Exhibit 10.3


 


Confidential


 





 


 


Vista Medical
Technologies, Inc.


 


SUBSCRIPTION
AGREEMENT


 


Dated as of May         , 2004


 


Name of Subscriber:


 


Address of Subscriber:


 


Facsimile
Number:


 


Telephone
Number:


 


E-Mail
Address:


 


Tax
ID Number of Subscriber:


 


TO:         Vista
Medical Technologies, Inc., a Delaware Corporation
(the “Company”).


 


SUBSCRIPTION TO PURCHASE,
at the closing (the “Closing”), or any subsequent closing (each, an “Additional
Closing”), units (a “Unit” or the “Units”) consisting of
shares of Common Stock, $0.01 par value per share, and warrants (the “Common
Stock Warrants”) exercisable for the purchase of one half shares of Common
Stock of the Company, on the terms and conditions set forth on Exhibit A
hereto.  Each unit consists of one share of Common Stock and a Common
Stock Warrant to purchase one half share of Common Stock of the Company. The
Common Stock and the Common Stock Warrants, and the shares of Common Stock
issuable upon the exercise of the Common Stock Warrants, are collectively
referred to herein as the “Securities”.


 


Price Per Unit:     $0.85


 


Subscription Amount: 
$                         (the
“Subscription Amount”) delivered herewith (as provided by paragraph “A”
below).


 

















 


The undersigned
Subscriber hereby irrevocably subscribes  for,
and agrees to purchase, the Securities, at the Subscription Amount (this “Subscription”),
in accordance with and subject to the terms, provisions and conditions set
forth herein and the exhibits hereto. 
When this Subscription Agreement is completed, signed and returned, with
payment, by the undersigned Subscriber, and accepted by the Company, the
Subscriber will become entitled to all of its benefits and subject to all of
the obligations, restrictions and limitations set forth herein and in the
exhibits hereto.


 


The Subscriber
understands that this Subscription is an irrevocable offer to purchase the
Securities and may be accepted or rejected in whole or in part for any reason
whatsoever by the Company, at any time on or prior to May 25, 2004, unless otherwise
extended by the Placement Agent (as defined herein) and the Company (but in no
event later than June 01, 2004).


 


This Subscription is subject to the Company’s receipt, at the Closing,
of executed Subscription Agreements that have been accepted by the Company to
purchase units with aggregate gross proceeds to the Company in an amount equal
to at least $4,000,000 plus any such additional amounts, if any, required by
the Nasdaq Listing Qualifications Panel.


 


This
Subscription is subject to the Company’s execution of a definitive voting
agreement with the holders of more than 50% of the Company’s outstanding shares
of Common Stock and Preferred Stock, providing that such holders shall vote in
favor of approval of the issuance of the shares of Common Stock and the shares
of Common Stock issuable upon the exercise of the Common Stock Warrants.


 


A.            Payment.  In connection with this Subscription
Agreement and subject to acceptance by the Company, the Subscriber hereby
delivers the Subscription Amount.  The
Subscription Amount will be held in a separate escrow fund pending the
Company’s acceptance or rejection of this Subscription.  If the Company rejects this Subscription,
the Subscription Amount shall be returned in full without interest; and the
Subscriber shall have no further rights or obligations under or in respect of
this Subscription.  See Exhibit B for payment instruction.


 


B.            Representations and Warranties.    In connection with this Subscription, the
Subscriber hereby represents and warrants to, agrees with the Company,
acknowledges and confirms as follows:


 


(1)           The Securities being subscribed for
by the Subscriber will be purchased for the account of the Subscriber for
investment only and not with a view to, nor with any intention of, a
distribution or resale thereof, in whole or in part, or the grant of any
participation therein.  The Subscriber
has no agreement or other arrangement with any other person to sell, transfer,
or pledge any part of the Securities or any agreement or arrangement that would
guarantee the Subscriber any profit or against any loss with respect to such
Securities, and the Subscriber has no plans to enter into


 


2

















 


any such agreement or arrangement. 
The Subscriber acknowledges and confirms that it understands that the
Securities, and those securities issuable upon exercise or conversion of the
Securities, as the case may be, have not been registered under the Securities
Act of 1933, as amended (the “Securities Act”), and the rules and
regulations promulgated thereunder, or the securities laws of any state or
other jurisdiction, and cannot be disposed of unless subsequently registered
under the Securities Act and any applicable laws of states or other
jurisdictions or an exemption from such registration is available.


 


(2)           The Securities are
being offered and sold by the Company under an exemption from registration
provided by the Securities Act and the rules and regulations promulgated
thereunder in reliance, in good faith, upon the representations and warranties
of the Subscriber contained herein.


 


(3)           The Subscriber:


 


(A) has been furnished a copy of the Company’s confidential offering package dated May 17, 2004 (the “PPM”);
 
(B) has carefully read, has carefully considered and fully understands the provisions of:
 
(i) the PPM (including, without limitation, the terms of this offering and the Securities offered by the Company (including as described in the “OFFERING SUMMARY” section of the PPM) and the materials under the “RISK FACTORS” section of the PPM);
 
(ii) all documents and information included as exhibits, or incorporated in the PPM by reference, including but not limited to the filings and information made under the Exchange Act (as defined in the PPM); and
 
(iii) this Subscription Agreement (and the exhibits and annexes hereto).
 
(C) has been given sufficient access and opportunity to:
 
(i) examine all material books and records, and material contracts and documents of the Company and such other information and documents as the Subscriber has requested; and
 
(ii) ask questions of the Company and its management, and, if the Subscriber asked questions of the Company or its management, has received satisfactory answers.
 
(D) represents and warrants that in making the decision to invest in the Securities, the Subscriber has relied on independent investigations


 


3

















 


made by the Subscriber and the Subscriber’s own professional advisors.  The Subscriber acknowledges that no representation has been made by the Company or otherwise by or on behalf of the Company concerning the Securities (including any current value of the Securities or as to any prospective return on investment in the Securities), the Company, its business or prospects, or other matters, except as set forth in the PPM.
 


(4)           The Subscriber is able (i) to bear
the economic risk of the Subscriber’s investment in the Securities; (ii) to
hold the Securities for an indefinite period of time and understands that the
Securities cannot be resold unless subsequently registered under the Securities
Act or unless an exemption from such registration is available, as established
by an opinion of counsel satisfactory to the Company; and (iii) currently, and
based on existing conditions, hereafter will be able to afford a complete loss
of such investment.


 


(5)           The Subscriber understands the
business in which the Company is engaged and has such knowledge and experience
in financial and business matters that the Subscriber is capable of evaluating
the merits and risks of the Subscriber’s investment in the Securities and of
making an informed investment decision with respect thereto.


 


(6)           The Subscriber hereby acknowledges
and confirms that, except as set forth in the PPM, neither the Company nor any
of its officers, directors, affiliates, agents or representatives has made any
representations or warranties (oral or written) concerning (i) the Securities;
(ii) the Subscriber’s investment in the Securities; or (iii) the Company, its
business, prospects, or anticipated financial or other results, or other
matters.


 


(7)           The Subscriber understands that all certificates or other documents evidencing the Securities will bear substantially the following legend:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR “BLUE SKY” LAWS, AND MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND BLUE SKY LAWS OR AN EXEMPTION THEREFROM IS AVAILABLE AS ESTABLISHED BY A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION.
 
(8)           The Subscriber understands that no federal or state agency has passed on or made any recommendation or endorsement of the Securities.
 


(9)           The Subscriber hereby represents and
warrants that:


 


4

















 


(Please check the boxes opposite each of the
items in clauses (a) and (b) below which is true of the Subscriber.  If clause (a) is checked, the Subscriber
need not complete the items under clause (c). 
If clause (a) is not checked, please complete each blank in clause (c)
below.  Please also initial each item
checked or completed.)


 


	
  o

  	
   

  	
  (a)           The Subscriber is
  an “accredited investor” (as such term is defined in Rule 501(a) of
  Regulation D promulgated by the Securities and Exchange Commission under the
  Securities Act) for at least one of the reasons specified below:

  



 


o            The Subscriber’s net worth (together with the net worth
of the Subscriber’s spouse) exceeds $1,000,000.


 


o            The Subscriber’s individual income in each of the two
immediately previous calendar years has been $200,000 or more and his current
year’s income is reasonably expected to be at least equal to that amount; or,
the Subscriber’s joint income with his spouse in each of the two immediately
previous calendar years has been $300,000 or more and the current year’s joint
income is reasonably expected to equal at least that amount.


 


o            The Subscriber, if other than an individual, either (A)
is a corporation, partnership, business trust or 501(c)(3) organization which
has total assets in excess of $5,000,000 and has not been formed for the
specific purpose of purchasing the Securities, or (B) is an entity (other than
a trust) with only accredited investors as its partners, members or
shareholders, or (C) is a trust other than a business trust which has assets in
excess of $5,000,000, has not been organized for the purposes of acquiring the
investment in the Securities and has its investment hereunder directed by a
person described in the first sentence of the following clause (b).  The Subscriber, if other than an individual,
represents that this Subscription has been duly authorized by all necessary
corporate, partnership or other governance action on its part.


 


o            (b)           The
Subscriber has (or, if other than an individual, is directed by a person who
has) such knowledge and experience in financial and business matters that he or
she is capable of evaluating the risks of an investment in the Securities.  The Subscriber has adequate means of
providing for current financial needs and contingencies, has no need for
liquidity in the investment in the Securities, and is able to bear the
substantial economic risks of the investment in the Securities for an
indefinite period.


 


(c)           The Subscriber (if
an individual) hereby represents and warrants that:


 


(If the box opposite Paragraph (9)(a) above
has not been checked, please complete the blanks below in this clause
(c).)


 


5

















 


The Subscriber’s higher education consists of the following (include
college or university, any graduate programs and any other specialized
education programs relevant to the Subscriber’s business experience):


 


The Subscriber’s principal business and professional activities during
the last five years are as follows:


 


(10)         The Subscriber hereby represents and
warrants as to the following personal information:


 


(Each Subscriber should furnish all of the
information called for below in this Paragraph (10).)


 


The
Subscriber’s residence address (or, if other than an individual, principal
office address) is as follows:


 


The Subscriber
(if an individual) maintains a house or apartment in the following state(s) in
addition to his or her residence:


 


The Subscriber
(if an individual) pays state income taxes in the following state:


 


The Subscriber
(if an individual) holds a driver’s license in the following state:


 


The Subscriber
(if an individual) is registered to vote in the following state:


 


(11)         This Subscription Agreement and any
other documents executed and delivered by the Subscriber in connection herewith
have been duly executed and delivered by the Subscriber, and are the legal,
valid and binding obligations of the Subscriber enforceable in accordance with
their respective terms.


 


(12)         The execution and delivery of this
Subscription Agreement and any other documents executed and delivered by the
Subscriber in connection herewith do not, and the performance and consummation
of the terms and transactions set forth


 


6

















 


or contemplated herein will not, contravene or result in a default
under any provision of existing law or regulations to which the Subscriber is
subject, or any indenture, mortgage or other agreement or instrument to which
the Subscriber is a party or by which he, she or it is bound and does not
require on the part of the Subscriber any approval, authorization, license or
filing from or with any foreign, federal or state or municipal board or agency.


 


(13)         The Subscriber acknowledges that
Silicon Valley Bank is acting only as an escrow agent in connection with the
offering of the Securities described here, and has not endorsed, recommended or
guaranteed the purchase, value or repayment of such Securities.


 


C.            Effectiveness of Subscription.


 


(1)           This Subscription shall be binding
upon the successors and permitted assigns of the Subscriber and, when accepted
by the Company, shall be binding upon the successors and assigns of the
Company.


 


(2)           All of the agreements,
representations and warranties made by the Subscriber in this Subscription
Agreement shall survive the execution and delivery hereof.  The Subscriber shall immediately notify the
Company upon discovering that any of the representations or warranties made
herein were false when made or has, as a result of changes in circumstances,
become false.  Every provision of this
Subscription Agreement is intended to be severable, and if any term or
provision hereof is held to be illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the validity of the remainder
hereof.


 


(3)           The agreements of the Subscriber and
the Company set forth herein shall become effective and binding upon the
undersigned, without right of revocation, upon the Company’s acceptance of this
Subscription.


 


D.            Hedging.                Subscriber
will not engage in any hedging or other transaction which is designed to or
could reasonably be expected to lead to or result in a disposition of the
Securities by the Subscriber or any other person or entity.  Such prohibited hedging or other
transactions include without limitation effecting any short sale or having in
effect any short position (whether or not such sale or position is against the
box and regardless of when such position was entered into) or any purchase,
sale or grant of any right (including without limitation any put or call
option) with respect to the Securities.


 


E.             Shareholder Approval.


 


(1)           Unless previously prepared and filed,
as soon as practicable following the acceptance of this Subscription, the
Company agrees that it shall prepare and file with the SEC a preliminary proxy
statement (as amended and supplemented, the “Proxy Statement”) in connection
with the meeting of its shareholders (the “Shareholders Meeting”).  At the Shareholders Meeting, the Company
will seek to obtain shareholder approval (“Shareholder Approval”) of the
issuance of the shares of


 


7

















 


Common Stock and shares of Common Stock upon the exercise of the Common
Stock Warrants. The Company shall use its reasonable best efforts to respond to
any written comments of the SEC or its staff, and, to the extent permitted by
law, to cause the Proxy Statement to be mailed to the Company’s shareholders as
promptly as practicable after responding to all such comments to the
satisfaction of the SEC staff. Subscriber shall cooperate with the Company in
the preparation of the Proxy Statement or any amendment or supplement thereto
and shall furnish the Company with all information required to be included
therein with respect to Subscriber, the Subscription and this offering.


 


(2)           Without limiting the generality of
the foregoing, the Subscriber shall correct promptly any information provided
by it to be used specifically in the Proxy Statement, if required, that shall
have become false or misleading in any material respect and shall take all
reasonable steps necessary to file with the SEC and have declared effective or
cleared by the SEC any amendment or supplement to the Proxy Statement so as to
correct the same and to cause the Proxy Statement as so corrected to be
disseminated to the shareholders of the Company, in each case to the extent
required by applicable law.


 


F.             Brokers or Finders.    The
Subscriber has not engaged any brokers, finders or agents, and the Company has
not, and will not, except with respect to Viewtrade Financial (the “Placement
Agent”), incur, directly or indirectly, as a result of any action taken by
the Subscriber, any liability for brokerage or finders’ fees or agents’
commissions or any similar charges in conjunction with this Subscription
Agreement.  In the event that the
preceding sentence is in any way inaccurate, the Subscriber agrees to indemnify
and hold harmless the Company from any liability for any commission or
compensation in the nature of a finder’s fee (and the costs and expenses of
defending against such liability) for which the Company, or any of its
officers, directors, employees or representatives, is responsible, except such
as related to the Placement Agent for which the Company is solely responsible
in accordance with the terms and provisions of that certain Selling Agreement
dated March 30, 2004 by and between the Company and the Placement Agent.


 


G.            Legal Advice.    The
Subscriber understands that nothing in the Company’s filings under the Exchange
Act, this Subscription Agreement or any other materials presented to the
Subscriber in connection with the purchase and sale of the Securities
constitutes legal, tax or investment advice. 
The Subscriber has consulted such legal, tax and investment advisors as
she, he or it, in her, his or its sole discretion, has deemed necessary or
appropriate in connection with this Subscription Agreement, and his, her or its
subcription for the purchase of the Securities.


 


H.            Miscellaneous.    Unless
otherwise indicated, the address on the front page of this document is the
legal residence of the Subscriber and all offers and communications in
connection with the offering of the Securities subscribed to herein have been
conducted at such address.


 


8

















 


I.              Communications.    Any
notice, demand, request or other communication which may be required or
contemplated herein shall be sufficiently given if (i) given either by
facsimile transmission, by reputable overnight delivery service, delivery
charges prepaid, or by registered or certified mail, postage prepaid and return
receipt requested, to the address indicated herein or to such other address as
any party hereto may specify as provided herein, or (ii) delivered personally
at such address.


 


J.             Confidentiality.    The
Subscriber agrees to maintain in strict confidence all non-public information
regarding the Company obtained from the Company or its representatives or
agents during the course of this Subscription. 
The Subscriber also agrees not to trade in the securities of the Company
(other than pursuant to this Subscription Agreement) at any time that the
Subscriber is in possession of any non-public information regarding the Company
obtained from the Company or its agents during the course of this Subscription.


 


K.            Applicable Law.    This
Subscription Agreement and all legal relations, claims or obligations arising
out of this transaction shall be governed by and construed in accordance with
the internal substantive laws of the Commonwealth of Delaware.


 


[signature page follows]


 


9

















 


IN WITNESS WHEREOF,
the undersigned has executed this Subscription Agreement this
       day of the month of
              ,
2004.


 


	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Taxpayer
  Identification No.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Purchase
  Price:

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Number of
  Shares to be acquired:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Underlying
  Shares subject to warrants:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for
  Notice:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FacsimileNo.:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TelephoneNo.:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attn:

  	
   

  	
   

  
																				



 


Please
indicate below the number and type of Company securities beneficially held (as
determined under Rule 13d-3 under the Securities Exchange Act of 1934) as of
the date hereof, but excluding the Company securities identified above that you
are purchasing.  This information will
be included in the Registration Statement and, by signing above, you
acknowledge that the Company may rely on this information for inclusion in the
Registration Statement.


 


 


(Identify the
number of securities and type (e.g., common stock, warrants, etc.)


 


 


(Identify the extent to which
you may not exercise sole voting and/or dispositive power of such securities
and the reason(s) why)


 


10

















 


ACCEPTANCE


 


The foregoing
Subscription is hereby accepted upon the terms and conditions set forth herein.


 


	
   

  	
  VISTA MEDICAL TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
  , 2004

  	
   

  
								



 


11

















 


EXHIBIT A


 


This Exhibit A is
qualified in its entirety by Annex A hereto. 
Capitalized terms used in this Exhibit A and not otherwise defined shall
have the meanings set forth in the Subscription Agreement.


 


	
  Securities
  Offered:

  	
   

  	
  Each unit consists of one Share of Common Stock of the Company and a
  Warrant to purchase one-half share of Common Stock of the Company.

  
	
   

  	
   

  	
   

  
	
  Offering Amount:

  	
   

  	
  Minimum of $4 million/maximum of $4,636,363 million.

  
	
   

  	
   

  	
   

  
	
  Closings:

  	
   

  	
  The initial closing of the offering will occur after we have received
  subscriptions for at least $4.0 million of Units plus such additional
  amounts, if any required by the Nasdaq delisting panel as a condition to our
  remaining listed on the Nasdaq SmallCap Market.  See “Risk Factors– Nasdaq Delisting Notice” in the PPM.  It is contemplated that there may be
  subsequent closings, each of which would be on the same terms (including but
  not limited to Per Unit Price, Common Stock and Common Stock Warrants, and
  forced conversion) as those of the initial Closing.

  
	
   

  	
   

  	
   

  
	
  Per Unit Price:

  	
   

  	
  $0.85

  
	
   

  	
   

  	
   

  
	
  Warrants:

  	
   

  	
  The Warrants have an exercise price of  75% of the average of the closing bid prices of the Company’s
  common stock over the 15 trading days ending three days prior to the closing
  of the sale of Units and shall be exercisable for Common Stock of the Company
  upon the payment of cash and have a five-year term, subject to the forced
  exercise provision below. 
  NOTWITHSTANDING THE FOREGOING, THE WARRANTS SHALL NOT BE EXERCISABLE
  UNLESS AND UNTIL STOCKHOLDER APPROVAL OF THE ISSUANCE OF SHARES OF COMMON
  STOCK UPON CONVERSION OF THE SHARES AND UPON THE EXERCISE OF THE WARRANTS IS
  OBTAINED.  See “Stockholder Approval”
  below.

  
	
   

  	
   

  	
   

  
	
  Forced Exercise:

  	
   

  	
  The Company can require holders of Warrants to exercise their
  Warrants upon 30 days prior notice (or forfeit such Warrants) when the price
  of the Company’s common stock closes at $3.40 per share or greater for 20
  consecutive trading days subsequent to the effectiveness of the registration
  statement pertaining to the resale of the Common Stock underlying the
  Securities; provided that the registration statement described below shall be
  effective at all times during such 30-day notice period.  The payment of the exercise price under a
  Forced Exercise may be made in cash, check, wire

  



 


12

















 


	
   

  	
   

  	
  transfer or by cashless exercise pursuant to paragragh 1(a) of the
  Common Stock Purchase Warrant.

  
	
   

  	
   

  	
   

  
	
  Registration
  Rights:

  	
   

  	
  The Company has agreed with the Placement Agent to file a
  registration statement within 30 days of Closing covering the resale of the
  Common Stock and the Common Stock underlying the Warrants offered
  herein.  The Company has also agreed
  to use its best efforts to cause such registration statement to become
  effective as promptly as practicable and to remain effective until the first
  anniversary of the Closing (except as otherwise set forth above). Without
  limiting the foregoing, the Company will promptly respond to all SEC
  comments, inquiries and requests, and shall request acceleration of
  effectiveness at the earliest possible date. 
  In the event a registration statement is not filed with the SEC within
  30 days or is not declared effective within 90 days from the date of filing,
  then in such event a fee of 1% per month (or portion thereof) shall be
  assessed against the Company as a Default Payment and in favor of the holders
  of the Common Stock and Warrants for each such 30 day period until such time
  as the registration statement is declared effective.

  
	
   

  	
   

  	
   

  
	
  Transfer
  Restrictions:

  	
   

  	
  The Shares will initially be unregistered and may not be transferred
  absent registration under the Securities Act of 1933 (the “Securities Act”)
  or the availability of an exemption therefrom.

  
	
   

  	
   

  	
   

  
	
  Use of Proceeds:

  	
   

  	
  The Company intends that the net proceeds of the Private Placement
  and, if any, the additional proceeds to be received upon exercise of
  Warrants, will be used for development and expansion of the Company’s Obesity
  Surgery Management Services business, including working capital, funding of
  anticipated operating losses, infrastructure development, expenses associated
  with marketing efforts and payment of corporate overhead.  In addition, we intend to use a portion of
  the proceeds from this offering (along with certain other of our assets) to
  redeem some of our outstanding shares of Series A Preferred Stock (the
  “Preferred Shares”) and to obtain the rights to (i) redeem additional
  Preferred Shares in the future and (ii) cause the conversion of Preferred
  Shares to common stock in the future.  Specifically, we currently
  contemplate using approximately $200,000 to redeem 85,000 of our 1,000,000
  outstanding Preferred Shares.  We also intend to transfer to the holders
  of our Series A Preferred Stock a total of 1,400,000 shares of Viking
  Systems, Inc. which we hold.  In exchange, we anticipate gaining the
  following rights: (i) the holders of Series A Preferred Stock will consent
  (which consent we are required to obtain) to the completion of the Offering
  described in this Memorandum, (ii) at any time on or prior to January 15,
  2006, we will have the right (at our option) to redeem an additional 300,000
  Preferred Shares for $500,000, and (iii) upon

  



 


13

















 


	
   

  	
   

  	
  completion of the redemption described in (ii), the remaining
  outstanding Preferred Shares will convert into common stock on a 1:1
  basis.  The terms described in this paragraph are based on current
  negotiations and are subject to change. 
  We could also use a portion of the net proceeds to invest in joint
  ventures or other collaborative arrangements, or to invest in or acquire
  products or services.

  
	
   

  	
   

  	
   

  
	
  Stockholder
  Approval:

  	
   

  	
  The Company shall at its annual meeting of stockholders seek
  stockholder approval of the issuance of the shares of common stock and upon
  the exercise of the Warrants no later than May 24, 2004.  IT SHALL BE A CONDITION TO CLOSING THAT
  THE COMPANY SHALL HAVE ENTERED INTO A VOTING AGREEMENT WITH THE HOLDERS OF
  MORE THAN 50% OF THE COMPANY’S OUTSTANDING SHARES OF COMMON STOCK AND
  PREFERRED STOCK PROVIDING THAT SUCH HOLDERS SHALL VOTE IN FAVOR OF SUCH
  APPROVAL.

  
	
   

  	
   

  	
   

  
	
  Risk Factors:

  	
   

  	
  The Securities offered hereby involve a high degree of risk.  See Risk Factors in the PPM.

  
	
   

  	
   

  	
   

  
	
  Placement Agent:

  	
   

  	
  Viewtrade Financial (“Viewtrade”).

  
	
   

  	
   

  	
   

  
	
  Confidential
  Information:

  	
   

  	
  The recipient of this Memorandum and the materials attached hereto
  agrees with the Company to maintain in confidence this disclosed information,
  together with any other non-public information regarding the Company obtained
  from the Company or their agents during the course of the proposed
  Offering.  The recipient also agrees
  not to trade in the securities of the Company (other than pursuant to this
  Offering) at any time that the recipient is in possession of any non-public
  information regarding the Company obtained from the Company or its agents
  during the course of this Offering. 
  The Company has caused these materials to be delivered to you in
  reliance upon such agreement and upon Rule 100(b)(2)(ii) of Regulation FD as
  promulgated by the Securities and Exchange Commission.

  



 


14

















 


EXHIBIT B


 


Payment Instructions


 


Remittance Via Check:


 


	
  Payable To:

  	
   

  	
  Vista Medical Technologies, Inc. Escrow
  Account

  
	
   

  	
   

  	
   

  
	
  Account #:

  	
   

  	
  3300410793

  
	
   

  	
   

  	
   

  
	
  Mailed To:

  	
   

  	
  Deposit Escrow Services

  
	
   

  	
   

  	
  Mail Sort HG180

  
	
   

  	
   

  	
  Silicon Valley Bank

  
	
   

  	
   

  	
  3003 Tasman Drive

  
	
   

  	
   

  	
  Santa Clara, CA 95054

  



 


Remittance Via Wire
Transfer:


 


	
  Account Name:

  	
   

  	
  Vista Medical Technologies, Inc. Escrow
  Account

  
	
   

  	
   

  	
   

  
	
  Bank:

  	
   

  	
  Silicon Valley Bank

  
	
   

  	
   

  	
   

  
	
  Account #:

  	
   

  	
  3300410793

  
	
   

  	
   

  	
   

  
	
  ABA #:

  	
   

  	
  121140399

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  Silicon Valley Bank

  
	
   

  	
   

  	
  3003 Tasman Drive

  
	
   

  	
   

  	
  Santa Clara, CA 95054

  



 


15

















 


Annex A


 


Registration Rights


 


1.             Registration of Shares.  The Company will (i) use best efforts to
prepare and file, within 30 days after the Closing, a Registration Statement
(the “Registration Statement”) with the SEC to register resales under
the Securities Act of the Common Stock and Common Stock issuable upon the
exercise of the Common Stock Warrants by the Subscriber, (ii) use its
reasonable best efforts to cause the Registration Statement to become effective
as soon as practicable after such filing, (iii) use its reasonable best efforts
to cause such registration statement to become effective as promptly as
practicable and to remain effective until the first anniversary of the Closing
(except as otherwise set forth above); provided  that the Company
may suspend sales at any time under the Registration Statement immediately upon
notice to the Subscriber, for a period or periods of time not to exceed 90 days
in the aggregate during any 12-month period, if there then exists material,
non-public information relating to the Company, which in the reasonable opinion
of the Company, would not be appropriate for disclosure during that time, and
(iv) prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may
be necessary to keep such Registration Statement effective for the period
specified in this sentence above. 
Without limiting the foregoing, the Company will promptly respond to all
SEC comments, inquiries and requests, and shall request acceleration of
effectiveness at the earliest possible date. 
In the event a registration statement is not filed with the SEC within
30 days or is not declared effective within 90 days from the date of filing,
then in such event a fee of 1% per month (or portion thereof) shall be assessed
against the Company as a Default Payment and in favor of the holders of the
Common Stock and Warrants for each such 30 day period until such time as the
registration statement is declared effective. 
The Subscriber shall provide all information and materials, including,
without limitation, all information requested in a questionnaire to be provided
to the Subscriber by the Company, and take all such action as may be required
in order to permit the Company to comply with all applicable requirements of
the Securities Act and the Exchange Act and to obtain any desired acceleration
of the effective date of the Registration Statement, such provision of
information and materials to be a condition precedent to the obligations of the
Company hereunder to register the Common Stock issued or issuable upon the
exercise of the Common Stock Warrants. 
The offerings made pursuant to the Registration Statement shall not be
underwritten.


 


2.             Registration Procedures.  With respect to the registration of Common
Stock under this Annex A, the Company will: (i) furnish to the
Subscriber such number of copies of the Registration Statement, each amendment
and supplement thereto, the prospectus included in such Registration Statement
(including each preliminary prospectus) and such other documents as the
Subscriber may reasonably request in order to facilitate the disposition of the
Common Stock and the Common Stock acquired by the Subscriber upon the exercise
of Common Stock Warrants and owned by the Subscriber; (ii) use its best efforts
to register or qualify the Common


 


16

















 


Stock included in such registration under such other securities or blue
sky laws of such jurisdictions as the Subscriber reasonably requests and do any
and all other acts and things which may be reasonably necessary or advisable to
enable the Subscriber to consummate the disposition in such jurisdictions of
the shares of Common Stock to be sold by the Subscriber (provided  that
the Company will not be required to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, subject itself to taxation in any such jurisdiction, or consent
to general service of process in any such jurisdiction); (iii) notify the
Subscriber at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon discovery that, or upon the discovery
of the happening of any event as a result of which, the prospectus included in
such registration statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and the Company will
promptly prepare and file with the SEC and, at the request of any the
Subscriber, furnish to the Subscriber a reasonable number of copies of, a
supplement or amendment to such prospectus so that, as thereafter delivered to
the Subscriber, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading in light of the circumstances under which they were
made; and (iv) promptly reissue, or promptly authorize and instruct its
transfer agent to reissue, unlegended certificates at the request of the
Subscriber upon such Subscriber’s delivery of original certificates
representing the shares of Common Stock tendered for sale pursuant to the
effective Registration Statement, and to promptly respond to broker’s inquiries
made of the Company in connection with such sales, in each case with a view to
reasonably assisting the Subscriber to complete such sale during such period of
effectiveness.


 


3.             Registration Expenses. All of
the out-of-pocket expenses incurred by the Company in complying with its
obligations under this Annex A in connection with the registration of
the Common Stock and the Common Stock issuable upon the exercise of the Common
Stock Warrants, including, without limitation, all SEC, Nasdaq SmallCap Market
and blue sky registration and filing fees, printing expenses, transfer agents’
and registrars’ fees, and the fees and disbursements of the Company’s outside
counsel and independent accountants shall be paid by the Company.  The Company shall not be responsible to pay
any legal fees for any Subscriber or any selling expenses of any Subscriber
(including, without limitation, any broker’s fees or commissions, including underwriter
commissions).


 


4.             Indemnification.


 


(a)           The Company agrees to indemnify and
hold harmless, to the extent permitted by law, the Subscriber, its officers,
directors, employees and agents and each Person who controls such Subscriber
(within the meaning of the Securities Act), if applicable, against any losses,
claims, damages or liabilities, joint or several, to which such the Subscriber
or any such director, officer, employee, agent or controlling Person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether


 


17

















 


commenced or threatened, in respect thereof) arise out of or are based
upon (i) any untrue or alleged untrue statement of a material fact contained
(A) in the Registration Statement or prospectus or preliminary prospectus or
any amendment thereof or supplement thereto used in connection with this Annex
A or (B) in any application or other document or communication (in this Annex
A collectively called an “application”) executed by or on behalf of the
Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify any securities covered by
such Registration Statement under the “blue sky” or securities laws thereof,
(ii) any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading or (iii) any
violation by the Company of the Securities Act or any state securities law, or
any rule or regulation promulgated under the Securities Act or any state
securities law, or any other law applicable to the Company relating to any such
registration or qualification, and the Company will reimburse the Subscriber
and each such director, officer and controlling Person for any legal or any
other expenses incurred by them in connection with investigating or defending
any such loss, claim liability, action or proceeding; provided  that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding with respect thereof)
or expense arises out of or is based upon an untrue statement, any such
prospectus or preliminary prospectus or any amendment or supplement thereto, or
in any application, in reliance upon and in conformity with written information
prepared and furnished to the Company by the Subscriber or any other subscriber
expressly for use therein or by the Subscriber’s failure to deliver a copy of
the prospectus or any amendments or supplements thereto after the Company has
furnished the Subscriber with a sufficient number of copies of the same.


 


(b)           In connection with the Registration
Statement, the Subscriber will furnish to the Company in writing such information
and documents concerning the Subscriber as the Company reasonably requests for
use in connection with the Registration Statement or prospectus and, to the
extent permitted by law, will indemnify and hold harmless the Company and its
directors and officers and each other Person who controls or is controlled by
the Company and the directors and officers of each such Person controlling or
controlled by the Company and the directors and officers of each such
controlling or controlled Person (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities, joint or several, to which
the Company or any such director or officer or controlling or controlled Person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (i)
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or in, any application or (ii) any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission or alleged omission is made in such Registration
Statement, any such prospectus or preliminary prospectus or any amendment or
supplement thereto, or in any application, in reliance upon and in conformity
with written information concerning


 


18

















 


the Subscriber prepared and furnished to the Company by or on behalf of
the Subscriber in writing expressly for use therein, and the Subscriber will
reimburse the Company and each such director, officer and controlling or
controlled Person for any legal or any other expenses incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding.


 


(c)           Any person entitled to
indemnification hereunder will (i) give prompt written notice to the Company of
any claim with respect to which it seeks indemnification and (ii) unless in
such indemnified party’s reasonable judgment a conflict of interest between
such indemnified parties and the Company may exist with respect to such claim,
permit the Company to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that
the failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations hereunder unless the
failure to give such notice is materially prejudicial to an indemnifying
party’s ability to defend such action. 
If such defense is assumed, the indemnified party will not be subject to
any liability for any settlement made by the Company without its consent (but
such consent will not be unreasonably withheld).  Anything to the contrary appearing in this Annex A
notwithstanding, the Company will not be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified hereunder with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.  If the Company assumes the defense, the indemnified party may
engage its own counsel at its own sole cost and expense.  All fees and expenses of counsel to any
indemnified party required to be paid by the Company shall be paid by the
Company as incurred by such indemnified party.


 


(d)           The indemnification provided for
herein will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director,
employee, agent or controlling or controlled Person of such indemnified party
and will survive the transfer of securities issued hereunder by the
Subscriber.  If the indemnification
provided for herein is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
the Company, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Company, on the one hand, and
the indemnified party or parties, on the other hand, in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.


 


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