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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 20, 1998
VISION-SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-20970 13-3430173
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
9 Strathmore Road, Natick, Massachusetts 01760
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 650-9971
Not Applicable
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
On August 20, 1998, pursuant to an Investment Agreement, dated August
6, 1998 between Vision-Sciences, Inc., (the "Company") and 3DV Systems, Ltd., a
privately-held Israeli company ("3DV"), (the "Agreement") the Company purchased
338,099 shares of common stock of 3DV (the "Shares"), for a purchase price of $3
million in cash, $500,000 of which the Company had previously advanced to 3DV in
May 1998. The Company funded the purchase price from proceeds received from
Asahi Optical Co., Ltd., (Asahi Kogaku Kogyo Kabushiki Kaisha), a Japanese
corporation ("Asahi"), in exchange for 2,000,000 shares of the Company's common
stock, $.01 par value per share (the "Common Stock"), and certain rights
pursuant to the License Agreement between the Company and Asahi described below.
The Shares were previously unissued shares of common stock of 3DV and, after the
closing of the transaction, represent 25% of the fully diluted share capital of
3DV. Prior to the investment by the Company, 3DV was a subsidiary of RDC
Rafael Development Corporation Ltd. ("RDC"), an Israeli company.
Pursuant to the Agreement, the Company also issued 500,000 shares of
its Common Stock to RDC in exchange for certain rights. These rights include an
option to purchase all of the remaining shares of capital stock of 3DV owned by
RDC, which represent 62.85% of the fully-diluted share capital of 3DV, at the
then fair market value of such shares.
In addition, RDC has the right to require the Company to purchase up to
the remaining 75% of the fully-diluted share capital of 3DV, including 12.15%
that would be owned by employees of 3DV, at the then fair market value of such
shares. Two of the Company's directors, Mr. Katsumi Oneda and Mr. Lewis C. Pell,
have been appointed to the Board of Directors of 3DV.
The terms of the Agreement were determined on the basis of arms'-length
negotiations. Prior to the execution of the Agreement, neither the Company nor
any of its affiliates had any material relationship with either 3DV or RDC.
In connection with these transactions with 3DV and RDC, the Company
also entered into a License and Manufacturing Agreement (the "L&M Agreement")
with 3DV, dated August 6, 1998, pursuant to which the Company obtained
exclusive, worldwide, perpetual and royalty-free rights to commercially exploit
products in certain fields of use that incorporate, or use, component parts
embodying technology developed by 3DV. The L&M Agreement allows the Company to
sublicense certain of these rights to approved assigns. Asahi, which
manufactures and markets a wide variety of cameras, medical endoscopes and
industrial imaging systems worldwide under the brand name Pentax, is the sole
approved assign under the L&M Agreement, and the Company has sublicensed certain
of its rights under the L&M Agreement to Asahi pursuant to the License Agreement
described below.
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On August 6, 1998, the Company executed a Memorandum of
Understanding (the "MOU") with Imagineering, Ltd., pursuant to which the
Company will acquire exclusive rights to research to be performed in
association with certain innovations as described in the MOU (the
"Innovations") that are designed to improve the performance of CMOS-based
Image Sensors. The MOU grants the Company exclusive rights to any resulting
patent applications and patent rights that result from such research. A
consultant to Imagineering, Ltd. will perform the research, and the Company
plans to grant the consultant a nonstatutory stock option for 1,000,000
shares of the Company's Common Stock, which will vest 100% upon the delivery
of the Innovations. In addition, the Company will fund the cost of the
research by Imagineering, Ltd., initially for a period of one year. The terms
of the MOU were determined on the basis of arms'-length negotiations. Prior
to the execution of the MOU, neither the Company nor any of its affiliates
had any material relationship with Imagineering, Ltd. or the consultant.
The Company also executed a License Agreement (the "License") with
Asahi, dated August 6, 1998, pursuant to which the Company granted Asahi
exclusive rights, as an approved assign under the L&M Agreement, to certain
technology in certain fields and to acquire from the Company and 3DV certain
products having application in those fields. Notwithstanding the License, the
Company has reserved the right to use the technology licensed to Asahi in
products bearing the Company's own trademarks within certain fields of use. In
addition, the License grants Asahi a worldwide, perpetual, royalty-free license
to patentable and non-patentable technology relating to the utilization or
application of CMOS-based Image Sensors, as researched or developed by the
Company, pursuant to the MOU with Imagineering, Ltd. On August 17, 1998, Asahi
paid the Company $5 million in cash in exchange for the rights described above
in the License Agreement and the issuance by the Company to Asahi of 2,000,000
shares of Common Stock. The terms of the License Agreement were determined on
the basis of arms'-length negotiations. Prior to the execution of the License
Agreement, neither the Company nor any of its affiliates had any material
relationship with Asahi.
3DV Systems Ltd. was established in 1996, and has developed a new
concept of a three-dimensional (3D) video camera, based on unique technology.
The acquisition and manipulation of three-dimensional images provides solutions
for needs that include: medical imaging applications; concept and feasibility
studies; broadcast studio applications; architectural applications; courtroom
visualization; animation and virtual reality; and a wide range of CAD and CAE
services. The 3DV video camera captures a frame or movie in three-dimensional
mode, with each pixel having the Z (depth or distance from the viewer)
dimension. The camera allows the building of a 3D image and its manipulation at
a high frame rate. It is an all-in-one unit (video = color + depth), requiring
significantly less CPU power than other 3D systems, and its design makes it
simple to carry and operate.
Rafael Development Corporation (RDC) is a business development company
owned by Rafael, a division of the Israeli Ministry of Defense, and an
investment company controlled by Discount Investment Corporation, PEC Israel
Economic Corporation and Elron Electronic Industries (Nasdaq: ELRNF). RDC's
mission is to apply Rafael's proven technologies,
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extensive industrial infrastructure and highly experienced team of scientists,
engineers and technicians to commercial applications.
This report may contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which reflect the Company's current
judgment on certain issues. Because such statements apply to future events, they
are subject to risks and uncertainties that could cause the actual results to
differ materially. Important factors which could cause actual results to differ
materially are described in the Company's reports on Form 10-K and 10-Q on file
with the Securities and Exchange Commission.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired: Not filed herewith;
to be filed by amendment. Pursuant to Item 7(a)(4) of Form 8-K, the Company
hereby indicates that the filing of such financial information is impractical
and undertakes to file such information as soon as it is available on a Form
8-K/A Amendment to this report and in any event by November 3, 1998.
(b) Pro forma financial information: Not filed herewith; to be filed
by amendment. Pursuant to Item 7(a)(4) of Form 8-K, the Company hereby
indicates that the filing of such financial information is impractical and
undertakes to file such information as soon as it is available on a Form
8-K/A Amendment to this report and in any event by November 3, 1998.
(c) Exhibits:
10.1 - Investment Agreement dated as of August 6, 1998 by and
among the Company, 3DV Systems Ltd. and RDC Rafael
Development Corporation Ltd.
10.2 - License and Manufacturing Agreement dated
as of August 6, 1998 between the Company and
3DV Systems Ltd.
10.3 - Memorandum of Understanding dated August 6, 1998
between the Company and Imagineering, Ltd.
10.4 - License Agreement dated as of August 6, 1998 between
the Company and Asahi Optical Co., Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 4, 1998 VISION-SCIENCES, INC.
By: /s/ James A. Tracy
------------------------------
James A. Tracy
Vice President, Finance
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EXHIBIT INDEX
Exhibit No.
10.1* - Investment Agreement dated as of August 6, 1998 by and among
the Company, 3DV Systems Ltd. and RDC Rafael Development
Corporation Ltd.
10.2* - License and Manufacturing Agreement dated as of August 6,
1998 between the Company and 3DV Systems Ltd.
10.3* - Memorandum of Understanding dated August 6, 1998 between
the Company and Imagineering, Ltd.
10.4* - License Agreement dated as of August 6, 1998 between the
Company and Asahi Optical Co., Ltd.
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* Confidential treatment requested as to certain portions, which portions
have been deleted and filed separately with the Securities and Exchange
Commission.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT is made as of August 6, 1998 (this
"Agreement"), by and among (i) VISION SCIENCES, INC., a Delaware Corporation
("VSI"), (ii) 3DV SYSTEMS LTD., a company organized under the laws of the State
of Israel ("3DV"), and (iii) RDC RAFAEL DEVELOPMENT CORPORATION LTD., a company
organized under the laws of the State of Israel ("RDC"). 3DV, VSI and RDC are
each referred to in this Agreement as a "Party" and collectively as the
"Parties."
Recitals:
A. The Parties desire to enter into a joint venture
relationship, on the terms and conditions described herein, to allow each party
to participate in the other party's growth and to engage in activities for the
mutual benefit and reward of each party;
B. 3DV wishes to sell and VSI wishes to purchase an interest
in 3DV's business, through the acquisition of certain shares of 3DV, together
with the right to purchase additional shares of 3DV, on the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, the Parties agree as follows.
1. Definitions.
"3DV" has the meaning set forth in the preamble above.
"Affiliate" means with respect to a Person, any other Person
controlling, controlled by, or under common control with such Person, and
"control" shall mean the ownership of a majority of the equity of such Person or
the ability to appoint or elect a majority of the governing board or to appoint
the management of such Person.
"Approved Assigns" has the meaning set forth in the License and
Manufacturing Agreement.
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"Acquired Shares" means 354.167 duly authorized, issued and outstanding
new ordinary shares, par value NIS 0.01 per share, of the share capital of 3DV,
entitled to such rights, terms and privileges as set forth in the Memorandum and
Articles of Association of 3DV, and represent twenty-five percent (25%) of all
the issued and outstanding shares of the fully diluted share capital of 3DV.
"Closing" has the meaning set forth in Section 2.4 below.
"Closing Date" has the meaning set forth in Section 2.4 below.
"Copyrights" has the meaning set forth in the definition of
Intellectual Property below.
"Disclosure Schedule" means the disclosure schedule accompanying this
Agreement and initialed by the Parties, which shall be arranged in schedules
corresponding to the numbered section and paragraph references contained in this
Agreement.
"Employee" means a person employed by 3DV.
"Employee Pension Benefit Plan" means and includes where applicable any
plan or arrangement, including any agreement, whether arising by statute or
otherwise under or pursuant to which 3DV has or could have any liability,
payment or obligation to any employee or consultant of 3DV or to any person or
group of persons performing services to 3DV or on its behalf.
"Environmental Requirements" shall mean all Israeli statutes,
regulations and ordinances concerning pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous materials, substances or wastes, as
such requirements are enacted on or prior to and in effect on the Closing Date.
"Exercise Notice" has the meaning set forth in Section 3.1(b) below.
"Financial Statements" has the meaning set forth in Section 4.5 below.
"GAAP" means Israeli generally accepted accounting principles as in
effect from time to time, consistently applied.
"Indemnitee" has the meaning set forth in Section 8.3 below.
"Indemnitor" has the meaning set forth in Section 8.3 below.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
"Intellectual Property" means any and all rights of 3DV or its
Affiliates, anywhere in the world, with respect to patents, trade secrets,
copyrights, mask work rights and other proprietary rights, regardless whether
such rights exist as of the Closing Date or the Second Closing Date, including,
without limitation (i) any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications, owned by or licensed to 3DV or in which 3DV has any right, title
or interest (the foregoing in this clause (i) hereinafter referred to as
"Patents"), (ii) any foreign or United States trademarks, service marks, trade
dress, trade names, brand names, corporate names, logos, service marks, and all
registrations and applications for registration thereof of 3DV (the foregoing in
this clause (ii) hereinafter referred to as "Trademarks"), and (iii) any foreign
or United States copyright registrations and applications for registration
thereof of 3DV (the foregoing in this clause (iii) hereinafter referred to as
"Copyrights"), and (iv) any source code, object code, documentation,
modifications, upgrades, enhancements, and interfaces owned by 3DV or that 3DV
has the right to use, sell or distribute subject to the terms of such rights.
"Knowledge" of any Person means, the actual knowledge of any of the
executive officers of such Person.
"License and Manufacturing Agreement" means that certain License and
Manufacturing Agreement, dated as of the date hereof, between VSI and 3DV.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or other
security interest.
"Loss" means any and all loss, cost, damage, judgment, claim,
liability, and expense (including reasonable attorneys' fees and disbursements),
but specifically excluding indirect, consequential or other special damages,
except that, in the case of an VSI Indemnifiable Claim, "Loss" shall include any
provable diminution in the value of the Acquired Shares, the value of,
represented by the purchase price for, such Acquired Shares as a result of a
breach of any of the representations and warranties made by 3DV in Section 5 of
this Agreement.
"Material Adverse Effect" means a material adverse effect on the
assets, financial condition or results of operations of 3DV.
"Notice of Claim" has the meaning set forth in Section 8.3 below.
"Option Period" means the period [**].
"Party" and "Parties" have the meanings set forth in the preface above.
"Patents" has the meaning set forth in the definition of Intellectual
Property above.
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"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization or a government entity (or any
department, agency or political subdivision thereof).
"Put/Call Right" has the meaning set forth in Section 3.1, below.
"RDC Shares" means shares of the capital stock of 3DV other than the
Acquired Shares, representing 850,000 duly authorized, issued and outstanding
ordinary shares, par value NIS 0.01 per share, of the share capital of 3DV,
entitled to such rights, terms and privileges as set forth in the Memorandum and
Articles of Association of 3DV, and represent ing, after giving effect to the
issuance of the Acquired Shares as contemplated hereunder, sixty-percent (60%)
of all the issued and outstanding shares of the fully diluted share capital of
3DV. After the Closing, the Acquired Shares and the RDC Shares shall represent
all of the issued and outstanding voting shares of 3DV.
"Right of First Refusal" has the meaning set forth in Section 3.3,
below.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Tax" means any foreign, federal, state, or local income, sales, use,
transfer, excise, value added, registration, severance, stamp, occupation,
customs, duties, real property, personal property, capital stock, social
security, unemployment, disability, payroll or employee withholding, including
any interest, penalty, or addition thereto, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.3 below.
"Trademarks" has the meaning set forth in the definition of
Intellectual Property above.
"VSI" has the meaning set forth in the preface above.
"VSI Shares" means 500,000 duly issued, fully paid and non-assessable
shares of the common stock of VSI, par value $0.01 per share.
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2. Purchase and Sale of 3DV Shares.
2.1 Purchase and Sale of 3DV Shares. On the terms and subject to the
conditions set forth in this Agreement, VSI subscribes for and agrees to
purchase and accept from 3DV, and 3DV agrees to issue, sell and deliver the
Acquired Shares to VSI, free and clear of all liens, claims and encumbrances and
other rights of third parties whatsoever.
2.2 Purchase Price for Acquired Shares. The purchase price payable by
VSI to 3DV for the Acquired Shares acquired hereunder shall be US$3,000,000 (the
"Purchase Price"), payable in lawful currency of the United States on the
Closing Date by VSI in the manner provided in Section 2.5 below.
2.3 Issuance of VSI Shares. In consideration of the other rights and
benefits granted under Section 3. VSI shall issue and deliver the VSI Shares to
RDC, free and clear of all liens, claims and encumbrances and other rights of
third parties whatsoever. The certificates issued to RDC shall bear the legend
described in Section 5.21 below. RDC agrees that it shall not sell, assign,
transfer or otherwise dispose of the VSI Shares until the first anniversary of
the Closing Date, except with the prior written consent of VSI, which shall not
be unreasonably withheld, and except that RDC shall be entitled to assign its
rights in and to VSI Shares to employees of 3DV who agree to hold any VSI Shares
according to such restriction.
2.4 The Closing. The closing of the transactions contemplated by this
Article 2 (the "Closing") shall take place at the offices of Arnold & Porter,
399 Park Avenue, New York, NY 10022, commencing at 10:00 a.m. New York City time
on the later of August 17, 1998 or the date that the conditions to closing
described in Section 2.5 have been satisfied, or alternatively at such other
time and place as the parties may mutually agree. Either party may terminate
this Agreement if the Closing shall not have occurred on or before September 10,
1998 other than as a result of such party's breach of this Agreement.
2.5 Conditions to Closing. The obligation of VSI to consummate the
transactions contemplated by this Agreement are subject to the delivery to and
acceptance by VSI of the disclosure schedules (the "Disclosure Schedules") to
this Agreement, including without limitation the Disclosure Schedules referred
to in Section 5 of this Agreement, which 3DV shall deliver to VSI on or before
August 13, 1998 or as soon as practicable thereafter. VSI shall have five (5)
days following receipt to accept or reject such Disclosure Schedules based on
the matters disclosed thereon. The respective obligations of each of the parties
to consummate the transactions contemplated by this Agreement shall be subject
to the following additional conditions: (a) the representations and warranties
of the other party set forth in Section 5 or 6 shall be true and correct in all
material respects on and as of the closing date as though made on the closing
date, (b) each of the other parties shall have complied with the obligations of
such other party under this Agreement, (c) the receipt by such party of all
deliveries to be made to such party pursuant to Section 2.6, and (d) all
governmental consents
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and approvals necessary to consummate the transactions contemplated hereby shall
have been obtained and be in full force and effect.
2.6 Deliveries at the Closing.
At the Closing
(a) 3DV shall deliver or cause to be delivered to VSI, a duly
issued and executed stock certificate, representing the Acquired Shares being
acquired by VSI hereunder;
(b) VSI shall deliver or cause to be delivered to 3DV the
Purchase Price by payment of an amount equal to the Purchase Price (less
$500,000 previously received by 3DV as an advance and which will be credited to
the payment of the Purchase Price hereunder), in cash and in lawful currency of
the United States by a wire transfer of immediately available funds to an
account designated by 3DV on Exhibit hereto;
(c) VSI shall deliver to RDC a duly issued and executed stock
certificate, representing the VSI Shares granted to RDC, as set forth below;
(d) VSI and 3DV shall execute and deliver the License and
Manufacturing Agreement;
(e) 3DV and RDC shall deliver to VSI an opinion of legal
counsel for 3DV and RDC, which is reasonably customary for transactions of the
type contemplated by this Agreement; and
(f) VSI shall deliver to 3DV an opinion of legal counsel for
VSI, which is reasonably customary for transactions of the type contemplated by
this Agreement.
3. Purchase and Sale of RDC Shares.
3.1 Put/Call Right. (a) At any time during the Option Period, VSI shall
have the right to acquire from RDC, and RDC shall have the right to sell to VSI,
the RDC Shares on the terms and conditions described herein. The purchase price
for the RDC Shares shall be equal to 60% of the fair market value of the
business of 3DV (determined on a going concern basis, but the License and
Manufacturing Agreement and the Agreement between AOC and 3DV shall be valued
fairly to 3DV for this purpose) and determined by consent between the Boards of
Directors of VSI, on the one hand, and RDC, on the other hand, to be fair from a
financial point of view to their respective companies; provided that in no event
shall RDC be
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
required to sell the RDC Shares based on a valuation of 3DV less than (US) [**].
In the event that the parties shall be unable to reach a consensus on the
valuation of 3DV, the matter shall be submitted to an internationally recognized
investment bank operating in Israel for determination of the fair market value
of the business of 3DV by such investment bank. The purchase price payable for
the purchase and sale of the shares shall be paid in cash, or, in the event that
the average daily closing price of the common stock of VSI on NASDAQ over the 20
trading day period preceding the closing date shall be at least [**] per share,
and, at the election of VSI, a portion of the purchase price (as shall be agreed
between VSI and the Shareholders) shall be paid in common stock of VSI with a
value (based on the average 45 day prior trading value of such common stock)
equal to such portion of the purchase price.
If RDC requests, VSI will acquire shares of capital stock of 3DV held by
employees of 3DV on the same terms and conditions that VSI shall acquire the RDC
Shares. VSI's right to require RDC to sell the RDC Shares and RDC's right to
require VSI to purchase the RDC Shares is referred to herein as the "Put/Call
Right."
(b) The Put/Call Right may be exercised by either VSI or RDC
at any time during the Option Period , by delivering a written notice (an
"Exercise Notice") of such Party's desire to exercise the Put/Call Right and
initiate the procedures described on Schedule 3.1.
3.2 Purchase Price for RDC Shares. The purchase price for the RDC
Shares (the "Put/Call Price") determined pursuant to Section 3.1 shall be
payable by VSI to RDC (or its assigns) in lawful currency of the United States
on the Second Closing Date in the manner provided in Section 3.4 below.
3.3 The Second Closing. The closing of the transactions contemplated by
this Article 3 (the "Second Closing") shall take place subject to the
satisfaction of the conditions to closing set forth in Section 3.5 below and the
compliance with the other terms of this Agreement, at the offices of Arnold &
Porter, 399 Park Avenue, New York, NY 10022, commencing at 10:00 a.m. New York
City time on the next business day following the later of thirty days after (1)
the delivery by either party of the Exercise Notice, or (2) three (3) business
days following the satisfaction of the conditions to the obligations of RDC or
VSI; provided that either Party shall have the right to terminate this Agreement
if the conditions to such Party's obligations set forth in Section 3.5 below
have not been satisfied on or before 120 days following the delivery of the
Exercise Notice.
3.4 Deliveries at the Second Closing.
At the Second Closing
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(a) RDC shall deliver or cause to be delivered to VSI, a duly
issued and executed stock certificate, representing and evidencing the RDC
Shares being acquired by VSI hereunder, together with a stock power duly
executed in blank and otherwise in a form required and sufficient to convey good
record and beneficial title to the RDC Shares to VSI (or its assigns), free and
clear of any liens, claims, encumbrances or rights of third parties of any
description whatsoever; and
(b) VSI shall deliver or cause to be delivered to RDC (for the
benefit of the Shareholders) the Put/Call Price by payment of an amount equal to
the Put/Call Price in cash and in lawful currency of the United States by a wire
transfer of immediately available funds to an account designated by RDC(for the
benefit of the Shareholders) at a bank located in Israel or the United States
and, if applicable in the form of VSI shares as provided in Section 3.1.
3.5 Conditions to Second Closing. (a) Conditions to VSI's Obligations.
The obligation of VSI to purchase the RDC shares following the exercise of the
Put/Call Right shall be subject to the satisfaction on or before the Second
Closing Date of the following conditions (each of which may be waived by VSI in
its sole discretion):
(i) the representations and warranties of RDC and 3DV set
forth in Section 5 below, as supplemented by written Disclosure Schedules
delivered to VSI at least ten (10) days prior to the Second Closing Date, shall
be true and correct in all respects, on and as of the Second Closing Date, as
though made on and as of the Second Closing Date;
(ii) each of RDC and 3DV shall have performed in all material
respects the covenants and agreements required to be performed by RDC or 3DV, as
the case may be (provided that VSI shall have promptly notified 3DV of any
breach or alleged breach of this Agreement by 3DV of which VSI becomes aware);
(iii) any consent, approval, license or other authorization
from any governmen tal or administrative authority under any applicable law
shall have been obtained and be in full force and effect on and as of the Second
Closing Date;
(iv) except for any of the foregoing events or conditions
which were known to 3DV and disclosed prior to and taken into account in the
determination of the Put/Call Price, there shall not have occurred or be
pending or threatened any material adverse event or condition which has had or
could reasonably be expected to have a material adverse effect on the business,
assets, financial condition, prospects or results of operations of 3DV since the
date of this Agreement, and no claim, legal proceeding, action or investigation
shall be pending or threatened which challenges the validity of, or would
interfere with, any of the transactions contemplated hereby or under the License
and Manufacturing Agreement;
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(v) the License and Manufacturing Agreement shall be in full
force and effect and 3DV shall not have defaulted in any material respect in the
performance of any of its obligations to VSI thereunder (provided that VSI shall
have promptly notified 3DV of any breach or alleged breach of this Agreement by
3DV of which VSI becomes aware); and
(vi) VSI shall have received an opinion of legal counsel to
3DV and RDC, which is reasonably customary in transactions of this type, to the
effect that the RDC Shares are duly authorized, issued and outstanding ordinary
shares of 3DV, representing 75% of the issued and outstanding share capital of
3DV, and that the transaction undertaken at the Second Closing shall be
sufficient to convey good record and beneficial title to the RDC Shares to VSI,
free and clear of any liens, claims, encumbrances or rights of third parties of
any description whatsoever.
(b) Conditions to RDC's Obligations. The obligation of RDC to
sell the RDC shares following the exercise of the Put/Call Right shall be
subject to the satisfaction on or before the Second Closing Date of the
following conditions (each of which may be waived by RDC in its sole
discretion):
(i) if and to the extent that the Put/Call Price is to be paid
by VSI in part in the form of VSI shares of common stock, then the
representations and warranties of VSI set forth in Section 6 below shall be true
and correct in all respects, on and as of the Second Closing Date, as though
made on and as of the Second Closing Date;
(ii) VSI shall have performed in all material respects the
covenants and agreements required to be performed by VSI;
(iii) any consent, approval, license or other authorization
from any governmen tal or administrative authority under any applicable law
shall have been obtained and be in full force and effect on and as of the Second
Closing Date;
(iv) if and to the extent that the Put/Call Price is to be
paid by VSI in part in the form of VSI shares of common stock, except for any of
the foregoing events or conditions which were known and disclosed prior to and
reflected in the market price of the VSI shares, then there shall not have
occurred or be pending or threatened any material adverse event or condition
which could reasonably be expected to have a material adverse effect on the
business, assets, financial condition, prospects or results of operations of
VSI, and no claim, legal proceeding, action or investigation shall be pending or
threatened which challenges the validity of, or would interfere with, any of the
transactions contemplated hereby;
(v) the License and Manufacturing Agreement shall be in full
force and effect and VSI shall not have defaulted in any material respect in the
performance of any of its obligations to 3DV thereunder (provided that 3DV shall
have promptly notified VSI of any breach or alleged breach of this Agreement by
VSI of which 3DV becomes aware); and
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(vi) if and to the extent that the Put/Call Price is to be
paid by VSI in part in the form of VSI shares of common stock, then RDC shall
have received an opinion of legal counsel to VSI, in form and substance
reasonably satisfactory to RDC, to the effect that such VSI shares are duly
authorized, issued and outstanding common shares of VSI, and that the
transaction undertaken at the Second Closing shall be sufficient to convey good
record and beneficial title to such VSI Shares to RDC, free and clear of any
liens, claims, encumbrances or rights of third parties of any description
whatsoever.
(c) Best Efforts to Satisfy Conditions. Each of VSI, 3DV and
RDC shall at all times prior to the expiration of the Option Period use its best
efforts to ensure that each of the conditions to its obligations have been and
will be duly and validly satisfied on the Second Closing.
3.6 No Competing Transactions. Each of 3DV and RDC agree that prior to
the expiration of the Option Period it will not enter into any agreements,
understanding, arrangement or negotiations with any third party, or otherwise
subject any of the business or assets of 3DV to any claims or rights of third
parties, that are inconsistent with or otherwise conflicts with the rights of
VSI under this Section 3. Without limiting the generality of the foregoing, RDC
agrees until the expiration of the Option Period not to transfer, assign,
convey, pledge or otherwise dispose of any of the RDC Shares or any right or
interest in or to the RDC Shares, including any beneficial right or interest in
or to the RDC Shares or any proceeds thereof.
4. Additional Post-Closing Covenants.
4.1 Right Of First Refusal. If the Put/Call Right shall not be
exercised, then for a period of six months following the expiration of the
Option Period, VSI shall have a right of first refusal with respect to (i) any
proposed sale of shares of 3DV by RDC, (ii) any proposed sale or other issuance
of 3DV shares by 3DV, or (iii) any proposed debt or equity financing by 3DV (a
"Right of First Refusal").
4.2 Budgets and Capital Support.
(a) On or before December 31, 1998, VSI and 3DV shall work
together in good faith to prepare and agree upon a detailed budget for 3DV for
3DV's fiscal year ending December 31, 1999 (the "1999 Budget"). VSI agrees that
upon approval of the 1999 Budget by the Board of Directors of each of VSI and
3DV, VSI shall advance or otherwise secure any funds as and when needed to
finance any shortfall in the working capital requirements of 3DV as set forth in
the 1999 Budget (the "1999 Advanced Funds").
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(b) On or before December 1999, VSI and 3DV shall work
together in good faith to prepare and agree upon on a detailed budget for 3DV
for 3DV's fiscal year ending December 31, 2000 (the "2000 Budget"). VSI agrees
that upon approval of the 2000 Budget by the Board of Directors of each of VSI
and 3DV, VSI shall advance or otherwise secure any funds as and when needed to
finance any shortfall in the working capital requirements of 3DV as set forth in
the 2000 Budget for any period covered by the 2000 Budget that relates to the
period prior to November 15, 2000 (the "2000 Advanced Funds").
(c) In the event that the parties do not agree in a timely
fashion on the 1999 Budget or the 2000 Budget, then 115% of the budget or
operating statement for the immediately preceding fiscal year shall be the
effective operating budget for purposes of determining VSI's finance obligations
with respect to working capital shortfalls.
4.3 Issuance of Capital Notes.
(a) Against the 1999 Advanced Funds and the 2000 Advanced Funds 3DV
shall issue to VSI non-interest bearing, redeemable capital notes (the "Capital
Notes") which shall be convertible into ordinary shares of 3DV if the Put/Call
Rights are not exercised by either 3DV or VSI. If the Put/Call Right is not
exercised, the conversion price of the Capital Notes shall be based upon the
valuation of the first purchase of 3DV shares for an aggregate consideration of
at least [**] by any third party investor unaffiliated with any of the parties
in a bona fide, arms'-length transaction subsequent to the date of the
expiration of the Option Period.
4.4 Appointments to 3DV Board of Directors.
(a) From and after the Closing Date, and so long as VSI owns at least
seventy-five percent (75%) of the Acquired Shares, each of RDC and VSI shall
vote its RDC Shares and its Acquired Shares, respectively, and any other voting
securities of 3DV over which VSI or 3DV have voting control, and shall each take
all other reasonably necessary or desirable actions within each of its control
(whether in its capacity as a shareholder or otherwise, and including without
limitation attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
3DV shall take all reasonably necessary and desirable actions within its control
(including without limitation calling special board and shareholder meetings),
so that:
(i) the authorized number of directors on the Board of
Directors shall consist of no more than 5 members, and no action shall be taken
which might cause any increase or decrease in the size of the Board of Directors
until the expiration of the Put/Call Right; and
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(ii) Mr. Lewis C. Pell and Mr. Katsumi Oneda shall be elected
as members of the Board of Directors of 3DV, or such other two persons as may be
designated by VSI.
4.5 Shareholder Approval.
(a) Until the expiration of the Put/Call Right and the Right of First
Refusal, and so long as VSI owns at least seventy-five percent (75%) of the
Acquired Shares, all actions with respect to the following matters shall not be
taken by or on behalf of 3DV unless approved by holders of voting securities of
3DV representing at least of 80% of the outstanding voting shares of 3DV:
(i) the declaration or payment of any dividend or distribution in
respect of the securities of 3DV;
(ii) any amendment to the Memorandum and Articles of Association of
3DV;
(iii) any merger or consolidation of 3DV, any sale of all or
substantially all or of any material portion of 3DV's assets or properties of
3DV or the acquisition by 3DV of any other material business or the acquisition
of material assets outside the ordinary course of business of 3DV;
(iv) any fundamental change in the scope or nature of the business
of 3DV;
(v) the commencement of any initial public offering of 3DV's
securities;
(vi) any incurrence of indebtedness (including the issuance of any
guaranties), or the creation or imposition of any liens, mortgages or
encumbrances upon any assets or properties of 3DV securing indebtedness or
providing guaranties for or pledging 3DV's assets as collateral for indebtedness
of unaffiliated third parties;
(vii) any transaction, contract or commitment involving an Affiliate or
a shareholder of 3DV (other than subsidiaries of 3DV);
(viii) the commencement of any bankruptcy or insolvency proceeding,
liquidation or voluntary reorganization, or the taking of any corporate action
in furtherance thereof;
(ix) the issuance of any shares of capital stock or securities of
3DV; or
(x) any agreement or commitment to do any of the foregoing, or any
material amendment to, modification of or addition to any agreement or action
previously approved pursuant to this subsection.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
4.6 Observer Rights. Until the expiration of the Put/Call Rights and
the Right of First Refusal, VSI shall allow 3DV to designate a representative to
attend and observe all meetings of the board of directors of VSI.
4.7 Put/Call Price Adjustment Rights. In the event that VSI shall
acquire the shares of 3DV from the Shareholders pursuant to the Put/Call Right
and in the event that within a period of twelve months after the Second Closing
VSI shall sell substantially all the shares of 3DV or the assets of 3DV (whether
by merger or otherwise) to a third party for an aggregate price per share (or
equivalent price in the event of an asset sale) equal to more than [**] of the
Put/Call Price, then VSI shall pay to the Shareholders an amount equal to 10% of
such excess amount paid to such third party above the Put/Call Price.
5. Representations and Warranties of 3DV. 3DV, represents and warrants to VSI
as follows, except as such representations or warranties are qualified by
matters identified on the Disclosure Schedules to this Agreement:
5.1 Organization; Capitalization. (a) 3DV is a corporation duly
organized and validly existing under the laws of the State of Israel. 3DV is
duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where conducts business. 3DV has full corporate power and
authority to carry on the business in which it is engaged and to own and use the
properties owned and used by it. Schedule 5.1 of the Disclosure Schedule sets
forth for 3DV the number of shares of authorized share capital of each class of
its share capital, the number of issued and outstanding shares of each class of
its capital stock, the number of shares of its share capital held in treasury,
and the names of its duly elected directors and officers. True and correct
copies of the memorandum of association and articles of association, or any
other similar organizational and constituting documents of 3DV, as amended, have
been delivered to VSI and will be delivered to VSI at the Closing and the Second
Closing.
(b) All of the issued and outstanding shares of share capital
of 3DV have been duly authorized and are validly issued, fully paid and
nonassessable. The Acquired Shares to be issued and sold by 3DV to VSI hereunder
have been duly authorized and, when issued and delivered to VSI against payment
therefor as provided by this Agreement, will be validly issued, fully paid and
nonassessable.
(c) Except as set forth in Schedule 5.1(c) of the Disclosure
Schedule or this Agreement there are no outstanding or authorized options,
warrants, put rights, call rights, purchase rights, subscription rights,
conversion rights, exchange rights, stock appreciation rights, phantom stock
rights or other rights (contingent or other) that could require 3DV to sell,
transfer or otherwise dispose of any share capital of 3DV, and there are no
outstanding
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commitments of 3DV to issue any shares, warrants, options or other such rights
that may cause to become outstanding any of its own share capital or to
distribute any evidences of indebtedness or assets to holders of any class of
its share capital. 3DV has no contingent or other obligation to purchase, redeem
or otherwise acquire any shares of its capital stock or any interest therein or
to pay any dividend or make any other distribution in respect thereof (other
than as contemplated by this Agreement). Except as contemplated by this
Agreement, the issuance, sale and delivery of the Acquired Shares issuable under
this Agreement are not subject to any preemptive rights of stockholders of 3DV
or to any right of first refusal or other similar right in favor of any person.
Except as contemplated by this Agreement, neither 3DV or RDC with respect to the
shares of 3DV is a party to any voting agreement, voting trust, proxy or similar
agreement, arrangement or understanding relating to its capital stock, other
than any of the foregoing that are pursuant to agreements or understandings to
be cancelled on or before the Closing, and 3DV is not a party to any agreement,
arrangement or understanding relating to or providing for registration rights
with respect to its share capital.
5.2 Authorization of Transaction. 3DV has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder, including the execution and delivery of the License and Manufacturing
Agreement and the issuance and delivery of the Acquired Shares. The execution,
delivery and performance by 3DV of this Agreement and the License and
Manufacturing Agreement, and the consummation by 3DV of the transactions
contemplated hereby and thereby, have been duly authorized by 3DV and no other
corporate action on the part of 3DV is necessary to authorize the execution and
delivery by 3DV of this Agreement and the License and Manufacturing Agreement
and the consummation by it of the transactions contemplated hereby and thereby.
This Agreement and the License and Manufacturing Agreement have been duly
executed and delivered by 3DV and constitute the valid and legally binding
obligations of 3DV, enforceable against 3DV in accordance with their respective
terms and conditions.
5.3 No Conflict. Neither the execution and the delivery of this
Agreement, the issuance and delivery of the Acquired Shares, the execution of
the License and Manufacturing Agreement, nor the consummation of the
transactions contemplated hereby or thereby, shall (i) violate any statute,
regulation, rule, injunction, judgment, order, decree or ruling of any
government, governmental agency or court to which 3DV is subject or any
provision of the charter or bylaws (or similar governing documents) of 3DV or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any material agreement, to which
3DV is a party or by which it is bound or to which its assets are subject, which
could reasonably be expected to have a Material Adverse Effect. 3DV is not
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency in
order for 3DV to consummate the transactions contemplated by this Agreement,
except as contemplated by this Agreement or set forth in Schedule 5.3 of the
Disclosure Schedule.
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5.4 Brokers' Fees. 3DV has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
5.5 Financial Statements. (a) For purposes of this Agreement, the
term "Financial Statements" shall mean: (i) the audited consolidated balance
sheet as of December 31, 1997 (the "1997 Audited Balance Sheet") and the
related audited consolidated statements of income, shareholder's equity and
cash flows of 3DV, together with the notes thereto and report thereon of
independent public accountants, with respect to such accountants' review
thereof; and (ii) the unaudited consolidated balance sheets of 3DV as of June
30, 1998 recent interim date (the "Interim Balance Sheet") and the related
unaudited consolidated statements of income, shareholders' equity and cash
flows of 3DV for the 6 month period then ended, together with the notes
thereto. Exhibit A sets forth true and complete copies of the Financial
Statements.
(a) The Financial Statements present fairly the financial condition and
results of operations of 3DV as of their respective dates and for the periods
covered thereby, in conformity with GAAP applied on a consistent basis
throughout such periods.
(b) The books of account of 3DV are and, during the periods covered by
the Financial Statements were, and are, correct and complete in all material
respects, fairly and accurately reflect, reflected or will reflect the
consolidated income, expenses, assets and liabilities of 3DV taken as a whole,
including the nature thereof and the transactions giving rise thereto, and
provide or provided a fair and accurate basis for the preparation of the
Financial Statements.
5.6 Absence of Certain Developments. Except as otherwise contemplated
by this Agreement and except as reflected on the 1997 Balance Sheet, since the
date of the 1997 Balance Sheet, there has not been any material adverse change
in the properties, financial condition, or results of operations of 3DV. Without
limiting the generality of the foregoing and except as otherwise reflected on
the 1997 Balance Sheet, since the date of the 1997 Balance Sheet, 3DV has not:
(a) borrowed any amount or incurred or guaranteed or
otherwise become obligated to pay any material liabilities (including
performance bonds), except liabilities (other than indebtedness for borrowed
money) incurred in the under contracts entered into in the ordinary course of
business;
(b) mortgaged, pledged or subjected to any Lien any
material portion of its assets;
(c) sold, assigned, leased, transferred or disposed of or
abandoned any material portion of its properties or assets, including licenses
or sale of products embodying the Intellectual Property except in the ordinary
course of business;
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(d) suffered any theft, damage, destruction or casualty loss
to any of its owned or leased properties or assets in excess of $100,000,
whether or not covered by insurance;
(e) made any material capital expenditures or commitments
therefor;
(f) declared, paid or made or set aside for payment or
distribution of any kind in respect of its capital stock of other securities, or
directly or indirectly retired, redeemed, purchased or otherwise acquired any
shares of capital stock of 3DV.
(g) issued, authorized or proposed the issuance of,
reclassified, or sold any shares of capital stock of any of 3DV, or securities
convertible into or exchangeable for, or rights, warrants or options to acquire
any such shares or other convertible securities or acquire any capital stock or
other securities or interests of any Person, or otherwise made a loan or advance
to or investment in any Person;
(h) made any material change in employment terms for any of
the key employees or officers or directors of 3DV; or
(i) committed to do any of the foregoing.
5.7 Undisclosed Liabilities. 3DV has no material liability (whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated and whether due or to become due), except for (i) liabilities set
forth on the Interim Balance Sheet (including any liabilities identified in the
notes thereto), (ii) liabilities under executory agreements, contracts, leases,
licenses and other arrangements listed in the Disclosure Schedule, (iii)
liabilities set forth in Schedule 5.7 of the Disclosure Schedule, and (iv)
liabilities that would not have a Material Adverse Effect.
5.8 Legal Compliance. (a) 3DV is in substantial compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of Israeli
government (and all agencies thereof). Since inception of 3DV, 3DV has not
received any written communication from any governmental authority that alleges
that 3DV is not in substantial compliance with any such foreign, federal, state
or local laws, rules or regulations.
(b) (i) No payments or inducements were made or given, directly or
indirectly, to any governmental officials in the jurisdictions in which 3DV
conducts its business, by 3DV or by any of its officers, directors, employees or
agents in connection with any opportunity, agreement, license, permit,
certificate, consent, order, approval, waiver or other authorization relating to
the business of 3DV, except for such payments or inducements as were lawful
under the written laws, rules and regulations of such jurisdictions.
(ii) Neither 3DV, nor any director, officer, agent, employee
or other person associated with or acting on behalf of 3DV, (A) has used any
corporate funds for any unlawful
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contribution, gift, entertainment or other unlawful expense relating to
political activity; (B) made any direct or indirect unlawful payment to any
government official or employee from corporate funds; (C) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977; or (D)
made any bribe, unlawful rebate, payoff, influence payment, kickback or other
unlawful payment in connection with the business of 3DV.
(c) 3DV has all governmental licenses and permits or other
authorizations necessary to conduct its business as conducted on and prior to
the date of this Agreement and such licenses, permits and other authorizations
are in full force and effect, and no violation exists or has been recorded in
respect of any such licenses, permits or other authorizations, no proceeding is
pending seeking revocation or limitation of any such licenses, permits or other
authorizations.
5.9 Tax Matters. 3DV has filed all Tax Returns required to be
filed by it, and has paid all Taxes due and payable by it as and to the extent
reflected on such Tax Returns.
(b) Except as disclosed in Schedule 5.9 of the Disclosure Schedule, all
Taxes due and payable on or prior to the Closing Date in respect of all periods
prior to the Closing Date have been paid or accrued for on the books and records
of 3DV, except for any such Taxes that are either (i) being contested or
challenged in good faith or (ii) not in excess of the reserve for tax
liabilities reflected on the books and records of 3DV as adjusted through the
Closing Date in accordance and consistent with past custom and practices of 3DV.
10 Real Property.
(a) 3DV does not own any real property.
(b) Schedule 5.10(b) of the Disclosure Schedule sets forth all real
property leased or subleased and used (excluding premises of customers) by 3DV.
3DV has made available to VSI a true and correct copy of the leases and
subleases set forth in Schedule 5.10(b) of the Disclosure Schedule. Each lease
and sublease set forth in Schedule 5.10(b) of the Disclosure Schedule is valid,
binding, enforceable against 3DV and, to the Knowledge of 3DV, against the other
party thereto, and is in full force and effect in all material respects. With
respect to each such lease or sublease set forth in Schedule 5.10(b) of the
Disclosure Schedule, 3DV has exclusive possession of the leased or subleased
premises and 3DV has complied in all material respects with the terms of such
lease or sublease and is not in default or arrears with respect to the payment
of any rent or other amounts due under any such lease or sublease, and 3DV has
not received any current notice of default under any such lease or sublease.
5.11 Intellectual Property.
(a) 3DV owns or otherwise has the right to use all Intellectual
Property that is used in and necessary for the operation and conduct of the
business of 3DV as currently conducted and as to be conducted based on the
commitments of 3DV as of the date hereof
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free and clear of all Liens and as of the Closing Date and have the right to
sell and distribute all Intellectual Property owned by 3DV and sold or
distributed by 3DV as part of 3DV's Imaging products.
(b) Schedule 5.11 of the Disclosure Schedule sets forth a list of all
Patents, Trademarks and Copyrights owned by 3DV or in which 3DV has any right to
use.
(c) None of the Intellectual Property is subject to any action, suit,
proceeding, order, hearing or claim that is pending, or to the Knowledge of 3DV,
threatened, which challenges the validity, disposition or use or ownership by
3DV of the Intellectual Property.
(d) 3DV has not received any written notice from any Person or given
any written notice to any Person alleging that any other Person is infringing
upon or otherwise violating the rights of 3DV in and to the Intellectual
Property. To the Knowledge of 3DV, no Person is infringing upon or otherwise
violating the rights of 3DV in and to the Intellectual Property.
(e) 3DV has not received any written notice from any Person alleging
that the use of the Intellectual Property by 3DV infringes upon or otherwise
violates the proprietary rights of such Person or any other Person. To the
Knowledge of 3DV, the use and disposition of the Intellectual Property in the
conduct of the business of 3DV does not infringe upon or otherwise violate the
proprietary rights of any other Person.
(f) Except for the License Agreement and as set forth in Schedule 5.11
of the Disclosure Schedule, 3DV is not a party to or bound by and, upon
consummation of the transactions contemplated by this Agreement, 3DV will be a
party to or bound by, any license or other agreement requiring the payment of
any royalty (excluding third party software generally commercially available).
(g) 3DV maintains and enforces a policy requiring its technical
personnel and officers to execute and deliver to 3DV a confidentiality agreement
on substantially the terms set forth in Schedule 5.11 of the Disclosure
Schedule. 3DV has taken such steps as are reasonable under the circumstances and
consistent with industry practices to preserve the legal protection for 3DV's
trade secret rights in the commercial Imaging products sold or distributed by
3DV.
5.12 Contracts.
(a) Schedule 5.12 of the Disclosure Schedule sets forth a complete list
of all material contracts, agreements or understanding involving any amount
greater than $50,000 (including any agreement providing for the performance of
any service by, for or on behalf of 3DV), and including, without limitation, any
agreement under which it has created, incurred, assumed or guaranteed any
indebtedness for borrowed money or any capitalized lease obligation.
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(b) 3DV has made available to VSI a true and correct copy of each
written agreement set forth in Schedule 5.12 of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding and
enforceable against 3DV; (B) neither 3DV, nor to the Knowledge of 3DV, the other
party thereto, is in a breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, permit
termination, modification or acceleration, or require indemnification, under the
agreement which could reasonably be expected to have a Material Adverse Effect;
and (C) 3DV has not repudiated any provision of the agreement.
5.13 Insurance. Schedule 5.13 of the Disclosure Schedule sets forth
each insurance policy issued by a third party maintained by or for the benefit
of 3DV. All such insurance policies are in full force and effect, and 3DV is not
in material default with respect to its obligations under any of such insurance
policies.
5.14 Litigation. Schedule 5.14 of the Disclosure Schedule sets forth
each instance in which any of 3DV (i) is subject to any outstanding judicial
injunction, judgment, order, decree or ruling in connection with which legal
process has been duly served upon any of 3DV or of which 3DV has Knowledge, or
(ii) is a party or, to the Knowledge of 3DV, is threatened to be made a party,
to any action, suit, proceeding, or hearing of, in or before any court or
administrative agency of any jurisdiction or before any arbitrator.
5.15 Employees. (a) (i) 3DV is not a party to nor is it bound by any
collective bargaining agreement, nor has it experienced any strike, slowdown,
stoppage, lockout or material dispute, grievance, or claim of unfair labor
practices or other collective bargaining dispute within the past three years;
(ii) to the Knowledge of 3DV, there are no current union organizing activities
among 3DV's employees; and (iii) 3DV has not received notice of the intent of
any government agency responsible for the enforcement of labor or employment
laws to conduct an investigation nor, to the Knowledge of 3DV, is any such
investigation in progress. As of the date of this Agreement, 3DV believes that
3DV's employee relations are satisfactory. Schedule 5.15 sets forth a complete
list of all persons (including their personal holding companies) employed by 3DV
or performing consulting services on a regular basis for or on behalf of 3DV or
otherwise receiving any form of compensation from or on behalf of 3DV.
5.16 Employee Benefits. (a) Schedule 5.16 of the Disclosure Schedule
sets forth all of the current Employee Benefit Plans and all other employee
benefit, fringe benefit plans and programs maintained or contributed to by 3DV
with respect to current or former employees of 3DV (collectively, the "Plans").
3DV has provided or made available to VSI a copy of each of the Plans, including
all amendments thereto.
5.17 Environmental Matters. (a) 3DV is in compliance with all
applicable environmental Requirements (which compliance includes, but is not
limited to, the possession
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by 3DV of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof), except where failure to be in compliance would not have a Material
Adverse Effect. To the Knowledge of 3DV, 3DV has not received any written
communication, whether from a governmental authority, citizens group, employee
or otherwise, alleging that 3DV is not in such compliance, and there are no past
or present actions, activities, circumstances, conditions, events or incidents
that may prevent or interfere with such compliance in the future.
(b) There is no Environmental Claim pending or threatened against 3DV
or, to the Knowledge of 3DV, against any person or entity whose liability for
any Environmental Claim any of 3DV has or may have retained or assumed either
contractually or by operation of law which would have a Material Adverse Effect.
5.18 Tangible Assets. 3DV has good and sufficient title to, or the
right to use and commercially exploit, all of its material tangible assets, free
and clear of any Lien (other than a Permitted Lien).
5.19 Investments. 3DV does not own, directly or indirectly, any capital
stock of, or other equity or partnership interest in, any other Person.
5.20 Disclosure. The written information provided to VSI in connection
with the transactions contemplated by this Agreement does not contain any untrue
statement of a material fact or omit to state a material fact necessary to be
stated in order to make the information or statements contained or referenced
therein not misleading.
5.21 Acquisition of VSI Shares for Investment. (a) The VSI Shares being
acquired by RDC pursuant to Section 2.3 above are being acquired for investment
only and not with a view to any public distribution thereof, and RDC shall not
offer to sell or otherwise dispose of such shares in violation of any of the
registration requirements of the Securities Act or any comparable state or
foreign laws.
(b) Each share certificate representing (i) the VSI Shares or (ii) any
other securities issued in respect of the VSI Shares upon any stock split, stock
dividend, recapitalization, merger or similar event (unless no longer required
in the opinion of United States counsel to VSI) shall be stamped or otherwise
imprinted with a legend substantially in the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY STATE SECURITIES LAWS. NEITHER THESE
SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. IN NO
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EVENT MAY THESE SECURITIES BE TRANSFERRED PRIOR TO AUGUST 6,
1999."
6. Representations and Warranties of VSI. VSI represents and warrants to 3DV and
RDC as follows:
6.1 Organization. VSI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
6.2 Authorization of Transaction. VSI has full power and authority to
execute and deliver this Agreement and the License and Manufacturing Agreement,
and to issue and deliver the VSI shares, and to perform its obligations
hereunder and under the License and Manufacturing Agreement. This Agreement
constitutes the valid and legally binding obligation of VSI enforceable against
VSI in accordance with its terms and conditions.
6.3 No Conflict. Neither the execution and the delivery of this
Agreement or the License and Manufacturing Agreement, nor the consummation of
the transactions contemplated hereby or thereby, shall (i) violate any statute,
regulation, rule, injunction, judgment, order, decree or ruling of any
government, governmental agency or court to which VSI is subject or any
provision of its certificate of incorporation or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license or instrument
to which VSI is a party or by which it is bound or to which any of its assets is
subject (including, without limitation, under any agreement, contract or
instrument governing the obligations of the shareholders of VSI). VSI is not
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency or
any other Person in order for VSI to consummate the transactions contemplated by
this Agreement, except where the failure to give notice, to file, or to obtain
any authorization, consent or approval would not prevent or interfere with the
ability of VSI to consummate the transactions contemplated by this Agreement.
6.4 Brokers' Fees. Except as set forth in Schedule 5.4 of the
Disclosure Schedule, VSI has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which 3DV or RDC could become liable or
obligated.
6.5 SEC Filed Documents. As of the date of this Agreement, VSI filings
with the Securities and Exchange Commission ("SEC"), as amended and supplemented
by each later filed report do not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein and
necessary to make the statements therein not misleading. VSI's current reports
filed with the SEC comply in all material respects with the
21
<PAGE>
applicable requirements of the Exchange Act and the rules thereunder in effect
as of the date of filing.
6.6 Acquisition of 3DV Shares for Investment. (a) The 3DV shares being
purchased by VSI pursuant to Section 2.1 above are being acquired for investment
only and not with a view to any public distribution thereof, and VSI shall not
offer to sell or otherwise dispose of such shares in violation of any of the
registration requirements of the Securities Act or any comparable state or
foreign laws. VSI has such knowledge, experience and sophistication in the
industry of which 3DV is a part to enable it to evaluate the merits and risks
and to assume such risks associated with an investment in 3DV Shares. Prior to
the Closing Date VSI had full access to information and 3DV for the purpose of
conducting a due diligence of the business of 3DV.
(b) Each share certificate representing (i) the 3DV Shares or
(ii) any other securities issued in respect of the 3DV shares upon any stock
split, stock dividend, recapitalization, merger or similar event (unless no
longer required in the opinion of United States counsel to 3DV) shall be stamped
or otherwise imprinted with a legend substantially in the following form:
"The securities represented by this certificate were
originally issued on August ___, 1998, and have not been
registered under the United States Securities Act of 1933, as
amended, or under the securities laws of any other
jurisdiction, nor has any action been taken under the laws of
any other jurisdiction to permit the public distribution,
sale, trading or listing of the securities evidenced by this
certificate.
7. Representations and Warranties of RDC. Subject to the Disclosure Schedules,
RDC represents and warrants to VSI as follows:
7.1 Organization. RDC is a corporation duly organized, validly existing
and in good standing under the laws of State of Israel. Schedule 7.1 sets forth
the names of each of the shareholders of RDC.
7.2 Authorization of Transaction RDC has full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of RDC,
enforceable against RDC in accordance with its terms and conditions.
7.3 No Conflict. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, shall
(i) violate any statute, regulation, rule, injunction, judgment, order, decree
or ruling of any government, governmental agency or court to which RDC is
subject or any provision of its certificate of incorporation or bylaws or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice
22
<PAGE>
under any agreement, contract, lease, license or instrument to which RDC is a
party or by which it is bound or to which any of its assets is subject
(including, without limitation, under any agreement, contract or instrument
governing the obligations of the shareholders of RDC. RDC is not required to
give any notice to, make any filing with, or obtain any authorization, consent
or approval of any government or governmental agency or any other Person in
order for RDC to consummate the transactions contemplated by this Agreement,
except where the failure to give notice, to file, or to obtain any
authorization, consent or approval would not prevent or interfere with the
ability of RDC to consummate the transactions contemplated by this Agreement.
7.4 Warranties Regarding RDC Shares. RDC owns the RDC Shares free and
clear of any and all Liens. Except as contemplated by this Agreement above,
there are no outstanding or authorized options, warrants, put rights, call
rights, purchase rights, subscription rights, conversion rights, exchange
rights, stock appreciation rights, phantom stock rights or other rights
(contingent or other) that could require RDC to sell, transfer or otherwise
dispose of or encumber the RDC Shares or any other capital stock of 3DV owned or
controlled by RDC. RDC has no contingent or other obligation to sell, lend, or
otherwise dispose of any shares of 3DV capital stock or any interest therein
(other than as contemplated by this Agreement). Except as contemplated by this
Agreement, the sale and delivery of the RDC Shares pursuant to the Put/Call
Right are not subject to any preemptive rights of any other Person or other
stockholders of 3DV or RDC, or to any other right of first refusal or other
similar right in favor of any Person. Except as contemplated by this Agreement,
with respect to the RDC Shares, RDC is not a party to any voting agreement,
voting trust, proxy or similar agreement, arrangement or understanding relating
to the capital stock of 3DV, other than any of the foregoing that are pursuant
to agreements or understandings to be cancelled on or before the Closing.
7.5 Brokers' Fees. RDC has no liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
7.6 3DV Representations. To the best knowledge of RDC, none of the
representations and warranties of 3DV set forth in Section 5 hereof are untrue
or incorrect in any material respect.
8. Indemnification.
8.1 3DV and RDC Indemnification of VSI. (a) On the terms and subject to
the conditions of this Agreement, 3DV and RDC shall indemnify VSI against, and
hold VSI harmless from, any and all Loss based upon, arising out of or resulting
from (i) any breach by 3DV and RDC of any of the representations and warranties
made by 3DV in Section 5 (in the case of 3DV) or RDC in Section 7 (in the case
of RDC) above, or (ii) any breach by 3DV or RDC of any of the covenants and
agreements of either of them contained in this Agreement. Any claim by VSI for
indemnification under this Section 8.1 shall be hereinafter referred to as a
"VSI Indemnifiable Claim." Notwithstanding the foregoing, VSI shall not be
entitled to maintain any claim for indemnification under this Section 8.1 unless
and until the aggregate amount of such
23
<PAGE>
Claims exceeds $250,000, and neither 3DV nor RDC shall have any liability under
this Section 8.1 for an amount in the aggregate greater than the Purchase Price
plus the market value of the VSI Shares on the Closing Date.
8.2 VSI Indemnification of 3DV. (a) On the terms and subject to the
conditions of this Agreement, following the Closing, VSI shall indemnify 3DV
against, and hold 3DV harmless from, any and all Loss based upon, arising out of
or resulting from (i) any breach by VSI of any of the representations and
warranties made by VSI in Section 6 above, or (ii) any breach by VSI of any of
the covenants and agreements of VSI contained in this Agreement. Any claim by
3DV for indemnification under this Section 7.2 shall be hereinafter referred to
as a "3DV Indemnifiable Claim."
Notwithstanding the foregoing, 3DV shall not be entitled to maintain any claim
for indemnification under this Section 8.2 unless and until the aggregate
amount of such Claims exceeds $250,000, and VSI shall have no liability under
this Section 8.3 for an amount in the aggregate greater than the Purchase Price.
8.3 Indemnification Procedures. (a) Any party seeking indemnification
hereunder (the "Indemnitee") shall notify the party liable for such
indemnification (the "Indemnitor") in writing of any event, omission or
occurrence which the Indemnitee has determined has given or could give rise to
liabilities or losses that are indemnifiable hereunder (such written notice
being hereinafter referred to as a "Notice of Claim"). Such notice shall be
given promptly after the Indemnitee becomes aware of its own claim or that of a
third party; provided that, the failure of any Indemnitee to give notice (other
than in respect of a third party claim) shall not relieve the Indemnitor of its
obligations under this Section 8 unless such failure continues beyond the time
limits set out in Section 8.5 below which shall relieve the Indemnitor of its
obligations under this Section 8. A Notice of Claim shall specify in reasonable
detail the nature and any particulars of the event, omission or occurrence
giving rise to a right of indemnification. The Indemnitor shall satisfy its
obligations hereunder within thirty (30) calendar days of its receipt of a
Notice of Claim or, if later, within thirty (30) calendar days after the
Indemnitee shall have actually incurred or suffered a liability or loss which is
the subject of such Notice of Claim; provided, however, that so long as the
Indemnitor is in good faith defending a claim pursuant to paragraph (ii) below
and provided that the Indemnitee has not otherwise actually incurred or suffered
a liability or loss for which the Indemnitee was required to pay or otherwise
post a bond, its obligation to indemnify the Indemnitee with respect thereto
shall be suspended.
(b) With respect to any third party claim (a "Third Party Claim") which
is the subject of a Notice of Claim, the Indemnitor shall, in good faith and at
its own expense, defend, contest or otherwise protect against any such Third
Party Claim with legal counsel of its own selection. The Indemnitee shall have
the right, but not the obligation, to participate, at its own expense, in the
defense thereof through counsel of its own choice and shall have the right, but
not the obligation, to assert any and all cross claims or counterclaims it may
24
<PAGE>
have. The Indemnitee shall at all times cooperate in all reasonable ways with,
make its relevant files and records available for inspection and copying by, and
make its employees reasonably available or otherwise to render reasonable
assistance to, the Indemnitor. In the event that the Indemnitor fails to timely
defend, contest or otherwise protect against any such Third Party Claim, or if
injunctive relief is sought or issued (and not dismissed within 10 days) which
would have a material adverse effect on the Indemnitee, the Indemnitee shall
have the right to defend, contest, assert cross claims or counterclaims, or
otherwise protect against, the same and may make any compromise or settlement
thereof; provided that, it does so in good faith and be entitled to all amounts
paid as a result of such third party claim, demand, suit or action or any good
faith compromise or settlement thereof. Any compromise of asserted liability by
the Indemnitor shall require the prior written consent of the party seeking
indemnification, which consent shall not be unreasonably withheld.
8.4 Determination of Losses. In determining the amount of any loss,
liability or expenses for which any Party is entitled to indemnification under
this Section 8, the gross amount thereof will be reduced by the value of any
correlative benefit or any other benefit, including, without limitation, any tax
benefit or credit or insurance proceeds received or to be received by such.
8.5 Limitation on Indemnifiable Claims. No VSI Indemnifiable Claim may
be asserted or otherwise maintained by VSI against RDC or 3DV in respect of
Section 8.1(a)(i) above after either (a) twelve months following the Closing
Date, or (b) in the event that the Second Closing occurs, twelve months
following the Second Closing Date (unless in either case a Notice of Claim with
respect to such Indemnifiable Claim has been made before such date), except that
any VSI Indemnifiable Claims based on the breach of the representation and
warranty of 3DV relating to the capitalization of 3DV may be made until the
expiration of a period of five (5) years following the Closing Date. No 3DV
Indemnifiable Claim may be asserted or otherwise maintained by 3DV or RDC
against VSI in respect of Section 8.2(a)(i) above after either (a) twelve months
following the Closing Date, or (b) in the event that the Second Closing occurs,
twelve months following the Second Closing Date (unless in either case a Notice
of Claim with respect to such Indemnifiable Claim has been made before such
date).
9. Miscellaneous.
9.1 Press Releases and Public Announcements. The fact and terms of this
Agreement and the transactions proposed hereby are confidential and each Party
shall maintain such confidentiality and, without the written consent of the
other Parties hereto, which consent shall not be unreasonably withheld, shall
not disclose the financial terms of this Agreement or the transactions proposed
hereby, to any other Person, other than each Party's respective legal, financial
and accounting advisors who have been advised of the terms of this
confidentiality agreement. Notwithstanding the foregoing, any Party may make
public disclosure of the fact of or terms of this Agreement to the extent it is
required by applicable
25
<PAGE>
law (as established by an opinion of counsel delivered to the other Parties) and
such disclo sure shall be limited to such information regarding this Agreement
as is so required by applicable law. The Parties agree to cooperate and consult
with each other as to the content of any such disclosure relating to this
Agreement required by law as described in the preceding sentence.
9.2 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person (including, without limitation, employees of
3DV) other than the Parties and their respective successors and permitted
assigns.
9.3 Entire Agreement. This Agreement (including the documents referred
to herein) and the License and Manufacturing Agreement constitute the entire
agreement between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties with respect to the
subject matter hereof, written or oral, to the extent they related to the
subject matter hereof, including, without limitation, the Letter of Intent dated
May 9, 1998.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Neither 3DV, RDC nor VSI may assign either this Agreement
or any of its rights, interests or obligations hereunder without the prior
written approval of the other Parties.
9.5 Counterparts This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then seven
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to 3DV: 3DV Systems Ltd.
Bldg. 7 Industrial Park
P.O. Box 249, Yokneam 20692
Israel
Attn: Ori J. Braun, President
Tel: 011-972-4-9599599
Fax: 011-972-4-9590719
26
<PAGE>
with a copy to: Zellermayer, Pelossof Advocates
Europe House
37 Shaul Hamelech Blvd.
Tel Aviv 64928
Israel
Attention: Michael Zellermayer
Facsimile: 011-972-3-695-2884
If to VSI:
Vision-Sciences, Inc.
40 Ramland Road South
Orangeburg, New York 10962
USA
Attn: Katsumi Oneda
Tel: 914-365-0600
Fax: 914-365-0620
with a copy to:
Paul I. Rachlin, Esq.
Arnold & Porter
399 Park Avenue
New York, NY 10591
Facsimile: (212) 715-1172
If to RDC:
RDC Development Corporation Ltd.
New Industrial Park
P.O.Box 258
Yokneam 20692
ISRAEL
Attention: Ruben Krupik
Facsimile: 011-972-4-959-0720
27
<PAGE>
With a copy to:
Zellermayer, Pelossof Advocates
Europe House
37 Shaul Hamelech Blvd.
Tel Aviv 64928
Israel
Attention: Michael Zellermayer
Facsimile: 011-972-3-695-2884
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
until the next business day after it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth. For purposes of this Section
6.7, a business day shall be any day on which commercial banks are open in New
York and Israel.
9.8 Governing Law; Procedural Matters. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Israel without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Israel or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Israel. For the
adjudication of any disputes arising in connection with this Agreement, the
parties hereby consent to the personal jurisdiction of and venue in any district
court in of competent subject matter jurisdiction located in Tel Aviv, Israel,
and the parties agree that such jurisdiction and venue shall be exclusive. The
parties further consent to service of any process relating to this Agreement by
registered or certified mail or by personal service. The parties hereby exclude
from application to this Agreement the United Nations Convention on Contracts
for the International Sale of Goods.
9.9 Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the Parties. No
waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to be a waiver
of any other default, misrepresentation or breach of warranty or covenant
hereunder.
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9.10 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
9.11 Expenses. Except as otherwise provided in this Agreement, each of the
Parties shall bear its own costs and expenses (including legal and investment
advisory fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
9.12 Incorporation of Exhibits and Schedules. The Exhibits and Schedules of the
Disclo sure Schedule identified in this Agreement are incorporated herein by
reference and made a part hereof.
* * * *
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
VISION SCIENCES, INC.
By: /s/Katsumi Oneda, President
-------------------------------
3DV SYSTEMS LTD.
By: /s/Ori Brown, President
-------------------------------
RDC RAFAEL DEVELOPMENT
CORPORATION LTD.
By: /s/Ruben Kripik, CEO
-------------------------------
<PAGE>
Exhibit 10.2
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisks
denote omissions.
LICENSE AND MANUFACTURING AGREEMENT
BETWEEN
VISION-SCIENCES, INC.
AND
3DV SYSTEMS LTD.
----------------
This License and Manufacturing Agreement ("Agreement") is made as of
August 6, 1998 between (1) Vision-Sciences, Inc. ("VSI"), a Delaware corporation
with its principal place of business at 9 Strathmore Rd., Natick, Massachusetts
01760 , and (2) 3DV Systems Ltd. ("3DV"), an Israeli company with its principal
place of business at Bldg. 7, Industrial Park, P.O. Box 249, Yokneam 20692
Israel.
RECITALS:
A. VSI is engaged in the development and sale of endoscopes and related
technologies and products, and 3DV is engaged in the development and manufacture
of 3D digital cameras and 3D imaging technologies and the design and development
of products embodying those technologies; and
B. VSI desires to license from 3DV certain exclusive rights with
respect to 3DV's technologies in certain fields and to acquire exclusively from
3DV (subject to specified exceptions) certain products manufactured by or on
behalf of 3DV and having application in or used in those fields in accordance
with the terms hereof; and
C. 3DV desires to grant such rights and manufacture and sell such
products in accordance with the terms hereof; and
D. The parties, together with RDC Rafael Development Corporation Ltd.,
a company organized under the laws of the State of Israel ("RDC"), are entering
into an Investment Agreement of even date herewith (the "Investment Agreement")
providing for among other things an investment by VSI in 3DV and the
establishment of a close strategic alliance between the parties.
NOW, THEREFORE, for and in consideration of the foregoing, of the
mutual covenants and undertakings contained herein and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties intending to be legally bound, hereby agree as
follows:
<PAGE>
1. Definitions
-----------
1.1. "3DV Component" means a camera component or other imaging
module or device that is covered by 3DV Proprietary Rights, or
made by a process covered by 3DV Proprietary Rights, which 3DV
Proprietary Rights are enforceable in any country in which
the camera (or component thereof) or other imaging module or
device is made, used or sold, and which camera (or component
thereof) or device is at the lowest level of integration that
is reasonably practicable, such as a camera or other imaging
component for inclusion in an endoscope or other product of
VSI or an Approved Assign.
1.2. "3DV Proprietary Rights" means any and all rights of 3DV or
its Affiliates, anywhere in the world, with respect to (i) the
patents and patent applications (including continuations and
continuations in part to the extent claiming the same or
similar subject matter) described on Exhibit I (the "Basic
Patents") and (ii) any subsequent patents or patent
applications covering improvements, modifications and
enhancements to the Basic Patents and claiming subject matter
which could not be lawfully practiced without a license or
right to use the Basic Patents, together with all trade
secrets and other intellectual property rights of 3DV
disclosed in the Basic Patents or in any of such other patents
or patent applications.
1.3. "Affiliate" means, with respect to a corporation or other
entity, any entity controlling, controlled by, or under common
control with such first entity.
1.4. "Approved Assigns" means any assignee of VSI of any rights and
obligations of VSI under this Agreement which shall be
approved by 3DV in writing; provided that 3DV hereby agrees
that Asahi Optical Co., a company organized under the laws of
Japan ("AOC") shall constitute an Approved Assign.
1.5. "Claims" has the meaning set forth in Section 5.1.
1.6. "Confidential Information" has the meaning set forth in
Section 8.1.
1.7. "Digital Still Camera" means a camera designed and/or used
primarily to capture still images (as opposed to full motion
video) in digital form, which camera includes a 3DV Component
or otherwise is covered by 3DV Proprietary Rights, or made by
a process covered by 3DV Proprietary Rights, which 3DV
Proprietary Rights are enforceable in any country in which the
device is designed, made, used or sold.
1.8. "Disclosing Party" shall have the meaning given in Section
8.1.
2
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote
omissions.
1.9. "EO Element" means the electro optic shutter technology
described in the Basic Patents.
1.10. "Exclusive VSI Field" means the field represented by the use,
market and application of devices designed and/or used
primarily in, or capable of substantial use in, any of the
following application areas: (i) [**] systems; (ii) [**]
systems; (iii) [**] systems; and (iv) [**] systems [**].
1.11. "Nonconformities" has the meaning set forth in Section 3.4.
1.12. "Product" means a device designed, made, used, offered for
sale or sold by or for VSI or an Approved Assign, which device
includes a 3DV Component or otherwise is covered by 3DV
Proprietary Rights, or made by a process covered by 3DV
Proprietary Rights, which 3DV Proprietary Rights are
enforceable in any country in which the device is designed,
made, used or sold.
1.13. "Receiving Party" shall have the meaning given in Section 8.1.
2. Licenses and Other Intellectual Property Matters
------------------------------------------------
2.1. Subject to the provisions of Article 3, 3DV hereby grants to
VSI a worldwide, perpetual (subject to the provisions of
Section 10), royalty-free license under all 3DV Proprietary
Rights to:
2.1.1. Design, have designed, make, have made, use, offer for sale,
sell and import Products, and adapt, distribute, perform and
display designs, computer software and other works of
authorship covered by 3DV Proprietary Rights, on a sole and
exclusive basis within the Exclusive VSI Field, including all
rights to the integration of 3DV Components into such products
and the distribution and sale of such products, in the
Exclusive VSI Field, but excluding the right to manufacture
and supply the 3DV Component (or the EO Element, as the case
may be), which shall be reserved exclusively to 3DV except in
the specific circumstances described in Section 3.1,
2.1.2. Design, have designed, make, have made, use, offer for sale,
sell and import Digital Still Cameras, and adapt, distribute,
perform and display designs, computer software and other works
of authorship covered by 3DV Proprietary Rights in connection
with Digital Still Cameras, on a nonexclusive basis, but
excluding the right to manufacture and supply the 3DV
Component (or the EO Element, as the case may be), which shall
be reserved exclusively to 3DV except in the specific
circumstances described in Section 3.1.
3
<PAGE>
2.2. VSI shall have the right to sublicense all or any part of its
rights under Section 2.1 to any Approved Assign or to assign
all or any part of its rights under Section 2.1 together with
its other relevant rights under this Agreement; provided that
such Approved Assign is bound to respect the rights of 3DV
pursuant to this Agreement.
2.3. Notifications of Related Inventions
2.3.1. 3DV shall promptly upon request or otherwise on or about every
six months during the term of this Agreement disclose to VSI
any invention, discovery, design, computer software or other
technology having applications in the Exclusive VSI Field and
which relates to the subject matter described by the 3DV
Proprietary Rights that is created, conceived or reduced to
practice by 3DV or its personnel during the term of this
Agreement, whether pursuant to Article 3 or otherwise. A
disclosure shall consist of a written summary sufficient to
convey a clear understanding of the nature, purpose, operation
and characteristics of the invention, discovery, design,
computer software or other technology to the extent available.
Upon request, 3DV shall provide to VSI any information
reasonably required by VSI for the evaluation or use thereof.
3DV shall consult with VSI concerning the patenting or other
legal protection of each such invention, discovery, design,
computer software or other technology. After doing so, , it
shall be 3DV's right to apply for, prosecute and maintain
patents and other forms of legal protection included in the
3DV Proprietary Rights and having applications in the
Exclusive VSI Field; provided that 3DV shall not unreasonably
refuse to take actions to apply for, prosecute and maintain
patents and other forms of legal protection when such actions
are reasonably requested by VSI, and if 3DV does refuse to
take such actions, 3DV shall assign to VSI all right, title
and interest in and to the affected patent, patent
application, or other legal protection to the extent, and only
to the extent, necessary to enable VSI to apply for, prosecute
and maintain in its name and on its behalf, and VSI thereafter
shall have the right, but not the obligation, to apply for,
prosecute and maintain, such patent, patent application or
other form of legal protection without consulting 3DV.
2.3.2. VSI shall promptly upon request or otherwise on or about every
six months during the term of this Agreement disclose to 3DV
any invention, discovery, design, computer software or other
technology having applications in the Exclusive VSI Field and
which relates to the subject matter described by the 3DV
Proprietary Rights that is created, conceived or reduced to
practice by VSI or its personnel during the term of this
Agreement (collectively, "VSI Rights"), whether pursuant to
Article 3 or otherwise. A disclosure shall consist of a
written summary sufficient to convey a clear understanding of
the nature, purpose, operation and characteristics of the
invention, discovery, design, computer software or other
technology. Upon request, VSI shall provide to
4
<PAGE>
3DV any information reasonably required by 3DV for the
evaluation or use thereof. VSI shall consult with 3DV
concerning the patenting or other legal protection of each
such invention, discovery, design, computer software or other
technology. After doing so, it shall be VSI's right to apply
for, prosecute and maintain patents and other forms of legal
protection included in the VSI Rights and having applications
in the Exclusive VSI Field; provided that VSI shall not
unreasonably refuse to take actions to apply for, prosecute
and maintain patents and other forms of legal protection when
such actions are reasonably requested by 3DV, and if VSI does
refuse to take such actions, VSI shall assign to 3DV all
right, title and interest in and to the affected patent,
patent application, or other legal protection to the extent,
and only to the extent, necessary to enable 3DV to apply for,
prosecute and maintain in its name and on its behalf, 3DV
thereafter shall have the right, but not the obligation, to
apply for, prosecute and maintain, such patent, patent
application or other form of legal protection without
consulting VSI.
2.3.3. 3DV shall promptly upon request or otherwise on or about every
six months disclose to any Approved Assign any patents and
patent applications of 3DV having application in the Exclusive
VSI Field and which is or, upon the establishment of any such
rights of VSI as aforesaid will be, includable within the
meaning of 3DV Proprietary Rights and the Approved Assign
shall promptly upon request or otherwise about every six
months disclose to 3DV any patents or patent applications of
the Approved Assign or its affiliates having application in
the subject matter areas described by the 3DV Proprietary
Rights.
2.4. The parties acknowledge that certain devices outside the
Exclusive VSI Field may be capable of incidental uses in the
Exclusive VSI Field and that such incidental uses by third
parties may be difficult or impossible to discover or control.
3DV, however, shall not directly or indirectly engage, or
assist any other person, corporation or other entity to
engage, in the design, development, manufacture, sale,
marketing or use of any device in the VSI Field anywhere in
the world during the term of this Agreement. 3DV acknowledges
that its obligations under this Section 2.6 are founded upon
valuable consideration, necessary to protect the legitimate
interests of VSI, and reasonable with respect to geographic
and temporal scope.
3. Manufacturing of 3DV Components
-------------------------------
3.1. Notwithstanding the provisions of Article 2, 3DV shall have
the exclusive right to manufacture for VSI and Approved
Assigns, and sell to VSI and Approved Assigns, the 3DV
Component to be included in a Product manufactured and sold by
or for VSI or an Approved Assign; provided, however, that such
right shall be suspended with respect to any model of 3DV
Component, and VSI and
5
<PAGE>
Approved Assigns may manufacture or have manufactured such
model of 3DV Component pursuant to the license granted in
Section 2.1, if (i) 3DV elects by written notice to VSI or an
Approved Assign not to manufacture that model of 3DV
Component, (ii) 3DV does not or cannot manufacture that model
of 3DV Component and sell such 3DV Component to VSI or an
Approved Assign for a price that is fair and reasonable and
which is at a price that is the most favorable price offered
or granted to any non-Affiliate of 3DV, or (iii) 3DV does not
or cannot supply that model of 3DV Component in quantities
sufficient to meet the requirements of 3DV and VSI or an
Approved Assign according to the pre-arranged schedule as
determined from time to time. Notwithstanding the foregoing,
the exclusive manufacturing rights reserved to 3DV shall not
expire or otherwise be suspended under this Section 3.1 unless
and until VSI or the Approved Assigns, as the case may be,
shall have provided reasonable notice of the basis for such
expiration or suspension and an opportunity to cure or
otherwise address the problem that would otherwise give rise
to such basis for the expiration or suspension of 3DV's
manufacturing rights.
3.2. At the request of VSI or an Approved Assign, 3DV shall
cooperate in determining specifications, performance
requirements and other qualities of 3DV Components necessary
for their integration into Products. If the design or
development of 3DV Components for inclusion into Products will
require significant research or development, 3DV and VSI or an
Approved Assign may enter into an agreement concerning
collaborative research or joint development relating thereto.
Such an agreement may provide terms for the design and
development of 3DV Components by 3DV in accordance with
specifications and a schedule consistent with the requirements
of VSI or an Approved Assign and provide for testing of 3DV
Components to ensure compliance with such specifications. 3DV
also shall cooperate in any inspection or validation of its
manufacturing processes that may be required by regulatory
authorities having jurisdiction over 3DV Components or
Products.
3.3. At any time during the term of this Agreement, VSI or an
Approved Assign (each a "purchaser") may order 3DV Components
from 3DV by submitting a purchase order therefor to 3DV. The
price and delivery schedule and terms of payment for such 3DV
Components shall be negotiated in good faith between 3DV and
the purchaser, as the case may be. Unless 3DV elects not to
supply a model of 3DV Component, 3DV shall not unreasonably
refuse to accept, or delay its acceptance of, any such
purchase order in accordance with a pre-arranged schedule
determined from time to time, and if 3DV does so, clauses (i)
through (iii) of Section 3.1 shall apply. Upon the acceptance
of any such purchase order, 3DV shall deliver the 3DV
Components ordered, in accordance with the requirements of
this Agreement and the specifications, delivery schedule and
other requirements applicable under the purchase order. All
such
6
<PAGE>
deliveries shall be F.O.B. the port of export (in accordance
with Incoterms 1990), unless the purchase order specifies
otherwise.
3.4. Prior to each delivery of 3DV Components, 3DV shall test the
3DV Components in accordance with any test protocol
applicable under the purchase order or otherwise agreed to
between 3DV and the purchaser. 3DV shall give the purchaser
reasonable advance notice of any such testing, and the
purchaser shall have the right to participate in any such
testing. For each 3DV Component that is required to be so
tested, 3DV shall provide the purchaser with detailed test
data demonstrating that the 3DV Component conforms to the
applicable test criteria. Upon delivery of each shipment of
3DV Components, and in addition to any testing by 3DV required
by this Section 3.4, the purchaser shall have seven 7days
from the date of receipt to inspect and test all or any part
of such shipment to determine whether the 3DV Components in
the shipment (i) fail to conform to any applicable
requirements of this Agreement and the relevant purchase order
or (ii) have any defects in materials and workmanship
(collectively, "Nonconformities"). If the purchaser does not
discover any Nonconformities during such period and report
such Nonconformities to 3DV promptly upon discovery, the
purchaser shall be deemed to have accepted the shipment. If
the purchaser discovers and reports any Nonconformities within
such period, then (x) if the purchaser has so inspected and
tested only part of the shipment, 3DV shall so inspect and
test, or pay for the inspection and testing of, the remainder
of the shipment, and (y) 3DV shall, at 3DV's expense, either
(A) promptly correct all Nonconformities found through such
inspection and testing or (B) replace such nonconforming 3DV
Components with conforming 3DV Components and, at 3DV's
request, cost and direction, the purchaser shall ship the
nonconforming 3DV Components back to 3DV. Once 3DV believes
it has corrected such Nonconformities, the purchaser shall
have another seven (7) day period to determine if there are
any Nonconformities in the shipment. If 3DV fails to correct
any material Nonconformity within seven (7) days after
receiving notice of such Nonconformity, the purchaser may
reject all or any part of the shipment containing the 3DV
Component with the Nonconformity.
3.5. 3DV shall invoice the purchaser for the price of any 3DV
Components ordered pursuant to this Article 3 upon the
shipment of such 3DV Components. Any properly invoiced such
amounts shall be payable 30 days after the purchaser's receipt
of 3DV's invoice or 15 days after the purchaser's acceptance
of the relevant 3DV Components, whichever is later.
3.6. For purposes of this Section 3 and solely with respect to AOC
as an Approved Assign hereunder, references in the definition
of the term 3DV Component in Section 1.1 to a camera (or
component thereof) or other imaging device shall mean and
refer to solely to an EO Element.
7
<PAGE>
3.7. 3DV shall comply with all laws and regulations applicable to
its activities under this Section 3.
4. Representations and Warranties
------------------------------
4.1. The parties each represent and warrant that they have the
right, power and authority to enter into and to perform their
obligations under this Agreement.
4.2. 3DV represents and warrants that:
4.2.1. It is a corporation duly organized under the laws of Israel;
4.2.2. It has the right to grant the rights granted in Article 2;
4.2.3. This Agreement is not in violation of any obligation it has to
any third party;
3DV Components manufactured and sold by 3DV, and the subsequent use and resale
thereof, will not, to the best knowledge and belief of 3DV, infringe any patent,
trade secret, copyright, mask work right or other proprietary right of any third
party; and
4.3. VSI represents and warrants that:
4.3.1. It is a corporation duly organized under the laws of the State
of Delaware, United States of America; and
4.3.2. This Agreement is not in violation of any obligation it has to
any third party.
4.3.3. VSI and the Approved Assign have examined the Basic Patents,
were given adequate opportunity to ask questions and had
received all answers thereto and other information which they
had requested, all in satisfactory form and detail. VSI and
the Approved Assigns are fully aware that the technology of
3DV is at an early stage of development and that there can be
no assurances as to its feasibility or that it will ultimately
be matured or achieve the desired performance. VSI and the
Approved Assigns are experienced in the technological fields
which are relevant to 3DV's technology, and they are capable
of evaluating the economic risk which exists under these
conditions.
4.4. NEITHER PARTY MAKES ANY OTHER EXPRESS OR IMPLIED WARRANTIES
OF ANY KIND (INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE).
8
<PAGE>
5. Indemnity
---------
5.1. 3DV shall defend, indemnify and hold harmless VSI, Approved
Assigns, their customers and their respective directors,
officers, agents, employees and shareholders from and against
all claims, liabilities, suits, losses, damages and expenses
and any of the foregoing resulting from claims from third
parties, including costs and reasonable attorney's fees, but
excluding consequential or special damages ("Claims") relating
to or resulting from (i) the manufacture, of 3DV Components
manufactured by 3DV or (ii) any3DV Component manufactured and
sold by 3DV infringing upon, any patent, trade secret,
copyright, mask work right or other proprietary right of any
third party and 3DV shall take such commercially reasonable
actions as may facilitate or assist in the continued
manufacture, use and sale of such 3DV Component or modify the
design of the 3DV Component so as to render it noninfringing.
5.2. VSI and Approved Assign shall defend, indemnify and hold
harmless 3DV and its directors, officers, agents, employees
and shareholders from and against all Claims relating to or
resulting from (i) breach of any of the representations and
warranties made by VSI in Article 4, or (ii) the manufacture,
use or sale of Products manufactured and sold by VSI or
Approved Assign, as the case may be, except to the extent such
Claims are covered by Section 5.1.
5.3. In connection with any Claim covered by Section 5.1 or 5.2,
(i) the indemnifying party shall assume, at its cost and
expense, control of the defense or settlement of such Claim
through counsel selected by the indemnifying party; (ii) the
indemnified party shall have the right to participate in the
defense or settlement of the Claim at its expense; and (iii)
the parties shall cooperate to the extent necessary in the
defense of the Claim.
6. Third Party Infringement
------------------------
6.1. VSI shall have the right, but not the obligation, to enforce
the 3DV Proprietary Rights against infringement by a third
party in the Exclusive VSI Field. If VSI elects so to enforce
the 3DV Proprietary Rights, VSI's enforcement action shall be
at VSI's expense, and VSI shall have the right to retain any
settlement amounts or judgments recovered through such
enforcement. VSI shall have the right to join 3DV as a party
plaintiff if necessary or desirable in such enforcement. 3DV
shall fully cooperate with and supply all assistance
reasonably requested by VSI in such enforcement, including by
making its employees available to testify when requested and
to make available relevant records, papers, information,
samples, specimens and the like, all at VSI's or the Approved
Assigns cost.
9
<PAGE>
7. Insurance
---------
7.1. 3DV shall, at its sole expense, maintain policies of
comprehensive general liability insurance issued by insurers
acceptable to VSI in such amounts as the parties shall from
time to time agree. Such insurance shall provide (i) product
liability coverage and (ii) broad form contractual liability
coverage for the indemnity in Article 5. Such insurance shall
name VSI and Approved Assigns as additional insureds. Such
insurance shall be primary coverage without right of
contribution from any VSI insurance. Insurance obtained by VSI
is for the exclusive benefit of VSI.
7.2. 3DV shall provide VSI with written evidence of such insurance
upon request of VSI.
8. Confidentiality
---------------
8.1. For the purpose of this Article 8, the term "Confidential
Information" means any information used in or relating to the
business of one party (the "Disclosing Party"), including but
not limited to information concerning the Disclosing Party's
research, development efforts, trade secrets, product or
marketing plans, vendor or customer relationships, finances,
business operations or affairs and any information of third
parties that the Disclosing Party maintains in confidence,
and all tangible embodiments of such information, that is
received by the other party (the "Receiving Party"), in any
form.
8.2. A Receiving Party shall not use the Disclosing Party's
Confidential Information for any purpose other than in
accordance with this Agreement and shall not disclose
Confidential Information to any person other than its
employees and its independent contractors subject to a
nondisclosure obligation comparable in scope to this Article
8, which employees and independent contractors have a need to
know such Confidential Information; provided that VSI may (i)
disclose 3DV Confidential Information to an Approved Assign
subject to a nondisclosure obligation comparable in scope to
this Article 8, and (ii) to the extent reasonably necessary,
disclose to its customers and suppliers technical information
concerning the performance characteristics of 3DV Components,
which information is of a type reasonably and customarily
disclosed to customers and suppliers on a non-confidential
basis, in connection with the manufacture, use or sale of
Products.
8.3. Notwithstanding Section 8.2, a Receiving Party may use for any
purpose or disclose any information that the Receiving Party
can show (i) is or becomes publicly known through no fault of
the Receiving Party; (ii) is developed independently by the
Receiving Party; (iii) is known by the Receiving Party when
disclosed by the Disclosing Party, if the Receiving Party does
not then
10
<PAGE>
have a duty to maintain its confidentiality; or (iv) is
rightfully obtained by the Receiving Party from a third party
not obligated to preserve its confidentiality. A Receiving
Party also may disclose Confidential Information to the extent
required by a court or other governmental authority, provided
that (a) the Receiving Party gives the Disclosing Party
reasonable notice of the disclosure, (b) the Receiving Party
uses reasonable efforts to resist disclosing the Confidential
Information, and (c) the Receiving Party cooperates with the
Disclosing Party on request to obtain a protective order or
otherwise limit the disclosure.
8.4. The parties acknowledge that either party's breach of Section
8.2 would cause the other party irreparable injury for which
it would not have an adequate remedy at law. In the event of a
breach, the non-breaching party shall be entitled to
injunctive relief in addition to any other remedies it may
have at law or in equity.
9. LIMITATION OF LIABILITY
-----------------------
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES AS A RESULT OF ANY CLAIM ARISING
UNDER THIS AGREEMENT, REGARDLESS OF WHETHER THE PARTY WAS ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
10. Term and Termination
--------------------
10.1. This Agreement shall remain in effect unless terminated in
accordance with the provisions of this Article 10.
10.2. Each party shall have the right to terminate this Agreement if
the other party materially breaches its obligations under this
Agreement and fails to remedy the breach within ninety (90)
days after receiving notice of the breach from the
nonbreaching party.
10.3. 3DV shall have the right to terminate this Agreement with
respect to VSI upon 30 days written notice to VSI if (i) the
purchase and sale right of VSI and RDC pursuant to Section 3.1
of the Investment Agreement shall expire without being
exercised by VSI, (ii) VSI fails to satisfy its obligations in
respect of the 1999 Advanced Funds and 2000 Advanced Funds, as
defined in the Investment Agreement, or (iii) VSI becomes the
subject of voluntary bankruptcy, insolvency or similar
proceedings, or involuntary proceedings not dismissed within
90 days; provided that in the event of any such termination
with respect to VSI, (a) 3DV shall accept an assignment of any
sublicense to an Approved Assign, and such sublicense shall
then continue in effect as a license directly
11
<PAGE>
from 3DV to 3DV's sublicensee, (b) if VSI has assigned all or
any part of its rights under Section 2.1 to an Approved
Assign, this Agreement shall continue in effect with respect
to such Approved Assign unless terminated in accordance with
Section 10.2 or 10.3, and (c) such continuation shall be
subject to the provisions of Articles 3 and 10.
10.4. Except as provided in Section 10.3, in the event of any
termination of this Agreement, all of 3DV's Proprietary Rights
shall revert to 3DV, including any of 3DV's Proprietary Rights
with respect to improvements, modifications and enhancements
to, and applications of, 3DV technology created, conceived or
reduced to practice under this Agreement.
11. Notices
-------
11.1. All notices sent under this Agreement shall be in writing and
(i) hand delivered; (ii) transmitted by legible telecopy,
with a copy sent concurrently by certified mail, return
receipt requested; or (iii) delivered by prepaid overnight
courier. Such notices shall be deemed effective when received.
11.2. Notices shall be sent to the parties at the following
addresses or such other addresses as the parties subsequently
may provide:
If to VSI: Vision-Sciences, Inc.
40 Ramland Road South
Orangeburg, New York 10962
USA
Attn: Katsumi Oneda
Tel: 1-914-365-0600
Fax: 1-914-365-0620
If to 3DV: 3DV Systems Ltd.
Bldg. 7 Industrial Park
P.O. Box 249, Yokneam 20692
Israel
Attn: Ori J. Braun, President
Tel: 011-972-4-9599599
Fax: 011-972-4-9590719
12. Miscellaneous
-------------
12
<PAGE>
12.1. All communications between the parties shall be in the English
language.
12.2. Except as may be required by applicable law, neither party
may, without prior written consent of the other party, use the
name or any trademark of the other party in any advertising or
publicity material, or make any form of representation or
statement which would constitute an express or implied
endorsement by the other party of any product.
12.3. Nothing in this Agreement shall be construed as creating a
partnership, joint venture or agency relationship between the
parties, or as authorizing either party to act as agent for
the other.
12.4. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York of the
United States of America, with the same force and effect as if
executed and to be fully performed therein. For the
adjudication of any disputes arising in connection with this
Agreement, the parties hereby consent to the personal
jurisdiction of and venue in any federal or state court of
competent subject matter jurisdiction located in the State of
New York, and the parties agree that such jurisdiction and
venue shall be exclusive. The parties further consent to
service of any process relating to this Agreement by
registered or certified mail or by personal service. The
parties hereby exclude from application to this Agreement the
United Nations Convention on Contracts for the International
Sale of Goods.
12.5. The provisions of this Agreement are severable, and the
unenforceability of any provision of this Agreement shall not
affect the enforceability of the remainder of this Agreement.
The parties acknowledge that it is their intention that if any
provision of this Agreement is determined by a court to be
unenforceable as drafted, that provision should be construed
in a manner designed to effectuate the purposes of that
provision to the greatest extent possible under applicable
law.
12.6. The rights and remedies provided in this Agreement and all
other rights and remedies available to either party at law or
in equity are, to the extent permitted by law, cumulative and
not exclusive of any other right or remedy now or hereafter
available at law or in equity. Neither asserting a right nor
employing a remedy shall preclude the concurrent assertion of
any other right or employment of any other remedy, nor shall
the failure to assert any right or remedy constitute a waiver
of that right or remedy.
12.7. Except as otherwise specifically provided in this Agreement
and except with respect to any Approved Assign, neither party
shall assign any of its rights or obligations nor subcontract
or otherwise delegate any of its duties under this Agreement
to any third party without the prior written consent of the
other
13
<PAGE>
party, which shall not be withheld unreasonably. Any
assignment or delegation in violation of this Section 12.7
shall be void.
12.8. This Agreement shall be binding upon and inure to the benefit
of the parties, their successors, permitted assigns and legal
representatives.
12.9. All headings in this Agreement are included solely for
convenient references and shall not affect the meaning or
interpretation of this Agreement.
12.10. This Agreement may be executed in counterparts, each of which
shall be deemed to be original but all of which together shall
constitute a single instrument.
12.11. The provisions of and of Articles, 5 (for a period of twelve
(12) months following the date of the termination of this
Agreement), 8, 9, 11, and 12 shall survive the expiration or
termination of this Agreement; provided however that in
accordance with the terms of this Agreement no termination of
this Agreement with respect to VSI shall terminate or
derogate from any rights of any Approved Assign under this
Agreement.
12.12. This Agreement sets forth the entire agreement of the parties
concerning the subject matter hereof and supersedes all prior
agreements between the parties concerning the subject matter
hereof. Amendments to this Agreement must be in writing signed
by duly authorized officers of the parties. No claimed oral
agreement in respect thereto shall be considered as any part
hereof.
12.13. No waiver of or change in any of the terms hereof subsequent
to the execution hereof claimed to have been made by any
representative of either party shall have any force or effect
unless in writing, signed by duly authorized representatives
of the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers:
VISION-SCIENCES, INC. 3DV SYSTEMS LTD.
By: /s/Katsumi Oneda By: /s/Ori Brown
------------------------------ ----------------
Name: Katsumi Oneda Name: Ori Brown
------------------------------ ----------------
Title: President Title: President
------------------------------ ----------------
Date: August 6, 1998 Date: August 6, 1998
------------------------------ ----------------
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<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
August 3, 1998 MOU
Memorandum of Understanding
concerning a research and Patent-Rights Transfer in the area of
CMOS-based Image Sensors
between
Vision Sciences, Inc.
a Delaware corporation,
Nine Strathmore Road, Natick, Massachusetts 01760 USA
(hereinafter referred as "Vision Sciences")
and
Imagineering, Ltd
(hereinafter referred as "Imagineering")
WHEREAS
Imagineering is in possession of certain innovations (hereinafter called the
"innovations") that improve the performance of CMOS-based Image Sensors and are
potentially patentable (as further described in Appendix A, and hereinafter
referred as "the patents"), and
WHEREAS
Imagineering declares, that it is in the capacity to cause [**] who has
conceived the innovations (hereinafter referred as [**]), to perform the
necessary research, which may potentially result in patent applications, and
patent rights, and
WHEREAS
Imagineering declares that although there is no guarantee, to its best knowledge
the innovations do not infringe on existing patents, and
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
WHEREAS
Imagineering is willing to cause [**] to assign the patents to Vision Sciences,
under certain terms and conditions, and
WHEREAS
Vision Sciences wishes to acquire from Imagineering the exclusive rights to the
research performed in association with the patents, and
WHEREAS
Vision Sciences wishes to purchase the exclusive rights to the patents, by
causing [**] to issue in-writing detailed descriptions, which can be the basis
for the patent filing, assign the patents to Vision Sciences, and to assist
Vision Sciences in the process of having the patent rights assigned, and
WHEREAS
Vision Sciences declares it is aware that there is no guarantee that some, or
all of the innovations are patent-worthy or that the Patent Office will assign
to it the patent rights, or that the patented innovations are implementable.
NOW
Therefore in consideration of the promises and mutual covenants hereinafter
contained, and after making all needed inquiries the parties hereto agree as
follows:
1. Preamble, Headings and Appendices
1.1 The preamble to this Memorandum Of Understanding (hereinafter
called MOU) and its appendices are an integral and inseparable
part of this MOU.
1.2 The descriptive headings of this MOU are inserted for
convenience only and do not constitute a part of this
agreement.
2
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
2. Deliverables
Imagineering will deliver and assign to Vision Sciences:
2.1 Detailed and in-writing descriptions of each innovation listed
in Appendix A, scheduled for delivery as stated in Appendix B,
in a suitable form for the purpose of patent application
write-up by a patent attorney.
2.2 Technical information supportive of patent filing, such as
references to articles, and patents defined as a prior art,
and required by the Patent Office Examiner.
2.3 All know-how, diagrams, models, technical articles, electronic
schemes, notes, sketches, drawings, any documentation whether
written, stored on a magnetic media, which is directly
associated with the patents, and can support the patent
application examination process, as well as the development,
and the implementa tion of CMOS Image Sensors, based upon the
patents.
3. Other Services
Imagineering will cause [**] to:
3.1 perform in his best effort to turn the innovations into patent
applications,
3.2 help Vision Sciences to become an exclusive assignee of the
patents,
3.3 support the patent examining process, and
3.4 serve Vision Sciences with guidance, and advise during the
implementation of the innovations on CMOS Image Sensors,
within a definite but limited period, to the MOU Period, as defined in
section.
4. Period
This MOU shall commence on the date hereof and shall continue until the first
anniversary hereof (such period, as it may extended, being referred to as the "
MOU Period", unless sooner terminated in accordance with the provisions of
section 6). Vision Sciences and Imagineering intend to continue working together
for a period of five years, and shall negotiate the terms of this MOU and
extensions to the MOU Period from time to time, following the first anniversary
hereof.
3
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
5. Compensation
5.1 Deliverables and Service Fees: Vision Sciences shall pay
Imagineering for the deliverables, and the services fees of
U.S.[**] per month, on the last day of each month, and for the
entire MOU Period. Service for any partial month shall be
prorated. The payment will be wired to a bank branch, as
specified by Imagineering.
5.2 Reimbursement of Expenses: Vision Sciences shall reimburse
Imagineering for all reasonable and necessary expenses
incurred or paid by Imagineering in connection with, or is
related to, the performance of services by [**] under this
agreement. Imagineering or [**] will submit to Vision Sciences
itemized monthly statements, in a form satisfactory to Vision
Sciences, of such expenses incurred in the previous month.
Notwithstanding the foregoing, Imagineering or [**] shall not
incur total expenses in excess of U.S. $ 500 per month without
the prior written approval of Vision Sciences.
5.3 Benefits: Neither Imagineering or [**] shall be entitled to
any benefits, coverage, or privileges, including, without
limitation, social security, unemployment, medical or pension
payments, made available to employees of Vision Sciences.
6. Patents and Patent Filing
6.1 All the patents as listed in Appendix A, will be filed with
[**] as named inventor and Vision Sciences as the named
assignee.
6.2 Patent search, and patent filing, patent attorney, application
costs, and any other costs incurred on the way to patent
assignment to Vision Sciences, by the Patent Office, will be
the sole responsibility of Vision Sciences.
7. Premature Termination
The MOU Period may be terminated, prior to one year (hereinafter
referred as "terminated MOU Period"), for the following reasons:
7.1 Vision Sciences may have due to failure of Imagineering to
perform its obligations with, or without reason, as listed in
sections 2, and 3, and section 6, terminate the MOU upon 30
days' prior written notice to Imagineering.
4
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
7.2 Notwithstanding the foregoing, Vision Sciences may terminate
the MOU Period, effective immediately upon receipt of written
notice, if Imagineering or [**] breaches or threatens to
breach any provision in section 8.
7.3 Imagineering may have due to failure of Vision Sciences to
perform its obligations, as listed in section 5, and section
6, terminate the MOU upon 30 days' prior written notice to
Vision Sciences.
7.4 Notwithstanding the foregoing, Imagineering may terminate the
MOU Period, effective immediately upon receipt of written
notice, if Vision Sciences breaches or threatens to breach any
provision in section 8.
In the event of premature termination as listed in sections
7.1, 7.2, 7.3, and 7.4, Imagineering will be entitled to
payment for deliverables, and services performed and expenses
paid or incurred prior to the effective date of termination,
subject to the limitation on reimbursement of expenses set
forth in section 5.2. Such payments shall constitute full
settlement of any and all claims of Imagineering of every
description against Vision Sciences. Vision Sciences will
retain the rights to all the deliverables, and services
rendered, as listed in sections 2, and 3, but limited to the
terminated MOU Period. This will constitute the full
settlement of any and all claims of every description against
Imagineering.
8. Proprietary Information
8.1 Imagineering, [**] and Vision Sciences each acknowledges that
their relationship is one of high trust and confidence, and
that in the course of the MOU Period, and beyond, a party will
have access to and contact with Proprietary Information of the
other party. Both parties agree that, it or he will not during
the MOU Period or at any time thereafter, disclose to others,
or use for its or his benefit or the benefit of others, any
Proprietary Information or Invention which belongs to the
other party.
5
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
8.2 For the purpose of this MOU, Proprietary Information shall
mean, by way of illustration and not limited to, all
information (whether or not patentable and whether or not
copyrightable) owned, possessed, or used by other party,
including but not limited to, any invention, formula, vendor
information, customer information, apparatus, equipment, trade
secret, process, research, report, technical data, know-how,
computer program, software, software documentation, hardware
design, technology, marketing, or business plan, forecast,
unpublished financial statement, budget, license, price, cost,
name of on associate, and an employee list that is
communicated to, learned of, developed or otherwise acquired
by each party or [**], in the course of interaction during the
MOU Period.
8.3 For the purpose of this MOU, [**] involvement, and his role in
implementing this MOU, is considered Proprietary Information,
unless specifically required for its implementation, or unless
Vision Sciences is given an explicit, and in-writing consent,
or is required by law to disclose [**] involvement hereunder.
8.4 Imagineering and [**] obligations under sections 7.2, and 7.3,
on one hand, and Vision Sciences on the other, shall not apply
to any information of one party that (i) is or becomes known
to the general public under circumstances involving no breach
by the other party in terms of section 7.2, (ii) is generally
disclosed to third parties by the party, without restriction
on such third parties, or (iii) is approved for release by the
party officer.
8.5 Upon termination of this MOU or any other time upon request by
one party, the other party shall promptly deliver to the
requesting party, all records, files, memoranda, notes,
designs, data, reports, drawings, plans, computer programs,
software, software documentation, sketches, laboratory and
research notebooks and other documents (and all copies or
reproductions of such materials) which are the sole property
of the other party, and relate to its business.
8.6 Imagineering and [**] each represents that its or his
retention as a consultant with Vision Sciences and its or his
performance under the MOU does not, and shall not, breach any
oral or written policy or agreement to which Imagineering or
[**] is a party or subject including, without limitation any
such policy or agreement that obligates it or him to keep in
confidence any trade secrets or confidential or proprietary
information of its or his or any other party or to refrain
from competing, directly or indirectly with the business of
any party. Neither Imagineering, nor [**] shall disclose to
Vision Sciences any trade secrets or confidential or
proprietary information of any other party.
6
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
8.7 Imagineering and [**] each acknowledge that Vision Sciences
from time to time may have agreements with other persons or
with the government of the United States or other
jurisdiction, or agencies thereof, that impose obligations or
restrictions on Vision Sciences regarding invention made
during the course of work under such agreements or regarding
the confidential nature of such work. Imagineering and [**]
each agrees to bound by all such obligations and restrictions
that are known to it or him and to take all action necessary
to discharge the obligations of Vision Sciences under such
agreements.
8.8 Independent Contractor Status: Imagineering and[**] shall
perform all services under this MOU as "independent
contractors" and not as employees or agents for Vision
Sciences. Neither Imagineering nor [**] is authorized to
assume or create any obligation or responsibility, express or
implied, on behalf of, or in the name of, Vision Sciences or
to bind Vision Sciences in any manner.
9. MOU Validation
This MOU is valid if and only if, [**] commits formally, and in writing, to
assist Imagineering in meeting its obligations towards Vision Sciences, as
stated in this MOU. The provision for such in-writing commitment is attached as
Appendix C to this MOU.
10. Notices
All notices required or permitted under this MOU shall be in writing, and shall
be deemed effective upon personal delivery or upon deposit in any country Post
Office, by registered or certified mail, postage prepaid, addressed to the other
party at the address shown above, or such other address, or addresses as either
party shall designate to other, in accordance with this section 10.
11. Entire Agreement
This MOU constitutes the entire agreement between the parties and supersedes all
prior agreements and understandings, whether written or oral.
12. Amendment
This MOU may be amended or modified only by a written instrument executed by
both, Vision Sciences and Imagineering.
7
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13. Successors and Assigns
This MOU shall be binding upon, and inure to the benefit of, both parties and
their respective successors and assigns, including without limitation any
corporation with which, or into which Vision Sciences or Imagineering can be
merged or which may succeed to its obligations, assets or business.
14. Arbitration
In case of dispute between the parties agree to apply an arbitration mechanism
to be conducted in the Commonwealth of Massachusetts. The arbiter must be
acceptable on both parties. The parties agree that the outcome of the
arbitration is irrevocable.
15. Governing Law
This MOU is governed by the laws, and the jurisdiction of Commonwealth of
Massachusetts.
16. Invalid Provision Case
In the event that any provision of this MOU shall be invalid, illegal or
otherwise unenforceable, the validity, legality, and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this MOU as of the day and
year set forth below.
VISION SCIENCES, INC. IMAGINEERING
By: /s/Katsumi Oneda By /s/Aviad Stark
---------------------------- ----------------------
Katsumi Oneda, President Aviad Stark, President
Date: August 6, 1998 Date: August 3, 1998
------------------------- ----------------------
8
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Appendix A: The Innovations
Under this MOU, the following innovations will be researched by [**] and
eventually result with patent applications if the research concludes in success
and if found non-infringing on publicly known patents.
<TABLE>
<CAPTION>
Innovation Short Description
- --------------------------------------------------------------------------------
<S> <C> <C>
1
[**] [**]
- ----- ---------------- ---------------------------------------------------------
2
[**] [**]
- ----- ---------------- ---------------------------------------------------------
3
[**] [**]
- ----- ---------------- ---------------------------------------------------------
4
[**] [**]
- ----- ---------------- ---------------------------------------------------------
5
[**] [**]
- ----- ---------------- ---------------------------------------------------------
6
[**] [**]
- ----- ---------------- ---------------------------------------------------------
</TABLE>
9
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Appendix B: Schedule
These Appendix lists the delivery dates to the patent attorney of the material
required to prepare the patent filing. The Patent number corresponds to the
Innovation number, as listed in Appendix A.
<TABLE>
<CAPTION>
Patent Number Date
- --------------------------- --------------------------
<S> <C>
1
- --------------------------- --------------------------
2
- --------------------------- --------------------------
3
- --------------------------- --------------------------
4
- --------------------------- --------------------------
5
- --------------------------- --------------------------
6
- --------------------------- --------------------------
</TABLE>
10
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Appendix C: MOU Validation
I, [**] declare that I will act and perform whatever is expected on my part, to
make Imagineering fulfill its obligations, in line with this MOU.
By:
-------------------------------
[**]
Date:
-------------------------------
11
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote deletions.
LICENSE AGREEMENT
BETWEEN
VISION-SCIENCES, INC.
AND
ASAHI OPTICAL CO., LTD.
This License Agreement ("Agreement") is made as of August 6,
1998 (the "Effective Date") between (1) Vision-Sciences, Inc. ("VSI"), a
Delaware corporation with its principal place of business at 9 Strathmore Rd.,
Natick, Massachussetts 01760 , U.S.A. and (2) ASAHI OPTICAL CO., LTD. ("AOC"), a
Japanese corporation with its principal office at 2-36-9, Maeno-cho,
Itabashi-ku, Tokyo 174, Japan.
RECITALS:
A. VSI is engaged in the development and sale of industrial and medical
endoscopes and related technologies and products, and is a party to that certain
License and Manufacturing Agreement, dated as of August 6, 1998 (the "License
Agreement") between VSI and 3DV.
B. AOC is a party to that certain Agreement, dated as of the date
hereof (the "Manufacturing and Technical Assistance Agreement"), between AOC and
3DV, relating to, among other things, the manufacturing of certain products
incorporating Proprietary Rights (as defined herein).
C. AOC desires to acquire from VSI exclusive rights with respect to the
Proprietary Rights and Technology (as hereinbelow defined, respectively) in
certain fields and
<PAGE>
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisks denote deletions.
to acquire from VSI and 3DV (as hereinbelow defined) certain products having
applications in those fields in accordance with the terms hereof; and
D. VSI desires to grant such rights to AOC as the sole and exclusive
Approved Assign under the License Agreement, entitled to the rights and benefits
of an Approved Assign under the License Agreement in accordance with the terms
hereof.
NOW, THEREFORE, the parties, intending to be legally bound, hereby agree
as follows:
Article I
Definitions
1.1. "3DV" means 3DV Systems Ltd., an Israeli company with its principal
place of business at Bldg. 7, Industrial Park, P.O. Box 249, Yokneam 20692
Israel.
1.2. "Affiliate" means, with respect to a corporation or other entity,
any entity controlling, controlled by, or under common control with such first
entity.
1.3. "Claims" has the meaning set forth in Article 7.1.
1.4. "Confidential Information" has the meaning set forth in Article
10.1.
1.5. "CMOS" means active pixel CMOS-based image sensors as suggested by
[**].
1.6. "Digital Still Camera" means a camera which is designed and/or used
primarily to capture still images (as opposed to full motion video) in digital
form, and which is covered by Proprietary Rights or made by a process covered by
Proprietary Rights, which Proprietary Rights are enforceable in any country in
which the camera (or component thereof) is made, used or sold.
1.7. "Disclosing Party" has the meaning given in Article 10.1.
1.8. "Each Related Party" has the meaning given in Article 4.1.
2
<PAGE>
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisks denote deletions.
1.9. "EO Element" means the electro optical element of electro
optic shutter described in the Basic Patents referred to in Article 1.13.
1.10. "Exclusive Field" means the field represented by the use,
market and application of devices designed and/or used primarily in, or capable
of substantial use in, any of the following application area: (i) [**] systems;
(ii) [**] systems; (iii) [**]a systems; and (iv) [**] systems [**].
1.11. "Nonconformities" has the meaning set forth in Articles 3.4
and 5.2.
1.12. "Product" means a device designed, made, used, offered for
sale or sold by or for AOC, which is covered by Proprietary Rights or made by a
process covered by Proprietary Rights, which Proprietary Rights are enforceable
in any country in which the device is designed, made, used or sold, regardless
whether said device includes an EO Element or not.
1.13. "Proprietary Rights" means any and all rights of 3DV or its
Affiliates, anywhere in the world, with respect to (i) the patents and patent
applications (including continuations and continuations in part to the extent
claiming the same or similar subject matter) described on Exhibit I (the "Basic
Patents") and (ii) any subsequent patents or patent applications covering
improvements, modifications and enhancements to the Basic Patents and claiming
subject matter which could not be practiced without a license or right to use
the Basic Patents and without infringing the rights underlying the Basic
Patents, together with all trade secrets and other intellectual property rights
of 3DV disclosed in the Basic Patents or in any of such other patents or patent
applications.
1.14. "Receiving Party" has the meaning given in Article 10.1.
1.15. "[**]" means [**].
1.16. "Technology" means patentable and nonpatentable technology
relating to the utilization or application of CMOS as researched or developed
singly by VSI or jointly by VSI and [**].
3
<PAGE>
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisks denote deletions.
Article 2
Licenses and Other Intellectual Property Matters
2.1. VSI hereby grants and assigns to AOC, as the sole and exclusive
Approved Assign under the License Agreement, a worldwide, perpetual,
royalty-free license under all Proprietary Rights to:
2.1.1. Design, have designed, make, have made, use, offer for sale,
sell and import Products, and adapt, distribute, perform and display designs,
computer software and other works of authorship covered by Proprietary Rights,
on a sole and exclusive basis within the Exclusive Field, including all rights
to the integration of EO Element into such products and the distribution and
sale of such products, in the Exclusive Field, but excluding the right to
manufacture and supply the 3DV Component (or the EO Element, as the case may
be), which shall be reserved exclusively to 3DV except in the specific
circumstances described in Section 3.1, and
2.1.2. Design, have designed, make, have made, use, offer for sale,
sell and import Digital Still Cameras, and adapt, distribute, perform and
display designs, computer software and other works of authorship covered by
Proprietary Rights in connection with Digital Still Cameras, on a nonexclusive
basis, but excluding the right to manufacture and supply the 3DV Component (or
the EO Element, as the case may be), which shall be reserved exclusively to 3DV
except in the specific circumstances described in Section 3.1.
2.2. VSI hereby grants a worldwide, perpetual, royalty-free license:
2.2.1. Use the Technology on a sole and exclusive basis for the
utilization or application of CMOS within the field of [**] systems and related
products; and
2.2.2. Use the Technology on a non-exclusive basis for the utilization
or application of CMOS outside the field of application described in Section
2.2.1.
2.3. Notwithstanding the provisions of Articles 2.1 and 2.2 above,
VSI reserves the right to:
2.3.1. Practice and use by itself (and its subcontractors) the
Proprietary Rights for the manufacture and sale of products bearing VSI's own
trademarks, only within the field of [**] systems and related products; and
4
<PAGE>
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisks denote deletions.
2.3.2. Practice and use by itself CMOS for products bearing VSI's own
trademarks in the field of [**] systems and related products.
2.4. VSI shall, at the request of AOC, permit, AOC to register, or
take other legal protection as to, the license granted to AOC hereunder at any
competent government authority, in order for AOC's position as a licensee under
this Agreement and as an Approved Assign under the License Agreement to be
effective against third parties.
2.5. VSI shall promptly upon request or otherwise on or about every
six months during the term of this Agreement disclose to AOC any invention,
discovery, design, computer software or other technology having applications in
the Exclusive Field and which relates to the subject matter of the Proprietary
Rights that is created, conceived or reduced to practice by VSI or 3DV, or its
personnel during the term of this Agreement, whether pursuant to Article 3 or
otherwise. A disclosure shall consist of a written summary sufficient to convey
a clear understanding of the nature, purpose, operation and characteristics of
the invention, discovery, design, computer software or other technology. Upon
request, VSI shall provide to AOC any information reasonably required by AOC for
the evaluation or use thereof. VSI shall consult with AOC concerning the
patenting or other legal protection of each such invention, discovery, design,
computer software or other technology
2.6. The parties acknowledge that certain devices outside the
Exclusive Field may be capable of incidental uses in the Exclusive Field and
that such incidental uses by third parties may be difficult or impossible to
discover or control. VSI, however, shall not (except as permitted in the
exercise of its rights under Section 2.3 above) directly or indirectly engage,
or assist any other person, corporation or other entity to engage, in the
design, development, manufacture, sale, marketing or use of any device in the
Exclusive Field anywhere the world during the term of this Agreement. VSI
acknowledges that its obligations under this Article 2.6 are founded upon
valuable consideration, necessary to protect the legitimate interests of AOC,
and reasonable with respect to geographic and temporal scope.
Article 3
Manufacturing of EO Element
Notwithstanding the provisions of Article 2, AOC acknowledges that 3DV shall
have an exclusive right to manufacture for AOC, and sell to AOC, EO Element to
be included in a Product manufactured and sold by or for AOC in accordance with
the terms and conditions set forth in the Manufacturing and Technical Assistance
Agreement, a copy of which is attached hereto as Exhibit A.
5
<PAGE>
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisks denote deletions.
Article 4
Technical Assistance
4.1. At the request of AOC and within a reasonable period of time
after such request, VSI shall from time to time make arrangements, so that [**]
or his assistants ("Each Related Party") will furnish AOC with all information
necessary to integrate the Technology, and VSI shall accordingly cause Each
Related Party to furnish AOC with such information by causing Each Related Party
to disclose the same in documentary form, by causing Each Related Party to
respond to inquiries from AOC, by causing Each Related Party to dispatch its
technical experts to AOC or to accept AOC's personnel at Each Related Party's
facilities, or by causing Each Related Party to take other suitable measures.
Article 5
Priority Development and Supply of CMOS
5.1. VSI shall develop the CMOS applicable to industrial and medical
endoscope systems and realted products, with first priority over other areas,
and shall manufacture and supply such CMOS to AOC at the fair, reasonable and
most favorable prices and conditions. So far as such development is made by VSI,
AOC shall purchase from VSI the CMOS to be used by AOC in the Exclusive Field.
5.2. Such sale and purchase of CMOS shall be governed by the
provisions of this Article 5.2.
5.2.1. At any time during the term of this Agreement, AOC may order
CMOS from VSI by submitting a purchase order therefor to VSI, and the price and
delivery schedule for such CMOS shall be negotiated in good faith between VSI
and AOC. VSI shall not unreasonably refuse to accept, or delay its acceptance
of, any such purchase order and shall, upon the acceptance of any such purchase
order, deliver the CMOS ordered, in accordance with the requirements of this
Agreement and the specifications, delivery schedule and other requirements
applicable under the purchase order. All such deliveries shall be F.O.B. port of
export (in accordance with INCOTERMS 1990), unless the purchase order specifies
otherwise.
6
<PAGE>
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisks denote deletions.
Article 6
Representations and Warranties
6.1. The parties each represent and warrant that they have the right,
power and authority to enter into and to perform their obligations under this
Agreement.
6.2. VSI represents and warrants that:
6.2.1. It is a corporation duly organized under the laws of the State
of Delaware;
6.2.2. It has the right to grant the rights granted in Article 2;
6.2.3. This Agreement is not in violation of any obligation it has to
any third Party;
6.2.4. All transactions contemplated in this Agreement are lawful and
not in violation of any laws and regulations both in Japan and in the United
States of America.
6.2.5. The CMOS manufactured and sold by VSI and the subsequent use and
resale thereof, will not infringe any patent, trade secret, copyright, mask work
right or other proprietary right of any third party;
6.2.6. The CMOS manufactured and sold by VSI and the subsequent use and
resale thereof, shall conform to any applicable requirements of this Agreement
and the relevant purchase order, be free of design defects that would render the
CMOS inoperable or unusable in Products, and be free of defects in materials and
workmanship for a period of one year from their acceptance by AOC. If CMOS fails
to conform to the representation and warranty of this Article 6.2.6, VSI shall
promptly remedy, or shall cause [**] to promptly remedy, such failure at the
expense of VSI; and
6.2.7. All the Proprietary Rights shall be maintained in effect and
valid pursuant to all applicable local laws and regulations, and the Technology
is and consist of patentable and nonpatentable technology relating to the
utilization or application of CMOS which is available to VSI at the time of the
furnishing thereof to AOC.
6.3. AOC represents and warrants that:
6.3.1. It is a corporation duly organized under the laws of Japan; and
6.3.2. This Agreement is not in violation of any obligation it has to
any third Party;
7
<PAGE>
6.4. NEITHER PARTY MAKES ANY OTHER EXPRESS OR IMPLIED WARRANTIES OR
ANY KIND (INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE).
Article 7
Indemnity
7.1. VSI shall defend, indemnify and hold harmless AOC and its
customers, directors, officers, agents, employees and shareholders from and
against all claims, liabilities, suits, losses, damages and expenses, including
costs and reasonable attorney's fees, but excluding consequential or special
damages ("Claims") relating to or resulting from (i) breach of any of the
representations and warranties made by VSI in Article 6, (ii) the use or sale of
CMOS manufactured and sold by VSI. If CMOS manufactured and sold by VSI
infringes any patent, trade secret, copyright, mask work right or other
propriety right of any third party, VSI shall use commercially reasonable
efforts, at VSI's expense, to promptly procure the rights necessary for the
continueduse and sale of such CMOS or modify the design of the CMOS so as to
render it noninfringing.
7.2. AOC shall defend, indemnify and hold harmless VSI and its
directors, officers, agents, employees and shareholders from and against all
Claims relating to or resulting from (i) breach of any of the representations
and warranties made by AOC in Article 6, or (ii) the manufacture, use or sale of
Products manufactured and sold by AOC, except to the extent such Claims are
covered by Article 7.1
7.3. In connection with any Claim covered by Article 7.1 or 7.2, (i)
the indemnifying party shall assume, at its cost and expense, control of the
defense or settlement of such Claim through counsel selected by the indemnifying
party; (ii) the indemnified party shall have the right to participate in the
defense or settlement of the Claim at its expense; and (iii) the parties shall
cooperate to the extent necessary in the defense of the Claim.
8
<PAGE>
Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisks denote deletions.
Article 8
Third Party Infringement
8.1. AOC shall have the right, but not the obligation, to enforce the
Proprietary Rights against infringement by a third party in the Exclusive Field.
If AOC elects to enforce the Proprietary Rights, AOC's enforcement action shall
be at AOC's expense, and AOC shall have the right to retain any settlement
amounts or judgments recovered through such enforcement. AOC shall have the
right to join VSI, 3DV or [**] as a party plaintiff if necessary or desirable in
such enforcement. VSI shall fully cooperate with and supply, and shall cause 3DV
or [**], as the case may be, to fully cooperate with and supply, all assistance
reasonably requested by AOC in such enforcement, including by making its
employees available to testify when requested and to make available relevant
records, papers, information, samples, specimens and the like, at AOC's cost and
expense.
Article 9
Insurance
9.1. VSI shall, at its sole expense, maintain policies of
comprehensive general liability insurance issued by insurers acceptable to AOC
in amounts reasonably acceptable to the parties as they shall determine from
time to time. Such insurance shall provide (i) product liability coverage and
(ii) broad form contractual liability coverage for the indemnity in Article 7.
Such insurance shall name AOC as additional insureds. Such insurance shall be
primary coverage without right of contribution from any AOC insurance. Insurance
obtained by AOC is for the exclusive benefit of AOC.
9.2. VSI shall provide AOC with written evidence of such insurance
upon request of AOC.
Article 10
Confidentiality
10.1. For the purpose of this Article 10, the term "Confidential
Information" means any information used in or relating to the business of one
party (the "Disclosing Party"), including but not limited to information
concerning the Disclosing Party's research, development efforts, trade secrets,
product or marketing plans, vendor or customer relationships, finances, business
operations or affairs and any information of third parties that the
9
<PAGE>
Disclosing Party maintains in confidence, and all tangible embodiments of such
information, that is received by the other party (the "Receiving Party"), in any
form
10.2. A Receiving Party shall not use the Disclosing Party's
Confidential information for any purpose other than in accordance with this
Agreement and shall not disclose Confidential Information to any person other
than its employees and its independent contractors subject to a nondisclosure
obligation comparable in scope to this Article 10, which employees and
independent contractors have a need to know such Confidential Information;
provided that AOC may, to the extent reasonably necessary, disclose to its
customers and suppliers technical information concerning the performance
characteristics of CMOS or Technology, which information is of a type reasonably
and customarily disclosed to customers and suppliers on a non-confidential
basis, in connection with the manufacture, use or sale of Products or other
products for which CMOS is used.
10.3. Notwithstanding Article 10.2, a Receiving Party may use for any
purpose or disclose any information that the Receiving Party can show (i) is or
becomes publicly known through no fault of the Receiving Party; (ii) is
developed independently by the Receiving Party; (iii) is known by the Receiving
Party when disclosed by the Disclosing Party, if the Receiving Party does not
then have a duty to maintain its confidentiality; or (iv) is rightfully obtained
by the Receiving Party form a third party not obligated to preserve its
confidentiality. A Receiving Party also may disclose Confidential Information to
the extent required by a court or other governmental authority, provided that
(a) the Receiving Party gives the Disclosing Party reasonable notice of the
disclosure, (b) the Receiving Party uses reasonable efforts to resist disclosing
the Confidential Information, and (c) the Receiving Party cooperates with the
Disclosing Party on request to obtain a protective order or otherwise limit the
disclosure.
10.4. The parties acknowledge that either party's breach of Article
10.2 would cause the other party irreparable injury for which it would not have
an adequate remedy at law. In the event of a breach, the non-breaching party
shall be entitled to injunctive relief in addition to any other remedies it may
have at law or in equity.
10
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Article 11
Limitation of Liability
11.1. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT
SPECIAL, INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES AS THE RESULT OF ANY
CLAIM ARISING UNDER THIS AGREEMENT, REGARDLESS OF WHETHER THE PARTY WAS ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
Article 12
Term and Termination
12.1. This Agreement shall remain in effect unless terminated in
accordance with the provisions of this Article 12.
12.2. Each party shall have the right to terminate this Agreement if
the other party breaches its obligations under this Agreement and fails to
remedy the breach within ninety (90) days after receiving notice of the breach
from the nonbreaching party.
12.3. AOC shall have the right to terminate this Agreement without
cause upon thirty (30) days written notice to VSI.
12.4. VSI shall have the right to terminate this Agreement upon thirty
(30) days written notice to AOC if AOC becomes the subject of voluntary
bankruptcy, insolvency or similar proceedings, or involuntary proceedings not
dismissed within ninety (90) days.
12.5. In the event of any termination of this Agreement, all of
Proprietary Rights and Technology shall revert to VSI, including any of
Proprietary Rights or Technology with respect to improvements, modifications and
enhancements to, and applications of VSI technology created, conceived or
reduced to practice under this Agreement.
Article 13
Notices
13.1. All notices sent under this Agreement shall be in writing and
(i) hand delivered, (ii) transmitted by legible telecopy, with a copy sent
concurrently by certified airmail, return receipt requested; or (iii) delivered
by prepaid overnight courier. Such notices shall be deemed effective when
received.
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13.2. Notices shall be sent to the parties at the following addresses
or such other addresses as the parties subsequently may provide:
If to VSI:
Vision-Sciences, Inc.
40 Ramland Road South
Orangeburg, New York 10962
USA
Attn: Katsumi Oneda
Tel: 1-914-365-0600
Fax: 1-914-365-0620
If to AOC:
Asahi Optical Co. Ltd.
2-36-9 Maeno-cho
Itabashi-ku
Tokyo 174
Japan
Attn. Tohru Matsumoto, President
Tel: 81-3-3960-5150
Fax: 81-3-3960-5226
Article 14
Miscellaneous
14.1. All communications between the parties shall be in the English
language.
14.2. Except as may be required by applicable law, neither party may,
without prior written consent of the other party, use the name or any trademark
of the other party in any advertising or publicity material, or make any form of
representation or statement which would constitute an express or implied
endorsement by the other party of any product.
14.3. Nothing in this Agreement shall be construed as creating a
partnership, joint venture or agency relationship between the parties, or as
authorizing either party to act as agent for the other.
14.4. This Agreement shall be governed by and construed in accordance
with the laws of New York, with the same force and effect as if executed and to
be fully performed therein. Unless amicably settled through mutual consultation
between the parties, all disputes, controversies of differences which may arise
between the parties out of our in relation to or in
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connection with this Agreement or any breach thereof shall be settled by
arbitration. The place of arbitration shall be, unless otherwise agreed between
the parties, the country in which the respondent resides. In case the respondent
is VSI, the arbitration shall be conducted in New York by the American
Arbitration Association under the American Arbitration Association. In case the
respondent is AOC, the arbitration shall be conducted in Tokyo by the Japan
Commercial Arbitration Association under the Commercial Arbitration Rules
thereof. The award rendered in such arbitration shall be final and binding upon
both parties. The parties hereby exclude from application to this Agreement the
United Nations Convention on Contracts for the International Sale of Goods.
14.5. The provisions of this Agreement are severable, and the
unenforceability of any provision of this Agreement shall not affect the
enforceability of the remainder of this Agreement. The parties acknowledge that
it is their intention that if any provision of this Agreement is determined by a
court to be unenforceable as drafted, that provision should be construed in a
manner designed to effectuate the purposes of that provision to the greatest
extent possible under applicable law.
14.6. The rights and remedies provided in this Agreement and all other
rights and remedies available to either party at law or in equity are, to the
extent permitted by law, cumulative and not exclusive of any other right or
remedy now or hereafter available at law or in equity. Neither asserting a right
nor employing a remedy shall preclude the concurrent assertion of any other
right or employment of any other remedy, nor shall the failure to assert any
right or remedy constitute a waiver of that right or remedy.
14.7. Except as otherwise specifically provided in this Agreement,
neither party shall assign any of its rights or obligations nor subcontract or
otherwise delegate any of its duties under this Agreement to any third party
without the prior written consent of the other party, which shall not be
withheld unreasonably. Any assignment or delegation in violation of this Article
14.7 shall be void.
14.8. This Agreement shall be binding upon and inure to the benefit of
the parties, their successors, permitted assigns and legal representatives.
14.9. All headings in this Agreement are included solely for convenient
references and shall not affect the meaning or interpretation of this Agreement.
14.10. This Agreement may be executed in counterparts, each of which
shall be deemed to be original but all of which together shall constitute a
single instrument.
14.11. The provisions of Articles 6, 7, 10, 11, 12, 13, and 14 shall
survive the expiration or termination of this Agreement.
14.12. This Agreement and the License Agreement sets forth the entire
agreement of the parties concerning the subject matter hereof and supersedes all
prior agreements between
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the parties concerning the subject matter hereof. Amendments to this Agreement
must be in writing signed by duly authorized officers of the parties. No claimed
oral agreement in respect thereto shall be considered as any part hereof.
14.13. No waiver of or change in any of the terms hereof subsequent to
the execution hereof claimed to have been made by any representative of either
party shall have any force or effect unless in writing, signed by duly
authorized representatives of the parties.
Article 15
Repurchase of VSI Stock
15.1. In addition to any and all relief, remedies, damages and rights
available to AOC under this Agreement and under law, in the event of any breach
of this Agreement by VSI or failure by VSI to timely perform any of its
obligations hereunder or if any representations or warranties of VSI hereunder
are not accurate and true or do not remain accurate and true during the term of
this Agreement, AOC shall have the right, at any time thereafter, to require VSI
to buy back the two million (2,000,000) shares of common stock in VSI, at price
of two point fifty U.S. dollars (U.S. $2.50) per share, that were purchased by
AOC in August 1998, and VSI shall thereupon promptly repurchase all the shares
at such price.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.
VISION-SCIENCES, INC. ASAHI OPTICAL CO., LTD.
By: /s/Katsumi Oneda By: /s/Tohru Mataumoto
------------------------ -----------------------
Name: Katsumi Oneda Name: Tohru Mataumoto
------------------------ -----------------------
Title: President Title: President
------------------------ -----------------------
Date: August 6, 1998 Date: August 10, 1998
---------------------------- ---------------------
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Confidential Materials omitted and filed separately
with the Securities and Exchange Commission. Asterisks denote deletions.
(EXHIBIT I)
BASIC PATENTS
1. [**]
2. [**]
3. [**]
4. [**]
5. [**]
6. [**]
I. Registered / Issued Patent Rights:
Country Patent Registration/ Date of Registration/
Issuance No. Issuance
II. Patent Applications:
Country Patent Application No. Date of Application
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