Document:

exv10w1

Exhibit 10.1

ZONARE MEDICAL SYSTEMS, INC.

1999 STOCK PLAN

     1. Purposes of the Plan. The purposes of this Stock Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to provide additional
incentive to Employees, Directors and Consultants and to promote the success of the Company’s business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options,
as determined by the Administrator at the time of grant. Stock Purchase Rights may also be
granted under the Plan.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Administrator” means the Board or any of its Committees as shall be administering the Plan in accordance with Section 4 hereof.

          (b) “Applicable Laws” means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Options
or Stock Purchase Rights are granted under the Plan.

          (c) “Board” means the Board of Directors of the Company.

          (d) “Code” means the Internal Revenue Code of 1986, as amended.

          (e) “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 hereof.

          (f) “Common Stock” means the Common Stock of the Company.

          (g) “Company” means ZONARE Medical Systems, Inc., a Delaware corporation.

          (h) “Consultant” means any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory services to such entity.

          (i) “Director” means a member of the Board of Directors of the Company.

          (j) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

 

 

          (k) “Employee” means any person, including Officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an
Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For
purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a
leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option
and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director
nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by
the Company.

          (1) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (m) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

                (i) If the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or system for the last
market trading day prior to the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

                (ii) If the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, its Fair Market Value shall be the mean between the high bid and
low asked prices for the Common Stock on the last market trading day prior to the day of
determination; or

                (iii) In the absence of an established market for the Common Stock, the Fair Market
Value thereof shall be determined in good faith by the Administrator.

          (n) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

          (o) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

          (p) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

          (q) “Option” means a stock option granted pursuant to the Plan.

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          (r) “Option Agreement” means a written or electronic agreement between
the Company and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.

          (s) “Option Exchange Program” means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.

          (t) “Optioned Stock” means the Common Stock subject to an Option or a
Stock Purchase Right.

          (u) “Optionee” means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.

          (v) “Parent” means a “parent corporation,” whether now or hereafter
existing, as defined in Section 424(e) of the Code.

          (w) “Plan” means this 1999 Stock Plan.

          (x) “Restricted Stock” means shares of Common Stock acquired pursuant to
a grant of a Stock Purchase Right under Section 11 below.

          (y) “Section 16(b)” means Section 16(b) of the Securities Exchange Act of
1934, as amended.

          (z) “Service Provider” means an Employee, Director or
Consultant.

          (aa) “Share” means a share of the Common Stock, as adjusted in accordance
with Section 12 below.

          (bb) “Stock Purchase Right” means a right to purchase Common Stock pursuant
to Section 11 below.

          (cc) “Subsidiary” means a “subsidiary corporation,” whether now or
hereafter existing, as defined in Section 424(f) of the Code.

     3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be subject to option and sold under the
Plan is 23,685,594 Shares. The Shares may be authorized but unissued, or reacquired Common Stock.

          If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised
in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which
were subject thereto shall become available for future grant or sale under the Plan (unless the
Plan has terminated). However, Shares that have actually been issued under the

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Plan, upon exercise of either an Option or Stock Purchase Right, shall not be returned to the Plan
and shall not become available for future distribution under the Plan, except that if Shares of
Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan.

     4. Administration of the Plan.

          (a) Administrator. The Plan shall be administered by the Board or a Committee appointed by the Board, which Committee shall be constituted to comply with Applicable Laws.

          (b) Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject
to the approval of any relevant authorities, the Administrator shall have the authority in its discretion:

                (i) to determine the Fair Market Value;

                (ii) to select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder;

                (iii) to determine the number of Shares to be covered by each such award granted hereunder;

                (iv) to approve forms of agreement for use under the Plan;

                (v) to determine the terms and conditions, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions,
and any restriction or limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion,
shall determine;

                (vi) to determine whether and under what circumstances an Option may be settled in cash under subsection 9(e) instead of Common Stock;

                (vii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option has declined since
the date the Option was granted;

                (viii) to initiate an Option Exchange Program;

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                (ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for
preferred tax treatment under foreign tax laws;

                (x) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right
that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined. All elections by Optionees to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem
necessary or advisable; and

                (xi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan.

          (c) Effect of Administrator’s Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees.

     5. Eligibility.

          (a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

          (b) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar
year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

          (c) Neither the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee any right with respect to continuing the Optionee’s relationship as a Service
Provider with the Company, nor shall it interfere in any way with his or her right or the Company’s right to terminate such relationship at any time, with or without cause.

     6. Term of Plan. The Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term often (10) years unless sooner terminated under Section 14 of the
Plan.

     7. Term of Option. The term of each Option shall be stated in the Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant
thereof.

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In the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.

     8. Option Exercise Price and Consideration.

          (a) The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the
following:

               
(i) In the case of an Incentive Stock Option

                          (A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.

                          (B) granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

                (ii) In the case of a Nonstatutory Stock Option

                          (A) granted to a Service Provider who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.

                          (B) granted to any other Service Provider, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant.

                (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.

          (b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the
case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of (1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which such Option shall be exercised, (5) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, or (6) any combination of the foregoing methods of payment. In making

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its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company.

     9. Exercise of Option.

          (a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable according to the terms hereof at such times and under such
conditions as determined by the Administrator and set forth in the Option Agreement. Except in the case
of Options granted to Officers, Directors and Consultants, Options shall become exercisable at a
rate of no less than 20% per year over five (5) years from the date the Options are granted. Unless
the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during
any unpaid leave of absence. An Option may not be exercised for a fraction of a Share.

                     An Option shall be deemed exercised when the Company receives: (i) written or electronic
notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise
the Option, and (ii) full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized by the Administrator
and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall
be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee
and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect to the Shares,
notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such
Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the Shares are issued, except as provided in
Section 12 of the Plan.

                     Exercise of an Option in any manner shall result in a decrease in the number of Shares
thereafter available, both for purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.

          (b) Termination of Relationship as a Service Provider. If an Optionee ceases to
be a Service Provider, such Optionee may exercise his or her Option within such period of time
as is specified in the Option Agreement (of at least thirty (30) days) to the extent that the Option
is vested on the date of termination (but in no event later than the expiration of the term of the
Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement,
the Option shall remain exercisable for three (3) months following the Optionee’s termination. If,
on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the Administrator, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.

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          (c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a
result of the Optionee’s Disability, the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement (of at least six (6) months) to the extent the
Option is vested on the date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s
termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.

          (d) Death of Optionee. If an Optionee dies while a Service Provider, the Option
maybe exercised within such period of time as is specified in the Option Agreement (of at
least six (6) months) to the extent that the Option is vested on the date of death (but in no event
later than the expiration of the term of such Option as set forth in the Option Agreement) by the Optionee’s
estate or by a person who acquires the right to exercise the Option by bequest or inheritance. In the
absence of a specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee’s termination. If, at the time of death, the Optionee is
not vested as to the entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

          (e) Buyout Provisions. The Administrator may at any time offer to buy out for a
payment in cash or Shares, an Option previously granted, based on such terms and conditions as
the Administrator shall establish and communicate to the Optionee at the time that such offer is made.

     10. Non-Transferability of Options and Stock Purchase Rights. The Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

     11. Stock Purchase Rights.

          (a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in
addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside
of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing or electronically of the terms, conditions and
restrictions related to the offer, including the number of Shares that such person shall be
entitled to purchase, the price to be paid, and the time within which such person must accept such
offer. The terms of the offer shall comply in all respects with Section 260.140.42 of Title 10 of
the California Code of Regulations. The offer shall be accepted by execution of a Restricted Stock
purchase agreement in the form determined by the Administrator.

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          (b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable
upon the voluntary or involuntary termination of the purchaser’s service with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the Administrator may determine. Except with respect to Shares purchased by Officers, Directors and Consultants, the repurchase option shall in no case lapse at a rate of
less than 20% per year over five (5) years from the date of purchase.

          (c) Other Provisions. The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by
the Administrator in its sole discretion.

          (d) Rights as a Stockholder. Once the Stock Purchase Right is exercised, the purchaser shall have rights equivalent to those of a stockholder and shall be a stockholder
when his or her purchase is entered upon the records of the duly authorized transfer agent of the
Company. No adjustment shall be made for a dividend or other right for which the record date is
prior to the date the Stock Purchase Right is exercised, except as provided in Section 12 of the Plan.

     12. Adjustments Upon Changes in Capitalization. Merger or Asset Sale.

          (a) Changes in Capitalization. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each outstanding Option or
Stock Purchase Right, and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been
granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each such
outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt of consideration by the
Company. The conversion of any convertible securities of the Company shall not be deemed to
have been “effected without receipt of consideration.” Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or Stock Purchase Right.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as
practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide

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for an Optionee to have the right to exercise his or her Option or Stock Purchase Right until
fifteen (15) days prior to such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option or Stock Purchase Right would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock
Purchase Right will terminate immediately prior to the consummation of such proposed action.

          (c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right
substituted by the successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume or substitute for
the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase
Right becomes fully vested and exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully exercisable for a period
of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. For the purposes of this paragraph, the
Option or Stock Purchase Right shall be considered assumed if, following the merger or sale of
assets, the option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger
or sale of assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of assets is not
solely common stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be received upon
the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject
to the Option or Stock Purchase Right, to be solely common stock of the successor corporation
or its Parent equal in fair market value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.

     13. Time of Granting Options and Stock Purchase Rights. The date of grant of
an Option or Stock Purchase Right shall, for all purposes, be the date on which the
Administrator makes the determination granting such Option or Stock Purchase Right, or such
other date as is determined by the Administrator. Notice of the determination shall be given
to each Service Provider to whom an Option or Stock Purchase Right is so granted within a
reasonable time after the date of such grant.

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     14. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

          (b) Stockholder Approval. The Board shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

          (c) Effect of Amendment or Termination. No amendment, alteration, suspension
or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed
otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by
the Optionee and the Company. Termination of the Plan shall not affect the Administrator’s ability
to exercise the powers granted to it hereunder with respect to Options granted under the Plan
prior to the date of such termination.

     15. Conditions Upon Issuance of Shares.

          (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of counsel for the Company
with respect to such compliance.

          (b) Investment Representations. As a condition to the exercise of an Option, the
Administrator may require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required.

     16. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company
of any liability in respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

     17. Reservation of Shares. The Company, during the term of this Plan, shall at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

     18. Stockholder Approval. The Plan shall be subject to approval by the stockholders of
the Company within twelve (12) months after the date the Plan is adopted. Such stockholder
approval shall be obtained in the degree and manner required under Applicable Laws.

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     19. Information to Optionees and Purchasers. The Company shall provide to each
Optionee and to each individual who acquires Shares pursuant to the Plan, not less frequently than
annually during the period such Optionee or purchaser has one or more Options or Stock Purchase
Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan,
during the period such individual owns such Shares, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose duties in
connection with the Company assure their access to equivalent information.

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ZONARE MEDICAL SYSTEMS, INC.

1999 STOCK PLAN

STOCK OPTION AGREEMENT

     Unless otherwise defined herein, the terms defined in the 1999 Stock Plan shall have the same
defined meanings in this Stock Option Agreement (the “Option Agreement”).

     I. NOTICE OF STOCK OPTION GRANT

420 N Bernardo Avenue

Mountain View, CA 94043

     You have been granted an option to purchase Common Stock of the Company, subject to the terms and
conditions of the Plan and this Option Agreement, as follows:

     Date of Grant

     Vesting Commencement Date

     Exercise Price per Share

     Total Number of Shares Granted

     Total Exercise Price

	 	 	 	 	 
	 

	 	Type of Option
	 	                     Incentive Stock Option
	 
	 	 	 	 
	 

	 	 	 	                     Nonstatutory Stock Option

     Term/Expiration Date

     Exercise and Vesting Schedule:

     This Option shall be exercisable in whole or in part, and shall vest according to the following
vesting schedule:

 

 

     Termination Period:

     This Option may be exercised, to the extent it is then vested, for three (3) months after Optionee
ceases to be a Service Provider. Upon death or Disability of the Optionee, this Option may be
exercised, to the extent it is then vested, for one year after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the Term/Expiration Date as
provided above.

     II. AGREEMENT

          1. Grant of Option. The Administrator of the Company hereby grants to the Optionee
named in the Notice of Grant (the “Optionee”), an option (the “Option”) to purchase the number of
Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of
Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the event of a conflict
between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of
the Plan shall prevail.

          If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code.
Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option
shall be treated as a Nonstatutory Stock Option (“NSO”).

          2. Exercise of Option. This Option shall be exercisable during its term in accordance
with the provisions of Section 9 of the Plan as follows:

               (a) Right to Exercise.

                    (i) Subject to subsections 2(a)(ii) and 2(a)(iii) below, this Option shall be exercisable
cumulatively according to the vesting schedule set forth in the Notice of Grant. .

                    (ii) This Option may not be exercised for a fraction of a Share.

               (b) Method of Exercise. This Option shall be exercisable by delivery of an exercise
notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the
election to exercise the Option, the number of Shares with respect to which the Option is being
exercised, and such other representations and agreements as may be required by the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by the aggregate Exercise Price.

          No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such
exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to the Optionee on the date on which the Option is exercised
with respect to such Shares.

          3. Optionee’s Representations. In the event the Shares have not been registered under
the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall,
if required by the Company, concurrently with the exercise of all or any portion of this Option,
deliver

 

 

to the Company his or her Investment Representation Statement in the form attached hereto
as Exhibit B, and shall read the applicable rules of the Commissioner of Corporations
attached to such Investment Representation Statement.

          4. Lock-Up Period. Optionee hereby agrees that, if so requested by the Company or any
representative of the underwriters (the “Managing Underwriter”) in connection with any registration
of the offering of any securities of the Company under the Securities Act, Optionee shall not sell
or otherwise transfer any Shares or other securities of the Company during the 180-day period (or
such other period as may be requested in writing by the Managing Underwriter and agreed to in
writing by the Company) (the “Market Standoff Period”) following the effective date of a
registration statement of the Company filed under the Securities Act. Such restriction shall apply
only to the first registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public in an underwritten
public offering under the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of such Market Standoff
Period.

          5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

               (a) cash;

               (b) check;

               (c) consideration received by the Company under a formal cashless exercise program adopted by
the Company in connection with the Plan; or

               (d) surrender of other Shares which, (i) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.

          
6. Restrictions on Exercise. This Option may not be exercised until such time as the
Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon
such exercise or the method of payment of consideration for such shares would constitute a
violation of any Applicable Law.

          7. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be
binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

          8. Term of Option. This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with the Plan and the
terms of this Option.

          9. Tax Consequences. Set forth below is a brief summary as of the date of this Option
of some of the federal tax consequences of exercise of this Option and disposition of the Shares.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND

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REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

               (a) Exercise of NSO. There may be a regular federal income tax liability upon the
exercise of an NSO. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Exercised Shares on the date of exercise over the Exercise Price. If Optionee is an
Employee or a former Employee, the Company will be required to withhold from Optionee’s
compensation or collect from Optionee and pay to the applicable taxing authorities an amount in
cash equal to a percentage of this compensation income at the time of exercise, and may refuse to
honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at
the time of exercise.

               (b) Exercise of ISO. If this Option qualifies as an ISO, there will be no regular
federal income tax liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Exercised Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes and may subject
the Optionee to the alternative minimum tax in the year of exercise.

               (c) Exercise of ISO Following Disability. If the Optionee ceases to be an Employee as
a result of a disability that is not a total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the Optionee must
exercise an ISO within three months of such termination for the ISO to be qualified as an ISO.

               (d) Disposition of Shares. In the case of an NSO, if Shares are held for at least one
year, any gain realized on disposition of the Shares will be treated as long-term capital gain for
federal income tax purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term capital gain for
federal income tax purposes. If Shares purchased under an ISO are disposed of within one year
after exercise or two years after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price of the Exercised Shares and the lesser of (i) the Fair Market Value of
the Exercised Shares on the date of exercise, or (ii) the sale price of the Exercised Shares.
Different rules may apply if the Shares are subject to a substantial risk of forfeiture (within the
meaning of Section 83 of the Code) at the time of purchase. Any additional gain will be taxed as
capital gain, short-term depending on the period that the ISO Shares were held.

               (e) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to
Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (i) the date two years after the Date of
Grant, or (ii) the date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income
tax withholding by the Company on the compensation income recognized by the Optionee.

          10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference.
The Plan and this Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee’s interest except by means of a writing signed by the Company and

-4-

 

Optionee. This Option Agreement is governed by the internal substantive laws but not the choice of
law rules of California

          11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE
HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

     Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar
with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had
an opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions arising under the Plan or
this Option. Optionee further agrees to notify the Company upon any change in the residence
address indicated below.

	 	 	 	 	 	 	 
	 	OPTIONEE:

	 	 	ZONARE MEDICAL SYSTEMS, INC.
	 	 
	 
	 	 
	 	 
	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Signature

	 	 	By	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Print Name

	 	 	Title	 	 
	 
	 	 	 	 	 	 
	 	Residence Address:
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	 

	 	 	 	 	 

-5-

 

EXHIBIT A

1999 STOCK PLAN

EXERCISE NOTICE

ZONARE Medical Systems, Inc.

420 N Bernardo Avenue

Mountain View, CA 94043

Attention: Chief Executive Officer

     1. Exercise of Option. Effective as of today,                                         , the undersigned
(“Optionee”) hereby elects to exercise Optionee’s option (the “Option”) to purchase                     
shares of the Common Stock (the “Shares”) of ZONARE Medical Systems, Inc. (the “Company”) under and
pursuant to the 1999 Stock Plan (the “Plan”) and the Stock Option Agreement dated                     
(the “Option Agreement”).

     2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price
of the Shares, as set forth in the Option Agreement.

     3. Representations of Optionee. Optionee acknowledges that Optionee has received, read and
understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and
conditions.

     4. Rights as Shareholder. Until the issuance of the Shares (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the optioned stock, notwithstanding the exercise of the Option. The Shares shall
be issued to the Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior to the date of
issuance except as provided in Section 11 of the Plan.

     5. Company’s Right of First Refusal. Before any Shares held by Optionee or any transferee
(either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred
(including transfer by gift or operation of law), the Company or its assignee(s) shall have a right
of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the
“Right of First Refusal”).

          (a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or
otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee
(“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee;
and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer
the Shares (the

 

 

“Offered Price”), and the Holder shall offer the Shares at the Offered Price to the
Company or its assignee(s).

          (b) Exercise of Right of First Refusal. At any time within thirty (30) days after
receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the
Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to
any one or more of the Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.

          (c) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by
the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price
includes consideration other than cash, the cash equivalent value of the non-cash consideration
shall be
determined by the Board of Directors of the Company in good faith.

          (d) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof within 30 days after receipt of the
Notice or in the manner and at the times set forth in the Notice.

          (e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 120 days after the date of the Notice, that any such sale or other
transfer is effected in accordance with any applicable securities laws and that the Proposed
Transferee agrees in writing that the provisions of this Section shall continue to apply to the
Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right of First Refusal
before any Shares held by the Holder may be sold or otherwise transferred.

          (f) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section notwithstanding, the transfer of any or all of the Shares during the Optionee’s
lifetime or on the Optionee’s death by will or intestacy to the Optionee’s immediate family or a
trust for the benefit of the Optionee’s immediate family shall be exempt from the provisions of
this Section. “Immediate Family” as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or other recipient
shall receive and hold the Shares so transferred subject to the provisions of this Section, and
there shall be no further transfer of such Shares except in accordance with the terms of this
Section.

          (g) Termination of Right of First Refusal. The Right of First Refusal shall terminate
as to any Shares upon the first sale of Common Stock of the Company to the general public pursuant
to a registration statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.

     6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents
that

-2-

 

Optionee has consulted with any tax consultants Optionee deems advisable in connection with
the purchase or disposition of the Shares and that Optionee is not relying on the Company for any
tax advice.

     7. Restrictive Legends and Stop-Transfer Orders.

          (a) Legends. Optionee understands and agrees that the Company shall cause the legends
set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s)
evidencing ownership of the Shares together with any other legends that may be required by the
Company or by state or federal securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY
THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.

          (b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.

          (c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or
pay dividends to any purchaser or other transferee to whom such Shares shall have been so
transferred.

     8. Successors and Assigns. The Company may assign any of its rights under this Exercise
Notice to single or multiple assignees, and the terms and conditions of this Exercise Notice shall
inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on
transfer herein set forth, the terms and conditions of this Exercise Notice shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and assigns.

-3-

 

     9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall
be submitted by Optionee or by the Company forthwith to the Administrator which shall review such
dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall
be final and binding on all parties.

     10. Governing Law; Severability. This Exercise Notice is governed by the internal
substantive laws, but not the choice of law rules, of California.

     11. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference.
This Exercise Notice, the Plan, the Restricted Stock Purchase Agreement, the Option Agreement and
the Investment Representation Statement constitute the entire agreement of the parties with respect
to the subject matter hereof and supersede in their entirety all prior undertakings and agreements
of the Company and Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee’s interest except by means of a writing signed by the Company and
Optionee.

	 	 	 	 	 	 	 
	 	Submitted by:

	 	 	Accepted by:
	 	 
	 
	 	 	 	 	 	 
	 	OPTIONEE:

	 	 	ZONARE MEDICAL SYSTEMS, INC.	 	 
	 
	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Signature

	 	 	By	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Print Name

	 	 	Its	 	 
	 
	 	 	 	 	 	 
	 	Residence Address:

	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	420 N Bernardo Avenue 	 	 
	 	 

	 	 	Mountain View, CA 94043 	 	 
	 
	 	 	 	 	 	 
	 	 

Date Received

	 	 	 	 	 

-4-

 

EXHIBIT B

INVESTMENT REPRESENTATION STATEMENT

	 	 	 
	OPTIONEE:
	 	 
	 
	 	 
	COMPANY:

	 	ZONARE MEDICAL SYSTEMS, INC.
	 
	 	 
	SECURITY:

	 	COMMON STOCK
	 
	 	 
	AMOUNT:
	 	 
	 
	 	 
	DATE:
	 	 

     In connection with the purchase of the above-listed Securities, the undersigned Optionee represents
to the Company the following:

          (a) Optionee is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s
own account only and not with a view to, or for resale in connection with, any “distribution”
thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

          (b) Optionee acknowledges and understands that the Securities constitute “restricted
securities” under the Securities Act and have not been registered under the Securities Act in
reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee
understands that, in the view of the Securities and Exchange Commission, the statutory basis for
such exemption may be unavailable if Optionee’s representation was predicated solely upon a present
intention to hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the market price of the
Securities, or for a period of one year or any other fixed period in the future. Optionee further
understands that the Securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register the Securities.
Optionee understands that the certificate evidencing the Securities will be imprinted with a legend
which prohibits the transfer of the Securities unless they are registered or such registration is
not required in the opinion of counsel satisfactory to the Company, and with any legend required
under applicable state securities laws.

     
     (c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the Securities Act, which, in substance, permit limited public resale of “restricted securities”
acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701
at the time of the grant of the Option to the Optionee, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days
thereafter (or such longer

 

 

period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited
“broker’s transaction” or in transactions directly with a market maker (as said term is defined
under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability
of certain public information about the Company, (3) the amount of Securities being sold during any
three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.

     In the event that the Company does not qualify under Rule 701 at the time of grant of the Option,
then the Securities may be resold in certain limited circumstances subject to the provisions of
Rule 144, which requires the resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an
affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the
satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.

          (d) Optionee further understands that in the event all of the applicable requirements of Rule
701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A,
or some other registration exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden
of proof in establishing that an exemption from registration is available for such offers or sales,
and that such persons and their respective brokers who participate in such transactions do so at
their own risk. Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.

	 	 	 	 	 	 	 
	 	 	Signature of Optionee:	 	 
	 
	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 

-2-

 

ATTACHMENT 1

STATE OF CALIFORNIA — CALIFORNIA ADMINISTRATIVE CODE

Title 10. investment — Chapter 3. Commissioner of Corporations

     260.141.11: Restriction on Transfer. (a) The issuer of any security
upon which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each issuee or
transferee of such security at the time the certificate evidencing the security is delivered to
the issuee or transferee.

     (b) It is unlawful for the holder of any such security to consummate a sale or transfer of
such security, or any interest therein, without the prior written consent of the Commissioner
(until this condition is removed pursuant to Section 260.141.12 of these rules), except:

          (1) to the issuer;

          (2) pursuant to the order or process of any court;

          (3) to any person described in Subdivision (i) of Section 25102 of the Code or Section
260.105.14 of these rules;

          (4) to the transferor’s ancestors, descendants or spouse, or any custodian or trustee for
the account of the transferor or the transferor’s ancestors, descendants, or spouse; or to a
transferee by a trustee or custodian for the account of the transferee or the transferee’s
ancestors, descendants or spouse;

          (5) to holders of securities of the same class of the same issuer;

          (6) by way of gift or donation inter vivos or on death;

          (7) by or through a broker-dealer licensed under the Code (either acting as such or as a
finder) to a resident of a foreign state, territory or country who is neither domiciled in this
state to the knowledge of the broker-dealer, nor actually present in this state if the sale of
such securities is not in violation of any securities law of the foreign state, territory or
country concerned;

          (8) to a broker-dealer licensed under the Code in a principal transaction, or as an
underwriter or member of an underwriting syndicate or selling group;

          (9) if the interest sold or transferred is a pledge or other lien given by the purchaser to
the seller upon a sale of the security for which the Commissioner’s written consent is obtained
or under this rule not required;

          (10) by way of a sale qualified under Sections 25111, 25112, 25113 or 25121 of the Code, of
the securities to be transferred, provided that no order under Section 25140 or subdivision (a)
of Section 25143 is in effect with respect to such qualification;

          (11) by a corporation to a wholly owned subsidiary of such corporation, or by a wholly
owned subsidiary of a corporation to such corporation;

          (12) by way of an exchange qualified under Section 25111, 25112 or 25113 of the Code,
provided that no order under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;

          (13) between residents of foreign states, territories or countries who are neither
domiciled nor actually present in this state;

          (14) to the State Controller pursuant to the Unclaimed Property Law or to the administrator
of the unclaimed property law of another state; or

          (15) by the State Controller pursuant to the Unclaimed Property Law or by the administrator
of the unclaimed property law of another state if, in either such case, such person (i)
discloses to potential purchasers at the sale that transfer of the securities is restricted
under this rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;

          (16) by a trustee to a successor trustee when such transfer does not involve a change in
the beneficial ownership of the securities;

          (17) by way of an offer and sale of outstanding securities in an issuer transaction that is
subject to the qualification requirement of Section 25110 of the Code but exempt from that
qualification requirement by subdivision (f) of Section 25102; provided that any such transfer
is on the condition that any certificate evidencing the security issued to such transferee shall
contain the legend required by this section.

     (c) The certificates representing all such securities subject to such a restriction on
transfer, whether upon initial issuance or upon any transfer thereof, shall bear on their face a
legend, prominently stamped or printed thereon in capital letters of not less than 10-point
size, reading as follows:

“IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER’S RULES.”

 

 

ZONARE MEDICAL SYSTEMS, INC.

1999 STOCK PLAN

STOCK OPTION AGREEMENT — EARLY EXERCISE

     Unless otherwise defined herein, the terms defined in the 1999 Stock Plan shall have the same
defined meanings in this Stock Option Agreement (the “Option Agreement”).

     I. NOTICE OF STOCK OPTION GRANT

     You have been granted an option to purchase Common Stock of the Company, subject to the terms and
conditions of the Plan and this Option Agreement, as follows:

	 	 	 	 	 
	 
	 	Date of Grant	 	 
	 
	 	 	 	 
	 
	 	Vesting Commencement Date	 	 
	 
	 	 	 	 
	 
	 	Exercise Price per Share	 	$
	 
	 	 	 	 
	 
	 	Total Number of Shares Granted	 	 
	 
	 	 	 	 
	 
	 	Total Exercise Price	 	$
	 
	 	 	 	 
	 
	 	Type of Option	 	                     Incentive Stock Option
	 
	 	 	 	 
	 
	 	 	 	                     Nonstatutory Stock Option
	 
	 	 	 	 
	 
	 	Term/Expiration Date	 	 

     Exercise and Vesting Schedule:

     This Option shall be exercisable in whole or in part, and shall vest according to the following
vesting schedule:

 

 

     Termination Period:

     This Option may be exercised, to the extent it is then vested, for three (3) months after Optionee
ceases to be a Service Provider. Upon death or Disability of the Optionee, this Option may be
exercised, to the extent it is then vested, for one year after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the Term/Expiration Date as
provided above.

     II. AGREEMENT

          1. Grant of Option. The Administrator of the Company hereby grants to the Optionee
named in the Notice of Grant (the “Optionee”), an option (the “Option”) to purchase the number of
Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of
Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the event of a conflict
between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of
the Plan shall prevail.

          If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code.
Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option
shall be treated as a Nonstatutory Stock Option (“NSO”).

          2. Exercise of Option. This Option shall be exercisable during its term in accordance
with the provisions of Section 9 of the Plan as follows:

               (a) Right to Exercise.

                    (i) Subject to subsections 2(a)(ii) and 2(a)(iii) below, this Option shall be exercisable
cumulatively according to the vesting schedule set forth in the Notice of Grant. Alternatively, at
the election of the Optionee, this Option may be exercised in whole or in part at any time as to
Shares which have not yet vested. Vested Shares shall not be subject to the Company’s repurchase
right (as set forth in the Restricted Stock Purchase Agreement, attached hereto as Exhibit
C-1).

                    (ii) As a condition to exercising this Option for unvested Shares, the Optionee shall execute
the Restricted Stock Purchase Agreement.

                    (iii) This Option may not be exercised for a fraction of a Share.

               (b) Method of Exercise. This Option shall be exercisable by delivery of an exercise
notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the
election to exercise the Option, the number of Shares with respect to which the Option is being
exercised, and such other representations and agreements as may be required by the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by the aggregate Exercise Price.

 

 

          No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such
exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to the Optionee on the date on which the Option is exercised
with respect to such Shares.

          3. Optionee’s Representations. In the event the Shares have not been registered under
the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall,
if required by the Company, concurrently with the exercise of all or any portion of this Option,
deliver to the Company his or her Investment Representation Statement in the form attached hereto
as Exhibit B, and shall read the applicable rules of the Commissioner of Corporations
attached to such Investment Representation Statement.

          4. Lock-Up Period. Optionee hereby agrees that, if so requested by the Company or any
representative of the underwriters (the “Managing Underwriter”) in connection with any registration
of the offering of any securities of the Company under the Securities Act, Optionee shall not sell
or otherwise transfer any Shares or other securities of the Company during the 180-day period (or
such other period as may be requested in writing by the Managing Underwriter and agreed to in
writing by the Company) (the “Market Standoff Period”) following the effective date of a
registration statement of the Company filed under the Securities Act. Such restriction shall apply
only to the first registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public in an underwritten
public offering under the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of such Market Standoff
Period.

          5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

               (a) cash;

               (b) check;

               (c) consideration received by the Company under a formal cashless exercise program adopted by
the Company in connection with the Plan; or

               (d) surrender of other Shares which, (i) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.

          6. Restrictions on Exercise. This Option may not be exercised until such time as the
Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon
such exercise or the method of payment of consideration for such shares would constitute a
violation of any Applicable Law.

          7. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be
binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

-3-

 

          8. Term of Option. This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with the Plan and the
terms of this Option.

          9. Tax Consequences. Set forth below is a brief summary as of the date of this Option
of some of the federal tax consequences of exercise of this Option and disposition of the Shares.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

               (a) Exercise of NSO. There may be a regular federal income tax liability upon the
exercise of an NSO. The Optionee will be treated as having received compensation income (taxable
at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over the Exercise Price. If Optionee is an Employee or a
former Employee, the Company will be required to withhold from Optionee’s compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage
of this compensation income at the time of exercise, and may refuse to honor the exercise and
refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.

               (b) Exercise of ISO. If this Option qualifies as an ISO, there will be no regular
federal income tax liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Exercised Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes and may subject
the Optionee to the alternative minimum tax in the year of exercise.

               (c) Exercise of ISO Following Disability. If the Optionee ceases to be an Employee as
a result of a disability that is not a total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the Optionee must
exercise an ISO within three months of such termination for the ISO to be qualified as an ISO.

               (d) Disposition of Shares. In the case of an NSO, if Shares are held for at least one
year, any gain realized on disposition of the Shares will be treated as long-term capital gain for
federal income tax purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term capital gain for
federal income tax purposes. If Shares purchased under an ISO are disposed of within one year
after exercise or two years after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price of the Exercised Shares and the lesser of (i) the Fair Market Value of
the Exercised Shares on the date of exercise, or (ii) the sale price of the Exercised Shares.
Different rules may apply if the Shares are subject to a substantial risk of forfeiture (within the
meaning of Section 83 of the Code) at the time of purchase. Any additional gain will be taxed as
capital gain, short-term depending on the period that the ISO Shares were held.

               (e) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to
Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (i) the date two years after the Date of
Grant, or (ii) the date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing

-4-

 

of such disposition. Optionee agrees that Optionee may be subject to income
tax withholding by the Company on the compensation income recognized by the Optionee.

               (f) Section 83(b) Election for Unvested Shares Purchased Pursuant to Options. With
respect to the exercise of an Option for unvested Shares, an election (the “Election”)
may be filed by the Optionee with the Internal Revenue Service, within 30 days of the
purchase of the Shares, electing pursuant to Section 83(b) of the Code to be taxed currently on any
difference between the purchase price of the Shares and their Fair Market Value on the date of
purchase. In the case of an NSO, this will result in a recognition of taxable income to the
Optionee on the date of exercise, measured by the excess, if any, of the Fair Market Value of the
Exercised Shares, at the time the Option is exercised over the purchase price for the Exercised
Shares. Absent such an election, taxable income will be measured and recognized by Optionee at the
time or times on which the Company’s Repurchase Option lapses. In the case of an ISO, such an
election will result in a recognition of income to the Optionee for alternative minimum tax
purposes on the date of exercise, measured by the excess, if any, of the Fair Market Value of the
Exercised Shares, at the time the Option is exercised, over the purchase price for the Exercised
Shares. Absent such an election, alternative minimum taxable income will be measured and
recognized by Optionee at the time or times on which the Company’s Repurchase Option lapses.
Optionee is strongly encouraged to seek the advice of his or her own tax consultants in connection
with the purchase of the Shares and the advisability of filing of the Election under Section 83(b)
of the Code. A form of Election under Section 83(b) is attached hereto as Exhibit C-5 for
reference.

     OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE
TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO MAKE THIS FILING ON OPTIONEE’S BEHALF.

          10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference.
The Plan and this Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee’s interest except by means of a writing signed by the Company and
Optionee. This Option Agreement is governed by the internal substantive laws but not the choice of
law rules of California

          11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION
OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN
EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.

-5-

 

     Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar
with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had
an opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions arising under the Plan or
this Option. Optionee further agrees to notify the Company upon any change in the residence
address
indicated below.

	 	 	 	 	 	 	 
	 	OPTIONEE:

	 	 	ZONARE MEDICAL SYSTEMS, INC.
	 	 
	 
	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Signature

	 	 	By	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Print Name

	 	 	Title	 	 
	 
	 	 	 	 	 	 
	 	Residence Address:
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	 

	 	 	 	 	 

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EXHIBIT A

1999 STOCK PLAN

EXERCISE NOTICE

ZONARE Medical Systems, Inc.

1061 Terra Bella Avenue

Mountain View, CA 94043

Attention: Chief Executive Officer

     1. Exercise of Option. Effective as of today,                                         , the undersigned
(“Optionee”) hereby elects to exercise Optionee’s option (the “Option”) to purchase                     
shares of the Common Stock (the “Shares”) of ZONARE Medical Systems, Inc. (the “Company”) under and
pursuant to the 1999 Stock Plan (the “Plan”) and the Stock Option Agreement dated                     
(the “Option Agreement”).

     2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price
of the Shares, as set forth in the Option Agreement.

     3. Representations of Optionee. Optionee acknowledges that Optionee has received, read and
understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and
conditions.

     4. Rights as Shareholder. Until the issuance of the Shares (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the optioned stock, notwithstanding the exercise of the Option. The Shares shall
be issued to the Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior to the date of
issuance except as provided in Section 11 of the Plan.

     5. Company’s Right of First Refusal. Before any Shares held by Optionee or any transferee
(either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred
(including transfer by gift or operation of law), the Company or its assignee(s) shall have a right
of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the
“Right of First Refusal”).

          (a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the
Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or
otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee
(“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee;
and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer
the Shares (the

 

 

“Offered Price”), and the Holder shall offer the Shares at the Offered Price to the
Company or its assignee(s).

          (b) Exercise of Right of First Refusal. At any time within thirty (30) days after
receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the
Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to
any one or more of the Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.

          (c) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by
the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price
includes consideration other than cash, the cash equivalent value of the non-cash consideration
shall be
determined by the Board of Directors of the Company in good faith.

          (d) Payment. Payment of the Purchase Price shall be made, at the option of the
Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof within 30 days after receipt of the
Notice or in the manner and at the times set forth in the Notice.

          (e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be
transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s)
as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 120 days after the date of the Notice, that any such sale or other
transfer is effected in accordance with any applicable securities laws and that the Proposed
Transferee agrees in writing that the provisions of this Section shall continue to apply to the
Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right of First Refusal
before any Shares held by the Holder may be sold or otherwise transferred.

          (f) Exception for Certain Family Transfers. Anything to the contrary contained in
this Section notwithstanding, the transfer of any or all of the Shares during the Optionee’s
lifetime or on the Optionee’s death by will or intestacy to the Optionee’s immediate family or a
trust for the benefit of the Optionee’s immediate family shall be exempt from the provisions of
this Section. “Immediate Family” as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or other recipient
shall receive and hold the Shares so transferred subject to the provisions of this Section, and
there shall be no further transfer of such Shares except in accordance with the terms of this
Section.

          (g) Termination of Right of First Refusal. The Right of First Refusal shall terminate
as to any Shares upon the first sale of Common Stock of the Company to the general public pursuant
to a registration statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.

     6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents
that

-2-

 

Optionee has consulted with any tax consultants Optionee deems advisable in connection with
the purchase or disposition of the Shares and that Optionee is not relying on the Company for any
tax advice.

     7. Restrictive Legends and Stop-Transfer Orders.

          (a) Legends. Optionee understands and agrees that the Company shall cause the legends
set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s)
evidencing ownership of the Shares together with any other legends that may be required by the
Company or by state or federal securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY
THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.

          (b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions
to its transfer agent, if any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.

          (c) Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or
pay dividends to any purchaser or other transferee to whom such Shares shall have been so
transferred.

     8. Successors and Assigns. The Company may assign any of its rights under this Exercise
Notice to single or multiple assignees, and the terms and conditions of this Exercise Notice shall
inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on
transfer herein set forth, the terms and conditions of this Exercise Notice shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and assigns.

-3-

 

     9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall
be submitted by Optionee or by the Company forthwith to the Administrator which shall review such
dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall
be final and binding on all parties.

     10. Governing Law; Severability. This Exercise Notice is governed by the internal
substantive laws, but not the choice of law rules, of California.

     11. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference.
This Exercise Notice, the Plan, the Restricted Stock Purchase Agreement, the Option Agreement and
the Investment Representation Statement constitute the entire agreement of the parties with respect
to the subject matter hereof and supersede in their entirety all prior undertakings and agreements
of the Company and Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee’s interest except by means of a writing signed by the Company and
Optionee.

	 	 	 	 	 	 	 
	 	Submitted by:

	 	 	Accepted by:
	 	 
	 
	 	 	 	 	 	 
	 	OPTIONEE:

	 	 	ZONARE MEDICAL SYSTEMS, INC.	 	 
	 
	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Signature

	 	 	By	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Print Name

	 	 	Its	 	 
	 
	 	 	 	 	 	 
	 	Residence Address:

	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	1061 Terra Bella Avenue 	 	 
	 	 

	 	 	Mountain View, CA 94043 	 	 
	 
	 	 	 	 	 	 
	 	 

Date Received

	 	 	 	 	 

-4-

 

EXHIBIT B

INVESTMENT REPRESENTATION STATEMENT

	 	 	 
	OPTIONEE:
	 	 
	 
	 	 
	COMPANY:

	 	ZONARE MEDICAL SYSTEMS, INC.
	 
	 	 
	SECURITY:

	 	COMMON STOCK
	 
	 	 
	AMOUNT:
	 	 
	 
	 	 
	DATE:
	 	 

     In connection with the purchase of the above-listed Securities, the undersigned Optionee represents
to the Company the following:

          (a) Optionee is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and knowledgeable decision
to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s
own account only and not with a view to, or for resale in connection with, any “distribution”
thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

          (b) Optionee acknowledges and understands that the Securities constitute “restricted
securities” under the Securities Act and have not been registered under the Securities Act in
reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the
bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee
understands that, in the view of the Securities and Exchange Commission, the statutory basis for
such exemption may be unavailable if Optionee’s representation was predicated solely upon a present
intention to hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the market price of the
Securities, or for a period of one year or any other fixed period in the future. Optionee further
understands that the Securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register the Securities.
Optionee understands that the certificate evidencing the Securities will be imprinted with a legend
which prohibits the transfer of the Securities unless they are registered or such registration is
not required in the opinion of counsel satisfactory to the Company, and with any legend required
under applicable state securities laws.

          (c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under
the Securities Act, which, in substance, permit limited public resale of “restricted securities”
acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701
at the time of the grant of the Option to the Optionee, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days
thereafter (or such longer

 

 

period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited
“broker’s transaction” or in transactions directly with a market maker (as said term is defined
under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability
of certain public information about the Company, (3) the amount of Securities being sold during any
three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.

     In the event that the Company does not qualify under Rule 701 at the time of grant of the Option,
then the Securities may be resold in certain limited circumstances subject to the provisions of
Rule 144, which requires the resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an
affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the
satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.

          (d) Optionee further understands that in the event all of the applicable requirements of Rule
701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A,
or some other registration exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden
of proof in establishing that an exemption from registration is available for such offers or sales,
and that such persons and their respective brokers who participate in such transactions do so at
their own risk. Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.

	 	 	 	 	 	 	 
	 	 	Signature of Optionee:	 	 
	 
	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 

-2-

 

ATTACHMENT 1

STATE OF CALIFORNIA — CALIFORNIA ADMINISTRATIVE CODE

Title 10. investment — Chapter 3. Commissioner of Corporations

     260.141.11: Restriction on Transfer. (a) The issuer of any security
upon which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each issuee or
transferee of such security at the time the certificate evidencing the security is delivered to
the issuee or transferee.

     (b) It is unlawful for the holder of any such security to consummate a sale or transfer of
such security, or any interest therein, without the prior written consent of the Commissioner
(until this condition is removed pursuant to Section 260.141.12 of these rules), except:

          (1) to the issuer;

          (2) pursuant to the order or process of any court;

          (3) to any person described in Subdivision (i) of Section 25102 of the Code or Section
260.105.14 of these rules;

          (4) to the transferor’s ancestors, descendants or spouse, or any custodian or trustee for
the account of the transferor or the transferor’s ancestors, descendants, or spouse; or to a
transferee by a trustee or custodian for the account of the transferee or the transferee’s
ancestors, descendants or spouse;

          (5) to holders of securities of the same class of the same issuer;

          (6) by way of gift or donation inter vivos or on death;

          (7) by or through a broker-dealer licensed under the Code (either acting as such or as a
finder) to a resident of a foreign state, territory or country who is neither domiciled in this
state to the knowledge of the broker-dealer, nor actually present in this state if the sale of
such securities is not in violation of any securities law of the foreign state, territory or
country concerned;

          (8) to a broker-dealer licensed under the Code in a principal transaction, or as an
underwriter or member of an underwriting syndicate or selling group;

          (9) if the interest sold or transferred is a pledge or other lien given by the purchaser to
the seller upon a sale of the security for which the Commissioner’s written consent is obtained
or under this rule not required;

          (10) by way of a sale qualified under Sections 25111, 25112, 25113 or 25121 of the Code, of
the securities to be transferred, provided that no order under Section 25140 or subdivision (a)
of Section 25143 is in effect with respect to such qualification;

          (11) by a corporation to a wholly owned subsidiary of such corporation, or by a wholly
owned subsidiary of a corporation to such corporation;

          (12) by way of an exchange qualified under Section 25111, 25112 or 25113 of the Code,
provided that no order under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;

          (13) between residents of foreign states, territories or countries who are neither
domiciled nor actually present in this state;

          (14) to the State Controller pursuant to the Unclaimed Property Law or to the administrator
of the unclaimed property law of another state; or

          (15) by the State Controller pursuant to the Unclaimed Property Law or by the administrator
of the unclaimed property law of another state if, in either such case, such person (i)
discloses to potential purchasers at the sale that transfer of the securities is restricted
under this rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;

          (16) by a trustee to a successor trustee when such transfer does not involve a change in
the beneficial ownership of the securities;

          (17) by way of an offer and sale of outstanding securities in an issuer transaction that is
subject to the qualification requirement of Section 25110 of the Code but exempt from that
qualification requirement by subdivision (f) of Section 25102; provided that any such transfer
is on the condition that any certificate evidencing the security issued to such transferee shall
contain the legend required by this section.

     (c) The certificates representing all such securities subject to such a restriction on
transfer, whether upon initial issuance or upon any transfer thereof, shall bear on their face a
legend, prominently stamped or printed thereon in capital letters of not less than 10-point
size, reading as follows:

“IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER’S RULES.”

 

 

EXHIBIT C-1

ZONARE MEDICAL SYSTEMS, INC.

1999 STOCK PLAN

RESTRICTED STOCK PURCHASE AGREEMENT

     THIS AGREEMENT is made between (the “Purchaser”) and ZONARE Medical Systems, Inc. (the
“Company”) as of                     , 20___.

     Unless otherwise defined herein, the terms defined in the 1999 Stock Plan shall have the
same defined meanings in this Agreement.

RECITALS

     A. Pursuant to the exercise of the option granted to Purchaser under the Plan and pursuant
to the Option Agreement dated                      by and between the Company and Purchaser with respect
to such grant (the “Option”), which Plan and Option Agreement are hereby incorporated by
reference, Purchaser has elected to purchase                      of those shares of Common Stock which
have not become vested under the vesting schedule set forth in the Option Agreement (“Unvested
Shares”). The Unvested Shares and the shares subject to the Option Agreement which have become
vested are sometimes collectively referred to herein as the “Shares”.

     B. As required by the Option Agreement, as a condition to Purchaser’s election to exercise
the option, Purchaser must execute this Agreement, which sets forth the rights and obligations
of the parties with respect to Shares acquired upon exercise of the Option.

     1. Repurchase Option.

          (a) If Purchaser’s status as a Service Provider is terminated for any reason, including
for cause, death, and Disability, the Company shall have the right and option to purchase from
Purchaser, or Purchaser’s personal representative, as the case may be, all of the Purchaser’s
Unvested Shares as of the date of such termination at the price paid by the Purchaser for such
Shares (the “Repurchase Option”).

          (b) Upon the occurrence of such termination, the Company may exercise its Repurchase
Option by delivering personally or by registered mail, to Purchaser (or his transferee or legal
representative, as the case may be), within ninety (90) days of the termination, a notice in
writing indicating the Company’s intention to exercise the Repurchase Option and setting forth
a date for closing not later than thirty (30) days from the mailing of such notice. The closing
shall take place at the Company’s office. At the closing, the holder of the certificates for
the Unvested Shares being transferred shall deliver the stock certificate or certificates
evidencing the Unvested Shares, and the Company shall deliver the purchase price therefor.

 

 

          (c) At its option, the Company may elect to make payment for the Unvested Shares to a bank
selected by the Company. The Company shall avail itself of this option by a notice in writing
to Purchaser stating the name and address of the bank, date of closing, and waiving the closing
at the Company’s office.

          (d) If the Company does not elect to exercise the Repurchase Option conferred above by
giving the requisite notice within ninety (90) days following the termination, the Repurchase
Option shall terminate.

          (e) The Repurchase Option shall terminate in accordance with the vesting schedule
contained in Optionee’s Option Agreement.

     2. Transferability of the Shares; Escrow.

          (a) Purchaser hereby authorizes and directs the Secretary of the Company, or such other
person designated by the Company, to transfer the Unvested Shares as to which the Repurchase
Option has been exercised from Purchaser to the Company.

          (b) To insure the availability for delivery of Purchaser’s Unvested Shares upon repurchase
by the Company pursuant to the Repurchase Option under Section 1, Purchaser hereby appoints the
Secretary, or any other person designated by the Company as escrow agent, as its
attorney-in-fact to sell, assign and transfer unto the Company, such Unvested Shares, if any,
repurchased by the Company pursuant to the Repurchase Option and shall, upon execution of this
Agreement, deliver and deposit with the Secretary of the Company, or such other person
designated by the Company, the share certificates representing the Unvested Shares, together
with the stock assignment duly endorsed in blank, attached hereto as Exhibit C-2. The
Unvested Shares and stock assignment shall be held by the secretary in escrow, pursuant to the
Joint Escrow Instructions of the Company and Purchaser attached as Exhibit C-3 hereto,
until the Company exercises its Repurchase Option, until such Unvested Shares are vested, or
until such time as this Agreement no longer is in effect. As a further condition to the
Company’s obligations under this Agreement, the spouse of the Purchaser, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit C-4. Upon
vesting of the Unvested Shares, the escrow agent shall promptly deliver to the Purchaser the
certificate or certificates representing such Shares in the escrow agent’s possession belonging
to the Purchaser, and the escrow agent shall be discharged of all further obligations
hereunder; provided, however, that the escrow agent shall nevertheless retain such certificate
or certificates as escrow agent if so required pursuant to other restrictions imposed pursuant
to this Agreement.

          (c) The Company, or its designee, shall not be liable for any act it may do or omit to do with
respect to holding the Shares in escrow and while acting in good faith and in the exercise of its
judgment.

          (d) Transfer or sale of the Shares is subject to restrictions on transfer imposed by any
applicable state and federal securities laws. Any transferee shall hold such Shares subject to all
the provisions hereof and the Exercise Notice executed by the Purchaser with respect to any
Unvested Shares purchased by Purchaser and shall acknowledge the same by signing a copy of this
Agreement.

-2-

 

     3. Ownership, Voting Rights, Duties. This Agreement shall not affect in any way the
ownership, voting rights or other rights or duties of Purchaser, except as specifically provided
herein.

     4. Legends. The share certificate evidencing the Shares issued hereunder shall be
endorsed with the following legend (in addition to any legend required under applicable federal and
state securities laws):

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND
RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

     5. Adjustment for Stock Split. All references to the number of Shares and the
purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock
split, stock dividend or other change in the Shares which may be made by the Company pursuant to
Section 12 of the Plan
after the date of this Agreement.

     6. Notices. Notices required hereunder shall be given in person or by registered mail
to the address of Purchaser shown on the records of the Company, and to the Company at their
respective principal executive offices.

     7. Survival of Terms. This Agreement shall apply to and bind Purchaser and the
Company and their respective permitted assignees and transferees, heirs, legatees, executors,
administrators and legal successors.

     8. Section 83(b) Election. Purchaser hereby acknowledges that he or she has been
informed that, with respect to the exercise of an Option for Unvested Shares, an election (the
“Election”) may be filed by the Purchaser with the Internal Revenue Service, within 30 days
of the purchase of the exercised Shares, electing pursuant to Section 83(b) of the Code to be taxed
currently on any difference between the purchase price of the exercised Shares and their Fair
Market Value on the date of purchase. In the case of a Nonstatutory Stock Option, this will result
in a recognition of taxable income to the Purchaser on the date of exercise, measured by the
excess, if any, of the Fair Market Value of the exercised Shares, at the time the Option is
exercised over the purchase price for the exercised Shares. Absent such an Election, taxable
income will be measured and recognized by Purchaser at the time or times on which the Company’s
Repurchase Option lapses. In the case of an Incentive Stock Option, such an Election will result
in a recognition of income to the Purchaser for alternative minimum tax purposes on the date of
exercise, measured by the excess, if any, of the Fair Market Value of the exercised Shares, at the
time the option is exercised, over the purchase price for the exercised Shares. Absent such an
Election, alternative minimum taxable income will be measured and recognized by Purchaser at the
time or times on which the Company’s Repurchase Option lapses. Purchaser is strongly encouraged to
seek the advice of his or her own tax consultants in connection with the purchase of the Shares and
the advisability of filing of the Election under Section 83(b) of the Code. A form of Election
under Section 83(b) is attached hereto as Exhibit C-5 for reference.

     PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO
FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PURCHASER REQUESTS THE COMPANY OR
ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER’S BEHALF.

-3-

 

     9. Representations. Purchaser has reviewed with his own tax advisors the federal,
state, local and foreign tax consequences of this investment and the transactions contemplated by
this Agreement. Purchaser is relying solely on such advisors and not on any statements or
representations of the Company or any of its agents. Purchaser understands that he (and not the
Company) shall be responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.

     10 Governing Law. This Agreement shall be governed by the internal substantive
laws, but not the choice of law rules, of California.

     Purchaser represents that he has read this Agreement and is familiar with its terms and
provisions. Purchaser hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board upon any questions arising under this Agreement.

     IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.

	 	 	 	 	 	 	 
	 	OPTIONEE:

	 	 	ZONARE MEDICAL SYSTEMS, INC.
	 	 
	 
	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Signature

	 	 	By	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Print Name

	 	 	Title	 	 
	 
	 	 	 	 	 	 
	 	Residence Address:
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	 

	 	 	 	 	 

	 	 	 	 	 
	Dated:
	 	 	 	 
	 

	 	 

	 	 

-4-

 

EXHIBIT C-2

ASSIGNMENT SEPARATE FROM CERTIFICATE

     
     FOR VALUE RECEIVED I, hereby sell, assign and transfer unto ZONARE Medical Systems, Inc.
                                         (                    ) shares of the Common Stock of ZONARE Medical Systems, Inc.
standing in my name of the books of said corporation represented by Certificate No.                     
herewith and do hereby irrevocably constitute and appoint                      to transfer the
said stock on the books of the within named corporation with full power of substitution in the
premises.

     
     This Stock Assignment may be used only in accordance with the Restricted Stock Purchase
Agreement between ZONARE Medical Systems, Inc. and the undersigned dated                     .

	 	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Signature:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

     INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of
this assignment is to enable the Company to exercise its “repurchase option,” as set forth in
the Agreement, without requiring additional signatures on the part of the Purchaser.

 

 

EXHIBIT C-3

JOINT ESCROW INSTRUCTIONS

                                        ,                     

ZONARE Medical Systems, Inc.

1061 Terra Bella Avenue

Mountain View, CA 94043

Attention: Secretary

Dear Secretary:

   As Escrow Agent for both ZONARE Medical Systems, Inc. (the “Company”), and the undersigned
purchaser of stock of the Company (the “Purchaser”), you are hereby authorized and directed to
hold the documents delivered to you pursuant to the terms of that certain Restricted Stock
Purchase Agreement (“Agreement”) between the Company and the undersigned, in accordance with
the following instructions:

     1. In the event the Company and/or any assignee of the Company (referred to collectively
for convenience herein as the “Company”) exercises the Company’s repurchase option set forth in
the Agreement, the Company shall give to Purchaser and you a written notice specifying the
number of shares of stock to be purchased, the purchase price, and the time for a closing
hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in accordance
with the terms of said notice.

     2. At the closing, you are directed (a) to date the stock assignments necessary for the
transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver
the stock assignments, together with the certificate evidencing the shares of stock to be
transferred, to the Company or its assignee, against the simultaneous delivery to you of the
purchase price (by cash, a check, or some combination thereof) for the number of shares of
stock being purchased pursuant to the exercise of the Company’s repurchase option.

     3. Purchaser irrevocably authorizes the Company to deposit with you any certificates
evidencing shares of stock to be held by you hereunder and any additions and substitutions to said
shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you
as Purchaser’s attorney-in-fact and agent for the term of this escrow to execute with respect to
such securities all documents necessary or appropriate to make such securities negotiable and to
complete any transaction herein contemplated, including but not limited to the filing with any
applicable state blue sky authority of any required applications for consent to, or notice of
transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a stockholder of the Company while the stock is held by you.

 

 

     4. Upon written request of the Purchaser, but no more than once per calendar year, unless the
Company’s repurchase option has been exercised, you will deliver to Purchaser a certificate or
certificates representing so many shares of stock as are not then subject to the Company’s
repurchase option. Within 120 days after cessation of Purchaser’s continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will deliver to Purchaser
a certificate or certificates representing the aggregate number of shares held or issued pursuant
to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the
Company’s repurchase option.

     5. If at the time of termination of this escrow you should have in your possession any
documents, securities, or other property belonging to Purchaser, you shall deliver all of the same
to Purchaser and shall be discharged of all further obligations hereunder.

     6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed
by all of the parties hereto.

     7. You shall be obligated only for the performance of such duties as are specifically set
forth herein and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed by you to be genuine and to have been signed or presented by the
proper party or parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any
act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.

     8. You are hereby expressly authorized to disregard any and all warnings given by any of the
parties hereto or by any other person or corporation, excepting only orders or process of courts of
law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you shall not be liable
to any of the parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

     9. You shall not be liable in any respect on account of the identity, authorities or rights of
the parties executing or delivering or purporting to execute or deliver the Agreement or any
documents or papers deposited or called for hereunder.

     10. You shall not be liable for the outlawing of any rights under the Statute of Limitations
with respect to these Joint Escrow Instructions or any documents deposited with you.

     11. You shall be entitled to employ such legal counsel and other experts as you may deem
necessary properly to advise you in connection with your obligations hereunder, may rely upon the
advice of such counsel, and may pay such counsel reasonable compensation therefor.

     12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be
an officer or agent of the Company or if you shall resign by written notice to each party. In the
event of any such termination, the Company shall appoint a successor Escrow Agent.

-2-

 

     13. If you reasonably require other or further instruments in connection with these Joint
Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in
furnishing such instruments.

     14. It is understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the securities held by you hereunder, you are authorized
and directed to retain in your possession without liability to anyone all or any part of said
securities until such disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of competent jurisdiction
after the time for appeal has expired and no appeal has been perfected, but you shall be under no
duty whatsoever to institute or defend any such proceedings.

     15. Any notice required or permitted hereunder shall be given in writing and shall be deemed
effectively given upon personal delivery or upon deposit in the United States Post Office, by
registered or certified mail with postage and fees prepaid, addressed to each of the other parties
thereunto entitled at the following addresses or at such other addresses as a party may designate
by ten days’ advance written notice to each of the other parties hereto.

	 	 	 	 	 	 	 
	 

	 	COMPANY:
	 	ZONARE Medical Systems, Inc.
	 	 
	 

	 	 	 	1061 Terra Bella Avenue	 	 
	 

	 	 	 	Mountain View, CA 94043	 	 
	 
	 	 	 	 	 	 
	 

	 	PURCHASER:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ESCROW AGENT:
	 	Patrick Pohlen	 	 
	 

	 	 	 	Latham & Watkins	 	 
	 

	 	 	 	140 Scott Drive	 	 
	 

	 	 	 	Menlo Park, CA 94025	 	 

     16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose
of said Joint Escrow Instructions; you do not become a party to the Agreement.

     17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and
their respective successors and permitted assigns.

     18. These Joint Escrow Instructions shall be governed by the internal substantive laws, but
not the choice of law rules, of California.

-3-

 

	 	 	 	 	 	 	 
	 	PURCHASER:

	 	 	ZONARE MEDICAL SYSTEMS, INC.
	 	 
	 
	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Signature

	 	 	By	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	Print Name

	 	 	Title	 	 
	 
	 	 	 	 	 	 
	 	Residence Address:
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 

	 	 	 	 	 
	 	 

	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	ESCROW AGENT
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 
	 	 

Corporate Secretary

	 	 	 	 	 

-4-

 

EXHIBIT C-4

CONSENT OF SPOUSE

     I,                                         , spouse of have read and approve the foregoing Restricted Stock
Purchase Agreement (the “Agreement”). In consideration of granting of the right to my spouse
to purchase shares of                                         , as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the
Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any
rights in said Agreement or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property in effect in the state of our residence as of
the date of the signing of the foregoing Agreement.

	 	 	 	 	 	 	 
	 

	 	Dated:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	Signature:	 	 	 	 
	 

	 	 	 	 

	 	 

 

 

EXHIBIT C-5

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

     The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the Internal Revenue
Code of 1986, as amended, to include in taxpayer’s gross income or alternative minimum taxable
income, as the case may be, for the current taxable year the amount of any compensation taxable to
taxpayer in connection with taxpayer’s receipt of the property described below:

	1.	 	The name, address, taxpayer identification number and taxable year of the undersigned are as
follows:

	 	 	 	 	 	 	 	 	 
	 

	 	NAME:
	 	TAXPAYER:
	 	SPOUSE:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	ADDRESS:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	IDENTIFICATION NO.:
	 	TAXPAYER:
	 	 	 	SPOUSE:
	 
	 	 	 	 	 	 	 	 
	 

	 	TAXABLE YEAR:	 	 	 	 	 	 

	2.	 	The property with respect to which the election is made is described as follows: 
             shares (the “Shares”) of the Common Stock of ZONARE Medical Systems, Inc.
(the “Company”).
	 
	3.	 	The date on which the property was transferred is:                      .
	 
	4.	 	The property is subject to the following restrictions:
	 
	 	 	The Shares may not be transferred and are subject to forfeiture under the terms of an
agreement between the taxpayer and the Company. These restrictions lapse upon the
satisfaction of certain conditions contained in such agreement.
	 
	5.	 	The fair market value at the time of transfer, determined without regard to any restriction
other than a restriction which by its terms will never lapse, of such property is:
$                    .
	 
	6.	 	The amount (if any) paid for such property is: $                    .

     The undersigned has submitted a copy of this statement to the person for whom the services were
performed in connection with the undersigned’s receipt of the above-described property. The
transferee of such property is the person performing the services in connection with the transfer
of said property.

     The undersigned understands that the foregoing election may not be revoked except with the
consent of the Commissioner.

	 	 	 	 	 	 	 
	 

	 	Dated:                                         ,                    
	 	 
 

Taxpayer
	 	 

The undersigned spouse of taxpayer joins in this election.

	 	 	 	 	 	 	 
	 

	 	Dated:                                         ,                    
	 	 
 

Spouseexv10w4

Exhibit 10.4

ZONARE MEDICAL SYSTEMS, INC.

INDEMNIFICATION AGREEMENT

     This Indemnification Agreement (the “Agreement”) is made as of                                         , 200           
          by
and between Zonare Medical Systems, Inc., a Delaware corporation (the “Company”), and
                                         (the “Indemnitee”).

RECITALS

     The Company and Indemnitee recognize the increasing difficulty in obtaining liability
insurance for directors, officers and key employees, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance. The Company and Indemnitee
further recognize the substantial increase in corporate litigation in general, subjecting
directors, officers and key employees to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited. Indemnitee does not
regard the current protection available as adequate under the present circumstances, and Indemnitee
and agents of the Company may not be willing to continue to serve as agents of the Company without
additional protection. The Company desires to attract and retain the services of highly qualified
individuals, such as Indemnitee, and to indemnify its directors, officers and key employees so as
to provide them with the maximum protection permitted by law.

AGREEMENT

     In consideration of the mutual promises made in this Agreement, and for other good and
valuable consideration, receipt of which is hereby acknowledged, the Company and Indemnitee hereby
agree as follows:

     1. Indemnification.

          (a) Third Party Proceedings. The Company shall indemnify Indemnitee if Indemnitee is
or was a party or is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Company) by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any
action or inaction on the part of Indemnitee while an officer or director or by reason of the fact
that Indemnitee is or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such
settlement is approved in advance by the Company, which approval shall not be unreasonably
withheld) actually and reasonably incurred by Indemnitee in connection with such action, suit or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself,

 

 

create a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or,
with respect to any criminal action or proceeding, that Indemnitee had reasonable cause to believe
that Indemnitee’s conduct was unlawful.

          (b) Proceedings By or in the Right of the Company. The Company shall indemnify
Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened,
pending or completed action or proceeding by or in the right of the Company or any subsidiary of
the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while an officer or director or by reason of the
fact that Indemnitee is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts
paid in settlement (if such settlement is approved in advance by the Company, which approval shall
not be unreasonably withheld), in each case to the extent actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such action or suit if Indemnitee acted
in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company and its stockholders, except that no indemnification shall be made in
respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudicated by
court order or judgment to be liable to the Company in the performance of Indemnitee’s duty to the
Company and its stockholders unless and only to the extent that the court in which such action or
proceeding is or was pending shall determine upon application that, in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.

          (c) Mandatory Payment of Expenses. To the extent that Indemnitee has been successful
on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1(a)
or Section 1(b) or the defense of any claim, issue or matter therein, Indemnitee shall be
indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by
Indemnitee in connection therewith.

     2. No Employment Rights. Nothing contained in this Agreement is intended to create in
Indemnitee any right to continued employment.

     3. Expenses; Indemnification Procedure.

          (a) Advancement of Expenses. The Company shall advance all expenses incurred by
Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or
criminal action, suit or proceeding referred to in Section l(a) or Section 1(b) hereof (including
amounts actually paid in settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby.

          (b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to
his or her right to be indemnified under this Agreement, give the Company notice in

2

 

 writing as soon as practicable of any claim made against Indemnitee for which indemnification
will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company and shall be given in accordance with the provisions of Section
12(d) below. In addition, Indemnitee shall give the Company such information and cooperation as it
may reasonably require and as shall be within Indemnitee’s power.

          (c) Procedure. Any indemnification and advances provided for in Section 1 and this
Section 3 shall be made no later than twenty (20) days after receipt of the written request of
Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the
Company’s Certificate of Incorporation or Bylaws providing for indemnification, is not paid in full
by the Company within twenty (20) days after a written request for payment thereof has first been
received by the Company, Indemnitee may, but need not, at any time thereafter bring an action
against the Company to recover the unpaid amount of the claim and, subject to Section 11 of this
Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’
fees) of bringing such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding
in advance of its final disposition) that Indemnitee has not met the standards of conduct which
make it permissible under applicable law for the Company to indemnify Indemnitee for the amount
claimed, but the burden of proving such defense shall be on the Company and Indemnitee shall be
entitled to receive interim payments of expenses pursuant to Section 3(a) unless and until such
defense may be finally adjudicated by court order or judgment from which no further right of appeal
exists. It is the parties’ intention that if the Company contests Indemnitee’s right to
indemnification, the question of Indemnitee’s right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its stockholders) to have made a
determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of conduct required by applicable law, nor an actual determination
by the Company (including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) that Indemnitee has not met such
applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the
applicable standard of conduct.

          (d) Notice to Insurers. If, at the time of the receipt of a notice of a claim
pursuant to Section 3(b) hereof, the Company has director and officer liability insurance in
effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers
in accordance with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the
Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such
policies.

          (e) Selection of Counsel. In the event the Company shall be obligated under Section
3(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee,
upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company,
the Company will not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same proceeding,

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provided that (i) Indemnitee shall have the right to employ counsel in any such proceeding at
Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously
authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any such defense or
(C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding,
then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

     4. Additional Indemnification Rights; Nonexclusivity.

          (a) Scope. Notwithstanding any other provision of this Agreement, the Company hereby
agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that
such indemnification is not specifically authorized by the other provisions of this Agreement, the
Company’s Certificate of Incorporation, the Company’s Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or rule which expands the
right of a Delaware corporation to indemnify a member of its board of directors or an officer, such
changes shall be deemed to be within the purview of Indemnitee’s rights and the Company’s
obligations under this Agreement. In the event of any change in any applicable law, statute or
rule which narrows the right of a Delaware corporation to indemnify a member of its board of
directors or an officer, such changes, to the extent not otherwise required by such law, statute or
rule to be applied to this Agreement shall have no effect on this Agreement or the parties’ rights
and obligations hereunder.

          (b) Nonexclusivity. The indemnification provided by this Agreement shall not be
deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Certificate
of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested members of
the Company’s Board of Directors, the General Corporation Law of the State of Delaware, or
otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity
while holding such office. The indemnification provided under this Agreement shall continue as to
Indemnitee for any action taken or not taken while serving in an indemnified capacity even though
he or she may have ceased to serve in any such capacity at the time of any action, suit or other
covered proceeding.

     5. Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines
or penalties actually or reasonably incurred in the investigation, defense, appeal or settlement of
any civil or criminal action, suit or proceeding, but not, however, for the total amount thereof,
the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments,
fines or penalties to which Indemnitee is entitled.

     6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that in certain
instances, Federal law or public policy may override applicable state law and prohibit the Company
from indemnifying its directors and officers under this Agreement or otherwise. For example, the
Company and Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”)
has taken the position that indemnification is not permissible for liabilities arising under
certain federal securities laws, and federal legislation prohibits indemnification for certain
ERISA violations. Indemnitee understands and acknowledges that the

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Company has undertaken or may be required in the future to undertake with the SEC to submit
the question of indemnification to a court in certain circumstances for a determination of the
Company’s right under public policy to indemnify Indemnitee.

     7. Officer and Director Liability Insurance. The Company shall, from time to time,
make the good faith determination whether or not it is practicable for the Company to obtain and
maintain a policy or policies of insurance with reputable insurance companies providing the
officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the
Company’s performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance coverage against the
protection afforded by such coverage. In all policies of director and officer liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights
and benefits as are accorded to the most favorably insured of the Company’s directors, if
Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the
Company but is an officer; or of the Company’s key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain such insurance if the Company determines in good faith that such
insurance is not reasonably available, if the premium costs for such insurance are disproportionate
to the amount of coverage provided, if the coverage provided by such insurance is limited by
exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a parent or subsidiary of the Company.

     8. Severability. Nothing in this Agreement is intended to require or shall be
construed as requiring the Company to do or fail to do any act in violation of applicable law. The
Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall
not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as
provided in this Section 8. If this Agreement or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify
Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not
have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.

     9. Exceptions. Any other provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement:

          (a) Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee
with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way
of defense, except with respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if the Board of Directors finds it to be
appropriate;

          (b) Lack of Good Faith. To indemnify Indemnitee for any expenses incurred by
Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this
Agreement, if a court of competent jurisdiction determines that each of the material assertions
made by Indemnitee in such proceeding was not made in good faith or was frivolous;

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          (c) Insured Claims. To indemnify Indemnitee for expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and
amounts paid in settlement) to the extent such expenses or liabilities have been paid directly to
Indemnitee by an insurance carrier under a policy of officers’ and directors’ liability insurance
maintained by the Company; or

          (d) Claims under Section 16(b). To indemnify Indemnitee for expenses or the payment
of profits arising from the purchase and sale by Indemnitee of securities in violation of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

     10. Construction of Certain Phrases.

          (a) For purposes of this Agreement, references to the “Company” shall include, in
addition to the resulting corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and employees or agents,
so that if Indemnitee is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.

          (b) For purposes of this Agreement, references to “other enterprises” shall include
employee benefit plans; references to “fines” shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to “serving at the request
of the Company” shall include any service as a director, officer, employee or agent of the
Company which imposes duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries; and if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner “not opposed to the best interests of the Company” as referred to in this
Agreement.

     11. Attorneys’ Fees. In the event that any action is instituted by Indemnitee under
this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be
paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee
with respect to such action, unless as a part of such action, the court of competent jurisdiction
determines that each of the material assertions made by Indemnitee as a basis for such action were
not made in good faith or were frivolous. In the event of an action instituted by or in the name
of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees,
incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s
counterclaims and cross-claims made in such action), unless as a part of such action the court
determines that each of Indemnitee’s material defenses to such action were made in bad faith or
were frivolous.

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     12. Miscellaneous.

          (a) Governing Law. This Agreement and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto shall be governed, construed and interpreted in
accordance with the laws of the State of Delaware, without giving effect to principles of conflict
of law.

          (b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter herein and merges all
prior discussions between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, shall be effective unless in writing signed by the parties to
this Agreement. The failure by either party to enforce any rights under this Agreement shall not
be construed as a waiver of any rights of such party.

          (c) Construction. This Agreement is the result of negotiations between and has been
reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this
Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be
construed in favor of or against any one of the parties hereto.

          (d) Notices. Any notice, demand or request required or permitted to be given under
this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, and addressed to the party to be notified at such party’s
address as set forth below or as subsequently modified by written notice.

          (e) Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one instrument.

          (f) Successors and Assigns. This Agreement shall be binding upon the Company and its
successors and assigns, and inure to the benefit of Indemnitee and Indemnitee’s heirs, legal
representatives and assigns.

          (g) Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall
execute all documents required and shall do all acts that may be necessary to secure such rights
and to enable the Company to effectively bring suit to enforce such rights.

          (h) Coverage. All agreements and obligations of the Company contained herein shall
begin when Indemnitee first provides services to the Company, regardless of the date of this
Agreement, and shall continue after Indemnitee is no longer providing service to the Company for
any proceedings described in Section 1 above, whether or not he/she is acting or serving in any
such capacity at the time any liability or expense is incurred for which indemnification can be
provided under this Agreement.

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[Signature Page Follows]

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     IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the
date first above written.

	 	 	 	 	 	 	 
	Zonare Medical Systems, Inc.	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 

	 	 
	 	 
	Name:

	 	Donald Southard	 	 	 	 
	Title:

	 	Chief Executive Officer	 	 	 	 

	 	 	 	 	 	 	 
	 	 	Agreed to and accepted by:	 	 
	 
	 	 	 	 	 	 
	 	 	INDEMNITEE:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	Address:

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