REGISTRATION RIGHTS AGREEMENT
June 5, 2000
To each of the holders of outstanding
securities (the "Dicon Shareholders")
of Vismed, Inc., d/b/a Dicon, a California
corporation ("Dicon"), pursuant to the Agreement
and Plan of Reorganization dated May 16, 2000
Ladies and Gentlemen:
This will confirm that, in consideration of your agreement to sell and
transfer to Paradigm Medical Industries, Inc, a Delaware corporation,
("Paradigm"), all of the securities of Dicon held by you, in exchange for shares
of the restricted Common Stock of Paradigm, all pursuant to, and as provided in,
that Agreement and Plan of Reorganization dated May 16, 2000 (the "Agreement and
Plan of Reorganization") entered into by and among Paradigm, Paradigm
Subsidiary, Inc., a Utah corporation ("Paradigm Subsidiary"), and Dicon and as
an inducement to Dicon and the Dicon Shareholders to consummate the transaction
contemplated by the Agreement and Plan of Reorganization, Paradigm covenants and
agrees with each of the Dicon Shareholders as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock, $0.001 par value per
share, of Paradigm, as constituted as of the date of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Restricted Stock" shall mean the shares of Paradigm Common Stock
issued to you pursuant to the Agreement and Plan of Reorganization,
excluding shares (i) which have been registered under the Securities Act
pursuant to an effective registration statement filed thereunder and
disposed of in accordance with the registration statement covering them; or
(ii) which have been publicly sold pursuant to Rule 144 under the
Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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"Selling Expenses" shall mean the expenses so described in Section 5.
2. Restrictive Legend. Each certificate representing Common Stock shall,
except as otherwise provided herein be stamped or otherwise imprinted with a
legend substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED
OF UNLESS IT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION
IS AVAILABLE. THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT
BY AND BETWEEN PARADIGM, PARADIGM SUBSIDIARY AND THE SHAREHOLDER, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF PARADIGM.
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
Restricted Stock (other than under the circumstances described in Section 4),
the holder of such Restricted Stock shall give written notice to Paradigm of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and shall be accompanied by an opinion of counsel
satisfactory to Paradigm to the effect that the proposed transfer may be
effected without registration under the Securities Act, whereupon the holder of
such Restricted Stock shall be entitled to transfer such Restricted Stock in
accordance with the terms of its notice; provided, however, that no such opinion
of counsel shall be required for a transfer to one or more partners of the
transferor (in the case of a transferor that is a partnership) or to an
affiliated corporation (in the case of a transferor that is a corporation). Each
certificate for Restricted Stock transferred as above provided shall bear the
legend set forth in Section 2, except that such certificate shall not bear such
legend if (i) Paradigm receives a satisfactory opinion of counsel that such
transfer is in accordance with the provisions of Rule 144 (or any other rule
permitting public sale without registration under the Securities Act); or (ii)
the opinion of counsel referred to above is to the further effect that the
transferee and any subsequent transferee (other than an affiliate of Paradigm)
would be entitled to transfer such securities in a public sale without
registration under the Securities Act.
4. Demand Registration. For a period of five (5) years from the date
beginning five (5) months from the date hereof (the "Term"), any holder of
Restricted Stock may make a written request for registration under the
Securities Act (a "Demand Registration") of all or part of such holder of
Restricted Stock; provided, however, that Paradigm need effect a total of only
one Demand Registration on behalf of such holder. Such request shall specify the
number of shares of Restricted Stock proposed to be registered. If Paradigm at
any time proposes to register any Restricted Stock under the Securities Act for
resale pursuant to a Demand Registration, at such time it will give written
notice to all other holders of outstanding Restricted Stock of its intention so
to do. Upon the written request of any such holders, received by Paradigm within
ten (10) days following the date of Paradigm's registration notice to register
the holders' Restricted Stock, Paradigm will use its best efforts to cause such
Restricted Stock to be included in the registration statement proposed to be
filed by Paradigm. The holders of Restricted Stock to be registered pursuant to
this Section 4 shall execute such documentation as may be reasonably necessary
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to effect the registration and resale of the Restricted Stock proposed to be
included in such a registration statement upon the exercise of a Demand
Registration.
5. Registration Procedures. If and whenever Paradigm is required by the
provisions of Section 4 to use its best efforts to effect the registration of
any Restricted Stock under the Securities Act, Paradigm will, as expeditiously
as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the holders' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock covered by such
registration statement such number of copies of the registration statement and
the printed prospectus included therein (including each preliminary prospectus)
as such persons reasonably may request in order to facilitate the public sale or
other disposition of the Restricted Stock covered by such registration
statement;
(d) after the filing of the registration statement, Paradigm will
promptly notify each seller of Restricted Stock covered by the registration
statement of all comments delivered to Paradigm by the Commission and take all
reasonable actions required to respond to such comments;
(e) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock reasonably shall
request, provided, however, that Paradigm shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(f) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange on which the Common Stock of
Paradigm is then listed;
(g) immediately notify each seller of Restricted Stock under such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
of which Paradigm has knowledge as a result of which the prospectus contained in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing; and
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(h) in connection with each registration hereunder, the sellers of
Restricted Stock will furnish to Paradigm in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
6. Expenses. All expenses incurred by in connection with a registration
pursuant to Section 4, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for Paradigm, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, and fees of transfer agents and registrars, shall be borne by
Paradigm; provided, however, that Paradigm shall not be required to pay for any
registration proceeding begun pursuant to Section 4 if the registration request
is subsequently withdrawn by the Registered Holder.
7. Indemnification and Contribution.
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 4, Paradigm will indemnify and hold
harmless each seller of such Restricted Stock thereunder, and each other person,
if any, who controls such seller within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such seller or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Restricted Stock were registered under the Securities Act
pursuant to Section 4, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each such seller, and each such controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that Paradigm will not be liable in any such case if and to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by any such
seller, or any such controlling person in writing specifically for use in such
registration statement or prospectus.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 4, each seller of such Restricted
Stock thereunder, severally and not jointly, will indemnify and hold harmless
Paradigm, each person, if any, who controls Paradigm within the meaning of the
Securities Act, each officer of Paradigm who signs the registration statement,
and each director of Paradigm, against all losses, claims, damages or
liabilities, joint or several, to which Paradigm or such officer, director, or
controlling person may become subject under the Securities Act or otherwise
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Restricted Stock was registered under the Securities Act pursuant to
Section 4, any preliminary prospectus or final prospectus contained therein, or
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any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse Paradigm and each such officer, director, and controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to Paradigm by such
seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the shares
sold by such seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the net proceeds received by such seller from the sale of Restricted Stock
covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action or the threat of commencement, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to such indemnified party other than under this
Section 7 and shall only relieve it from any liability which it may have to such
indemnified party under this Section 7 if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 7 for any legal expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with and oversight of
counsel so selected, provided, however, that, if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to those available to the indemnifying party or if the interests of
the indemnified party reasonably may be deemed to conflict with the interests of
the indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assert such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 7 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
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or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
7; then, and in each such case, Paradigm and such holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such holder is
responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and Paradigm is responsible for the remaining portion;
provided, however, that, in any such case, (A) no holder will be required to
contribute any amount in excess of the net proceeds of the sale of all such
Restricted Stock sold by it pursuant to such registration statement; and (B) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person or entity.
8. Changes in Common Stock. If, and as often as, there is any change in
the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
9. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of Paradigm under the Securities
Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon request
a written statement by Paradigm as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of Paradigm, and such other
reports and documents so filed by Paradigm as such holder may reasonably request
in availing itself of any rule or regulation of the Commission allowing such
holder to sell any Restricted Stock without registration.
10. Representations and Warranties of Paradigm. Paradigm represents and
warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by
Paradigm have been duly authorized by all requisite corporate action and will
not violate any provision of the law, any order of any court or other agency of
government, the Certificate of Incorporation or Bylaws of Paradigm or any
provision of any indenture, agreement or other instrument to which it or any of
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its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of Paradigm.
(b) This Agreement has been duly executed and delivered by Paradigm
and constitutes the legal, valid and binding obligation of Paradigm, enforceable
in accordance with its terms.
11. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including, without
limitation, transferees of any Restricted Stock), whether so expressed or not.
(b) All notices, requests, consents and other communications hereunder
shall be in writing and shall be mailed by certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
(i) if to Paradigm or any other party hereto, at the address
of such party set forth in the Agreement and Plan of Reorganization;
(ii) if to any subsequent holder of Restricted Stock, to it
at such address as may have been furnished to Paradigm in writing by
such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to Paradigm by holders of Restricted Stock in accordance with the
provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of Paradigm and the holders of
the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The obligations of Paradigm to register shares of Restricted Stock
under Section 4 shall terminate five (5) years and five (5) months from the date
of this Agreement.
(g) If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
attorney's fees, costs and disbursements in addition to any other relief to
which such party may be entitled.
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Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this Agreement, whereupon this Agreement shall be a
binding Agreement between Paradigm and you.
Very truly yours,
PARADIGM SUBSIDIARY, INC. PARADIGM MEDICAL INDUSTRIES, INC.
By: /s/ Thomas F. Motter By: /s/ Thomas F. Motter
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Title: CEO Title: CEO
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Agreed to and accepted as of the date
first above written.
By: ______________________________________
Print Name: _____________________________
Title:____________________________________
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