice, receive Service credit for the entire period of such leave.
If Optionee does not resume active Employee status within such sixty
(60)-day period, then no Service credit shall be given for the period
of such leave.
(c) If the option is designated as an Incentive Option in
the Grant Notice, then the following additional provision shall apply:
- If the leave of absence continues for more than
ninety (90) days, then this option shall automatically convert to
a Non-Statutory Option under the Federal tax laws on the
ninety-first (91st) day of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by written
agreement. Following any such conversion of the option, all
subsequent exercises of such option, whether effected before or
after Optionee's return to active Employee status, shall result
in an immediate taxable event, and the Corporation shall be
required to collect from Optionee the Federal, state and local
income and employment withholding taxes applicable to such
exercise.
(d) In no event shall this option become exercisable for
any additional Option Shares or otherwise remain outstanding if
Optionee does not resume Employee status prior to the Expiration Date
of the option term.
8.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Vista Medical Technologies, Inc. (the "Corporation")
that I elect to purchase ___________ shares of the Corporation's Common Stock
(the "Purchased Shares") at the option exercise price of $ ___________ per share
(the "Exercise Price") pursuant to that certain option (the "Option") granted to
me under the Corporation's 1997 Stock Option/Stock Issuance Plan on
_____________, 199 .
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
________________________, 199
Date
_____________________________________________
Optionee
_____________________________________________
Address:
_____________________________________________
Print name in exact manner
it is to appear on the
stock certificate: _____________________________________________
Address to which certificate
is to be sent, if different
from address above: ____________________________________________
____________________________________________
Social Security Number: ____________________________________________
Employee Number: ____________________________________________
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
F. CORPORATION shall mean Vista Medical Technologies, Inc., a Delaware
corporation.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as specified in
the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
A-1.
<PAGE>
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as the price is reported by
the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
L. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
A-2.
<PAGE>
R. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option as specified in the Grant Notice.
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PERMANENT DISABILITY shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
V. PLAN shall mean the Corporation's 1997 Stock Option/Stock Issuance
Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.
X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
Z. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
<PAGE>
EXHIBIT B
1997 STOCK OPTION/STOCK ISSUANCE PLAN
<PAGE>
AS AMENDED MARCH 3, 1997
VISTA MEDICAL TECHNOLOGIES, INC.
1997 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1997 Stock Option/Stock Issuance Plan is intended to promote the
interests of Vista Medical Technologies, Inc., a Delaware corporation, by
providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
- the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and
- the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
<PAGE>
A. Prior to the Section 12 Registration Date, the Discretionary
Option Grant and Stock Issuance Programs shall be administered by the Board.
Beginning with the Section 12 Registration Date, the Primary Committee shall
have sole and exclusive authority to administer the Discretionary Option Grant
and Stock Issuance Programs with respect to Section 16 Insiders.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under this program.
IV. ELIGIBILITY
-2-
<PAGE>
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
D. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to non-employee Board members
who are elected or appointed to the Board after the Effective Date. A non-
employee Board member who has previously been in the employ of the Corporation
(or any Parent or Subsidiary) shall not be eligible to receive an option grant
under the Automatic Option Grant Program at the time he or she first becomes a
non-employee Board member, but shall be eligible to receive periodic option
grants under the Automatic Option Grant Program while he or she continues to
serve as a non-employee Board member.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed
2,820,000 shares.
-3-
<PAGE>
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 50,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1997 calendar year.
C. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.
Notwithstanding the above, no additional adjustment shall be made to any shares
or class of shares with respect to any transaction occurring prior to the
completion of an offering of shares of the Common Stock of the Company to the
public pursuant to an effective registration statement.
D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under this Plan per calendar year, (iii) the number
and/or class of securities for which grants are subsequently to be made under
the Automatic Option Grant Program to new and continuing non-employee Board
members, (iv) the number and/or class of securities and the exercise price per
share in effect under each outstanding option under the Plan and (v) the number
and/or class of securities and price per share in effect under each outstanding
option incorporated into this Plan from the Predecessor Plan. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
-4-
<PAGE>
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date, provided that
the Plan Administrator may fix the exercise price at less than 85% if the
optionee, at the time of the option grant, shall have made a payment to the
Company (including payment made by means of a salary reduction) equal to the
excess of the Fair Market Value of the Common Stock on the option grant date
over such exercise price.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Corporation
by reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no
-5-
<PAGE>
option shall have a term in excess of ten (10) years measured from the option
grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service
from the limited exercise period otherwise in effect for that option
to such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
-6-
<PAGE>
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but
also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may be assigned in whole or in part during the Optionee's lifetime. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall NOT be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
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C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent
the Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof), (ii) such option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
those option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
The determination of option comparability under clause (i) above shall be made
by the Plan Administrator, and its determination shall be final, binding and
conclusive.
B. All outstanding repurchase rights shall terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
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D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.
E. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those options are assumed or replaced and do not
otherwise accelerate. Any options so accelerated shall remain exercisable for
fully-vested shares until the EARLIER of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination. In addition, the Plan Administrator may
provide that one or more of the Corporation's outstanding repurchase rights with
respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate, and the shares subject to those
terminated repurchase rights shall accordingly vest in full.
F. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control. Each option so accelerated shall remain exercisable for fully-
vested shares until the EARLIER of (i) the expiration of the option term or (ii)
the expiration of the one (1)-year period measured from the effective date of
the Involuntary Termination. In addition, the Plan Administrator may provide
that one or more of the Corporation's outstanding repurchase rights with respect
to shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate, and the shares subject to those terminated repurchase
rights shall accordingly vest in full.
G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
H. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business
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structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish,
to elect between the exercise of the underlying option for shares of
Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of
(a) the Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (b) the
aggregate exercise price payable for such shares.
(ii) No such option surrender shall be effective unless
it is approved by the Plan Administrator, either at the time of the
actual option surrender or at any earlier time. If the surrender is
so approved, then the distribution to which the Optionee shall be
entitled may be made in shares of Common Stock valued at Fair Market
Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion
deem appropriate.
(iii) If the surrender of an option is not approved by
the Plan Administrator, then the Optionee shall retain whatever rights
the Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the LATER of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the
option is otherwise exercisable in
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accordance with the terms of the documents evidencing such option, but in
no event may such rights be exercised more than ten (10) years after the
option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for
a thirty (30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation, to the extent the
option is at the time exercisable for vested shares of Common Stock.
In return for the surrendered option, the Optionee shall receive a
cash distribution from the Corporation in an amount equal to the
excess of (A) the Take-Over Price of the shares of Common Stock which
are at the time vested under each surrendered option (or surrendered
portion thereof) over (B) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5)
days following the option surrender date.
(iii) Neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such
option surrender and cash distribution.
(iv) The balance of the option (if any) shall remain
outstanding and exercisable in accordance with the documents
evidencing such option.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
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A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Five,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the shares are
to vest,
(iii) the interval or intervals (if any) which are to
lapse between installments, and
(iv) the effect which death, Permanent Disability or
other event designated by the Plan Administrator is to have upon the
vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock
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by reason of any stock dividend, stock split, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration shall be
issued subject to (i) the same vesting requirements applicable to the
Participant's unvested shares of Common Stock and (ii) such escrow arrangements
as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase/cancellation
rights under the Stock Issuance Program shall terminate automatically, and all
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase/cancellation rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed in the
Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance
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<PAGE>
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase/cancellation rights are assigned
to the successor corporation (or parent thereof).
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT/ISSUANCE PROGRAM
I. OPTION TERMS
A. GRANT DATES. On the date of each Annual Stockholders Meeting
held after the Effective Date, option grants shall be made to (i) each new
Eligible Director who is elected to the Board at that particular Annual Meeting
and (ii) each continuing Eligible Director who is elected to the Board at that
particular Annual Meeting. Each automatic option grant shall be a Non-Statutory
Option. Each Eligible Director shall be granted an option to purchase 15,000
shares of Common Stock at the Annual Meeting at which he or she is first elected
to the Board and an option to purchase 5,000 shares of Common Stock at each
Annual Meeting thereafter at which he or she is elected to the Board. There
shall be no limit on the number of such automatic option grants any one Eligible
Director may receive over his or her period of Board service, and non-employee
Board members who have previously been in the employ of the Corporation (or any
Parent or Subsidiary) or who have otherwise received a stock option grant from
the Corporation prior to the Effective Date shall be eligible to receive one or
more such annual option grants over their period of continued Board service.
B. EXERCISE PRICE FOR OPTION SHARES.
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1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the date of
the Annual Stockholders Meeting with respect to which the option is granted.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
exercisable only with respect to option shares with respect to which the
automatic option grant has become vested. Provided that the non-employee
director continues to be a Member of the Board, the 15,000 share option grant
shall vest over four years in successive equal monthly installments from the
date of grant and the 5,000 share option grants shall vest at the end of each
additional year of Service completed by the optionee. No portion of the
automatic option grant shall vest after the optionee has ceased to be a member
of the Board.
E. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number
of vested shares of Common Stock for which the option is exercisable
at the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following
such cessation of Board service, be exercised for all or any portion
of those shares as fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the
twelve
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<PAGE>
(12)-month exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for any
vested shares for which the option has not been exercised. However, the
option shall, immediately upon the Optionee's cessation of Board service
for any reason other than death or Permanent Disability, terminate and
cease to be outstanding to the extent the option is not otherwise at that
time exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as fully-
vested shares of Common Stock. Immediately following the consummation of the
Corporate Transaction, each automatic option grant shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the shares of Common Stock at the time subject to such option and may
be exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. No approval or
consent of the Board or any Plan Administrator shall be required in connection
with such option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be
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made to the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same.
E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
ARTICLE FIVE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their
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shares. Such right may be provided to any such holder in either or both of the
following formats:
STOCK WITHHOLDING: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
STOCK DELIVERY: The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan
Effective Date. Options may be granted under the Discretionary Option Grant or
Automatic Option Grant Program at any time on or after the Plan Effective Date.
However, no options granted under the Plan may be exercised, and no shares shall
be issued under the Plan, until the Plan is approved by the Corporation's
stockholders. If such stockholder approval is not obtained within twelve (12)
months after the Plan Effective Date, then all options previously granted under
this Plan shall terminate and cease to be outstanding, and no further options
shall be granted and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plan after the Section 12 Registration Date. All options
outstanding under the Predecessor Plan on the Section 12 Registration Date shall
be incorporated into the Plan at that time and shall be treated as outstanding
options under the Plan. However, each outstanding option so incorporated shall
continue to be governed solely by the terms of the documents evidencing such
option, and no provision of the Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the EARLIEST of (i) the tenth
anniversary of the Plan Effective Date, (ii) the date on which all shares
available for issuance under the
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Plan shall have been issued as fully-vested shares or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon such
plan termination, all outstanding option grants and unvested stock issuances
shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
if so determined by the Board or pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and shares of Common Stock may be issued under
the Stock Issuance Program that are in each instance in excess of the number of
shares then available for issuance under the Plan, provided any excess shares
actually issued under those programs shall be held in escrow until there is
obtained any required approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan. If such
approval is not obtained within twelve (12) months after the date the first such
excess issuances are made, then (i) any unexercised options granted on the basis
of such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
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B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
[Remainder of This Page Intentionally Left Blank]
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APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person
or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation), of beneficial ownership (within
the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A)
have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board
approved such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
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(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
G. CORPORATION shall mean Vista Medical Technologies, Inc., a Delaware
corporation, and its successors.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
I. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
J. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to
the closing selling price per share of Common Stock on the date in
question, as such price is reported on the Nasdaq National Market or
any successor system. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(iii) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal
to the
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price per share at which the Common Stock is to be sold in the initial
public offering pursuant to the Underwriting Agreement.
(iv) For purposes of any option grants made prior to the
Underwriting Date, the Fair Market Value shall be determined by the
Plan Administrator, after taking into account such factors as it deems
appropriate.
M. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
N. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially
reduces his or her level of responsibility, (B) a reduction in his or
her level of compensation (including base salary, fringe benefits and
participation in any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
such individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.
P. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
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<PAGE>
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
S. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant or the Automatic Option Grant Program.
T. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
W. PLAN shall mean the Corporation's 1997 Stock Option/Stock Issuance
Plan, as set forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Y. PLAN EFFECTIVE DATE shall mean the date on which the Plan was adopted
by the Board.
Z. PREDECESSOR PLAN shall mean the Corporation's pre-existing Stock
Option Plan in effect immediately prior to the Plan Effective Date hereunder.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-
employee Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders.
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AB. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
AC. SECTION 12 REGISTRATION DATE shall mean the date on which the Common
Stock is first registered under Section 12(g) or Section 15 of the 1934 Act.
AD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
AE. SERVICE shall mean the performance of services for the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
AF. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
AG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
AH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.
AI. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AJ. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
AK. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
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<PAGE>
AL. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
AM. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
AN. UNDERWRITING DATE shall mean the date on which the Underwriting
Agreement is executed and priced in connection with an initial public offering
of the Common Stock.
<PAGE>
EXHIBIT 10.40
VISTA MEDICAL TECHNOLOGIES, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. If this option is designated an
Incentive Option in the Grant Notice, then this option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may also be assigned
in whole or in part during Optionee's lifetime. The assigned portion shall be
exercisable only by the person or persons who acquire a proprietary interest in
the option pursuant to such assignment. The terms applicable to the assigned
portion shall be the same as those in effect for this option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes
<PAGE>
exercisable for such installments, those installments shall accumulate and the
option shall remain exercisable for the accumulated installments until the
Expiration Date or sooner termination of the option term under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while
this option is outstanding, then Optionee shall have a period of three
(3) months (commencing with the date of such cessation of Service)
during which to exercise this option, but in no event shall this
option be exercisable at any time after the Expiration Date.
(ii) Should Optionee die while this option is
outstanding, then the personal representative of Optionee's estate or
the person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and
distribution shall have the right to exercise this option. Such right
shall lapse, and this option shall cease to be outstanding, upon the
EARLIER of (A) the expiration of the twelve (12)- month period
measured from the date of Optionee's death or (B) the Expiration Date.
(iii) Should Optionee cease Service by reason of
Permanent Disability while this option is outstanding, then Optionee
shall have a period of twelve (12) months (commencing with the date of
such cessation of Service) during which to exercise this option. In
no event shall this option be exercisable at any time after the
Expiration Date.
(iv) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for
more than the number of vested Option Shares for which the option is
exercisable at the time of Optionee's cessation of Service. Upon the
expiration of such limited exercise period or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be
outstanding for any vested Option Shares for which the option has not
been exercised. However, this option shall, immediately upon
Optionee's cessation of Service for any reason, terminate and cease to
be outstanding with respect to any Option Shares in which Optionee is
not otherwise at that time vested or for which this option is not
otherwise at that time exercisable.
2.
<PAGE>
(v) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to
remain outstanding.
6. SPECIAL ACCELERATION OF OPTION.
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
the Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully-vested shares of Common Stock. No such acceleration of
this option, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof) or (ii) this option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
Option Shares at the time of the Corporate Transaction (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent pay-out in accordance with the
option exercise/vesting schedule set forth in the Grant Notice. The
determination of option comparability under clause (i) shall be made by the Plan
Administrator, and such determination shall be final, binding and conclusive.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by
the successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, PROVIDED the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be
3.
<PAGE>
made to (i) the total number and/or class of securities subject to this option
and (ii) the Exercise Price in order to reflect such change and thereby preclude
a dilution or enlargement of benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a
Notice of Exercise for the Option Shares for which the option is
exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation;
(B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;
(C) shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or
(D) to the extent the option is exercised for
vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable written instructions (I) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus
all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (II) to the Corporation to deliver the
certificates for the purchased
4.
<PAGE>
shares directly to such brokerage firm in order to complete the sale
transaction.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to
the Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee)
for the satisfaction of all Federal, state and local income and
employment tax withholding requirements applicable to the option
exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
5.
<PAGE>
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
- This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is
exercised for one or more Option Shares: (A) more than three (3)
months after the date Optionee ceases to be an Employee for any reason
other than death or Permanent Disability or (B) more than twelve (12)
months after the date Optionee ceases to be an Employee by reason of
Permanent Disability.
6.
<PAGE>
- No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent)
the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which such installment first becomes exercisable
hereunder would, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other
securities for which this option or any other Incentive Options
granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate. Should such One
Hundred Thousand Dollar ($100,000) limitation be exceeded in any
calendar year, this option shall nevertheless become exercisable for
the excess shares in such calendar year as a Non-Statutory Option.
- Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for
favorable tax treatment as an Incentive Option only to the extent the
aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which this option first becomes exercisable in the
calendar year in which the Corporate Transaction occurs does not, when
added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this
option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. Should the applicable One
Hundred Thousand Dollar ($100,000) limitation be exceeded in the
calendar year of such Corporate Transaction, the option may
nevertheless be exercised for the excess shares in such calendar year
as a Non-Statutory Option.
- Should Optionee hold, in addition to this option, one
or more other options to purchase Common Stock which become
exercisable for the first time in the same calendar year as this
option, then the foregoing limitations on the exercisability of such
options as Incentive Options shall be applied on the basis of the
order in which such options are granted.
18. LEAVE OF ABSENCE. The following provisions shall apply upon the
Optionee's commencement of an authorized leave of absence:
(a) The exercise schedule in effect under the Grant Notice
shall be frozen as of the first day of the authorized leave, and this
option shall not become exercisable for any additional installments of
the Option Shares during the period Optionee remains on such leave.
7.
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(b) Should Optionee resume active Employee status within
sixty (60) days after the start date of the authorized leave, Optionee
shall, for purposes of the exercise schedule set forth in the Grant
Notice, receive Service credit for the entire period of such leave.
If Optionee does not resume active Employee status within such sixty
(60)-day period, then no Service credit shall be given for the period
of such leave.
(c) If the option is designated as an Incentive Option in
the Grant Notice, then the following additional provision shall apply:
- If the leave of absence continues for more than
ninety (90) days, then this option shall automatically convert to
a Non-Statutory Option under the Federal tax laws on the
ninety-first (91st) day of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by written
agreement. Following any such conversion of the option, all
subsequent exercises of such option, whether effected before or
after Optionee's return to active Employee status, shall result
in an immediate taxable event, and the Corporation shall be
required to collect from Optionee the Federal, state and local
income and employment withholding taxes applicable to such
exercise.
(d) In no event shall this option become exercisable for
any additional Option Shares or otherwise remain outstanding if
Optionee does not resume Employee status prior to the Expiration Date
of the option term.
8.
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EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Vista Medical Technologies, Inc. (the "Corporation")
that I elect to purchase ___________ shares of the Corporation's Common Stock
(the "Purchased Shares") at the option exercise price of $ ___________ per share
(the "Exercise Price") pursuant to that certain option (the "Option") granted to
me under the Corporation's 1997 Stock Option/Stock Issuance Plan on
_____________, 199 .
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
________________________, 199
Date
_____________________________________________
Optionee
_____________________________________________
Address:
_____________________________________________
Print name in exact manner
it is to appear on the
stock certificate: _____________________________________________
Address to which certificate
is to be sent, if different
from address above: ____________________________________________
____________________________________________
Social Security Number: ____________________________________________
Employee Number: ____________________________________________
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
F. CORPORATION shall mean Vista Medical Technologies, Inc., a Delaware
corporation.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as specified in
the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
A-1.
<PAGE>
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as the price is reported by
the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
L. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
A-2.
<PAGE>
R. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option as specified in the Grant Notice.
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PERMANENT DISABILITY shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
V. PLAN shall mean the Corporation's 1997 Stock Option/Stock Issuance
Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.
X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
Z. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
A-3.
<PAGE>
EXHIBIT 10.42
VISTA MEDICAL TECHNOLOGIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests
of Vista Medical Technologies, Inc., a Delaware corporation, by providing
eligible employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed Two Hundred
Thousand (200,000) shares.
B. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date and (iii) the number and class of
securities and the price per share in effect under each outstanding purchase
right in order to prevent the dilution or enlargement of benefits thereunder.
<PAGE>
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
B. The initial offering period shall commence as of the Effective
Date of the Plan and shall continue until March 31, 1999. Thereafter, each
successive offering period shall be of 24 months duration. The next offering
period shall commence on the first business day in April 1999, and subsequent
offering periods shall commence as designated by the Plan Administrator.
Notwithstanding the above, the Plan Administrator may shorten the duration of
any offering period to less than twenty-four (24) months provided that such
action is taken prior to the start date of such offering period.
C. Each offering period shall be comprised of a series of one or
more successive Purchase Intervals. Purchase Intervals shall run from the first
business day in April each year to the last business day in September of the
same year and from the first business day in October each year to the last
business day in March of the following year. Accordingly, the first Purchase
Interval in effect under the initial offering period shall commence at the
Effective Time and terminate on the last business day in September 1997.
D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new
offering period shall have a duration of twenty four (24) months, unless a
shorter duration is established by the Plan Administrator within five (5)
business days following the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of
any offering period under the Plan may enter that offering period on such start
date or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.
2.
<PAGE>
D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock during an offering period may be any
multiple of one percent (1%) of the Base Salary paid to the Participant during
each Purchase Interval within that offering period, up to a maximum of ten
percent (10%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:
(i) The Participant may, at any time during the
offering period, reduce his or her rate of payroll deduction to become
effective as soon as possible after filing the appropriate form with
the Plan Administrator. The Participant may not, however, effect more
than one (1) such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement of
any new Purchase Interval within the offering period, increase the
rate of his or her payroll deduction by filing the appropriate form
with the Plan Administrator. The new rate (which may not exceed the
ten percent (10%) maximum) shall become effective on the start date of
the first Purchase Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day following the
Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be held in
any segregated account or trust fund and may be commingled with the general
assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.
D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.
3.
<PAGE>
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant (other than Participants whose payroll deductions
have previously been refunded pursuant to the Termination of Purchase Right
provisions below) on each such Purchase Date. The purchase shall be effected by
applying the Participant's payroll deductions for the Purchase Interval ending
on such Purchase Date to the purchase of whole shares of Common Stock at the
purchase price in effect for the Participant for that Purchase Date.
C. PURCHASE PRICE. The purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date within
the offering period shall not be less than eighty-five percent (85%) of the
LOWER of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into that offering period or (ii) the Fair Market Value
per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Interval ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to
the purchase of shares of Common Stock on any Purchase Date because they are
not sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on the
Purchase Date shall be promptly refunded.
4.
<PAGE>
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next
scheduled Purchase Date in the offering period, terminate his or her
outstanding purchase right by filing the appropriate form with the
Plan Administrator (or its designate), and no further payroll
deductions shall be collected from the Participant with respect to the
terminated purchase right. Any payroll deductions collected during
the Purchase Interval in which such termination occurs shall, at the
Participant's election, be immediately refunded or held for the
purchase of shares on the next Purchase Date. If no such election is
made at the time such purchase right is terminated, then the payroll
deductions collected with respect to the terminated right shall be
refunded as soon as possible.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
offering period for which the terminated purchase right was granted.
In order to resume participation in any subsequent offering period,
such individual must re-enroll in the Plan (by making a timely filing
of the prescribed enrollment forms) on or before his or her scheduled
Entry Date into that offering period.
(iii) Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in
status) while his or her purchase right remains outstanding, then that
purchase right shall immediately terminate, and all of the
Participant's payroll deductions for the Purchase Interval in which
the purchase right so terminates shall be immediately refunded.
However, should the Participant cease to remain in active service by
reason of an approved unpaid leave of absence, then the Participant
shall have the right, exercisable up until the last business day of
the Purchase Interval in which such leave commences, to (a) withdraw
all the payroll deductions collected to date on his or her behalf for
that Purchase Interval or (b) have such funds held for the purchase of
shares on his or her behalf on the next scheduled Purchase Date. In
no event, however, shall any further payroll deductions be collected
on the Participant's behalf during such leave. Upon the Participant's
return to active service, his or her payroll deductions under the Plan
shall automatically resume at the rate in effect at the time the leave
began, unless the Participant withdraws from the Plan prior to his or
her return.
G. CORPORATE TRANSACTION. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the Purchase Interval in which such Corporate Transaction occurs to the
purchase of whole shares of Common
5.
<PAGE>
Stock at a purchase price per share not less than eighty-five percent (85%) of
the LOWER of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into the offering period in which such Corporate
Transaction occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Corporate Transaction. However,
the applicable limitation on the number of shares of Common Stock purchasable
per Participant shall continue to apply to any such purchase.
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Corporate Transaction,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Corporate Transaction.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
6.
<PAGE>
(i) The right to acquire Common Stock under each
outstanding purchase right shall accrue in a series of installments on
each successive Purchase Date during the offering period on which such
right remains outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant
has already accrued in the same calendar year the right to acquire
Common Stock under one (1) or more other purchase rights at a rate
equal to Twenty-Five Thousand Dollars ($25,000) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the
date or dates of grant) for each calendar year such rights were at any
time outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective at the Effective Time, PROVIDED
no purchase rights granted under the Plan shall be exercised, and no shares of
Common Stock shall be issued hereunder, until (i) the Plan shall have been
approved by the stockholders of the Corporation and (ii) the Corporation shall
have complied with all applicable requirements of the 1933 Act (including the
registration of the shares of Common Stock issuable under the Plan on a Form S-8
registration statement filed with the Securities and Exchange Commission), all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which the Common Stock is listed for trading and all
other applicable requirements established by law or regulation. In the event
such stockholder approval is not obtained, or such compliance is not effected,
within twelve (12) months after the date on which the Plan is adopted by the
Board, the Plan shall terminate and have no further force or effect, and all
sums collected from Participants during the initial offering period hereunder
shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate
upon the EARLIEST of (i) the last business day in March 2007, (ii) the date on
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate Transaction.
No further purchase rights shall be granted or
7.
<PAGE>
exercised, and no further payroll deductions shall be collected, under the Plan
following such termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at any
time to become effective immediately following the close of any Purchase
Interval. However, the Board may not, without the approval of the Corporation's
stockholders, (i) materially increase the number of shares of Common Stock
issuable under the Plan or the maximum number of shares purchasable per
Participant on any one Purchase Date, except for permissible adjustments in the
event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan or (iii) materially increase the
benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility to participate in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation.
B. Nothing in the Plan shall confer upon the Participant any right
to continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
C. The provisions of the Plan shall be governed by the laws of the
State of Delaware without resort to that State's conflict-of-laws rules.
8.
<PAGE>
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
Vista Medical Technologies, Inc.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the (i) regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. The
following items of compensation shall NOT be included in Base Salary: (i) all
overtime payments, bonuses, commissions (other than those functioning as base
salary equivalents), profit-sharing distributions and other incentive-type
payments and (ii) any and all contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf by the
Corporation or any Corporate Affiliate under any employee benefit or welfare
plan now or hereafter established.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean Vista Medical Technologies, Inc., a
Delaware corporation, and any corporate successor to all or substantially all of
the assets or voting stock of Vista Medical Technologies, Inc. which shall by
appropriate action adopt the Plan.
A-1
<PAGE>
H. EFFECTIVE TIME shall mean the time at which the Underwriting
Agreement is executed and finally priced. Any Corporate Affiliate which becomes
a Participating Corporation after such Effective Time shall designate a
subsequent Effective Time with respect to its employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. ENTRY DATE shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) For purposes of the initial offering period which
begins at the Effective Time, the Fair Market Value shall be deemed to
be equal to the price per share at which the Common Stock is sold in
the initial public offering pursuant to the Underwriting Agreement.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
A-2
<PAGE>
M. PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan as of the Effective Time are listed in
attached Schedule A.
O. PLAN shall mean the Corporation's Employee Stock Purchase Plan,
as set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each Purchase
Interval. The initial Purchase Date shall be the last business day in August
1997.
R. PURCHASE INTERVAL shall mean each successive six (6)-month period
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant.
S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in April
and October each year on which an Eligible Employee may first enter an offering
period.
T. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-3
<PAGE>
EXHIBIT 10.43
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of April, 1997
between Vista Medical Technologies, Inc., a Delaware corporation (the
"Corporation"), and Nicholas B. Binkley ("Director").
RECITALS:
A. Director, a member of the Board of Directors of the Corporation,
performs a valuable service in such capacity for the Corporation; and
B. The stockholders of the Corporation have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers, directors, agents
and employees of the Corporation to the maximum extent authorized by Section 145
of the Delaware General Corporation Law, as amended (the "Law"); and
C. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between the Corporation and the members of its Board of Directors with
respect to indemnification of such directors; and
D. In accordance with the authorization as provided by the Law, the
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of the Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded members of the Board of
Directors by such D & O Insurance, if any, and by statutory and bylaw
indemnification provisions; and
F. In order to induce Director to continue to serve as a member of the
Board of Directors of the Corporation, the Corporation has determined and agreed
to enter into this contract with Director;
NOW, THEREFORE, in consideration of Director's continued service as a
director after the date hereof, the parties hereto agree as follows:
1. INDEMNITY OF DIRECTOR. The Corporation hereby agrees to hold harmless
and indemnify Director to the fullest extent authorized or permitted by the
provisions of the Law, as may be amended from time to time.
<PAGE>
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 3 hereof, the Corporation hereby further agrees to hold harmless and
indemnify Director:
(a) against any and all expenses (including attorneys' fees), witness
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by Director in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation) to
which Director is, was or at any time becomes a party, or is threatened to be
made a party, by reason of the fact that Director is, was or at any time becomes
a director, officer, employee or agent of the Corporation, or is or was serving
or at any time serves at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Director by
the Corporation under the non-exclusivity provisions of the Bylaws of the
Corporation and the Law.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by the Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which the Director is indemnified
pursuant to Section 1 hereof or pursuant to any D & O Insurance purchased and
maintained by the Corporation;
(b) in respect of remuneration paid to Director if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment is
rendered against Director for an accounting of profits made from the purchase or
sale by Director of securities of the Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) on account of Director's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(e) on account of Director's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Director or any of Director's affiliates against the
Corporation or any officer, director or
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<PAGE>
stockholder of the Corporation unless such action, suit or proceeding was
authorized in the specific case by action of the Board of Directors of the
Corporation;
(g) on account of any action, suit or proceeding to the extent that
Director is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or
(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both the Corporation and Director have been advised that the Securities and
Exchange Commission believes that indemnification for liabilities arising under
the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Director for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which the
Corporation is or is alleged to be jointly liable with Director (or would be if
joined in such action, suit or proceeding), the Corporation shall contribute to
the amount of expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred and paid or payable by
Director in such proportion as is appropriate to reflect (i) the relative
benefits received by the Corporation on the one hand and Director on the other
hand from the transaction from which such action, suit or proceeding arose, and
(ii) the relative fault of the Corporation on the one hand and of Director on
the other hand in connection with the events which resulted in such expenses,
judgments, fines or settlement amounts, as well as any other relevant equitable
considerations. The relative fault of the Corporation on the one hand and of
Director on the other shall be determined by reference to, among other things,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent the circumstances resulting in such expenses, judgments,
fines or settlement amounts. The Corporation agrees that it would not be just
and equitable if contribution pursuant to this Section 4 were determined by pro
rata allocation or any other method of allocation which does not take account of
the foregoing equitable considerations.
5. CONTINUATION OF OBLIGATIONS.
(a) All agreements and obligations of the Corporation contained
herein shall continue during the period Director is a director, officer,
employee or agent of the Corporation (or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise)
and shall continue thereafter so long as Director shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal or investigative, by reason of the fact that Director
was serving the Corporation or such other entity in any capacity referred to
herein.
-3-
<PAGE>
(b) For six years after the effective time of (i) the acquisition of
the Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation) or (ii) the sale of all or substantially all of the assets of
the Corporation by means of any transaction or series of related transactions,
the Corporation (to the extent the Corporation is not the continuing or
surviving person of such reorganization, merger, consolidation or sale) shall
cause the acquiring, continuing or surviving corporation to (x) indemnify and
hold harmless Director in accordance with Sections 1 and 2 hereof and (y) use
its best efforts to provide directors' liability insurance on terms
substantially similar to the terms of the Corporation's then current directors'
liability insurance policy in effect on the dated thereof, or any other
arrangement reasonably satisfactory to Director, in respect of acts or omissions
occurring on or prior to the effective time of the reorganization, merger,
consolidation or sale.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Director of notice of the commencement of any action, suit or
proceeding, Director will, if a claim in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Director otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Director
notifies the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its
own expense;
(b) Except as otherwise provided below, to the extent that it may
wish, the Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Director. After notice from the Corporation to Director of its
election so as to assume the defense thereof, the Corporation will not be liable
to Director under this Agreement for any legal or other expenses subsequently
incurred by Director in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Director
shall have the right to employ his own counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense thereof shall be at the expense
of Director unless (i) the employment of counsel by Director has been authorized
by the Corporation, (ii) Director shall have reasonably concluded that there may
be a conflict of interest between the Corporation and Director in the conduct of
the defense of such action or (iii) the Corporation shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of Director's separate counsel shall be at the expense of
the Corporation. The Corporation shall not be entitled to assume the defense of
any action, suit or proceeding brought by or on behalf of the Corporation or as
to which Director shall have made the conclusion provided for in (ii) above; and
(c) The Corporation shall not be liable to indemnify Director under
this Agreement for any amounts paid in settlement of any action or claim
effected without its
-4-
<PAGE>
written consent. The Corporation shall be permitted to settle any action except
that it shall not settle any action or claim in any manner which would impose
any penalty, out-of-pocket liability, or limitation on Director without
Director's written consent. Neither the Corporation nor Director will
unreasonably withhold its or his consent to any proposed settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Director employs his own counsel pursuant to
Section 6(b)(i) through (iii) above, the Corporation shall advance to Director,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Director for such expenses.
(b) Director agrees that Director will reimburse the Corporation for
all reasonable expenses paid by the Corporation in defending any civil or
criminal action, suit or proceeding against Director in the event and only to
the extent it shall be ultimately determined by a final judicial decision (from
which there is no right of appeal) that Director is not entitled, under the
provisions of the Law, the Bylaws, this Agreement or otherwise, to be
indemnified by the Corporation for such expenses.
(c) Notwithstanding the foregoing, the Corporation shall not be
required to advance such expenses to Director if Director (i) commences any
action, suit or proceeding as a plaintiff unless such advance is specifically
approved by a majority of the Board of Directors or (ii) is a party to an
action, suit or proceeding brought by the Corporation and approved by a majority
of the Board which alleges willful misappropriation of corporate assets by
Director, disclosure of confidential information in violation of Director's
fiduciary or contractual obligations to the Corporation, or any other willful
and deliberate breach in bad faith of Director's duty to the Corporation or its
stockholders.
8. ENFORCEMENT.
(a) The Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on the Corporation
hereby in order to induce Director to continue as a director of the Corporation,
and acknowledges that Director is relying upon this Agreement in continuing in
such capacity.
(b) In the event Director is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Corporation shall reimburse Director for all Director's reasonable
fees and expenses in bringing and pursuing such action.
-5-
<PAGE>
9. SUBROGATION. In the event of payment under this agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Director by this
Agreement shall not be exclusive of any other right which Director may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
11. SURVIVAL OF RIGHTS. The rights conferred on Director by this
Agreement shall continue after Director has ceased to be a director, officer,
employee or other agent of the Corporation or such other entity and shall inure
to the benefit of Director's heirs, executors and administrators.
12. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or the obligation of
the Corporation to indemnify the Director to the full extent provided by the
Bylaws or the Law, and the affected provision shall be construed and enforced so
as to effectuate the parties' intent to the maximum extent possible.
13. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the internal laws of the State of Delaware.
14. BINDING EFFECT. This Agreement shall be binding upon Director and
upon the Corporation, its successors and assigns, and shall inure to the benefit
of Director, his heirs, personal representatives and assigns and to the benefit
of the Corporation, its successors and assigns.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
CORPORATION: VISTA MEDICAL TECHNOLOGIES, INC.,
a Delaware corporation
By:
------------------------------------
(Signature)
John R. Lyon, President
------------------------------------
Print Name and Title
DIRECTOR:
------------------------------------
(Signature)
Nicholas B. Binkley
------------------------------------
Print Name
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE>
EXHIBIT 10.44
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of _____, 19__
between Vista Medical Technologies, Inc., a Delaware corporation (the
"Corporation"), and ____________ ("Officer").
RECITALS:
A. Officer, an officer (but not currently a member of the Board of
Directors) of the Corporation, performs a valuable service in such capacity for
the Corporation; and
B. The stockholders of the Corporation have adopted Bylaws (the "Bylaws")
providing, for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and
C. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between the Corporation and its officers with respect to
indemnification of officers; and
D. In accordance with the authorization as provided by the Law, the
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of the Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded officers by such D & O
Insurance, if any, and by statutory and bylaw indemnification provisions; and
F. In order to induce Officer to continue to serve as an officer of the
Corporation, the Corporation has determined and agreed to enter into this
contract with Officer;
NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:
1. INDEMNITY OF OFFICER. The Corporation hereby agrees to hold harmless
and indemnify Officer to the fullest extent authorized or permitted by the
provisions of the Law, as it may be amended from time to time.
<PAGE>
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 3 hereof, the Corporation hereby further agrees to hold harmless and
indemnify Officer:
(a) against any and all legal expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Officer in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation) to
which Officer is, was or at any time becomes a party, or is threatened to be
made a party, by reason of the fact that Officer is, was or at any time becomes
a director, officer, employee or agent of the Corporation, or is or was serving
or at any time serves at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Officer by
the Corporation under the non-exclusivity provisions of the Bylaws of the
Corporation and the Law.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by the Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which Officer is indemnified
pursuant to Section 1 hereof or pursuant to any D & O Insurance purchased and
maintained by the Corporation;
(b) in respect of remuneration paid to Officer if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment is
rendered against Officer for an accounting of profits made from the purchase or
sale by Officer of securities of the Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) on account of Officer's conduct which is finally adjudged to have
been knowingly fraudulent or deliberately dishonest, or to constitute willful
misconduct;
(e) on account of Officer's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Officer or any of Officer's affiliates against the
Corporation or any officer, director or
-2-
<PAGE>
stockholder of the Corporation unless such action, suit or proceeding was
authorized in the specific case by action of the Board of Directors of the
Corporation;
(g) on account of any action, suit or proceeding to the extent that
Officer is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or
(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both the Corporation and Officer have been advised that the Securities and
Exchange Commission believes that indemnification for liabilities arising under
the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Officer for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which the
Corporation is or is alleged to be jointly liable with Officer (or would be if
joined in such action, suit or proceeding), the Corporation shall contribute to
the amount of expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred and paid or payable by
Officer in such proportion as is appropriate to reflect (i) the relative
benefits received by the Corporation on the one hand and Officer on the other
hand from the transaction from which such action, suit or proceeding arose, and
(ii) the relative fault of the Corporation on the one hand and of Officer on the
other hand in connection with the events which resulted in such expenses,
judgments, fines or settlement amounts, as well as any other relevant equitable
considerations. The relative fault of the Corporation on the one hand and of
Officer on the other hand shall be determined by reference to, among other
things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such expenses,
judgments, fines or settlement amounts. The Corporation agrees that it would
not be just and equitable if contribution pursuant to this Section 4 were
determined by pro rata allocation or any other method of allocation which does
not take account of the foregoing equitable considerations.
5. CONTINUATION OF OBLIGATIONS.
(a) All agreements and obligations of the Corporation contained
herein shall continue during the period Officer is a director, officer, employee
or agent of the Corporation (or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise)
and shall continue thereafter so long as Officer shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal or investigative, by reason of the fact that Officer was
serving the Corporation or such other entity in any capacity referred to herein.
-3-
<PAGE>
(b) For six years after the effective time of (i) the acquisition of
the Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any reorganization, merger
or consolidation) or (ii) the sale of all or substantially all of the assets of
the Corporation by means of any transaction or series of related transactions,
the Corporation (to the extent the Corporation is not the continuing or
surviving person of such reorganization, merger, consolidation or sale) shall
cause the acquiring, continuing or surviving corporation to (x) indemnify and
hold harmless Officer in accordance with Section 1 and 2 hereof and (y) use its
best efforts to provide officers' liability insurance on terms substantially
similar to the terms of the Corporation's then current officers' liability
insurance policy in effect on the date thereof, or any other arrangement
reasonably satisfactory to Officer, in respect of acts or omissions occurring on
or prior to the effective time of the reorganization, merger, consolidation or
sale.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Officer of notice of the commencement of any action, suit or
proceeding, Officer will, if a claim in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Officer otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Officer notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, to the extent that it may
wish, the Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Officer. After notice from the Corporation to Officer of its
election so as to assume the defense thereof, the Corporation will not be liable
to Officer under this Agreement for any legal or other expenses subsequently
incurred by Officer in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Officer shall have the
right to employ his or her own counsel in such action, suit or proceeding but
the fees and expenses of such counsel incurred after notice from the Corporation
of its assumption of the defense thereof shall be at the expense of Officer
unless (i) the employment of counsel by Officer has been authorized by the
Corporation, (ii) Officer shall have reasonably concluded that there may be a
conflict of interest between the Corporation and Officer in the conduct of the
defense of such action or (iii) the Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Officer's separate counsel shall be at the expense of the
Corporation. The Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of the Corporation or as to
which Officer shall have made the conclusion provided for in (ii) above; and
(c) the Corporation shall not be liable to indemnify Officer under
this Agreement for any amounts paid in settlement of any action or claim
effected without its
-4-
<PAGE>
written consent. The Corporation shall be permitted to settle any action except
that it shall not settle any action or claim in any manner which would impose
any penalty, out-of-pocket liability, or limitation on Officer without Officer's
written consent. Neither the Corporation nor Officer will unreasonably withhold
its or his or her consent to any proposed settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Officer employs his or her own counsel pursuant
to Section 6(b)(i) through (iii) above, the Corporation shall advance to
Officer, prior to any final disposition of any threatened or pending action,
suit or proceeding, whether civil, criminal, administrative or investigative,
any and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Officer for such expenses.
(b) Officer agrees that Officer will reimburse the Corporation for
all reasonable expenses paid by the Corporation in defending any civil or
criminal action, suit or proceeding against Officer in the event and only to the
extent it shall be ultimately determined by a final judicial decision (from
which there is no right of appeal) that Officer is not entitled, under the
provisions of the Law, the Bylaws, this Agreement or otherwise, to be
indemnified by the Corporation for such expenses.
(c) Notwithstanding the foregoing, the Corporation shall not be
required to advance such expenses to Officer if Officer (i) commences any
action, suit or proceeding as a plaintiff unless such advance is specifically
approved by a majority of the Board of Directors or (ii) is a party to an
action, suit or proceeding brought by the Corporation and approved by a majority
of the Board which alleges willful misappropriation of corporate assets by
Officer, disclosure of confidential information in violation of Officer's
fiduciary or contractual obligations to the Corporation, or any other willful
and deliberate breach in bad faith of Officer's duty to the Corporation or its
stockholders.
8. ENFORCEMENT.
(a) the Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on the Corporation
hereby in order to induce Officer to continue as an officer of the Corporation,
and acknowledges that Officer is relying upon this Agreement in continuing in
such capacity.
(b) In the event Officer is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Corporation shall reimburse Officer for all of Officer's reasonable
fees and expenses in bringing and pursuing such action.
-5-
<PAGE>
9. SUBROGATION. In the event of payment under this agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Officer by this
Agreement shall not be exclusive of any other right which Officer may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding office.
11. SURVIVAL OF RIGHTS. The rights conferred on Officer by this Agreement
shall continue after Officer has ceased to be a director, officer, employee or
other agent of the Corporation or such other entity and shall inure to the
benefit of Officer's heirs, executors and administrators.
12. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or the obligation of
the Corporation to indemnify Officer to the full extent provided by the Bylaws
or the Law, and the affected provision shall be construed and enforced so as to
effectuate the parties' intent to the maximum extent possible.
13. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the internal laws of the State of Delaware.
14. BINDING EFFECT. This Agreement shall be binding upon Officer and upon
the Corporation, its successors and assigns, and shall inure to the benefit of
Officer, his or her heirs, personal representatives and assigns and to the
benefit of the Corporation, its successors and assigns.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.
16. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement shall
confer upon Officer any right to continue in the service of the Corporation for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Corporation or Officer which rights are hereby expressly
reserved by each, to terminate Officer's service at any time for any reason
whatsoever, with or without cause.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
Corporation: VISTA MEDICAL TECHNOLOGIES, INC.,
a Delaware corporation
By:
-------------------------------------
(Signature)
John R. Lyon, President
----------------------------------------
Print Name and Title
OFFICER:
----------------------------------------
(Signature)
----------------------------------------
Print Name
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE>
EXHIBIT 10.45
WAIVER OF REGISTRATION RIGHTS
Vista Medical Technologies, Inc.
5451 Avenida Encinas, Suite A
Carlsbad, CA 92008
Attention: Robert De Vaere
Re: Public Offering of Common Stock of Vista Medical Technologies, Inc.
-------------------------------------------------------------------
Dear Mr. De Vaere:
In consideration of the proposed initial underwritten public offering of
Common Stock of Vista Medical Technologies, Inc., a California corporation (the
"Company"), to be managed by Goldman, Sachs & Co. and Salomon Brothers Inc
(collectively, the "Representatives"), expected to be consummated on or prior to
the end of April 1997 (the "Public Offering"), and, subject to and conditioned
upon the execution of similar letter agreements by persons holding at least a
majority of the outstanding number of shares of the Registrable Securities (as
defined in the Amended and Restated Investors' Rights Agreement dated November
27, 1996, as amended, between the Company and the parties thereto (the
"Investors' Rights Agreement")) the undersigned hereby waives (i) its rights
under the Investors' Rights Agreement to register and sell its Registrable
Securities, as defined above, as part of the Public Offering and (ii) the
requirement to notify the undersigned of the Public Offering as set forth in the
Investors' Rights Agreement.
Dated: February 28, 1997 Very truly yours,
--------------------------------------------
INVESTOR'S NAME AS APPEARS
ON STOCK BOOK
By:
----------------------------------------
Name
---------------------------------------
Title
<PAGE>
EXHIBIT 11.1
VISTA MEDICAL TECHNOLOGIES, INC.
STATEMENT RE: COMPUTATION OF PER SHARE DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net loss.......................................................... $ (2,090,709) $ (3,273,950) $ (7,439,139)
-------------- -------------- --------------
-------------- -------------- --------------
Weighted Average common shares outstanding........................ 750 64,870 148,875
Adjustments to reflect requirements of the Securities and Exchange
Commission (Effect of SAB 83).................................... 2,291,632 2,291,632 2,291,632
-------------- -------------- --------------
Adjusted weighted average common shares outstanding............... 2,292,382 2,356,502 2,440,507
-------------- -------------- --------------
-------------- -------------- --------------
Historical net loss per share..................................... $ (0.91) $ (1.39) $ (3.05)
-------------- -------------- --------------
-------------- -------------- --------------
Adjusted weighted average common shares outstanding............... 2,440,507
Effect of assumed conversion of preferred shares from date of
issuance......................................................... 6,186,391
--------------
Adjusted weighted average pro forma common shares outstanding..... 8,626,898
--------------
--------------
Pro forma net loss per share...................................... $ (0.86)
--------------
--------------
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
"Selected Financial Data" and to the use of our report dated January 30, 1997,
except for Note 9, as to which the date is March 3, 1997 in the Registration
Statement (Form S-1) and the related Prospectus of Vista Medical Technologies,
Inc. for the registration of 4,025,000 shares of its common stock.
ERNST & YOUNG LLP
San Diego, California
March 7, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE REGISTRANT'S FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 10,284,529
<SECURITIES> 0
<RECEIVABLES> 526,119
<ALLOWANCES> 0
<INVENTORY> 1,212,825
<CURRENT-ASSETS> 12,159,873
<PP&E> 1,469,782
<DEPRECIATION> 387,679
<TOTAL-ASSETS> 14,315,717
<CURRENT-LIABILITIES> 1,354,766
<BONDS> 0
0
115,742
<COMMON> 5,382
<OTHER-SE> 12,839,827
<TOTAL-LIABILITY-AND-EQUITY> 14,315,717
<SALES> 2,243,756
<TOTAL-REVENUES> 3,853,462
<CGS> 2,252,509
<TOTAL-COSTS> 2,252,509
<OTHER-EXPENSES> 9,040,092
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,439,139)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,439,139)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,439,139)
<EPS-PRIMARY> (0.86)
<EPS-DILUTED> (0.86)
</TABLE>
