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As filed with the Securities and Exchange Commission on November 17, 1999
Registration No. 333-____________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SONOSITE, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1405022
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 3020
North Creek Parkway
Bothell, Washington 98011-8214
(425) 951-1200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Kevin M. Goodwin
President and Chief Executive Officer
SonoSite, Inc.
P.O. Box 3020
North Creek Parkway
Bothell, Washington 98041-3020
(425) 951-1200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
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<S> <C>
Stephen M. Graham Rodd M. Schreiber
Perkins Coie Skadden, Arps, Slate, Meagher & Flom (Illinois)
1201 Third Avenue, Suite 4800 333 West Wacker Drive, Suite 2100
Seattle, Washington 98101-3099 Chicago, IL 60606
(206) 583-8888 (312) 407-0700
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [X]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of Each Proposed Maximum Proposed Maximum
Class of Securities Amount to be Aggregate Offering Per Share Offering Amount of
to Be Registered Registered (1) Price (2) Price (2) Registration Fee
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Common Stock, $.01 par value..... 1,250,000 shares $40,625,000.00 $32.50 $11,294.00
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(1) All 1,250,000 shares registered pursuant to this registration statement are
to be offered by selling shareholders.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 on the basis of
the average of the high and low selling prices of the Common Stock on
November 15, 1999, as reported on the Nasdaq National Market.
---------------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this preliminary prospectus is not complete and may be +
+ changed. These securities may not be sold until the registration statement +
+ filed with the Securities and Exchange Commission is effective. This +
+ preliminary prospectus is not an offer to sell nor does it seek an offer to +
+ buy these securities in any jurisdiction where the offer or sale is not +
+ permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1999
1,250,000 Shares
SONOSITE, INC.
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Common Stock
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The selling shareholders are offering to sell 1,250,000 shares of our
common stock with this prospectus. SonoSite, Inc. will not receive any of the
proceeds from sales of these shares by the selling shareholders.
The selling shareholders acquired the offered shares directly from us in a
private placement that was exempt from the registration requirements of the
federal securities laws. We are required to register these shares under the
terms of the Purchase Agreements, each dated as of November 10, 1999, between us
and the selling shareholders named in this prospectus.
Our common stock is traded on the Nasdaq National Market under the symbol
"SONO." On November 15, 1999, the last sale price of the common stock, as
reported on the Nasdaq National Market, was $32.4375 per share.
The selling shareholders may sell their shares from time to time on the
Nasdaq National Market or otherwise. They may sell the shares at prevailing
market prices or at prices negotiated with purchasers. The selling shareholders
will be responsible for any commissions or discounts due to brokers or dealers.
The amount of those commissions or discounts cannot be known now because they
will be negotiated at the time of the sales. We will pay all other offering
expenses.
Before buying any shares you should read the discussion of material risks
of investing in common stock in "Risk Factors" beginning on Page 1.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this Prospectus is November ___, 1999.
<PAGE>
TABLE OF CONTENTS
CONTENTS
RISK FACTORS............................................ 1
FORWARD-LOOKING STATEMENTS.............................. 7
WHERE YOU CAN FIND MORE INFORMATION..................... 8
INCORPORATION OF INFORMATION WE FILE WITH THE SEC....... 8
USE OF PROCEEDS......................................... 9
DIVIDEND POLICY......................................... 9
SELLING SHAREHOLDERS.................................... 9
PLAN OF DISTRIBUTION.................................... 11
VALIDITY OF COMMON STOCK................................ 12
EXPERTS................................................. 12
We have not authorized any person to give you any information or to make
any representations other than those contained in this prospectus. You should
not rely on any information or representations other than this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
securities other than the common stock. It is not an offer to sell or a
solicitation of an offer to buy securities if the offer or solicitation would be
unlawful. The affairs of SonoSite, Inc. may have changed since the date of this
prospectus. You should not assume that the information in this prospectus is
correct at any time subsequent to its date.
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RISK FACTORS
In addition to the other information contained in this prospectus, you
should carefully read and consider the following risk factors before purchasing
our common stock. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
We have a limited operating history and there are numerous reasons why we may
not be successful
We commenced operations as a separate company in April 1998. Prior to that,
we operated as a business unit of ATL Ultrasound. We have only recently begun to
ship our first products. Accordingly, we have a limited operating history and
our prospects for success are difficult to determine. You should consider our
business and prospects in light of the risks and uncertainties encountered by
new technology companies in evaluating whether to invest in our common stock.
There are many reasons why we may be unsuccessful in implementing our strategy,
including:
. any inability to manufacture our products with the quality and quantity
necessary to achieve profitability;
. our dependence on the market acceptance of a new platform for ultrasound
imaging procedures;
. our inability to achieve market acceptance of our products for any other
reason;
. our reliance on third-party manufacturing of our products;
. our need to maintain and expand distribution networks;
. our need to obtain governmental approvals in key foreign markets;
. any loss of key personnel;
. any inability to respond effectively to competitive pressures;
. any inability to manage rapid growth and expanding operations; and
. any failure to comply with governmental regulations.
We have a history of losses, we expect future losses and we may never be
profitable
We have incurred net losses in each quarter since we started operations and
have only recently begun product sales. As of September 30, 1999, we had an
accumulated deficit of approximately $39.3 million, including approximately
$10.3 million that was accumulated prior to our commencing operations as a
separate company in April 1998. We expect to incur substantial additional
expenses in the future as we continue to conduct research and development
efforts on newer generation products and increase sales and marketing efforts on
our recently released first generation products. We will need to generate
significant additional revenues in the future before we will be able to achieve
and maintain profitability. Our business strategies may not be successful and we
may not be profitable in any future period. If we do become profitable, we
cannot be certain that we can sustain or increase profitability on a quarterly
or annual basis.
Demand for our products may fluctuate, is subject to numerous uncertainties and
may not support a profitable business
Our products represent a new platform for ultrasound imaging procedures and
we have only sold our products in limited quantities. The market for hand-
carried, high-performance ultrasound devices is new and largely untested. We do
not know the rate at which physicians or other healthcare providers will adopt
our products or the rate at which they will purchase them in the future.
Acceptance of our products by physicians, including physicians who do not
currently use ultrasound, is essential to our success and may require us to
overcome resistance to a new platform for ultrasound imaging. Use of our
products will require training for physicians who currently do not use
ultrasound imaging instruments. The time required to complete such training may
be substantial and could result in a delay or decrease in market acceptance.
Currently, patients requiring an ultrasound examination are generally referred
to a centralized testing location. Radiologists and other specialized
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providers of ultrasound at these locations may have an incentive to discourage
market acceptance for our products in order to maintain these referrals.
Physicians and other healthcare providers will not purchase our products
unless they determine that they are preferable to other means of obtaining an
ultrasound examination and that the benefits to the patient and physician
outweigh the costs of purchasing our products. This determination will depend on
our products' image quality, cost-effectiveness, ease of use, reliability and
portability. Furthermore, acceptance of our products by physicians and other
healthcare providers may be more difficult if they are unable to obtain adequate
reimbursement from third-party payors for tests performed using our products. In
addition, while we have priced our products to be competitive in the marketplace
for lower-end ultrasound machines, our pricing policies could limit market
acceptance compared to competing products or alternative testing methods.
We rely on ATL Ultrasound for manufacturing our products and any interruption or
delay at ATL Ultrasound could harm our business
We have contracts with ATL Ultrasound for manufacturing services for all of
our ultrasound products. These services are critical to our ability to deliver
our products to customers. ATL Ultrasound may be unable to provide all the
manufacturing capacity we will need to meet our planned objectives. Although we
believe that we will ultimately develop alternative sources for the services
provided by ATL Ultrasound, we may lose future sales and incur additional
expenses as a result of any interruption or delay by ATL Ultrasound in
manufacturing our products. Additionally, ATL Ultrasound has the right to
terminate our manufacturing contract on 180 days' notice.
We intend to assume some or all of the manufacture and assembly of our products
but we have no manufacturing experience or capability
Within the next two years, we intend to assume some or all of the
manufacture and assembly of our products. To do so, we will be required to
develop our own manufacturing capability. We may be unable to comply with
regulations applicable to manufacturers of ultrasound devices or manufacture our
products at a cost or in quantities necessary to achieve or maintain
profitability. In addition to compliance with regulatory requirements, we may
encounter difficulties in scaling up production of our products, including
problems involving manufacturing yields, quality control and assurance and
shortages of qualified personnel. We will also need to effectively manage raw
material inventories to minimize shortages that would disrupt manufacture. We
have no experience with manufacturing and assembly and we may be unable to
successfully meet these challenges.
If our third-party vendors fail to supply us with the highly specialized parts
and other components we need for our products, we will be unable to effectively
ship our products
We depend on third-party vendors to supply highly specialized parts, such
as custom-designed integrated circuits and some transducer components. These
vendors may experience difficulty in manufacturing these parts, or in meeting
our high quality standards. In addition, these parts generally have long order
lead times which restrict our ability to respond quickly to changing market
conditions. If we are required to switch vendors, the manufacture and delivery
of our products could be interrupted for an extended period. We also rely on
third party vendors to supply essential parts and components that are in high
demand in other industries such as electronics manufacturing and
telecommunications equipment manufacturing. Our ability to manufacture and
deliver products in a timely manner could be harmed if these vendors fail to
maintain an adequate supply of these components.
We depend on single-source vendors for some of our components which may be
difficult and costly to replace
We depend on single-source vendors for some key components for our
products, including custom-designed integrated circuits, image displays,
batteries, capacitors and transformers. There are relatively few alternative
sources of supply for some of these components. While these vendors have
generally produced our components with acceptable quality, quantity and cost in
the past, they have experienced periodic problems that have caused us delays in
production. To date these problems have not been material. These suppliers may
be unable to meet our future demands or may continue to experience quality and
specification problems which might cause us to experience delays, incur
additional costs and possibly miss customer deliveries. Establishing additional
or replacement suppliers for these components may take a substantial
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amount of time. If we have to switch to a replacement vendor, the manufacture
and delivery of our products could be interrupted for an extended period.
Our future success could be impaired if the perception of our products is based
on any early performance problems
We will not succeed unless the marketplace is confident that we can provide
quality products and deliver them in a timely manner. We have only recently
begun to ship our products. If these initial shipments fail to perform as
advertised or if they are perceived as being difficult to use or causing
discomfort to patients, the public image of our products may be impaired. Public
perception may also be impaired if we fail to deliver our products in a timely
manner due to difficulties with our suppliers and vendors or due to our
inability to efficiently manufacture and assemble products in-house. A tarnished
reputation could result in the failure of our products to gain market acceptance
even after any quality or delivery problems are resolved.
We may be unable to manage our growth, which could strain our resources and
impair our ability to deliver our products
We expect significant growth in all areas of operations as we develop and
market our products. We will need to add personnel and expand our capabilities,
which may strain our existing management, operational, financial and other
resources. To compete effectively and manage future growth, we must
. accurately forecast demand for our products;
. train, manage and motivate a growing employee base; and
. improve existing operational, financial and management information systems.
We may be unable to complete necessary improvements to our systems,
procedures and controls to support our future operations in a timely manner. In
addition, we may be unable to attract or retain required personnel and our
management may be unable to develop the additional expertise required to manage
any future growth.
Our quarterly operating results are uncertain and may fluctuate significantly,
which could impair the value of your investment
Our future operating results will depend on numerous factors, many of which
we do not control. Changes in any or all of these factors could cause our
operating results to fluctuate and increase the volatility of our stock. Some of
these factors are
. demand for our products;
. product and price competition;
. changes in the costs of components;
. success of our indirect sales and distribution channels;
. successful development and commercialization of new and enhanced products on
a timely basis;
. timing of new product introductions and product enhancements by us or our
competitors; and
. timing and magnitude of our expenditures.
In addition, we intend to have our products manufactured based on forecasts
of sales in future periods. Our forecast in any particular period may prove
inaccurate, which could cause fluctuations in our manufacturing costs and our
operating results. Our future operating results could fall below the
expectations of securities analysts or investors and reduce the market price of
our stock. We believe that there may be some fluctuations caused by year-end
budgetary pressures on our customers, customer buying patterns and the efforts
of our indirect sales and distribution network to meet or exceed annual sales
quotas. These factors make it difficult to forecast our revenues and operating
results.
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The market for ultrasound imaging products is highly competitive and we may be
unable to compete effectively
The existing market for ultrasound imaging products is well established and
intensely competitive. In addition, we are seeking to develop new markets for
our hand-carried ultrasound imaging products. In response, we expect competition
to increase as potential and existing competitors begin to enter these new
markets or modify their existing products to compete directly with ours. Our
primary competitors have
. better name recognition;
. significantly greater financial resources; and
. existing relationships with some of our potential customers.
Our competitors may be able to use their existing relationships to
discourage customers from purchasing our products. In addition, our competitors
may be able to devote greater resources to the development, promotion and sale
of new or existing products, thereby allowing them to respond more quickly to
new or emerging technologies and changes in customer requirements.
We have limited sales and marketing experience and rely on an indirect sales and
distribution network to sell our products which we may be unable to successfully
maintain or replace
We have limited sales and distribution capabilities and have established an
indirect sales and distribution network to sell our products domestically and
internationally. Our future revenue growth will depend in large part on our
success in maintaining and expanding these indirect sales and distribution
channels. We depend on these distributors to help promote market acceptance and
demand for our products. We may elect to develop our own direct sales and
distribution capabilities in the future or we may be required to do so if we
fail to maintain or expand our existing third-party distribution network.
Developing our own direct sales and distribution capabilities will be expensive
and time-consuming. We may be unable to develop our own distribution
capabilities in a timely manner, if at all, which would have an adverse effect
on our ability to sell our products.
Many of our third-party distributors will be in the business of
distributing other, sometimes competing, medical products. As a result, our
products may not receive the resources and support required within this network
to meet our sales objectives.
We intend to manage our third-party distribution network with several sales
directors. These sales directors will need a high level of technical expertise
and knowledge regarding our products' capabilities and ultrasound imaging
products in general and their use. We face intense competition for qualified
sales directors and may be unable to attract and retain such personnel, which
would adversely affect our ability to expand and maintain our third-party
distribution network.
If we do not retain key employees and attract additional highly skilled
employees, we will not be successful
Our future performance will depend largely on the efforts and abilities of
our key technical, marketing and managerial personnel and our ability to retain
them. Our success depends on our ability to attract and retain additional key
personnel in the future. The loss of any of our key employees could adversely
affect our business, particularly the loss of any of our key engineering
personnel. We do not have any employment agreements with any of our employees.
We do not maintain key person insurance on any of our employees.
We may be unable to adequately protect our intellectual property rights, which
could harm our business
Our success and ability to compete depend on our licensed and internally
developed technology. We protect our proprietary technology through a
combination of patent, copyright, trade secret and trademark law. We also enter
into confidentiality or license agreements with our employees, consultants and
corporate partners, and generally control access to, and the distribution of,
our product designs, documentation and other proprietary information, as well as
the designs, documentation and other information we license from others. Despite
our efforts to protect these proprietary rights, unauthorized parties may copy,
develop independently or otherwise obtain and use our products or technology.
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We cannot be sure that our pending patent applications will result in
issued patents. In addition, our issued patents or pending applications may be
challenged or circumvented by our competitors. Policing unauthorized use of our
intellectual property will be difficult and we cannot be certain that we will be
able to prevent misappropriation of our technology, particularly in countries
where the laws may not protect our proprietary rights as fully as in the United
States.
Our products may infringe on the intellectual property rights of others which
could subject us to significant liability
Many of our competitors in the ultrasound imaging business hold issued
patents and have filed, or may file, patent applications. Our competitors may
claim our technology or products infringe upon the technology covered by these
patents or patent applications. Any such claims, with or without merit, could
. be time-consuming to defend;
. result in costly litigation;
. divert management's attention and resources;
. cause product shipment delays;
. require us to enter into royalty or licensing agreements;
. prevent us from manufacturing or selling some or all of our products; or
. result in our liability to one or more of these competitors.
If a third party makes a successful claim of patent infringement against
us, we may be unable to license the infringed or similar technology on
acceptable terms, if at all.
Our products may become obsolete
Our competitors may develop and market ultrasound products that render our
products obsolete or noncompetitive. In addition, although diagnostic ultrasound
imaging products may have price and/or performance advantages over competing
medical imaging equipment, such as computed tomography and magnetic resonance
imaging, any price or performance advantages may not continue. Our products
could become obsolete or unmarketable if other products utilizing new
technologies are introduced or new industry standards emerge. As a result, the
life cycles of our products are difficult to estimate. To be successful, we will
need to continually enhance our products and to design, develop and market new
products that successfully respond to any competitive developments. In addition,
because our products are based on a single platform, we may be more vulnerable
to adverse events affecting the healthcare industry generally, and the medical
ultrasound market specifically, than we would be if we offered products based on
more than one platform.
We may incur tax liability in connection with our spinoff from ATL Ultrasound
Our spinoff was treated by ATL Ultrasound as a tax-free spinoff under
Section 355 of the Internal Revenue Code of 1986. However, if ATL Ultrasound
were to recognize taxable gain from the spinoff, the Internal Revenue Service
could impose that liability on any member of the ATL Ultrasound consolidated
group as constituted prior to the spinoff, including SonoSite. ATL Ultrasound
has agreed to cover 85% of any such liability (unless the tax is imposed due to
the actions by ATL Ultrasound solely or SonoSite solely, in which case ATL
Ultrasound and SonoSite have agreed that the party who is solely at fault shall
bear all of the tax liability). We cannot guarantee that ATL Ultrasound would
indemnify us or agree that it caused the liability to be imposed. If we were
required to pay all or a portion of any taxes related to the spinoff, our
business would be adversely affected.
Governmental regulation of our business could prevent us from introducing new
products in a timely manner
All of our planned products and our manufacturing activities and the
manufacturing activities of our third-party medical device manufacturers are
subject to extensive regulation by a number of governmental agencies, including
the U.S. Food and Drug Administration and comparable international agencies. We
and such third-party manufacturers are or will be required to
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. undergo rigorous inspections by domestic and international agencies;
. obtain the prior approval of these agencies before we can market and sell our
products; and
. satisfy content requirements for all of our sales and promotional materials.
Compliance with the regulations of these agencies may delay or prevent us
from introducing new or improved products. We may be subject to sanctions,
including the temporary or permanent suspension of operations, product recalls
and marketing restrictions, if we fail to comply with the laws and regulations
pertaining to our business. Our third-party medical device manufacturers may
also be subject to the same sanctions and, as a result, may be unable to supply
our products.
We need to establish international markets for our products and our prospects of
doing so successfully are uncertain
Our current business strategy depends on our ability to establish
international markets for our products. We will need to devote significant
management attention and financial resources to obtain any necessary foreign
governmental approvals. International sales are subject to inherent risks,
including
. the costs of localizing products for foreign markets;
. longer receivables collection periods and greater difficulty in receivables
collection, as compared to those experienced in the United States;
. reduced protection for intellectual property rights in some countries;
. fluctuations in the value of the U.S. dollar relative to other currencies;
and
. delays or failures in obtaining necessary regulatory approvals.
We may face product liability and warranty claims which could result in
significant costs
The sale and support of our products entails the risk of product liability
or warranty claims, such as those based on claims that the failure of one of our
products resulted in a misdiagnosis. The medical instrument industry in general
has been subject to significant medical malpractice litigation. We may incur
significant liability in the event of such litigation. Although we maintain
product liability insurance, we cannot be sure that this coverage is adequate or
that it will continue to be available on acceptable terms, if at all.
We also may face warranty exposure, which could adversely affect our
operating results. We anticipate that our products will carry a one-year
warranty against defects in materials and workmanship. We will be responsible
for all claims, actions, damages, liens, liabilities, costs and expenses under
our manufacturing contract with ATL Ultrasound for all product recalls, returns
and defects attributable to manufacturing. We intend to establish reserves for
the liability associated with product warranties. However, any unforeseen
warranty exposure could adversely affect our operating results.
We may require additional funding to satisfy our future capital expenditure
needs and our prospects of obtaining such funding are uncertain
Our future revenues may not be sufficient to support the expenses of our
operations and the expansion of our business. We may therefore need additional
equity or debt capital to finance our operations as we develop our products and
expand our sales internationally. To date, our capital requirements have been
met primarily by the sale of equity, contributions by ATL Ultrasound in
connection with our spinoff and by grant revenue from the U.S. Office of Naval
Research under a U.S. Government Defense Advanced Research Projects Agency
grant. ATL Ultrasound's funding obligations have been met and any future grant
revenue is expected to be immaterial. As such, if we need additional financing
we would need to explore other sources of financing, including public equity or
debt offerings, private placements of equity or debt and collaborative or other
arrangements with corporate partners. Financing may not be available when needed
or may not be available on acceptable terms. If we are unable to obtain
financing, we may be required to delay, reduce or eliminate some or all of our
research and development and/or sales and marketing efforts.
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Our stock price has been and is likely to continue to be volatile
The market price for our common stock and for securities of medical
technology companies generally has been volatile in the past and is likely to
continue to be volatile in the future. If you decide to purchase our shares, you
may not be able to resell them at or above the price you paid due to a number of
factors, including
. actual or anticipated variations in quarterly operating results;
. the loss of significant orders;
. changes in earnings estimates by analysts;
. announcements of technological innovations or new products by our
competitors;
. changes in the structure of the healthcare financing and payment systems;
. general conditions in the medical industry; and
. significant sales of our common stock by one or more of our principal
shareholders.
Our restated articles of incorporation, our bylaws, Washington law and some of
our agreements contain provisions that could discourage a takeover that may be
beneficial to shareholders
There are provisions in our restated articles of incorporation, our bylaws
and Washington law that make it more difficult for a third party to obtain
control of SonoSite, even if doing so would be beneficial to our shareholders.
Additionally, the acquisition of SonoSite may be made more difficult or
expensive by the following:
. a provision in our license agreement with ATL Ultrasound requiring a
significant cash payment to ATL Ultrasound upon a change in control of
SonoSite;
. a shareholder rights agreement; and
. acceleration provisions in benefit plans and change-in-control agreements
with all of our employees.
The "Year 2000" problem could disrupt our business
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January 1,
2000, computer systems and software used by many companies and organizations in
a wide variety of industries will produce erroneous results, or fail, unless
they are modified or upgraded to process date information correctly. Our
greatest potential exposure with respect to the Year 2000 problem stems from the
possibility that some computer systems used by us and third parties with whom we
do business will be unable to distinguish 21st century dates from 20th century
dates, which may significantly delay or limit our ability to develop and market
our products. Based on our design process and assessment to date, we believe the
current versions of our products are "Year 2000 compliant"--that is, they are
capable of adequately distinguishing 21st century dates from 20th century dates.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on our
current expectations, assumptions, estimates and projections about us and our
industry. When used in this prospectus, the words "expects," "anticipates,"
"estimates" and "intends" and similar expressions are intended to identify
forward-looking statements. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in such forward-looking statements as a result of numerous factors, as more
fully described in "Risk Factors" and elsewhere in this prospectus. You should
not unduly rely on these forward-looking statements, which apply only as of the
date of this prospectus.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, DC 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. The SEC maintains an Internet site at http://www.sec.gov that
contains reports, proxy and information statements, and other information,
regarding issuers, including us, that file documents with the SEC
electronically. You can also inspect our SEC filings at the offices of The
Nasdaq Stock Market, 1735 K Street, N.W., Washington DC 20006.
This prospectus is a part of a registration statement on Form S-3 that we
filed with the SEC with respect to the common stock offered by this prospectus.
This prospectus does not contain all the information that is in the registration
statement. We omitted certain parts of the registration statement as allowed by
the SEC. We refer you to the registration statement and its exhibits for further
information about us and the common stock offered by the selling shareholders.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus, and the information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until this offering is completed:
. our Annual Report to Shareholders for the fiscal year ended December 31,
1998;
. our Amended Annual Report on Form 10-K/A for the fiscal year ended December
31, 1998;
. our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
. our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
. our Quarterly Report on Form 10-Q for the quarter ended September 30, 1999;
and
. our Proxy Statement for the 1999 Annual Meeting of Shareholders.
You may request a copy of these filings, at no cost, by writing to or
telephoning us at the address below. However, we will not provide copies of the
exhibits to these filings unless we specifically incorporated by reference the
exhibits in this prospectus.
SonoSite, Inc.
Kevin M. Goodwin
P.O. Box 3020
North Creek Parkway
Bothell, Washington 98041-3020
(425) 951-1200
-8-
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our common stock
offered in this prospectus.
DIVIDEND POLICY
We have not paid any dividends on our common stock since our inception and
do not anticipate paying any dividends on our common stock in the foreseeable
future.
SELLING SHAREHOLDERS
We are registering all 1,250,000 shares covered by this prospectus on
behalf of the selling shareholders named in the table below. We issued all the
shares to the selling shareholders in a private placement transaction. We have
registered the shares to permit the selling shareholders and their pledgees,
donees, transferees or other successors in interest that receive their shares
from the selling shareholders as a gift, partnership distribution or another
nonsale-related transfer after the date of this prospectus to resell the shares
when they deem appropriate.
In the purchase agreements, each selling shareholder has represented that
he, she or it acquired the shares of our common stock for investment and with no
present intention of distributing those shares. In addition, each selling
shareholder has represented that he, she or it qualifies as an "accredited
investor" as such term is defined in Rule 501 under the Securities Act of 1933,
as amended. We agreed in the purchase agreements to prepare and file a
registration statement as soon as practicable and to bear all expenses other
than fees and expenses of counsel or other advisors for the selling shareholders
and underwriting discounts and commissions and brokerage commissions and fees.
Accordingly, in recognition of the fact that the selling shareholders, even
though they purchased the shares without a view to distribution, may wish to be
legally permitted to sell the shares when each deems appropriate, we filed with
the SEC a registration statement on Form S-3, of which this prospectus forms a
part. We have also agreed to prepare and file any amendments and supplements to
the registration statement as may be necessary to keep the registration
statement effective until the earlier of
. two years after the effective date of the registration statement; or
. the date on which the shares offered in this prospectus may be resold by the
selling shareholders without registration and without regard to volume
limitations by reason of Rule 144 under the Securities Act of 1933, as
amended, or any other rule of similar effect.
Except as noted in the table below, no selling shareholder has had a
material relationship with us within the past three years except as the result
of the ownership of the shares offered in this prospectus or other of our
securities.
The following table sets forth the name of each selling shareholder, the
number of shares of common stock owned beneficially by each selling shareholder
before and after this offering and the number of shares which may be offered
pursuant to this prospectus. This information is based on information provided
by the selling shareholders. There are currently no agreements, arrangements or
understandings with respect to the sale of any of the shares. The shares are
being registered to permit public secondary trading of the shares, and the
selling shareholders may offer the shares for resale from time to time.
-9-
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Number of Shares Shares Beneficially
Owned Prior to Offering Being Offered Owned After Offering(1)
------------------------ ---------------- -----------------------
Name Number Percent(2) Number Percent
---- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Pogue Capital International Ltd. 25,000 * 25,000 0 0
Franklin Small Cap Growth Fund 400,000 5.04% 400,000 0 0
(#198)
Franklin Global Health Care Fund 50,000 * 50,000 0 0
(#199)
Pacific Asset Partners 25,000 * 25,000 0 0
Deborah H. Berghorst, as trustee of 50,000 * 50,000 0 0
the Berghorst 1998 Grantor
Retained Annuity Trust
D. Theodore Berghorst(3) 55,000 * 55,000 0 0
Putnam Health Sciences Trust 383,200 4.83% 383,200 0 0
Putnam Variable Trust - Putnam VT 16,800 * 16,800 0 0
Health Sciences Fund
Putnam Voyager Fund II 74,300 * 74,300 0 0
Putnam Funds Trust - Putnam 400 * 400 0 0
Investment Fund 98
Putnam Investment Funds Putnam 300 * 300 0 0
Worldwide Equity Fund
Safeco Employee Savings Plan Stock 49,000 * 49,000 0 0
Fund
Safeco Common Stock Fund 20,700 * 20,700 0 0
Safeco Resource Series Trust Small 9,300 * 9,300 0 0
Company Stock Portfolio
Safeco Resource Series Trust 29,000 * 1,000 28,000 *
Northwest Fund
Goldman Sachs Commodity Corp LLC 5,000 * 5,000 0 0
Dompe' farmaceutici s.p.a. 50,000 * 50,000 0 0
Merlin Biomed International 20,000 * 20,000 0 0
Merlin BioMed LP 15,000 * 15,000 0 0
</TABLE>
* Less than 1%
(1) Assumes the sale of all shares offered in this prospectus and no other
purchases or sales of our common stock.
(2) Applicable percentage of ownership is based on 7,929,767 shares of our
common stock outstanding on October 31, 1999.
(3) D. Theodore Berghorst is Managing Director and Group Head of Prudential
Vector Healthcare Group, a unit of Prudential Securities Incorporated.
Prudential Vector Healthcare Group acted as placement agent for the private
placement in which Mr. Berghorst and the other selling shareholders
acquired the offered shares. Vector Securities International, Inc.,
predecessor to Prudential Vector Healthcare Group, acted as managing
underwriter in our public offering in April 1999. Mr. Berghorst was Chief
Executive Officer and Chairman of the Board of Directors of Vector
Securities.
-10-
<PAGE>
PLAN OF DISTRIBUTION
The common stock offered by this prospectus may be sold from time to time
by selling shareholders, who consist of the persons named under "Selling
Shareholders" above and those persons' pledgees, donees, transferees or other
successors in interest. We will pay all costs, expenses and fees in connection
with the registration of the common stock offered by this prospectus. The
selling shareholders must pay all brokerage commissions and similar selling
expenses relating to the sale of their shares. The selling shareholders may sell
their shares on the Nasdaq National Market or otherwise, at market prices or at
negotiated prices. They may sell shares by one or a combination of the
following:
. a block trade in which a broker or dealer so engaged will attempt to sell the
shares as agent, but may position and resell a portion of the block as
principal to facilitate the transaction;
. purchases by a broker or dealer as principal and resale by the broker or
dealer for its account pursuant to this prospectus;
. an exchange distribution in accordance with the rules of an exchange;
. ordinary brokerage transactions and transactions in which a broker solicits
purchasers; and
. in open-market transactions in reliance on Rule 144 under the Securities Act
of 1933, provided they meet the requirements of that rule.
The selling shareholders may enter into hedging transactions with broker-
dealers in connection with distributions of the shares or otherwise. In these
transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with selling shareholders. The
selling shareholders also may sell shares short and redeliver the shares to
close out short positions. The selling shareholders may enter into option or
other transactions with broker-dealers which require the delivery to the broker-
dealer of the shares. The broker-dealer may then resell or otherwise transfer
the shares under this prospectus. The selling shareholders also may loan or
pledge the shares to a broker-dealer. The broker-dealer may sell the loaned
shares, or upon a default the broker-dealer may sell the pledged shares under
this prospectus.
In effecting sales, brokers or dealers engaged by the selling shareholders
may arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from selling shareholders in amounts to be
negotiated prior to the sale. The selling shareholders and any broker-dealers
that participate in the distribution may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, and any proceeds or
commissions received by them, and any profits on the resale of shares sold by
broker-dealers, may be deemed to be underwriting discounts and commissions.
Because the selling shareholders may be deemed to be underwriters, they will be
subject to the prospect-delivery requirements of the Securities Act of 1933. In
addition, any securities covered by this prospectus which qualify for sale under
Rule 144 promulgated under the Securities Act may be sold under Rule 144 rather
than under this prospectus. The selling stockholders have advised us that they
have not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. There is
no underwriter or coordinating broker acting in connection with the proposed
sale of shares by the selling stockholders.
We have agreed to indemnify each selling shareholder against certain
liabilities, including liabilities arising under the Securities Act of 1933. The
selling shareholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving shares of the common stock against
certain liabilities, including liabilities arising under the Securities Act of
1933.
-11-
<PAGE>
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in some
states the shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and complied with.
Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended, any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of the
distribution. In addition, each selling stockholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the exchange Act, including Regulation M, which provisions may
limit the timing of purchases and sales of shares of our common stock by the
selling stockholders. We will make copies of this prospectus available to the
selling stockholders and have informed them of the need to deliver copies of
this prospectus to purchasers at or prior to the time of any sale of the shares.
If any selling shareholder notifies us that a material arrangement has been
entered into with a broker-dealer for the sale of shares through a block trade,
special offering, exchange, distribution or secondary distribution or a purchase
by a broker or dealer, we will file a prospectus supplement, if required by Rule
424 under the Securities Act of 1933, setting forth
. the name of each of the selling shareholders and the participating broker-
dealers;
. the number of shares involved;
. the price at which the shares were sold;
. the commissions paid or discounts or concessions allowed to the broker-
dealers, where applicable;
. a statement to the effect that the broker-dealers did not conduct any
investigation to verify the information set out or incorporated by reference
in this prospectus; and
. any other facts material to the transaction.
VALIDITY OF COMMON STOCK
Certain legal matters in connection with the common stock offered by this
prospectus have been passed upon for us by Perkins Coie LLP, Seattle,
Washington.
EXPERTS
Our financial statements as of December 31, 1997 and 1998, and for each of
the years in the three-year period ended December 31, 1998 and for the period
from February 1994 (inception) to December 31, 1998 have been incorporated by
reference in this prospectus and the related registration statement in reliance
upon the report of KPMG LLP, independent auditors, incorporated by reference
herein, and upon the authority of KPMG LLP as experts in accounting and
auditing.
-12-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts payable, by the registrant in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee and the Nasdaq National Market additional listing fee.
SEC registration fee................................... $11,294.00
Nasdaq National Market additional listing fee.......... $17,500.00
Legal fees and expenses................................ $10,000.00
Accounting fees and expenses........................... $ 7,500.00
Miscellaneous fees and expenses........................ $ 1,706.00
Total.................................................. $48,000.00
==========
Item 15. Indemnification of Directors and Officers
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article VI of the registrant's restated articles of
incorporation provides for indemnification of the registrant's directors,
officers, employees and agents to the maximum extent permitted by Washington
law. The directors and officers of the registrant also may be indemnified
against liability they may incur for serving in those capacities pursuant to a
liability insurance policy maintained by the registrant for such purpose.
Section 23B.08.320 of the Washington Business Corporation Act authorizes a
corporation to limit a director's liability to the corporation or its
shareholders for monetary damages for acts or omissions as a director, except in
certain circumstances involving intentional misconduct, knowing violations of
law or illegal corporate loans or distributions, or any transaction from which
the director personally receives a benefit in money, property or services to
which the director is not legally entitled. Article V of the registrant's
restated articles of incorporation contains provisions implementing, to the
fullest extent permitted by Washington law, such limitations on a director's
liability to the registrant and its shareholders.
Item 16. Exhibits
4.1 Form of Purchase Agreement
5.1 Opinion of Perkins Coie LLP, counsel to the registrant,
regarding the legality of the common stock
23.1 Consent of KPMG LLP, independent auditors
23.2 Consent of Perkins Coie LLP (contained in the opinion filed as
Exhibit 5.1 hereto)
24.1 Power of attorney (contained on signature page)
II-1
<PAGE>
Item 17. Undertakings
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in this registration statement or any material change to such
information in this registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
D. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunder duly
authorized, in the City of Bothell, State of Washington, on the 16th day of
November, 1999.
SonoSite, Inc.
/s/ Kevin M. Goodwin
--------------------
By: Kevin M. Goodwin
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
Kevin M. Goodwin and Donald F. Seaton III, or either of them, as attorneys-in-
fact with full power of substitution, to execute in the name and on the behalf
of each person, individually and in each capacity stated below, and to file, any
and all amendments to this registration statement, including any and all post-
effective amendments, and any related Rule 462(b) registration statement and any
amendment thereto.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated below on the 16th day of November, 1999.
Signature Title
--------- -----
/s/ Kirby L. Cramer Chairman of the Board
- -----------------------------
Kirby L. Cramer
/s/ Kevin M. Goodwin President, Chief Executive Officer and Director
- ----------------------------- (Principal Executive Officer)
Kevin M. Goodwin
/s/ Donald F. Seaton III Vice President-Business Development,
- ----------------------------- Chief Financial Officer,
Donald F. Seaton III Secretary and Treasurer
/s/ Edward V. Fritzky Director
- -----------------------------
Edward V. Fritzky
/s/ Steven R. Goldstein, M.D. Director
- -----------------------------
Steven R. Goldstein, M.D.
/s/ William G. Parzybok, Jr. Director
- -----------------------------
William G. Parzybok, Jr.
II-3
<PAGE>
Director
- -----------------------------
Jeffrey Pfeffer, Ph.D.
/s/ Dennis A. Sarti, M.D. Director
- -----------------------------
Dennis A. Sarti, M.D.
/s/ Jacques Souquet, Ph.D. Director
- -----------------------------
Jacques Souquet, Ph.D.
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number
-------
4.1 Form of Purchase Agreement
5.1 Opinion of Perkins Coie LLP, counsel to the registrant,
regarding the legality of the common stock
23.1 Consent of KPMG LLP independent auditors
23.2 Consent of Perkins Coie LLP (contained in Exhibit 5.1)
24.1 Power of attorney (contained on signature page)
II-5
<PAGE>
EXHIBIT 4.1
PURCHASE AGREEMENT
THIS AGREEMENT is made as of the [ ] day of November, 1999, by and
among SonoSite, Inc., a corporation organized under the laws of the State of
Washington, with its principal offices at 19807 North Creek Parkway, Suite 200,
Bothell, Washington 98011-8214, and the purchaser whose name and address is set
forth on the signature page hereof (the "Purchaser"). All references to the
"Company" herein shall refer to SonoSite, Inc. and its subsidiary.
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company, and the Purchaser agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the terms
and conditions of this Agreement, the Company has authorized the sale of up to
1,250,000 shares (the "Shares") of common stock, par value $0.01 per share (the
"Common Stock"), of the Company.
SECTION 2. Agreement to Sell and Purchase the Shares. At the Closing
(as defined in Section 3), the Company will sell to the Purchaser, and the
Purchaser will buy from the Company, upon the terms and conditions hereinafter
set forth, the number of Shares (at the purchase price) shown below:
Price Per
Number to Be Share In Aggregate
Purchased Dollars Price
--------------- --------- --------------
$ $
The Company proposes to enter into this same form of purchase
agreement with certain other investors (the "Other Purchasers") and expects to
complete sales of the Shares to them. The Purchaser and the Other Purchasers are
hereinafter sometimes collectively referred to as the "Purchasers," and this
Agreement and the agreements executed by the Other Purchasers are hereinafter
sometimes collectively referred to as the "Agreements." The term "Placement
Agent" shall mean Prudential Vector Healthcare Group, a unit of Prudential
Securities Incorporated.
SECTION 3. Delivery of the Shares at the Closing. The completion of
the purchase and sale of the Shares (the "Closing") shall occur as soon as
practicable following notification by the Securities and Exchange Commission
(the "Commission") to the Company of the Commission's willingness to declare
effective the registration statement to be filed by the Company pursuant to
Section 7.1 hereof (the "Registration Statement") at a place and time (the
"Closing Date") to be agreed
<PAGE>
upon by the Company and the Placement Agent. In the absence of any such
agreement, the Closing shall be held at the offices of Perkins Coie LLP, 1201
Third Avenue, 48th Floor, Seattle, Washington 98101, counsel to the Company, in
Seattle, Washington at 9:00 a.m. local time on the fifth business day after the
Company delivers written notice to the Placement Agent of receipt of such
notification from the Commission. The Company will promptly notify the
Purchasers by facsimile transmission or otherwise of the date, place and time of
the Closing.
At the Closing, the Company shall deliver to the Purchaser one or more
stock certificates registered in the name of the Purchaser, or in such nominee
name(s) as designated by the Purchaser in writing, representing the number of
Shares set forth in Section 2 above and bearing an appropriate legend referring
to the fact that the Shares were sold in reliance upon the exemption from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), provided by Section 4(2) thereof and Rule 506 thereunder. The Company
will substitute one or more replacement certificates without the legend at the
request of the Purchase promptly after such time as the Registration Statement
becomes effective. The name(s) in which the stock certificates are to be
registered are set forth in the Stock Certificate Questionnaire attached hereto
as part of Appendix I. The Company's obligation to complete the purchase and
sale of the Shares and deliver such stock certificate(s) to the Purchaser at the
Closing shall be subject to the following conditions, any one or more of which
may be waived by the Company: (a) receipt by the Company of same-day funds in
the full amount of the purchase price for the Shares being purchased hereunder;
(b) completion of the purchases and sales under the Agreements with all of the
Other Purchasers; and (c) the accuracy of the representations and warranties
made by the Purchasers and the fulfillment of those undertakings of the
Purchasers to be fulfilled prior to the Closing. The Purchaser's obligation to
accept delivery of such stock certificate(s) and to pay for the Shares evidenced
thereby shall be subject to the following conditions: (a) the Commission has
notified the Company of the Commission's willingness to declare the Registration
Statement effective on or prior to the 75th day after the date such Registration
Statement was filed by the Company; and (b) the accuracy in all material
respects of the representations and warranties made by the Company herein and
the fulfillment in all material respects of those undertakings of the Company to
be fulfilled prior to Closing. The Purchaser's obligations hereunder are
expressly not conditioned on the purchase by any or all of the Other Purchasers
of the Shares that they have agreed to purchase from the Company.
SECTION 4. Representations, Warranties and Covenants of the Company.
The Company hereby represents and warrants to, and covenants with, the Purchaser
as follows:
<PAGE>
4.1. Offering Materials. The Company has not distributed and will
not distribute prior to the Closing Date any offering material in connection
with the offering and sale of the Shares other than the Confidential Private
Placement Memorandum, dated October 29, 1999 prepared by the Company, including
all Exhibits, supplements and amendments thereto (the "Private Placement
Memorandum") or any amendment or supplement thereto. The Company has not in the
past nor will it hereafter take any action independent of the Placement Agent to
sell, offer for sale or solicit offers to buy any securities of the Company
which would bring the offer, issuance or sale of the Shares, as contemplated by
this Agreement, within the provisions of Section 5 of the Securities Act, unless
such offer, issuance or sale was or shall be within the exemptions of Section 4
of the Securities Act.
4.2. Organization and Qualification. The Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Washington with corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Private Placement Memorandum and to enter into and perform its obligations under
this Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
would not, singly or in the aggregate, have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of the Company.
4.3. Authorized Capital Stock. The authorized, issued and
outstanding capital stock of the Company is as set forth in the Private
Placement Memorandum under "Capitalization" (except for subsequent issuances, if
any, pursuant to this Agreement or pursuant to reservations, agreements,
employee or director benefit plans or the exercise of convertible securities
referred to in the Private Placement Memorandum); the shares of issued and
outstanding capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable and have not been issued in
violation of or are not otherwise subject to any preemptive or other similar
rights. There are no outstanding subscriptions, options, warrants, convertible
or exchangeable securities or other rights granted to or by the Company to
purchase shares of Common Stock or other securities of the Company and there are
no commitments, plans or arrangements to issue any shares of Common Stock or any
security convertible into or exchangeable for Common Stock, in each case other
than as described in the Private Placement Memorandum.
<PAGE>
4.4. Issuance, Sale and Delivery of the Shares. The Shares have
been duly authorized for issuance and sale to the Purchasers pursuant to this
Agreement and, when issued and delivered by the Company pursuant to this
Agreement against payment of the consideration set forth herein, will be validly
issued and fully paid and nonassessable; the certificates evidencing the Shares
are in due and proper form under Washington law; the authorized capital stock of
the Company, including the Shares, conforms to all statements relating thereto
included in the Private Placement Memorandum; and the issuance of the Shares is
not subject to preemptive or other similar rights. No further approval or
authority of the shareholders or the Board of Directors of the Company will be
required for the issuance and sale of the Shares to be sold by the Company as
contemplated herein.
4.5. Accountants. The accountants who certified the financial
statements and supporting schedules included (as exhibits or otherwise) in the
Private Placement Memorandum are independent public accountants as required by
the Securities Act and the rules and regulations of the Commission under the
Securities Act (the "Rules and Regulations").
4.6. Financial Statements. The financial statements included (as
exhibits or otherwise) in the Private Placement Memorandum present fairly the
financial position of the Company as of the dates indicated and the results of
their operations for the periods specified; except as otherwise stated in the
Private Placement Memorandum, said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis; and the supporting schedules included in the Private Placement Memorandum
present fairly the information stated therein. The financial and statistical
data set forth in the Private Placement Memorandum were prepared on an
accounting basis consistent with such financial statements.
4.7. No Material Change. Since June 30, 1999 and except as described
in the Private Placement Memorandum, (i) there has been no material adverse
change or any development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company, whether or not arising in the
ordinary course of business, (ii) there have been no transactions entered into
by the Company other than those in the ordinary course of business, which are
material with respect to the Company, and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock. The Company has no material contingent obligations which are
not disclosed in the Private Placement Memorandum.
<PAGE>
4.8. Environmental. Except as disclosed in the Private Placement
Memorandum and except as would not, singly or in the aggregate, reasonably be
expected to have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company, (A) the Company is in compliance with all applicable Environmental Laws
(as defined below), (B) the Company has all permits, authorizations and
approvals required under any applicable Environmental Laws and is in compliance
with the requirements of such permits authorizations and approvals, (C) there
are no pending or, to the best knowledge of the Company, threatened
Environmental Claims against the Company and (D) under applicable law, there are
no circumstances with respect to any property or operations of the Company that
are reasonably likely to form the basis of an Environmental Claim against the
Company.
For purposes of this Agreement, the following terms shall have the
following meanings: "Environmental Law" means any United States (or other
applicable jurisdiction's) Federal, state, local or municipal statute, law,
rule, regulation, ordinance, code, policy or rule of common law and any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgement, relating to the environment,
health, safety or any chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority. "Environmental
Claims" means any and all administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating in any way to any Environmental Law.
4.9. No Defaults. The Company is not in violation of its charter or
in material default in the performance or observance of any obligation,
agreement, covenant or condition contained in any material contract, indenture,
mortgage, loan agreement, deed, trust, note, lease, sublease, voting agreement,
voting trust, or other instrument or agreement to which the Company is a party
or by which it may be bound, or to which any of the property or assets of the
Company is subject.
4.10. Labor Matters. No labor dispute with the employees of the
Company exists or, to the best knowledge of the Company, is imminent.
4.11. No Actions. There is no action, suit or proceeding before or
by any court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Company, threatened, against or affecting the
Company which, singly or in the aggregate, might result in any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company, or which, singly or in the
aggregate, might materially and
<PAGE>
adversely effect the properties or assets thereof or which might materially and
adversely effect the consummation of this Agreement; all pending legal or
governmental proceedings to which the Company is a party or of which any of
their respective property or assets is the subject which are not described in
the Private Placement Memorandum, including ordinary routine litigation
incidental to the business, are, considered in the aggregate, not material.
4.12. Intellectual Property. Except as otherwise specifically
disclosed in the Private Placement Memorandum, the Company, to the best of its
knowledge, owns or is licensed to use all patents, patent applications,
inventions, trademarks, trade names, applications for registration of
trademarks, service marks, service mark applications, copyrights, know-how,
manufacturing processes, formulae, trade secrets, licenses and rights in any
thereof and any other intangible property and assets (herein called the
"Proprietary Rights") which are material to the business of the Company as now
conducted and as proposed to be conducted, in each case as described in the
Private Placement Memorandum. The description of the Proprietary Rights in the
Private Placement Memorandum is correct in all material respects and fairly and
correctly describes the Company's rights with respect thereto. The Company does
not have any knowledge of, and the Company has not given or received any notice
of, any pending conflicts with or infringement of the rights of others with
respect to any Proprietary Rights or with respect to any license of Proprietary
Rights which are material to the business of the Company. No action, suit,
arbitration, or legal, administrative or other proceeding, or investigation is
pending, or, to the best knowledge of the Company, threatened, which involves
any Proprietary Rights. The Company is not subject to any judgment, order,
writ, injunction or decree of any court or any Federal, state, local, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator, and has not entered
into or is not a party to any contract which restricts or impairs the use of any
such Proprietary Rights in a manner which would have a material adverse effect
on the use of any of the Proprietary Rights. Except as otherwise specifically
disclosed in the Private Placement Memorandum, to the best knowledge of the
Company, no Proprietary Rights used by the Company, and no services or products
sold by the Company, conflict with or infringe upon any proprietary rights of
any third party. The Company has not received written notice of any pending
conflict with or infringement upon such third-party proprietary rights. The
Company has not entered into any consent, indemnification, forbearance to sue or
settlement agreement with respect to Proprietary Rights other than in the
ordinary course of business. No claims have been asserted by any person with
respect to the validity of the Company's ownership or right to use the
Proprietary Rights and, to the best knowledge of the Company, there is no
reasonable basis for any such claim to be successful. The Proprietary Rights
which are material
<PAGE>
to the business of the Company are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or cancelled or is the
subject of cancellation or other adversarial proceedings, and all applications
therefor are pending and are in good standing. To the best of its knowledge, the
Company has complied, in all material respects, with its obligations relating to
the protection of the Proprietary Rights which are material to the business of
the Company used pursuant to licenses. To the best knowledge of the Company, no
person is infringing on or violating the Proprietary Rights which are material
to the business of the Company and owned or used by the Company.
4.13. Permits. The Company possesses and is operating in compliance
with all material licenses, certificates, consents, authorities, approvals and
permits (collectively, "Permits") from all state, Federal, foreign and other
regulatory agencies or bodies necessary to conduct the businesses now operated
by them, and the Company has not received any notice of proceedings relating to
the revocation or modification of any such permit or any circumstance which
would lead it to believe that such proceedings are reasonably likely which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company.
4.14. Due Execution, Delivery and Performance of the Agreements.
This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as rights to indemnity and
contribution hereunder may be limited by Federal or state securities laws or the
public policy underlying such laws. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein and
the fulfillment of the terms hereof have been duly authorized by all necessary
corporate action and will not conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, any
contract, indenture, mortgage, loan agreement, deed, trust, note, lease,
sublease, voting agreement, voting trust or other instrument or agreement to
which the Company is a party or by which it may be 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 charter or bylaws of the Company or any
applicable statute, law, rule, regulation, ordinance, decision, directive or
order.
4.15. Registration Rights. Except as described in the Private
Placement Memorandum, there are no persons with registration or other similar
<PAGE>
rights to have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the Securities Act.
4.16. Properties. The Company has good and marketable title to its
properties, free and clear of all material security interests, mortgages,
pledges, liens, charges, encumbrances and claims of record. The properties of
the Company are, in the aggregate, in good repair (reasonable wear and tear
excepted), and suitable for their respective uses. Any real properties 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 conduct of the business of the Company.
4.17. Accounting Systems. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets, (iii) access to assets is
permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
4.18. Compliance. The Company has conducted and is conducting its
business in compliance with all applicable Federal, state, local and foreign
statutes, laws, rules, regulations, ordinances, codes, decisions, decrees,
directives and orders, except where the failure to do so would not, singly or in
the aggregate, have a material adverse effect on the condition, financial or
otherwise, or on the earnings, business affairs or business prospects of the
Company.
4.19. Security Measures. The Company takes security measures
designed to enable the Company to assert trade secret protection in its non-
patented technology.
4.20. Contributions. To the best of the Company's knowledge, neither
the Company nor any employee or agent of the Company has made any payment of
funds of the Company or received or retained any funds in violation of any law,
rule or regulation.
4.21. Investment Company. The Company is not now, and after sale of
the Shares to be sold by it hereunder and application of the net proceeds from
such sale as described in the Private Placement Memorandum under the caption
"Use of Proceeds" will not be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
<PAGE>
4.22. Prior Offerings. All offers and sales of capital stock of the
Company prior to the date hereof were at all relevant times duly registered or
exempt from the registration requirements of the Securities Act and were duly
registered or subject to an available exemption from the registration
requirements of the applicable state securities or Blue Sky laws.
4.23. Taxes. The Company has filed all material tax returns required
to be filed, which returns are true and correct in all material respects, and
the Company is not in default in the payment of any taxes, including penalties
and interest, assessments, fees and other charges, shown thereon due or
otherwise assessed, other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without interest
which were payable pursuant to said returns or any assessments with respect
thereto.
4.24. Other Governmental Proceedings. Except as described in the
Private Placement Memorandum, there are no rulemaking or similar proceedings
before The United States Food and Drug Administration or comparable Federal,
state, local or foreign government bodies which involve or affect the Company,
which, if the subject of an action unfavorable to the Company, could involve a
prospective material adverse change in or effect on the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company.
4.25. ATL Ultrasound Agreements. The Company has not received any
communication (whether written or oral) relating to the termination or
threatened termination or modification or threatened modification of any
agreements entered into with ATL Ultrasound described in the Private Placement
Memorandum. Each such agreement is in effect substantially as described in the
Private Placement Memorandum.
4.26. Non-Competition Agreements. To the knowledge of the Company,
if any full-time employee identified in the Private Placement Memorandum has
entered into any non-competition, non-disclosure, confidentiality or other
similar agreement with any party other than the Company, such employee is
neither in violation thereof nor is expected to be in violation thereof as a
result of the business conducted or expected to be conducted by the Company as
described in the Private Placement Memorandum or such person's performance of
his obligations to the Company; and the Company has not received written notice
that any consultant or scientific advisor of the Company is in violation of any
non-competition, non-disclosure, confidentiality or similar agreement.
<PAGE>
4.27. Transfer Taxes. On the Closing Date, all stock transfer or
other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares to be sold to the Purchaser
hereunder will be, or will have been, fully paid or provided for by the Company
and all laws imposing such taxes will be or will have been fully complied with.
4.28. Insurance. The Company maintains insurance of the type and in
the amount that the Company reasonably believes is adequate for its business,
including, but not limited to, insurance covering all real and personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against by similarly situated
companies, all of which insurance is in full force and effect.
4.29. Additional Information. The Company represents and warrants
that the information contained in the following documents, which are included in
the Private Placement Memorandum or will be provided to Purchaser prior to the
Closing, is or will be true and correct in all material respects as of their
respective final dates:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, as amended;
(b) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1999;
(c) the Company's Proxy Statement for the 1999 Annual Meeting of
Shareholders;
(d) the Registration Statement;
(e) the Private Placement Memorandum, including all addenda and exhibits
thereto (other than the Appendices); and
(g) all other documents, if any, filed by the Company with the Securities
and Exchange Commission since June 30, 1999 pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
4.30. Private Placement Memorandum. The Private Placement
Memorandum, including, without limitation, any financial statements or schedules
included therein, and any supplements or amendments thereto, will not, at the
date of
<PAGE>
the Private Placement Memorandum, at the date of any such supplements or
amendments, or at the Closing Date, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading; provided, however, that
all Exhibits to the Private Placement Memorandum shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading as of the respective dates thereof.
4.31. Legal Opinions. Prior to the Closing, (a) Perkins Coie LLP,
counsel to the Company, will deliver its legal opinion to the Placement Agent
substantially in the form of Exhibit A hereto and (b) Townsend & Townsend,
patent counsel to the Company, will deliver its legal opinion to the Placement
Agent substantially in the form of Exhibit B hereto, in each case with such
changes therein as such counsel rendering the opinion and the Placement Agent
may agree upon.
4.32. Certificate. At the Closing, the Company will deliver to
Purchaser a certificate executed by the Chairman of the Board or President and
the chief financial or accounting officer of the Company, dated the Closing
Date, in form and substance reasonably satisfactory to the Purchasers, to the
effect that the representations and warranties of the Company set forth in this
Section 4 are true and correct in all material respects as of the date of this
Agreement and as of the Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions herein on its part to be performed
or satisfied on or prior to such Closing Date.
4.33. Year 2000 Compliance. The Company has reviewed its operations
to evaluate the extent to which the business or operations of the Company will
be affected by the Year 2000 Problem (as defined below). As a result of such
review, the Company has not noted any material Year 2000 Problems which would
prevent its products and systems from being capable of correctly interpreting
dates beyond the year 1999. Based on the Company's testing to date, the Company
has no reason to believe that Year 2000 Problems caused by its own products or
internal operations would have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company. The "Year 2000 Problem" as used herein means any significant
risk that computer hardware or software used in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data or in the operation of mechanical or electrical systems of
any kind will not, in the case of dates or time periods occurring after December
31, 1999, function at least as effectively as in the case of dates or time
periods occurring prior to January 1, 2000.
<PAGE>
SECTION 5. Representations, Warranties and Covenants of the
Purchaser. (a) The Purchaser represents and warrants to, and covenants with,
the Company that: (i) the Purchaser is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in shares representing an investment decision like that involved in
the purchase of the Shares, including investments in securities issued by the
Company, and has requested, received, reviewed and considered all information it
deems relevant in making an informed decision to purchase the Shares; (ii) the
Purchaser is acquiring the number of Shares set forth in Section 2 above in the
ordinary course of its business and for its own account for investment (as
defined for purposes of the Hart-Scott-Rodino Antitrust Improvement Act of 1976
and the regulations thereunder) only and with no present intention of
distributing any of such Shares or any arrangement or understanding with any
other persons regarding the distribution of such Shares within the meaning of
Section 2(11) of the Securities Act; (iii) the Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares except in compliance with the Securities Act and the Rules and
Regulations; (iv) the Purchaser has completed or caused to be completed the
Registration Statement Questionnaire and the Stock Certificate Questionnaire,
both attached hereto as Appendix I, for use in preparation of the Registration
Statement, and the answers thereto are true and correct as of the date hereof
and will be true and correct as of the effective date of the Registration
Statement; (v) the Purchaser has, in connection with its decision to purchase
the number of Shares set forth in Section 2 above, relied solely upon the
Private Placement Memorandum and the documents included therein and the
representations and warranties of the Company contained herein; and (vi) the
Purchaser is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act.
(b) The Purchaser hereby covenants with the Company not to make any
sale of the Shares without satisfying the prospectus delivery requirement under
the Securities Act, and the Purchaser acknowledges and agrees that such Shares
are not transferable on the books of the Company unless the certificate
submitted to the transfer agent evidencing the Shares is accompanied by a
separate officer's certificate: (i) in the form of Appendix II hereto, (ii)
executed by an officer of, or other authorized person designated by, the
Purchaser, and (iii) to the effect that (A) the Shares have been sold in
accordance with the Registration Statement, the Securities Act and the Rules and
Regulations and any applicable state securities or blue sky laws and (B) the
requirement of delivering a current prospectus has been satisfied. The
Purchaser acknowledges that there may occasionally be times when the Company
determines the use of the prospectus forming a part of the Registration
<PAGE>
Statement should be suspended until such time as an amendment or supplement to
the Registration Statement or the Prospectus has been filed by the Company and
any such amendment to the Registration Statement is declared effective by the
Commission, or until such time as the Company has filed an appropriate report
with the Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). The Purchaser hereby covenants that it will not sell any
Shares pursuant to said prospectus during the period commencing at the time at
which the Company gives the Purchaser written notice of the suspension of the
use of said prospectus and ending at the time the Company gives the Purchaser
written notice that the Purchaser may thereafter effect sales pursuant to said
prospectus. The Purchaser further covenants to notify the Company promptly of
the sale of all of its Shares.
(c) This Agreement has been duly executed and delivered by the
Purchaser and constitutes a valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as rights
to indemnity and contribution hereunder may be limited by Federal or state
securities laws or the public policy underlying such laws. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and the fulfillment of the terms hereof have
been duly authorized by all necessary corporate action and will not conflict
with or constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Purchaser pursuant to, any contract, indenture, mortgage, loan agreement, deed,
trust, note, lease, sublease, voting agreement, voting trust or other instrument
or agreement to which the Purchaser is a party or by which it or any of them may
be bound, or to which any of the property or assets of the Purchaser is subject,
nor will such action result in any violation of the provisions of the charter or
bylaws of the Purchaser or any applicable statute, law, rule, regulation,
ordinance, decision, directive or order.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Purchaser herein and in the certificates for the Shares
delivered pursuant hereto shall survive the execution of this Agreement, the
delivery to the Purchaser of the Shares being purchased and the payment
therefor.
<PAGE>
SECTION 7. Registration of the Shares; Compliance with the Securities
Act.
7.1. Registration Procedures and Expenses. The Company shall:
(a) as soon as practicable, prepare and file with the Commission the
Registration Statement on Form S-3 relating to the sale of the Shares
by the Purchaser from time to time through the automated quotation
system of the Nasdaq National Market or the facilities of any national
securities exchange on which the Company's Common Stock is then traded
or in privately-negotiated transactions;
(b) use its reasonable efforts subject to receipt of necessary information
from the Purchasers, to cause the Commission to notify the Company of
the Commission's willingness to declare the Registration Statement
effective within 75 days after the Registration Statement is filed by
the Company;
(c) prepare and file with the Commission such amendments and supplements
to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Registration Statement
effective until the earlier of (i) twenty-four months after the
effective date of the Registration Statement, (ii) the date on which
the Shares may be resold by the Purchasers without registration or
without regard to any volume limitations by reason of Rule 144 under
the Securities Act or any other rule of similar effect or (iii) all of
the Shares have been sold pursuant to the Registration Statement or
Rule 144 under the Securities Act or any other rule of similar effect;
(d) furnish to the Purchaser with respect to the Shares registered under
the Registration Statement (and to each underwriter, if any, of such
Shares) such reasonable number of copies of prospectuses in order to
facilitate the public sale or other disposition of all or any of the
Shares by the Purchaser; provided, however, that the obligation of the
Company to deliver copies of prospectuses to the Purchaser shall be
subject to the receipt by the Company of reasonable assurances from
the Purchaser that the Purchaser will comply with the applicable
provisions of the Securities Act and of such other
<PAGE>
securities or blue sky laws as may be applicable in connection with
any use of such prospectuses;
(e) during the period when such prospectuses are required to be delivered
under the Securities Act or the Exchange Act, will file all documents
required to be filed with the Commission pursuant to Section 13, 14 or
15 of the Exchange Act within the time periods required by the
Exchange Act and the rules and regulations promulgated thereunder;
(f) file documents required of the Company for normal blue sky clearance
in states specified in writing by the Purchaser; provided, however,
that the Company shall not be required to qualify to do business or
consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented; and
(g) bear all expenses in connection with the procedures in paragraphs (a)
through (e) of this Section 7.1 and the registration of the Shares
pursuant to the Registration Statement, other than fees and expenses,
if any, of counsel or other advisers to the Purchaser or the Other
Purchasers or underwriting discounts, brokerage fees and commissions
incurred by the Purchaser or the Other Purchasers, if any.
7.2. Transfer of Shares After Registration. The Purchaser agrees
that it will not effect any disposition of the Shares or its right to purchase
the Shares that would constitute a sale within the meaning of the Securities
Act, except as contemplated in the Registration Statement referred to in Section
7.1, and that it will promptly notify the Company of any changes in the
information set forth in the Registration Statement regarding the Purchaser or
its Plan of Distribution.
7.3. Indemnification. For the purpose of this Section 7.3:
(i) the term "Purchaser/Affiliate" shall include the Purchaser and any
affiliate of such Purchaser; and
(ii) the term "Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 7.1.
<PAGE>
(a) The Company agrees to indemnify and hold harmless each of the
Purchasers and each person, if any, who controls any Purchaser within the
meaning of the Securities Act, against any losses, claims, damages, liabilities
or expenses, joint or several, to which such Purchasers or such controlling
person may become subject, under the Securities Act, the Exchange Act, or any
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, including the prospectus, financial statements and schedules, and all
other documents filed as a part thereof, as amended at the time of effectiveness
of the Registration Statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A,
or pursuant to Rule 434, of the Rules and Regulations, or the prospectus, in the
form first filed with the Commission pursuant to Rule 424(b) of the Regulations,
or filed as part of the Registration Statement at the time of effectiveness if
no Rule 424(b) filing is required (the "Prospectus"), or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them, in light of the
circumstances under which they were made, not misleading, or arise out of or are
based in whole or in part on any inaccuracy in the representations and
warranties of the Company contained in this Agreement, or any failure of the
Company to perform its obligations hereunder or under law, and will reimburse
each Purchaser and each such controlling person for any legal and other expenses
as such expenses are reasonably incurred by such Purchaser or such controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability or expense arises out of or is based
upon (i) an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company: by or on behalf of the Purchaser expressly for use
therein, or (ii) the failure of such Purchaser to comply with the covenants and
agreements contained in Sections 5(b) or 7.2 hereof respecting sale of the
Shares, or (iii) the inaccuracy of any representations made by such Purchaser
herein or (iv) any statement or omission in any Prospectus that is corrected in
any subsequent Prospectus that was delivered to the Purchaser prior to the
pertinent sale or sales by the Purchaser.
<PAGE>
(b) Each Purchaser will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act, against any losses, claims, damages, liabilities or
expenses to which the Company, each of its directors, each of its officers who
signed the Registration Statement or controlling person may become subject,
under the Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon (i) any failure to comply with the covenants and agreements
contained in Sections 5(b) or 7.2 hereof respecting the sale of the Shares or
(ii) the inaccuracy of any representation made by such Purchaser herein or (iii)
any untrue or alleged untrue statement of any material fact contained in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Purchaser expressly
for use therein, and will reimburse the Company, each of its directors, each of
its officers who signed the Registration Statement or controlling person for any
legal and other expense reasonably incurred by the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action.
(c) Promptly after receipt by an indemnified party under this Section
7.3 of notice of the threat or commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party under this Section 7.3 promptly notify the indemnifying party in writing
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party for
contribution or otherwise than under the indemnity agreement contained in this
Section 7.3 or to the extent it is not prejudiced as a result of such failure.
In case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying party,
the indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory
<PAGE>
to such indemnified party; provided, however, if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be a conflict
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 7.3 for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed such counsel in connection with the assumption of legal defenses in
accordance with the proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel, approved by such indemnifying party in the case
of paragraph (a), representing all of the indemnified parties who are parties to
such action) or (ii) the indemnified party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of action, in each
of which cases the reasonable fees and expenses of counsel shall be at the
expense of the indemnifying party.
(d) If the indemnification provided for in this Section 7.3 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(a), (b) or (c) of this Section 7.3 in respect to any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any losses, claims, damages, liabilities or expenses referred to
herein (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Purchaser from the placement of Common Stock or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but the relative fault of the
Company and the Purchaser in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The respective relative benefits
received by the Company on the one hand and each Purchaser on the other shall be
deemed to be in the same proportion as the amount paid by such Purchaser to the
<PAGE>
Company pursuant to this Agreement for the Shares purchased by such Purchaser
that were sold pursuant to the Registration Statement bears to the difference
(the "Difference") between the amount such Purchaser paid for the Shares that
were sold pursuant to the Registration Statement and the amount received by such
Purchaser from such sale. The relative fault of such Selling Shareholders and
each Purchaser shall be determined by reference to, among other things, whether
the untrue or alleged statement of a material fact or the omission or alleged
omission to state a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Company or
by such Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in paragraph (c) of this Section 7.3, any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. The provisions set forth
in paragraph (c) of this Section 7.3 with respect to the notice of the threat or
commencement of any threat or action shall apply if a claim for contribution is
to be made under this paragraph (d); provided, however, that no additional
notice shall be required with respect to any threat or action for which notice
has been given under paragraph (c) for purposes of indemnification. The Company
and each Purchaser agree that it would not be just and equitable if contribution
pursuant to this Section 7.3 were determined solely by pro rata allocation (even
if the Purchaser 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 in this paragraph. Notwithstanding the provisions of this Section
7.3, no Purchaser shall be required to contribute any amount in excess of the
amount by which the Difference exceeds the amount of any damages that such
Purchaser 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
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Purchasers' obligations to
contribute pursuant to this Section 7.3 are several and not joint.
7.4. Termination of Conditions and Obligations. The restrictions
imposed by Section 5 or this Section 7 upon the transferability of the Shares
shall cease and terminate as to any particular number of the Shares upon the
passage of twenty-four months from the effective date of the Registration
Statement covering such Shares or at such time as an opinion of counsel
satisfactory in form and substance to the Company shall have been rendered to
the effect that such conditions are not necessary in order to comply with the
Securities Act.
<PAGE>
7.5. Information Available. So long as the Registration Statement is
effective covering the resale of Shares owned by the Purchaser, the Company will
furnish to the Purchaser:
(a) as soon as practicable after available (but in the case of the
Company's Annual Report to Shareholders, within 120 days after the end
of each fiscal year of the Company), one copy of (i) its Annual Report
to Shareholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting
principles by a national firm of certified public accountants), (ii)
if not included in substance in the Annual Report to Shareholders, its
Annual Report on Form 10-K, (iii) if not included in substance in its
Quarterly Reports to Shareholders, its quarterly reports on Form 10-Q,
and (iv) a full copy of the particular Registration Statement covering
the Shares (the foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of the Purchaser, a reasonable number of
copies of the prospectuses to supply to any other party requiring such
prospectuses;
and the Company, upon the reasonable request of the Purchaser, will meet with
the Purchaser or a representative thereof at the Company's headquarters to
discuss information relevant for disclosure in the Registration Statement
covering the Shares subject to appropriate confidentiality limitations.
SECTION 8. Broker's Fee. The Purchaser acknowledges that the Company
intends to pay to the Placement Agent a fee in respect of the sale of the Shares
to the Purchaser. Each of the parties hereto hereby represents that, on the
basis of any actions and agreements by it, there are no other brokers or finders
entitled to compensation in connection with the sale of the Shares to the
Purchaser.
SECTION 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, confirmed facsimile or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as addressed as follows:
<PAGE>
(a) if to the Company, to:
SonoSite, Inc.
19807 North Creek Parkway, Suite 200
Bothell, WA 98011-8214
Attn: Kevin M. Goodwin
with a copy to:
Perkins Coie LLP
1201 Third Avenue, 48th Floor
Seattle, Washington 98101
Attention: Stephen Graham, Esq.
or to such other person at such other place as the Company shall
designate to the Purchaser in writing; and
(b) if to the Purchaser, at its address as set forth at the end of this
Agreement, or at such other address or addresses as may have been
furnished to the Company in writing.
SECTION 10. Changes. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Purchaser.
SECTION 11. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 12. Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
<PAGE>
SECTION 13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York and the federal
law of the United States of America.
SECTION 14. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
SONOSITE, INC.
By_____________________________
Print or Type:
Name of Purchaser
(Individual or Institution):
_______________________________
Name of Individual representing
Purchaser (if an Institution):
_______________________________
Title of Individual representing
Purchaser (if an Institution):
_______________________________
Signature by:
Individual Purchaser or Individual
representing Purchaser:
_______________________________
Address: _____________________
Telephone: ____________________
Telecopier: __________________
<PAGE>
Exhibit 5.1
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November 16, 1999
SonoSite, Inc.
P.O. Box 3020
North Creek Parkway
Bothell, Washington 98041-3020
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to you in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), which you are filing with the
Securities and Exchange Commission for the resale of up to 1,250,000 shares of
common stock of SonoSite, Inc. (the "Company"),$.01 par value per share (the
"Shares"). We have examined the Registration Statement and such documents and
records of the Company as we have deemed necessary for the purpose of this
opinion.
Based upon the foregoing, we are of the opinion that upon the happening of
the following events:
(a) the filing and effectiveness of the Registration Statement and any
amendments thereto,
(b) due execution by the Company and registration by its registrar of the
Shares, and
(c) receipt by the Company of the consideration required for the Shares
the Shares will be duly authorized, validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and any amendment thereto, including any and all post-
effective amendments, and to the reference to our firm in the Prospectus of the
Registration Statement under the heading "Validity of Common Stock." In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Perkins Coie LLP
Perkins Coie LLP
<PAGE>
Exhibit 23.1
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CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
SonoSite, Inc.:
We consent to the use of our reports incorporated herein by reference and
to the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
----------------------------
KPMG LLP
Seattle, Washington
November 16, 1999
