EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
VISTA MEDICAL TECHNOLOGIES, INC.,
AND
PROMEDICA DISTRIBUTION, INC.
TABLE OF CONTENTS
Page
----
1. PURCHASE AND CONSIDERATION.............................................. 1
1.1 Purchase and Sale.................................................. 1
1.2 Assets Not to be transferred....................................... 2
1.3 Non-Assignment of Certain Assets................................... 2
1.4 Assumption of Liabilities.......................................... 2
1.5 Consideration...................................................... 3
1.6 Restrictions on Resale............................................. 3
1.7 Instruments of Transfer............................................ 3
1.8 Sales Taxes........................................................ 3
2. CLOSING................................................................. 3
2.1 The Closing........................................................ 3
2.2 Actions at the Closing............................................. 3
3. REPRESENTATIONS AND WARRANTIES OF SELLER................................ 4
3.1 Organization....................................................... 4
3.2 Authority.......................................................... 4
3.3 Effect of Agreement................................................ 4
3.4 Title to Assets.................................................... 5
3.5 Agreements......................................................... 5
3.6 Accounts Receivable................................................ 5
3.7 Litigation......................................................... 5
3.8 Compliance with Laws............................................... 5
3.9 Customer Lists..................................................... 5
3.10 Inventory.......................................................... 5
3.11 Brokers or Finders................................................. 5
3.12 Third Party Consents............................................... 6
3.13 Representations Complete........................................... 6
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER............................. 6
4.1 Organization....................................................... 6
4.2 Authority.......................................................... 6
4.3 Inventory.......................................................... 6
4.4 Business Plan...................................................... 6
4.5 Brokers or Finders................................................. 7
5. COVENANTS OF SELLER..................................................... 7
5.1 Access; Retention of Records....................................... 7
5.2 Compliance with Legal Requirements................................. 7
5.3 Effectiveness of Transaction....................................... 7
-i-
5.4 State Tax Certificate.............................................. 7
5.5 Tax Returns........................................................ 7
6. COVENANTS OF PURCHASER.................................................. 8
6.1 Compliance with Legal Requirements................................. 8
7. ADDITIONAL AGREEMENTS................................................... 8
7.1 Bulk Sales......................................................... 8
7.2 State Tax Certificate.............................................. 8
7.3 Expenses........................................................... 8
7.4 Public Disclosure.................................................. 8
7.5 Additional Documents and Further Assurance......................... 8
7.6 Tax-Free Reorganization............................................ 8
7.7 Collection of Accounts Receivable.................................. 11
8. INDEMNIFICATION......................................................... 11
8.1 Indemnification.................................................... 11
8.2 Non-Exclusivity of Remedy.......................................... 12
8.3 Survival........................................................... 12
9. MISCELLANEOUS PROVISIONS................................................ 12
9.1 Assignment, Successors and Assigns................................. 12
9.2 Notices............................................................ 13
9.3 Alterations and Waivers............................................ 13
9.4 Governing Law; Validity, Forum, Laws and Construction.............. 13
9.5 Severability....................................................... 13
9.6 No Third-Party Beneficiaries....................................... 14
9.7 Integration and Entire Agreement................................... 14
9.8 Counterpart and Headings........................................... 14
9.9 Specific Performance............................................... 14
9.10 Advice of Legal Counsel............................................ 14
Exhibit A Investors' Rights Agreement
-ii-
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement") is dated as of July 26, 1996, by
and between Vista Medical Technologies, Inc., a California corporation (the
"Purchaser"), ProMedica Distribution, Inc., a California corporation (the
"Seller") and, solely for purposes of Sections 7.6 and 7.7 of this Agreement,
Xxxxx Xxxx and Xxxxx Xxxxxx, the shareholders of Seller (individually, a
"Shareholder" and collectively, the "Shareholders").
RECITALS:
A. Seller is engaged in the distribution of certain cardiovascular
products.
B. Purchaser desires to purchase from Seller and Seller desires to sell
to Purchaser, on the terms and subject to the conditions of this Agreement,
certain of the assets of Seller as set forth hereunder.
C. Seller and Purchaser intend that the transactions contemplated hereby
be a "reorganization" as defined by Section 358(a)(1)(C) of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations, agreements herein
contained, the parties agree as follows:
1. PURCHASE AND CONSIDERATION.
1.1 PURCHASE AND SALE. Subject to the terms and conditions of this
Agreement, Seller agrees to transfer, convey, assign and deliver to Purchaser on
the Closing Date (as hereinafter defined), and Purchaser agrees to buy from
Seller, free and clear of all encumbrances (except as permitted under this
Agreement), all the assets and properties, tangible and intangible, real,
personal or mixed, owned or leased by Seller, of and pertaining to or used by
Seller, wherever located, whether known or unknown, and whether or not on the
books and records of Seller (the "Assets"), including by way of example but not
of limitation the following:
1.1.1 all of Seller's right, title and interest under (a) (i) that
certain Distribution Agreement between Seller and Xxxxxx, a French corporation,
dated November 10, 1992 and (ii) that certain U.S.A. Distribution Agreement
between Seller and Xxxxxxxxx-Xxxxxxxxx, Inc. dated September 1, 1991
(collectively, the "Distribution Agreements") and (b) (i) those certain sales
representative agreements pursuant to which the Inventory (as defined below) has
been sold in the past and (ii) that certain Sales Management Consultant
Agreement between Seller and Xxxxx More dated April 1, 1993 (collectively, the
"Sales Agreements");
1.1.2 all inventories, parts, supplies and products, and all of
Seller's rights to market, license and sell all products marketed, licensed or
sold by Seller under the Distribution Agreements, including, without limitation,
the Seller's rights as sole agent under the United States Food and Drug
Administration clearance to market such products in the United States (the
"Inventory");
1.1.3 all of Seller's claims against any parties relating to items
included in the Assets, including, without limitation, unliquidated rights under
manufacturer's and vendors' warranties or guarantees, but only to the extent
such claims do not relate to any liabilities retained by Seller and not assumed
by Purchaser;
1.1.4 all of Seller's transferable books and records, including,
without limitation, all customer and supplier lists, all advertising materials
and marketing plans, and manuals and other materials of Seller used in employee
and management training with respect to the Distribution Agreements or the Sales
Agreements; and
1.1.5 accounts receivable in the amount of $84,017.
1.2 ASSETS NOT TO BE TRANSFERRED. Seller shall retain and Purchaser shall
not acquire any other assets or properties of Seller (the "Excluded Assets").
1.3 NON-ASSIGNMENT OF CERTAIN ASSETS. Notwithstanding anything to the
contrary in this Agreement, to the extent that the assignment hereunder of any
of the Assets requires the consent of any other party (or in the event that any
of the same shall be nonassignable), neither this Agreement nor any action taken
pursuant to its provisions shall constitute an assignment or an agreement to
assign if such assignment or attempted assignment would constitute a breach
thereof or result in the loss or diminution thereof; provided, however, that in
each such case, Seller shall use its best efforts to obtain the consent of such
other party to an assignment to Purchaser. If such consent is not obtained by
the Closing Date, Seller shall cooperate with Purchaser in any arrangement
designed for Purchaser to perform Seller's obligations with respect to such
Asset after the Closing Date and for Purchaser to receive the benefits under any
such Asset after the Closing Date.
1.4 ASSUMPTION OF LIABILITIES. Subject to the terms and conditions
contained herein, on the Closing Date, Purchaser shall assume and agree
thereafter to pay, perform and discharge all liabilities and obligations of
Seller (a) under the Distribution Agreements and the Sales Agreements arising
from activities undertaken by Purchaser thereunder following the Closing and (b)
Seller's trade payables existing as of the date hereof in the maximum amount of
$84,017 (collectively, the "Assumed Liabilities"). Except for the Assumed
Liabilities, Purchaser shall not assume or have any responsibility for any other
liability, obligation or commitment of any nature, whether now or hereafter
existing, of Seller, and Seller shall pay all such liabilities, obligations or
commitments which are not Assumed Liabilities, including, without limitation,
liabilities or obligations arising out of inventory on Purchaser's books at
Closing or liabilities and obligations for payments to sales representatives
pursuant to the Sales Agreements or otherwise for sales made prior to
-2-
Closing. Purchaser's assumption of such liabilities and obligations of Seller
is intended to inure solely to the benefit of Seller, and notwithstanding
anything herein to the contrary, such assumption is not intended and shall not
be construed to give any third parties any greater or additional benefits than
they would have but for Purchaser's said assumption.
1.5 CONSIDERATION. Purchaser shall pay the purchase price (the "Purchase
Price") to Seller as follows: (a) the issuance of Forty-Six Thousand (46,000)
shares of Purchaser's Series B Preferred Stock (the "Shares"); and (b) the
assumption of those obligations and liabilities of Sellers to be assumed by
Purchaser pursuant to Section 1.4 hereof.
1.6 RESTRICTIONS ON RESALE. The Shares will be subject to the following
restrictions against transfer by Seller and any persons receiving them upon
liquidation of Seller: (a) any restrictions imposed by applicable federal and
state securities laws; and (b) certificates representing the Shares will bear
legends describing the applicable restrictions on transferability referred to in
this Section 1.6, including the following legend:
"The securities represented by this certificate are subject to the terms
and conditions of an Asset Purchase Agreement, dated as of July 26, 1996,
which includes certain restrictions on the sale of the securities. Copies
of the agreement may be obtained upon written request to the Secretary of
Vista Medical Technologies, Inc.."
1.7 INSTRUMENTS OF TRANSFER. The sale, assignment, transfer, conveyance
and delivery of the Assets shall be made by such bills of sale and other
recordable instruments of assignment, transfer and conveyance as Purchaser shall
reasonably request.
1.8 SALES TAXES. Seller shall pay and promptly discharge when due the
entire amount of any and all sales and use tax ("Sales Tax") imposed or levied
by reason of the sale of the Assets to Purchaser. The parties shall cooperate
with each other to the extent reasonably requested and legally permitted to
minimize any such Sales Tax.
2. CLOSING.
2.1 THE CLOSING. The transactions contemplated by this Agreement shall be
consummated (the "Closing") at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP,
000 Xxxx X Xxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000, at 10:00 a.m., local
time, on July 26, 1996, or on such other date as the parties shall mutually
agree (the "Closing Date").
2.2 ACTIONS AT THE CLOSING. At the Closing (or at such later date as
Seller and Purchaser agree): (a) Purchaser shall provide to Seller (or Seller's
designees) a stock certificate(s) in the name of the Seller (or its designees)
representing the Shares; (b) Purchaser and Seller (or its designees) shall have
executed and delivered the Amended and Restated Investors' Rights Agreement (the
"Rights Agreement") substantially in the form of EXHIBIT A hereto; and (c)
Seller will deliver to the Purchaser all bills of sale, endorsements,
assignments and other instruments as Purchaser shall reasonably request or as
necessary or appropriate to sell, convey, assign, transfer and deliver to
Purchaser good title, free and clear
-3-
of all liens or encumbrances to all the Assets (except as otherwise disclosed in
this Agreement or any schedule or exhibit hereto) and to evidence the due
execution, delivery and performance of the Agreement and satisfaction of the
conditions to the obligations of the Purchaser hereunder.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants
to Purchaser as follows:
3.1 ORGANIZATION. Seller is a corporation duly organized and validly
existing under the laws of the State of California. Seller has all requisite
corporate power and authority to, and is entitled to, carry on its business as
now conducted and to own or lease its properties as and in the places where such
business is now conducted and such properties are now owned, leased or operated.
Seller is qualified to do business in all foreign jurisdictions in which it is
required to be so qualified, except where the failure so to be qualified would
not have a material adverse effect on the business or assets of Seller.
3.2 AUTHORITY. Seller has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby have been duly
authorized by all requisite corporate action of Seller. The execution, delivery
and performance of this Agreement by Seller has been approved in accordance with
the corporate laws of the State of California by the holders of all of Seller's
outstanding capital stock. This Agreement has been duly executed and delivered
by and constitutes the valid and binding obligation, enforceable in accordance
with its terms, of Seller.
3.3 EFFECT OF AGREEMENT. The execution and delivery this Agreement by
Seller does not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, result in a
breach of, constitute a default (with or without notice or lapse of time, or
both) under or violation of, or result in the creation of any lien, charge or
encumbrance pursuant to, any provision of the Articles of Incorporation or
Bylaws of Seller, any law or regulation of any governmental authority, foreign
or domestic, or any provision of any agreement, instrument, understanding,
order, judgment or decree to which Seller is a party or by which Seller or any
of its properties or assets is bound or affected, nor will it give to any other
person or entity any interests or rights of any kind, including rights of
termination, acceleration, or cancellation, in or with respect to any of the
Assets, respectively. No consent of any person not a party to this Agreement
and no consent of any governmental authority is required to be obtained on the
part of Seller to permit the consummation of the transactions contemplated by
this Agreement (including without limitation the transfer to Purchaser of all
right, title and interest in and to the Assets, free and clear of any mortgages,
liens, pledges, encumbrances, claims, conditions or restrictions of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent or
otherwise).
-4-
3.4 TITLE TO ASSETS. Seller has good and marketable title to all of the
Assets, all of the Assets are free and clear of restrictions on or conditions to
transfer or assignment, and at the closing, Seller will sell, convey, assign,
transfer and deliver to Purchaser good title to all of the Assets, free and
clear of any mortgages, liens, pledges, encumbrances, claims, conditions and
restrictions of any nature whatsoever, direct or indirect, whether accrued,
absolute, contingent or otherwise.
3.5 AGREEMENTS. Seller has provided to Purchaser or its counsel copies of
all Distribution Agreements and Sales Agreements. As to the best of Seller's
knowledge, each of the other parties to such agreements or bound thereby has in
all material respects performed all the obligations required to be performed by
it to date thereunder. Seller does not know of, and Seller has not received
notice of the intention of any party to terminate any such agreement. Each such
agreement is valid, binding and enforceable in accordance with its terms
(subject to any applicable bankruptcy, insolvency or similar laws affecting
generally the enforcement of creditors' rights, and rules of law governing
injunctive relief, specific performance and other equitable remedies) and is in
full force and effect with no material default or dispute or basis therefor
existing with respect to Seller's performance and, to the best of Seller's
knowledge, other parties' performance thereunder.
3.6 ACCOUNTS RECEIVABLE. All of the accounts receivable included in the
Assets have arisen in the normal course of business, represent bona fide
indebtedness incurred by the applicable account debtors in the stated amounts
reflected on the books of Seller, subject to collection, and are subject, on the
date hereof, to no prior assignment, lien, set off or security interest.
3.7 LITIGATION. There is no action, suit, proceeding or investigation in
progress or pending before any court or governmental agency, and there is no
threat thereof against or relating to the Assets, nor, to the best of Seller's
knowledge, is there any basis for any such claim, suit or other proceeding which
might adversely affect the Assets.
3.8 COMPLIANCE WITH LAWS. Seller has materially complied with, is not in
material violation of, and has not received any notices of violation with
respect to, any foreign, federal, state or local statute, law or regulation with
respect to the Assets.
3.9 CUSTOMER LISTS. Seller has provided to Purchaser a complete and
correct description of its customer and mailing lists. Seller has the right to
use, free and clear of any claims or rights of others, all of such customer and
mailing lists.
3.10 INVENTORY. The Inventory has a book value of at least Ninety Thousand
Dollars ($90,000) at Closing.
3.11 BROKERS OR FINDERS. Seller is not obligated, directly or indirectly,
to any person for brokerage or finders' fees, agents' commissions or any similar
charges in connection with this Agreement.
-5-
3.12 THIRD PARTY CONSENTS. No third party consents are required for the
assignment of any Distribution Agreements or any Sales Agreements hereunder.
Purchaser acknowledges that the Sales Agreements generally are terminable
without cause by giving not less than ninety (90) days' prior written notice.
3.13 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Seller herein, nor any statement made in any schedule or certificate
furnished pursuant to this Agreement, when read in their entirety, contains or
will contain any untrue statement of a material fact at the Closing Date, or
omits or will omit to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading. There is no fact known to Seller or any of its
management which adversely affects the ability of Seller to carry out the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Seller as follows:
4.1 ORGANIZATION. Purchaser is a corporation duly organized and validly
existing under the laws of the State of California. Purchaser has all requisite
corporate power and authority to, and is entitled to, carry on its business as
now conducted and to own or lease its properties as and in the places where such
business is now conducted and such properties are now owned, leased or operated.
4.2 AUTHORITY. Purchaser has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby have been duly
authorized by all requisite corporate action of Purchaser. This Agreement has
been duly executed and delivered by and constitutes the valid and binding
obligation, enforceable in accordance with its terms, of Purchaser.
4.3 INVENTORY. Purchaser is acquiring the Inventory for resale in the
ordinary course of business.
4.4 BUSINESS PLAN. The Business Plan dated May 1996 previously delivered
to Seller (the "Business Plan") was prepared in good faith by the Company and
does not, to the best of the Company's knowledge after reasonable investigation,
contain any untrue statement of a material fact nor does it omit to state a
material fact necessary to make the statements therein not misleading, except
that with respect to projections and expressions of opinion or predictions
contained in the Business Plan, the Company represents only that such
projections and expressions of opinion and predictions were made in good faith
and that the Company believes there is a reasonable basis therefor.
-6-
4.5 BROKERS OR FINDERS. Purchaser is not obligated directly or indirectly
to any person for brokerage or finders' fee, agents' commissions or similar
charges in connection with this Agreement.
5. COVENANTS OF SELLER. Seller covenants and agrees as follows:
5.1 ACCESS; RETENTION OF RECORDS. Seller shall make immediately available
to and allow Purchaser and its authorized agents and accountants access to
Seller's records with respect to the Assets and cause Seller's employees to
cooperate with Purchaser in an examination of the Assets.
5.2 COMPLIANCE WITH LEGAL REQUIREMENTS. Seller will take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed on it with respect to the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to Purchaser in
connection with any such requirements. Seller will take all reasonable actions
necessary to obtain (and will cooperate with Purchaser in obtaining) any
consent, approval, order or authorization of, or any registration, declaration
or filing with, any governmental entity, domestic or foreign, or other person,
required to be obtained or made by Seller or by Purchaser in connection with the
taking of any action contemplated by this Agreement.
5.3 EFFECTIVENESS OF TRANSACTION. Subject to the terms and conditions of
this Agreement, Seller shall use its best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary and/or proper or
advisable under applicable laws and regulations to make effective the
transactions contemplated by this Agreement. Seller will execute and deliver,
or cause to be executed and delivered, such additional or further bills of sale,
endorsements, assignments, consents and other instruments as Purchaser may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement and to put Purchaser in possession of the Assets
acquired hereunder.
5.4 STATE TAX CERTIFICATE. Within ten (10) business days of the date of
this Agreement, Seller shall file or cause to be filed properly completed
applications or other appropriate forms of request with California's State Board
of Equalization to obtain a certificate of receipt of payment of all sales and
use taxes as authorized in and pursuant to California Revenue and Taxation Code
Sections 6811 through and including 6814 (the "Certificate of Sales Tax
Payment").
5.5 TAX RETURNS. Seller shall be responsible for and pay when due all of
Seller's taxes attributable to or levied or imposed upon the Assets relating or
pertaining to the period (or that portion of any period) ending on or prior to
the Closing Date. Seller shall continue to timely file within the time period
for filing, or any extension granted with respect thereto, all of Seller's tax
returns required to be filed in connection with the Assets or Seller's business
and any portion of any such tax returns connected therewith shall be true and
correct and completed in accordance with applicable laws. If, however, any
returns relate to Seller's taxes and to taxes payable by Purchaser, such
returns, at Purchaser's
-7-
discretion, shall be prepared and filed by Purchaser and taxes shown to be due
thereon shall be paid by Seller and Purchaser in accordance with the terms of
this Agreement. Seller shall timely provide to Purchaser all information,
documents and signatures and consents necessary for Purchaser to properly
prepare and file the returns described in the preceding sentence.
6. COVENANTS OF PURCHASER. Purchaser covenants and agrees as follows:
6.1 COMPLIANCE WITH LEGAL REQUIREMENTS. Purchaser will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to Seller in
connection with any such requirements. Purchaser will take all reasonable
actions necessary to obtain (and will cooperate with Seller in obtaining) any
consent, approval, order or authorization of, or any registration, declaration
or filing with, any governmental entity, domestic or foreign, or other person,
required to be obtained or made by Purchaser or by Seller in connection with the
taking of any action contemplated by this Agreement.
7. ADDITIONAL AGREEMENTS.
7.1 BULK SALES. Seller hereby indemnifies and holds Purchaser and its
affiliates harmless from any liability arising under any applicable bulk sales
or any similar laws and from any claims which may be revealed by compliance with
such laws.
7.2 STATE TAX CERTIFICATE. Seller hereby indemnifies and holds Purchaser
and its affiliates harmless from any liability arising under any applicable
sales and use tax laws and from any taxes or claims which may be due in order to
comply with such laws.
7.3 EXPENSES. Purchaser and Seller shall bear their respective expenses
incident to this Agreement and the transactions contemplated hereby.
7.4 PUBLIC DISCLOSURE. Unless otherwise required by law, any public
disclosure of the subject matter of this Agreement by any party hereto shall be
approved by all parties prior to release, provided that such approval shall not
be unnecessarily withhold or delayed.
7.5 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCE. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
7.6 TAX-FREE REORGANIZATION. Purchaser and Seller intend that the
transactions contemplated under this Agreement (the "Transactions") qualify as a
tax-free reorganization within the meaning of Section 368(a)(1)(C) of the Code;
PROVIDED, HOWEVER, that no party hereunder makes any representations or
warranties that such Transactions so qualify. Purchase and Seller agree not to
take a position on a Return or before any governmental
-8-
authority that is inconsistent with the tax treatment described in this Section
7.6 unless required by a final and binding determination or resolution by a
governmental authority with appropriate jurisdiction. In furtherance of the
intent to qualify the Transactions as a tax-free reorganization, Purchaser
represents and covenants to Seller and Seller represents and covenants to
Purchaser as follows:
(a) Representations and Covenants of Purchaser:
(i) Purchaser's principal reasons for participating in the
Transactions are BONA FIDE business purposes not related to taxes.
(ii) Purchaser has no plan or intention to reacquire from the
Shareholders any Shares to be issued pursuant to the Transactions.
(iii) Except for transfers described in Section 368(a)(2)(C) of
the Code, Purchaser will not, directly or indirectly, sell or otherwise dispose
of the assets acquired from Seller pursuant to a plan or intent existing at the
time of the Transactions, except for (a) assets disposed of in the ordinary
course of business, or (b) assets disposed of where the proceeds therefrom will
be used in connection with the distribution and/or marketing of cardiovascular
products, Seller's historic business activity.
(b) Representations and Covenants of Seller:
(i) Pursuant to the terms of this Agreement, Purchaser will
acquire substantially all of the assets of Seller. Specifically, at least
ninety percent (90%) of the fair market value of the net assets and at least
seventy percent (70%) of the fair market value of the gross assets held by
Seller immediately prior to the Transactions will be acquired by Purchaser in
the Transactions. For the purpose of determining the percentage of Seller's net
and gross assets held by Seller immediately prior to the Transactions, the
following assets will be treated as property held by Seller immediately prior to
the Transactions: (a) assets disposed of by Seller prior to the Transactions and
in contemplation thereof (including, without limitation, any asset disposed of
by Seller, other than in the ordinary course of business, pursuant to a plan or
intent existing during the period beginning with the commencement of
negotiations (whether formal or informal) with Purchaser regarding the
Transactions and ending at the closing of the Transactions (the "Pre-Exchange
Period")); (b) assets used by Seller to pay expenses or liabilities incurred in
connection with the Transactions; and (c) assets used to make distribution,
redemption or other payments in respect of shares of Seller's stock or rights to
acquire such stock (including payments treated as such for tax purposes) that
are made in contemplation of the Transactions or that are related thereto.
(ii) Other than in the ordinary course of business, Seller has
made no transfer of any of its assets (including any distribution of assets with
respect to, or in redemption of, stock) (a) in contemplation of the Transactions
or (b) during the Pre-Exchange Period.
-9-
(iii) For purposes of Treasury Regulation Section 1.368-1(d),
Seller operates or is deemed to operate at least one significant historic
business line and/or owns or is deemed to own a significant portion of its
historic business assets. Pursuant to the Transactions, Seller will transfer at
least one significant historic business line and/or a significant portion of its
historic business assets to Purchaser.
(iv) Seller's principal reasons for participating in the
Transactions are BONA FIDE business purposes not related to taxes.
(v) Seller has no Knowledge of, and believes that there does not
exist, any plan or intention on the part of shareholders (or any shareholder) of
Seller to engage in a sale, exchange, transfer, distribution, pledge (other than
pledges in connection with BONA FIDE loan transactions), disposition or any
other transaction which would result in a reduction in the risk of ownership or
a direct or indirect disposition (a "Sale") of Shares to be received in the plan
of liquidation pursuant to the Transactions that would reduce the ownership of
all Seller shareholders of such Shares to a number of shares having an aggregate
fair market value, as of the closing of the Transactions, of less than fifty
percent (50%) of the aggregate fair market value, of Seller stock outstanding
immediately prior to the consummation of the Transactions.
(vi) Seller intends that no consideration be paid or received
(directly or indirectly, actually or constructively) for the Assets being
transferred to Purchaser other than shares of Purchaser voting stock.
(vii) Seller will pay separately its own expenses relating to the
Transactions.
(viii) Seller has adopted a plan of complete liquidation pursuant
to which Seller will liquidate and distribute the Shares received in the
Transactions to the Shareholders as soon as reasonably possible after the
Transactions and in no event later than twelve (12) months after the
Transactions.
(c) Representations and Covenants of the Shareholders:
(i) Each Shareholder does not have any plan or intention to
engage in a sale, exchange, transfer, distribution, pledge (other than pledges
in connection with BONA FIDE loan transactions), disposition or any other
transaction which would result in a reduction in the risk of ownership or a
direct or indirect disposition of the Shares to be received in the plan of
liquidation pursuant to the Transactions that would reduce such Shareholder's
ownership of such Shares to a number of shares having an aggregate fair market
value, as of the closing of the Transactions, of less than seventy percent (70%)
of the aggregate fair market value of Seller stock owned by the such Shareholder
immediately prior to the consummation of the Transactions and each Shareholder
has no knowledge of, and believes that there does not exist, any plan or
intention on the part of shareholders (or any shareholder) of Seller to engage
in a sale, exchange, transfer, distribution, pledge (other than pledges in
connection
-10-
with BONA FIDE loan transactions), disposition or any other transaction which
would result in a reduction in the risk of ownership or a direct or indirect
disposition (a "Sale") of Shares to be received in the plan of liquidation
pursuant to the Transactions that would reduce the ownership of all Shareholders
of such stock to a number of shares having an aggregate fair market value, as of
the closing of the Transactions, of less than fifty percent (50%) of the
aggregate fair market value, of Seller stock outstanding immediately prior to
the consummation of the Transactions.
7.7 COLLECTION OF ACCOUNTS RECEIVABLE. Each of the shareholders, jointly
and severally, hereby guarantees that the accounts receivable included in the
Assetes transferred hereunder shall be collected and paid to Purchaser within
sixty (60) days of Closing.
8. INDEMNIFICATION.
8.1 INDEMNIFICATION.
8.1.1 Seller agrees to indemnify and hold Purchaser and its
affiliates harmless against all claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses of investigation (hereafter individually a "Loss" and collectively
"Losses") incurred by Purchaser or any of its affiliates (a) as a result of any
inaccuracy of a representation or breach of any warranty contained herein or in
any schedule, exhibit or other document delivered pursuant hereto by Seller or
any failure by Seller to perform or comply with any covenant contained herein or
in any schedule, exhibit or other document delivered pursuant hereto, or
resulting from or relating to any claim or action by any third party questioning
the validity of or otherwise seeking to rescind the transfer hereunder by Seller
to Purchaser of all right, title and interest in and to the Assets, (b) relating
to or resulting from any liabilities, obligations or commitments of, and all
claims against, Seller, or against or involving any of the Assets, arising from
or based upon any condition, event or action existing on or occurring before the
Closing Date, except to the extent specifically assumed by Purchaser as an
Assumed Liability, and (c) the failure of the parties hereto to comply with (i)
the "bulk sales" or "bulk transfer" laws or (ii) sales and use laws of any
jurisdiction in connection with the transactions contemplated hereby.
8.1.2 Purchaser agrees to indemnify and hold Seller harmless
against all Losses incurred by Seller as a result of any inaccuracy of a
representation or breach of any warranty, or any failure by Purchaser to perform
or comply with any covenant, contained herein or in any other document delivered
pursuant hereto or resulting from or relating to third party claims based on
Purchaser's use or operation of the Assets following the Closing Date.
8.1.3 Each party agrees to give the other written notice of any
event or assertion of which it has knowledge concerning any liability as to
which it may request indemnification hereunder. Each party will cooperate with
the other in determining the validity of any such claim or assertion. In each
case, the indemnifying party shall have the right to defend any such third-party
suits, claims or proceedings with counsel satisfactory to
-11-
the indemnified party. Each party agrees not to settle or compromise any such
third-party suit, claim or proceeding without the prior written consent of the
other, which consent shall not be unreasonably withheld. Upon obtaining
knowledge of the institution of any action, proceeding or other event which
could give rise to a claim of indemnity pursuant to this Section 8, the party
seeking indemnification shall promptly give written notice to the other party(s)
hereof. If such claim or demand relates to a claim or demand asserted by a
third party, the indemnifying party shall have the right at its expense to
employ counsel to defend such claim or demand and the indemnified party shall
have the right, but not the obligation, to participate in the defense of any
such claim or demand. So long as the indemnifying party is defending such claim
or demand in good faith, the indemnified party will not settle such claim or
demand without the indemnifying party's consent, which consent shall not be
unreasonably withheld. The indemnified party shall make available to the
indemnifying party all records and other materials reasonably required by it in
contesting a claim or demand asserted by a third party against the indemnified
party and shall cooperate in the defense thereof.
8.1.4 The indemnification obligations of the respective parties
under this Section 8 shall terminate on the first anniversary of the Closing
Date, but shall not terminate as to any Loss (or a potential claim by an
appropriate party) asserted in good faith prior to such date; PROVIDED, HOWEVER,
any claim for indemnification with respect to any Tax related matter shall
terminate upon the expiration of all applicable statutes of limitation.
8.2 NON-EXCLUSIVITY OF REMEDY. The indemnification provisions contained
in this Section 8 shall not be deemed to be the exclusive remedy or exclusive
means to obtain relief, as the case may be, of any party hereto, and the
provisions of this Section 8 shall not prejudice any other rights or remedies
that may be available to any party at law, in equity or otherwise.
8.3 SURVIVAL. Representations and warranties made hereunder in Sections 3
and 4 shall terminate on the first anniversary of the Closing Date, PROVIDED,
that in the event a claim for indemnification pursuant to Section 8 hereof, or
any other claim is asserted, based on a claim of misrepresentation or breach of
warranty set forth in Sections 3 or 4 hereof prior to the first anniversary date
of the Closing Date, such representations and warranties shall survive until the
resolution of such claim.
9. MISCELLANEOUS PROVISIONS.
9.1 ASSIGNMENT, SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Purchaser may assign its rights and obligations under
this agreement to any party without the consent of Seller, provided that the
assignee assumes Purchaser's liabilities and obligations under this Agreement.
Except as set forth in this Agreement, Seller may not assign its rights and
obligations hereunder.
-12-
9.2 NOTICES. All notices which are required or may be given pursuant to
the terms of this Agreement shall be in writing and shall be delivered
personally or by registered or certified mail, postage prepaid, or sent by
overnight delivery service as follows:
If to Purchaser: VISTA MEDICAL TECHNOLOGIES, INC.
0000 Xxxxxxx Xxxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
Attention: President
with a copy to: XXXXXXX, PHLEGER & XXXXXXXX LLP
000 Xxxx X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
If to Seller: PROMEDICA DISTRIBUTION, INC.
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Chief Executive Officer
Any of the addresses or addressees set forth above may be changed from time to
time by written notice from the party requesting the change.
Such notices and other communications shall for all purposes of this
Agreement be treated as being effective immediately if delivered personally, or
three (3) days after mailing by certified or registered mail, return receipt
requested, first class postage prepaid, or on (1) day after deposit for delivery
by an overnight delivery service.
9.3 ALTERATIONS AND WAIVERS. The waiver, amendment or modification of any
provision of this Agreement or any right, power or remedy hereunder, whether by
agreement of the parties or by custom, course of dealing or trade practice,
shall not be effective unless in writing and signed by the party against whom
enforcement of such waiver, amendment or modification is sought. No failure or
delay by either party in exercising any right, power or remedy with respect to
any of the provisions of this Agreement shall operate as a waiver of such
provisions with respect to such occurrences.
9.4 GOVERNING LAW; VALIDITY, FORUM, LAWS AND CONSTRUCTION. This Agreement
shall be construed, governed and enforced in accordance with the laws of the
State of California.
9.5 SEVERABILITY. In the event any provision of this Agreement or the
application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their
-13-
best efforts to replace the provision that is contrary to law with a legal one
approximating to the extent possible the original intent of the parties.
9.6 NO THIRD-PARTY BENEFICIARIES. Nothing contained in this Agreement
shall be construed to give any person other than Purchaser and Seller (or its
designees under Section 2.2) any legal or equitable right, remedy or claim under
or with respect to this Agreement.
9.7 INTEGRATION AND ENTIRE AGREEMENT. This Agreement, the Exhibits,
Schedules, the Non-Disclosure Agreement dated June 20, 1995 and other documents
referred to herein set forth the entire understanding between the parties and
supersede all previous and contemporaneous written or oral negotiations,
commitments, understandings and agreements relating to the subject matter hereof
and merge all prior and contemporaneous discussions between the parties. No
party shall be bound by any definition, condition, representation, warranty,
covenant or provision other than as contained herein.
9.8 COUNTERPART AND HEADINGS. For the convenience of the parties, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together constitute one and the same
instrument. All headings and captions are inserted for convenience of reference
only and shall not affect meaning or interpretation.
9.9 SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages
would be an inadequate remedy for any breach of the provisions of this Agreement
and agree that the obligations of the parties hereunder shall be specifically
enforceable.
9.10 ADVICE OF LEGAL COUNSEL. Each party acknowledges and represents that,
in executing this Agreement, it has had the opportunity to seek advice as to its
legal rights from legal counsel and that the person signing on its behalf has
read and understood all of the terms and provisions of this Agreement. Further,
each party has reviewed this Agreement, which may not be construed against any
party by reason of its preparation or word processing.
[Remainder of This Page Intentionally Left Blank]
-14-
IN WITNESS WHEREOF, the parties have executed, or caused to have executed
by an authorized officer, this Agreement on the date first above written.
PURCHASER: VISTA MEDICAL TECHNOLOGIES, INC.
a California corporation
By:/s/ Xxxx Xxxx
------------------------------------
Xxxx Xxxx
President
SELLER: PROMEDICA DISTRIBUTION, INC.
a California corporation
By:/s/ Xxxxx Xxxx
------------------------------------
Xxxxx Xxxx
------------------------------------
President
Solely with respect
to Sections 7.6 and 7.7
hereof
SHAREHOLDERS: /s/ Xxxxx Xxxx
------------------------------------
Xxxxx Xxxx
/s/ Xxxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
EXHIBIT A
INVESTORS' RIGHTS AGREEMENT
VISTA MEDICAL TECHNOLOGIES, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
July 12, 1996
TABLE OF CONTENTS
Page
----
SECTION 1. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS................. 1
1.1 Restrictions on Transferability.................................... 1
1.2 Certain Definitions................................................ 2
1.3 Restrictive Legend(s).............................................. 3
1.4 Notice of Proposed Transfers....................................... 3
1.5 Demand Registration Rights......................................... 4
1.6 Company Registration............................................... 6
1.7 Form S-3 Registration Rights....................................... 7
1.8 Expenses of Registration........................................... 8
1.9 Registration Procedures............................................ 8
1.10 Indemnification.................................................... 9
1.11 Information by Holder.............................................. 11
1.12 Rule 144 Reporting................................................. 11
1.13 Transfer of Registration Rights.................................... 12
1.14 Termination of Registration Rights................................. 12
1.15 "Market Stand Off" Agreement....................................... 13
SECTION 2. AFFIRMATIVE COVENANTS OF THE COMPANY AND SHAREHOLDERS......... 13
2.1 Financial Information.............................................. 13
2.2 Assignment of Rights to Financial Information...................... 14
2.3 Inspection Rights.................................................. 14
2.4 Attendance at Board Meetings....................................... 15
2.5 Termination of Covenants........................................... 15
2.6 Confidential Information, etc...................................... 15
SECTION 3. RIGHTS OF FIRST REFUSAL....................................... 16
3.1 Right of First Refusal on Company Issuances........................ 16
SECTION 4. MISCELLANEOUS................................................. 17
4.1 Governing Law...................................................... 17
4.2 Successors and Assigns............................................. 17
4.3 Entire Agreement................................................... 17
4.4 Notice............................................................. 18
4.5 Counterparts....................................................... 18
4.6 Severability....................................................... 18
4.7 Separability....................................................... 18
4.8 Approval of Amendments and Waivers................................. 18
4.9 Amendment of Prior Agreement....................................... 19
VISTA MEDICAL TECHNOLOGIES, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "AGREEMENT") is
made as of the 12th day of July, 1996, by and between Vista Medical
Technologies, Inc., a California corporation (the "Company"), and the
Shareholders listed on Schedule A hereto, each of which is herein referred to as
a "Shareholder."
RECITALS
WHEREAS, the Company and certain of the Shareholders (the "SERIES A
SHAREHOLDERS") are parties to a certain Investors Rights Agreement dated as of
July 27, 1995, as amended on September 15, 1995 (the "PRIOR AGREEMENT"),
pursuant to which the Company has agreed to the extent possible to grant to the
Series A Shareholders certain rights to cause the Company to register shares of
Common Stock issuable to the Series A Shareholders upon conversion of the
Company's Series A-1 Preferred Stock and Series A-3 Preferred Stock (the "SERIES
A PREFERRED") in the event the Company grants such rights to other shareholders,
and certain other matters as set forth therein;
WHEREAS, the Company and certain of the Shareholders (the "SERIES B
SHAREHOLDERS") are parties to the Series B Preferred Stock Purchase Agreement of
even date herewith (the "SERIES B AGREEMENT"); and
WHEREAS, in order to induce the Company to enter into the Series B
Agreement and to induce the Series B Shareholders to purchase shares of the
Company's Series B Preferred Stock (the "SERIES B PREFERRED") pursuant to the
Series B Agreement, the Shareholders and the Company hereby agree that this
Agreement shall amend and restate the Prior Agreement so that this Agreement
shall govern the obligations of the Company to register the resale of shares of
Common Stock issuable to the Shareholders upon conversion of their shares of the
Company's Series A Preferred and/or Series B Preferred, and certain other
matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
SECTION 1.
RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
1.1 RESTRICTIONS ON TRANSFERABILITY. Neither the Series A Preferred or
the Series B Preferred nor the Registrable Securities (as defined below) shall
be transferable except upon the conditions specified in this Agreement, which
conditions are intended to insure compliance with the provisions of the
Securities Act (as defined below), or upon such other terms as are in the
opinion of counsel to the Company satisfactory to comply with the
-1-
provisions of the Securities Act. Except for transfers made pursuant to Rule
144 of the Securities Act, the Shareholders will cause any proposed transferee
of Series A Preferred, Series B Preferred or Registrable Securities held by any
Shareholder to agree to take and hold such securities subject to the provisions
and upon the conditions specified in this Agreement and it will be a condition
precedent to the effectiveness of any such transfer that the Company shall have
secured a written agreement in form and substance satisfactory to the Company to
that effect, if so requested by the Company,
1.2 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"FORM S-3" shall mean Form S-3 under the Securities Act (as defined below)
as in effect on the date of this Agreement, or any substantially similar,
equivalent or successor form under the Securities Act.
"HOLDER" shall mean each holder of Registrable Securities.
"REGISTRABLE SECURITIES" means (i) the Common Stock issuable or issued upon
conversion of the Series A Preferred, (ii) the Common Stock issuable or issued
upon conversion of the Series B Preferred and (iii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the shares referenced
in (i) and (ii) above, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his rights under this
Section 1 are not assigned.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in
complying with Sections 1.5, 1.6 and 1.7 hereof other than Selling Expenses,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of Company counsel, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company required
to bear the legend set forth in Section 1.3 hereof or a legend substantially
similar thereto and all shares of Common Stock outstanding on the date of this
Agreement.
-2-
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the applicable sale.
1.3 RESTRICTIVE LEGEND(S).
(a) Each certificate representing the shares of Series A Preferred, Series
B Preferred and Registrable Securities shall (unless otherwise permitted by the
provisions of Section 1.4 below) be stamped or otherwise imprinted with a legend
in the following form (in addition to any legend required under applicable
California or other state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION.
(b) Each certificate representing shares of Registrable Securities into
which shares of the Series A Preferred and/or Series B Preferred are converted
also shall be stamped or otherwise imprinted with any legend required by the
Bylaws of the Company (in addition to any legend required under applicable
California or other state securities laws).
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing the Restricted Securities, by acceptance thereof, agrees to comply
in all respects with the provisions of this Section 1.4. Prior to any proposed
transfer of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall be
accompanied (except in transactions in compliance with Rule 144) by either (i) a
written opinion of legal counsel which shall be reasonably satisfactory to the
Company addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission, a copy of any
holder's request (together with all supplements or amendments thereto) to which
shall have been provided to the Company, at or prior to the time of first
delivery to the Commission's staff, to the effect that the transfer of such
securities without registration will not result in a recommendation by such
staff that action be taken with respect thereto, whereupon the
-3-
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Each certificate evidencing the Restricted
Securities transferred as provided for above shall bear the appropriate
restrictive legend set forth in Section 1.3 above, except that such certificate
shall not bear such restrictive legend if, in the opinion of counsel for the
Company or counsel for such holder, such legend is not required in order to
establish compliance with any provisions of the Securities Act.
Notwithstanding the provisions above, no such opinion of counsel or "no
action letter" shall be necessary for a transfer by a Shareholder which is a
partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner ("PARTNERS"), if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if he were an original
Shareholder hereunder.
1.5 DEMAND REGISTRATION RIGHTS.
(a) Commencing on July 12, 1999, if the Company shall receive a written
request (specifying that it is being made pursuant to this Section 1.5) from the
Holders of at least forty percent (40%) of the Registrable Securities that the
Company file a registration statement or similar document under the Securities
Act covering the registration of Registrable Securities the expected aggregate
offering price to the public of which is at least $7,500,000, then the Company
shall promptly notify all other Holders of such request and shall use its best
efforts to cause all Registrable Securities that such Holders have requested,
within fifteen (15) days after receipt of such written notice, to be registered
in accordance with this Section 1.5 to be registered under the Securities Act.
The Holders making the written request pursuant to this Section 1.5 shall be
referred to hereinafter as the "INITIATING HOLDERS".
Notwithstanding the foregoing, (i) the Company shall not be obligated to
effect a registration pursuant to this Section 1.5 during the period starting
with the date one hundred twenty (120) days prior to the Company's estimated
date of filing of, and ending on a date one hundred eighty (180) days following
the effective date of, a registration statement pertaining to an underwritten
public offering of the Company's securities, provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; and (ii)
if the Company shall furnish to such Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company or its shareholders
for a registration statement to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed six (6) months; provided, however, that the
Company shall not obtain such a deferral more than once in any 12-month period.
-4-
The Company shall be obligated to effect not more than two (2)
registrations pursuant to this Section 1.5 for which holders of Registrable
Securities are the Initiating Holders.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their demand by means of an underwriting, they shall so
advise the Company as part of their demand made pursuant to this Section 1.5,
and the Company shall include such information in the notice referred to in
Section 1.5(a). In such event, the right of any Holder to registration pursuant
to this Section 1.5 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein.
The Company shall, together with all Holders proposing to distribute their
securities through such underwriting, enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by the Company and
reasonably satisfactory to a majority of interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.5, if the underwriter
shall advise the Company in writing that marketing factors (including, without
limitation, an adverse effect on the per share offering price) require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities that would otherwise be registered
and underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated pro rata among such Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If any Holder disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The Registrable Securities so withdrawn shall also
be withdrawn from registration. If by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 1.5.
If the underwriter has not limited the number of Registrable Securities to
be underwritten, the Company may include securities for its own account (or for
the account of other securityholders) in such registration if the underwriter so
agrees and if the number of Registrable Securities that would otherwise have
been included in such registration and underwriting will not thereby be limited.
1.6 COMPANY REGISTRATION.
-5-
(a) If, at any time or from time to time, the Company shall determine to
register any of its securities, either for its own account or the account of a
securityholder or holders exercising their respective demand registration
rights, other than a registration relating solely to employee benefit plans on
Form S-8 or similar forms which may be promulgated in the future or a
registration on Form S-4 or similar forms which may be promulgated in the future
relating solely to a Securities and Exchange Commission Rule 145 or similar
transaction the Company will (i) promptly give to each Holder written notice
thereof and (ii) include in such registration (and any related qualification
under Blue Sky laws or other compliance), and in any underwriting involved
therein, all Registrable Securities of such Holders as specified in a written
request or requests made within fifteen (15) days after receipt of such written
notice from the Company.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
indicate in the notice given pursuant to Section 1.6(a). In such event the right
of any Holder to registration pursuant to this Section 1.6 shall be conditioned
upon such Holder's agreeing to participate in such underwriting and to the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other Holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company or by other holders exercising any
demand registration rights. Notwithstanding any other provision of this Section
1.6, if the underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the underwriter may exclude some or
all Registrable Securities or other securities from such registration and
underwriting (hereinafter an "UNDERWRITER CUTBACK"); provided, however, that if
such underwriting relates to any registration statement other than a
registration statement being filed with respect to the first registration
statement filed by the Company covering an underwritten offering of any of its
securities to the general public ("INITIAL PUBLIC OFFERING") in which no
secondary shares are included, then (i) in no event shall the aggregate number
of shares of Registrable Securities included in such underwriting be reduced
below thirty (30%) of the total number of shares proposed to be included in such
underwriting. In the event of an Underwriter Cutback, the Company shall so
advise all Holders and the other holders distributing their securities through
such underwriting, and the number of Registrable Securities and other securities
that may be included in the registration and underwriting shall be allocated
among all holders thereof (other than those holders who are exercising their
demand registration rights) on the basis that the holders who are not Holders
shall be cut back before any cutback of Holders. If the limitation determined
by the underwriter requires an Underwriter Cutback, such Underwriter Cutback
shall be in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders at the time of filing the
registration statement. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
-6-
1.7 FORM S-3 REGISTRATION RIGHTS. After the Initial Public Offering, the
Company shall use its best efforts to qualify for registration on Form S-3, and
to that end the Company shall use its best efforts to comply with the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), within twelve (12) months following the effective date of the first
registration of any securities of the Company for an underwritten registered
public offering. After the Company has qualified for the use of Form S-3, and
subject to the provisions of Section 1. 14, each Holder shall have the right to
request registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of such shares by each such Holder), subject only
to the following limitations:
(a) The Company shall not be obligated to cause a registration on Form S-3
to become effective prior to one hundred eighty (180) days following the
effective date of a Company initiated registration (other than a registration
effected solely to qualify an employee benefit plan or to effect a business
combination pursuant to Rule 145);
(b) The Company shall not be required to effect a registration pursuant to
this Section 1.7 unless the Holder or Holders requesting such a registration
propose to dispose of shares of Registrable Securities having an aggregate
disposition price (before deduction of underwriting discounts and expenses of
sale) of at least $500,000;
(c) The Company shall not be required to effect a registration pursuant to
this Section 1.7 if the Company shall furnish to the requesting Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company or its shareholders for the registration statement to
be filed at the date filing would be required, in which case the Company shall
have an additional period of not more than one hundred twenty (120) days within
which to file such registration statement; provided however, that the Company
shall not use this right more than once in any 12-month period;
(d) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding one hundred twenty
(120) days from the effective date thereof;
(e) The Company shall not be obligated to cause a registration on Form S-3
if in the prior six-month period the Company has caused a registration on Form
S-3 to become effective; and
(f) The Company shall be obligated to effect not more than two
registrations per year pursuant to this Section 1.7 for which holders of
Registrable Securities request such registration.
The Company shall give notice to all Holders of the receipt of a request
for registration pursuant to this Section 1.7 and shall use its best efforts to
cause all Registrable Securities that such Holders have requested, within
fifteen (15) days after receipt of such
-7-
written notice, be registered in accordance with this Section 1.7 to be
registered under the Securities Act. Subject to the foregoing, the Company will
use its best efforts to effect promptly any registration pursuant to this
Section 1.7. The provisions of Section 1.5(b) shall apply to any registration
effected pursuant to this Section 1.7
1.8 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.5, 1.6 and 1.7 (exclusive of Selling Expenses but inclusive of the
reasonable fees and expenses of one special counsel to the selling Holders)
shall be borne by the Company. Notwithstanding anything to the contrary herein,
the Company shall not be required to pay for any expenses of any registration
proceeding under Section 1.5 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to have been registered, unless such Holders agree to forfeit their
right to a demand registration pursuant to Section 1.5 (in which event such
right shall be forfeited by all Holders). In the absence of such an agreement
to forfeit, the Holders of Registrable Securities to have been registered shall
bear all such expenses pro rata on the basis of the Registrable Securities to
have been registered. Notwithstanding the foregoing, however, if at the time of
the withdrawal, the Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to the Holders
at the time of their request, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said expenses
and shall retain their rights pursuant to Section 1.5.
1.9 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Keep such registration, qualification or compliance effective for a
period of one hundred twenty (120) days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs;
(b) Prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them;
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be
-8-
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement; and
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
Notwithstanding any provision to the contrary in this Agreement, the
Company shall not be required in connection with any registration pursuant to
Sections 1.5, 1.6 or 1.7 to qualify shares in any state or jurisdiction which
requires the Company to qualify to do business or to file a general consent to
service of process.
1.10 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will promptly reimburse each such Holder, each of its
officers and directors and partners, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred (as and when incurred) in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
-9-
information furnished to the Company by an instrument duly executed by such
Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers and directors and partners and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof) including any of the foregoing incurred in
settlement of any litigation commenced or threatened, arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification, or compliance,
and will promptly reimburse the Company, such Holders, such directors,
officer's, partners, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred (as and when incurred) in connection with
investigation, preparing or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by an instrument
duty executed by such Holder and stated to be specifically for use therein,
provided, however, that the obligations of each such Holder hereunder shall be
limited to an amount equal to the proceeds to each such Holder of Registrable
Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 1.10 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at its own
expense, and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 1 unless such failure resulted in actual
detriment to the Indemnifying Party. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include
-10-
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party a release from all liability in respect of such claim or
litigation.
(d) If the indemnification provided for in this Section 1.10 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1 and otherwise.
1.11 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 1.
1.12 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Use its best efforts to make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act at
all times after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public;
(b) Use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Exchange Act at any time after it has become subject to such reporting
requirements,
(c) So long as a Shareholder owns any Restricted Securities, to furnish to
the Shareholder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the
-11-
effective date of the first registration statement filed by the Company for an
offering of its securities to the general public) and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual report of the Company, and such
other reports and documents of the Company as a Shareholder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
a Shareholder to sell any such securities without registration.
1.13 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted under Sections 1.5, 1.6 and 1.7 may be assigned or
otherwise conveyed to a transferee or assignee of Registrable Securities, who
shall be considered a "Holder," and the transferred shares shall be considered
"Registrable Securities," for purposes of this Section 1, provided that (i) said
transferee acquires (or, together with affiliates (as defined under the
Securities Act) ("AFFILIATES") of said transferee, after the acquisition then
beneficially owns) at least 250,000 shares of the Registrable Securities
(including shares of Series A Preferred and Series B Preferred prior to
conversion into Registrable Securities) and (ii) the Company is given written
notice by such Holder at the time of or within a reasonable time (but not more
than thirty (30) days) after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned, subject to said transferee's agreement
to be bound by and comply with the provisions of this Section 1.
1.14 TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
pursuant to this Section 1 shall terminate (i) upon the seventh anniversary of
the effective date of the first registration statement filed by the Company
covering the Initial Public Offering or (ii) if earlier, as to any individual
Holder, at such time after the Company's Initial Public Offering as all
Registrable Securities (including shares of Series A Preferred and Series B
Preferred prior to conversion into Registrable Securities) held by such Holder
can be sold within any three-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144 (including
Rule 144(k)) promulgated thereunder.
1.15 "MARKET STAND OFF" AGREEMENT. Each Holder hereby agrees that, during
the period of duration specified by the Company and an underwriter of common
stock or other securities of the Company, following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; PROVIDED, HOWEVER, that:
(a) such agreement shall not exceed 180 days for the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
-12-
(b) such agreement shall not exceed 90 days for any subsequent
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(c) all executive officers and directors of the Company and all
other persons with registration rights under this Agreement enter into similar
agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Notwithstanding the
foregoing, the obligations described in this Section 1.15 shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms which may be promulgated in the future, or a registration relating solely
to a SEC Rule 145 transaction on Form S-14 or Form S-15 or similar forms which
may be promulgated in the future.
SECTION 2.
AFFIRMATIVE COVENANTS OF THE COMPANY AND SHAREHOLDERS
2.1 FINANCIAL INFORMATION. Subject to Section 2.3, the Company will
furnish the following reports to the Shareholders for so long as the
Shareholders are holders of any Series A Preferred, Series B Preferred or
Registrable Securities:
(a) As soon as practicable after the end of each fiscal year, and in any
event within 90 days thereafter, audited consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and surplus and consolidated statements of
changes in financial position of the Company and its subsidiaries, if any, for
such year, prepared in accordance with generally accepted accounting principles
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of recognized national standing selected by the Company;
(b) Each month, an unaudited consolidated balance sheet of the Company and
its subsidiaries, if any, and consolidated statements of income and consolidated
statements of changes in financial condition of the Company and its subsidiaries
for such period, all in reasonable detail and signed, subject to changes
resulting from year-end audit adjustments, by the principal financial or
accounting officer of the Company;
(c) An annual operating budget for each coming year, delivered on or
before January 1 of each year; and
(d) Such other information relating to the financial condition, business,
prospects or corporate affairs of the Company as the investor may from time to
time request, provided,
-13-
however, that the Company shall not be obligated to provide information which it
deems proprietary.
2.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights granted
pursuant to Section 2.1 may be assigned by the Shareholders (or by any permitted
transferee of any such rights) so long as (i) the Company is given notice of any
such assignment within a reasonable time after the date the same is effected,
(ii) the transferee shall have acquired (or, together with such transferee's
Affiliates, after the acquisition shall then beneficially own) at least 250,000
shares of Registrable Securities (including shares Series A Preferred and Series
B Preferred prior to conversion into Registrable Securities) in a private
transaction and (iii) the transferee is not engaged in a business that is
competitive with the Company.
2.3 INSPECTION RIGHTS.
(a) The Company will permit any Investor, so long as such Investor (or its
representative) owns at least 200,000 Shares, or such number of shares of Common
Stock issued upon conversion of 200,000 or more Shares, or any combination
thereof (as presently constituted and subject to subsequent adjustment for stock
splits, stock dividends, reverse stock splits, recapitalizations and the like)
(a "SIGNIFICANT HOLDER") (or a representative of any Significant Holder) to
visit and inspect any of the properties of the Company, including its books of
account and other records (and make copies thereof and take extracts therefrom),
and to discuss its affairs, finances and accounts with the Company's officers
and its independent public accountants, all at such reasonable times and as
often as any such person may reasonably request.
(b) The provisions of Section 2.2 and this Section 2.3 shall not be in
limitation of any rights which any Holder or Significant Holder may have with
respect to the books and records of the Company and its subsidiaries, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
2.4 ATTENDANCE AT BOARD MEETINGS. So long as Kaiser Aerospace &
Electronics ("Kaiser") owns at least an aggregate of 1,000,000 shares of Series
A Preferred, and so long as Kaiser does not have a representative on the Board
of Directors of the Company, Kaiser shall receive from the Company notices of
all meetings of the Board of Directors, including without limitation telephonic
meetings, and Kaiser shall receive, with such limitations provided herein, any
materials distributed for such meeting, and may send one representative to such
meetings, PROVIDED, HOWEVER, that the Company may require as a condition
precedent that such representative proposing to attend any meeting of the Board
of Directors shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so received during such
meetings and may require that such representative sign a confidentiality
agreement with the Company; and, PROVIDED, FURTHER, that the Company reserves
the right not to provide information and to exclude such representative from any
meeting or portion thereof if attendance at such meeting by such representative
or dissemination of any information at such meeting to such representative
would, in the good
-14-
faith judgment of the Board of Directors, result in disclosure of trade secrets
to such representative, would compromise or adversely affect the attorney-client
privilege between the Company and its counsel, or would, in the good faith
judgment of the Board of Directors, result in a conflict of interest situation.
If such representative in his or her good faith judgment believes that an item
to be discussed by the Board of Directors would result in any conflict of
interest, such representative shall promptly bring such conflict to the
attention of the Chairman of the Board. In no event shall any provision of this
paragraph waive any obligation of confidentiality to the Company owed by any
such representative or Kaiser.
2.5 TERMINATION OF COVENANTS. The covenants set forth in Section 2.1,
Section 2.3 and Section 2.4 shall terminate and be of no further force or effect
after the closing date of the Initial Public Offering.
2.6 CONFIDENTIAL INFORMATION, ETC. Each Shareholder agrees that all
information received by it pursuant to this Section 2, and any other information
relating to the Company's technology, processes or formulas that is disclosed by
the Company to any Shareholder in writing and is marked "Confidential," shall be
considered confidential information. Each Shareholder further agrees that it
shall hold all such confidential information in confidence and shall not
disclose any such confidential information to any third party other than its
counsel or accountants nor shall such Shareholder use such confidential
information for any purpose other than evaluation of such Shareholder's
investment in the Company; provided, however, that the foregoing obligation to
hold in confidence and not to disclose confidential information shall not apply
to any such information that (a) was known to the public prior to disclosure by
the Company, (b) becomes known to the public through no fault of such
Shareholder, (c) is disclosed to such Shareholder on a non-confidential basis by
a third party having a legal right to make such disclosure or (d) is
independently developed by such Shareholder.
SECTION 3.
RIGHTS OF FIRST REFUSAL
3.1 RIGHT OF FIRST REFUSAL ON COMPANY ISSUANCES.
(a) The Company hereby grants to each Shareholder the right of first
refusal to purchase its Pro Rata Share (defined below) of all (or any part) of
New Securities (defined below) that the Company may from time to time propose to
sell and issue. Such Shareholder's "PRO RATA SHARE," for purposes of this
Section 3, is the ratio of the number of shares of Common Stock (assuming
conversion of all shares of Series A Preferred and Series B Preferred) then held
by such Shareholder to the total number of shares of Common Stock then
outstanding (assuming conversion of all shares of Series A Preferred and Series
B Preferred). This right of first refusal shall be subject to the following
provisions:
(b) "NEW SECURITIES" shall mean any Common Stock or Preferred Stock of the
Company, whether now authorized or not, and rights, options, or warrants to
purchase said
-15-
Common Stock or Preferred Stock, and securities of any type whatsoever that are,
or may become, convertible into or exchangeable for said Common Stock or
Preferred Stock; provided, however, that "NEW SECURITIES" does not include (i)
securities issuable upon conversion of or with respect to Series A Preferred
Stock, Series B Preferred Stock or any future series of preferred stock; (ii)
shares of the Company's Common Stock (or related options) issued to officers,
directors, employees of and/or consultants to the Company pursuant to plans or
agreements as approved by the Company's Board of Directors; (iii) shares of the
Company's Common Stock or Preferred Stock issued in connection with any stock
split, stock dividend, or recapitalization by the Company; (iv) securities
issued in connection with any equipment leasing, technology licensing, corporate
partnering, strategic alliance, acquisition, merger, purchase of assets or
similar transaction as approved by the Company's Board of Directors; and (v)
shares of the Company's Common Stock issued or issuable as a result of any
antidilution adjustment provided for in the Company's Articles of Incorporation
as in effect at the time of such issuance.
(c) In the event that the Company proposes to undertake an issuance of New
Securities, it shall give each Shareholder written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Shareholder shall have
twenty (20) business days from the date of receipt of any such notice to agree
to purchase some or all of his Pro Rata Share of such New Securities for the
price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased. Each Shareholder shall have a right of over-allotment such that if
any Shareholder fails to exercise his right hereunder to purchase his Pro Rata
Share of New Securities, the other Shareholders may purchase the non-purchasing
Shareholder's portion on a pro rata basis, within fifteen (15) business days
from the date such non-purchasing Shareholder fails to exercise his right
hereunder to purchase his Pro Rata Share of New Securities.
(d) In the event that the Shareholders fail to exercise in full the right
of first refusal within said twenty (20) plus fifteen (15) business day period,
the Company shall have one hundred twenty (120) days thereafter to sell (or
enter into an agreement pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within one hundred twenty (120) days from
the date of said agreement) the New Securities respecting which the
Shareholders' rights were not exercised, at a price and upon general terms no
more favorable to the purchasers thereof than specified in the Company's notice.
In the event the Company has not sold the New Securities within said one hundred
twenty (120) day period (or sold and issued New Securities in accordance with
the foregoing within one hundred twenty (120) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Shareholders in the manner
provided above.
(e) The right of first refusal granted under this Section 3. 1 shall not
apply to and shall expire upon the closing of the Company's Initial Public
Offering.
-16-
(f) The rights granted pursuant to this Section 3.1 may be assigned by the
Shareholders (or by any permitted transferee of any such rights) so long as (i)
the Company is given notice of any such assignment within a reasonable time
after the date the same is effected and (ii) the transferee shall have acquired
(or, together with such transferee's Affiliates, after the acquisition shall
then beneficially own) at least 250,000 shares of Registrable Securities
(including shares of Series A Preferred and Series B Preferred prior to
conversion into Registrable Securities) in a private transaction.
SECTION 4.
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California by California residents.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
4.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
4.4 NOTICES. ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to the Shareholders, to such Shareholders'
addresses set forth on the Schedule of Shareholders or to such other address as
such Shareholders shall have furnished to the Company in writing, (b) if to any
other holder of Registrable Securities, at such address as such holder shall
have furnished the Company in writing, or (c) if to the Company, to its address
set forth above and addressed to the attention of the President or at such other
addresses as the Company shall have furnished to the Shareholders. All notices
and other communications pursuant to the provisions of this Section 4.4 shall be
deemed delivered when mailed or sent by facsimile.
4.5 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
4.6 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
-17-
4.7 SEPARABILITY. Any invalidity, illegality, or limitation of the
enforceability with respect to any Shareholder of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Shareholder's domicile or otherwise, shall in no way affect
or impair the validity, legality, or enforceability of this Agreement with
respect to other Shareholder.
4.8 APPROVAL OF AMENDMENTS AND WAIVERS. Any term of this agreement may be
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with the written consent of (i) the Company and (ii) the holders
of at least a majority of the then outstanding shares of Registrable Securities,
excluding from the determination of such a majority in clause (ii) (both in
determining the total number of such shares outstanding and the number of such
shares consenting or not consenting) all shares previously disposed of by such
holders pursuant to one or more registration statements under the Securities Act
or pursuant to Rule 144. Any amendment, termination or waiver effected in
accordance with this section shall be binding upon the Shareholders, each of
their transferees and the Company. Each Shareholder acknowledges that by the
operation of this Section the holders of a majority of the outstanding
Registrable Securities as aforesaid may have the right and power to diminish or
eliminate all rights of such Shareholders under this Agreement.
4.9 AMENDMENT OF PRIOR AGREEMENT. This Agreement constitutes an amendment
of the Prior Agreement and is cast in the form of an amendment and restatement
solely for the ease of the parties hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-18-
The foregoing Restated Investors' Rights Agreement is hereby executed as of
the date first above written.
THE COMPANY:
VISTA MEDICAL TECHNOLOGIES, INC.
By:
-------------------------------------
Title:
-----------------------------------
Address: 0000 Xxxxxxx Xxxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
THE SHAREHOLDERS:
XXXXXX CITY PARTNERS
By:
-------------------------------------
Title:
-----------------------------------
Address: 000 Xxxxx Xxxx, Xxx. 000
Xxxxxx Xxxx, XX 00000
ONE LIBERTY FUND III, L.P.
By:
-------------------------------------
Title:
-----------------------------------
Address: 0 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
GILDE INTERNATIONAL, B.V.
By:
-------------------------------------
Title:
-----------------------------------
Address: 0 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
B.U.N.P.
By:
-------------------------------------
Title:
-----------------------------------
Address: c/o Community Technology Fund
Boston University Ventures
000 Xxx Xxxxx Xxxx
Xxxxxx, XX 00000
DOMAIN PARTNERS III, L.P.
By: One Xxxxxx Square Associates III, L.P.
By:
-------------------------------------
Title:
-----------------------------------
Address: Xxx Xxxxxx Xxxxxx, Xxx. 000
Xxxxxxxxx, XX 00000
BIOTECHNOLOGY INVESTMENTS
LIMITED
By: Old Court Limited
By:
-------------------------------------
Title:
-----------------------------------
Address: St. Julian's Court
St. Xxxxx Port
Guernsey, Channel Islands
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
D.P. III ASSOCIATES, L.P.
By: One Xxxxxx Square Associates III, L.P.
By:
-------------------------------------
Title:
-----------------------------------
Address: Xxx Xxxxxx Xxxxxx, Xxx. 000
Xxxxxxxxx, XX 00000
SBIC PARTNERS, L.P.
By: Xxxxxxx Xxxxxxx & Xxxxx X.X.,
General Partner
By: Xxxxxxx Xxxxxxx & Xxxxx Venture
Co.,
General Partner
By:
-------------------------------------
Title:
-----------------------------------
By: SL-SBIC Partners, L.P.,
General Partner
By: FW-SBIC, Inc.,
General Partner
By:
-------------------------------------
Title:
-----------------------------------
Address: 000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
KOICHIRO HIRO
-------------------------------------
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
Address: c/o Oktas
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
DELAWARE CHARTER GUARANTEE &
TRUST TTEE FBO XXXXX X. BRIEFS
-------------------------------------
By: Xxxx Xxxxxxx
-------------------------------------
Title: Agent c/o Xxxxx Xxxxxx
-----------------------------------
Address: 0000 Xxxx Xxxx Xxxx 0-000
Xxxxx Xxxx, XX 00000
With copy to:
c/o Oktas
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
XXXXXX XXXXX, M.D.
-------------------------------------
Address:
--------------------------------
NATIONAL CITY BANK AS CUSTODIAN CARDIAC
SURGICAL FBO XX. XXXXXXX X. XXXXXXXX, XX
By:
-------------------------------------
Title:
-----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
GUARANTEE & TRUST CO., TRUSTEE FBO XXXXXXX X.
XXXXXXX, M.D.
-------------------------------------
By:
-------------------------------------
Title:
-----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
[SIGNATURE PAGE TO RESTATED INVESTORS' RIGHTS AGREEMENT]
XXXXXXXX X. XXXXX, M.D.
------------------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
SELECTED MEDICAL ENTERPRISES
------------------------------------------
By:
-------------------------------------
Title:
-----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
PROMEDICA INTERNATIONAL, INC.
------------------------------------------
By:
-------------------------------------
Title:
-----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
A-1
EXHIBIT A
SCHEDULE OF SHAREHOLDERS
Shareholders
------------
XXXXXX CITY PARTNERS
000 Xxxxx Xxxx, Xxx. 000
Xxxxxx Xxxx, XX 00000
Attention: Xx. X.X. Xxxxx
ONE LIBERTY FUND III
0 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxx Xxxxxxx
GILDE INTERNATIONAL B.V.
0 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxx Xxxxxxx
B. U. N. P.
c/o Community Technology Fund
Boston University Ventures
000 Xxx Xxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Xx.
DOMAIN PARTNERS III, L.P.
Xxx Xxxxxx Xxxxxx. Xxx. 000
Xxxxxxxxx. XX 00000
Attention: Xxxxx X. Xxxxx. Ph.D.
BIOTECHNOLOGY INVESTMENTS LIMITED
St. Julian's Court
St. Xxxxx Xxx
Guernsey. Channel Islands
with copy to:
c/o Domain Associates
Xxx Xxxxxx Xxxxxx, Xxx. 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx. Ph.D.
DP III ASSOCIATES, L.P.
X-0
Xxx Xxxxxx Xxxxxx, Xxx. 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Ph.D
SBIC PARTNERS. L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxxx
XXXXXXXX XXXX
c/o Oktas
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
DELAWARE CHARTER GUARANTEE &
TRUST TTEE FBO XXXXX X. BRIEFS
0000 Xxxx Xxxx Xxxx 0-000
Xxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxx
with copy to:
c/o Oktas
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx Briefs
PIONEER CAPITAL CORPORATION
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
ACCEL III, L.P.
0 Xxxxxx Xxxxxx, Xxx. 000
Xxxxxxxxx, XX 00000
ACCEL JAPAN, L.P.
0 Xxxxxx Xxxxxx, Xxx. 000
Xxxxxxxxx, XX 00000
ACCEL '91
0 Xxxxxx Xxxxxx, Xxx. 000
Xxxxxxxxx, XX 00000
OAK INVESTMENT PARTNERS V, L.P.
0 Xxxxxx Xxxxxx
X-0
Xxxxxxxx, XX 00000
OAK V AFFILIATES FUND, L.P.
0 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
XXXXX XXXXXXX
0000 Xxxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
XXXX XXXXXXXXX
00000 Xxx xxx Xxxx
Xxxxxx Xxxxx Xx, XX 00000
XXXX XXXXXX XXXXXXX TRUST
U/A DTD 7-11-88
P. O. Xxx 0000
Xx Xxxxx, XX 00000
XXXXXX XXXXX, M.D.
0000 X. X. Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
NATIONAL CITY BANK AS CUSTODIAN
CARDIAC SURGICAL FBO XX. XXXXXXX X.
XXXXXXXX, XX
000 Xxxxxxxx Xxxx, XXX-0
Xxxxxxxxxxx, XX 00000
GUARANTEE & TRUST CO., TRUSTEE
FBO XXXXXXX X. XXXXXXX, M.D.
P. O. Xxx 0000
Xxxxxx Xxxxx Xx, XX 00000
XXXXXXXX X. XXXXX, M.D.
0000 Xxxxxxxxx Xxx
Xxxxxx Xxxx, XX 00000
SELECTED MEDICAL ENTERPRISES
0000 Xxxx Xxx
Xxxxxx, XX 00000
PROMEDICA INTERNATIONAL, INC.
000 Xxxxxxx Xxxxxx Xxxxx, #000
Xxxxxxx Xxxxx, XX 00000
A-3
