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As filed with the Securities and Exchange Commission on February 12, 1999.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CardioTech International, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Massachusetts 04-3186647
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
</TABLE>
78E Olympia Avenue
Woburn, Massachusetts 01801
(781) 933-4772
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
John E. Mattern
Chief Operating Officer, Chief Financial Officer and Clerk
CardioTech International, Inc.
78E Olympia Avenue
Woburn, Massachusetts 01801
(781) 933-4772
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
Michael L. Fantozzi, Esquire
Paul C. Levites, Esquire
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
(617) 542-6000
Approximate date of commencement of proposed sale to the public:
As soon as practical after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or interest
reinvestment, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
Proposed Maximum
Title of Each Class of Amount to be Proposed Maximum Aggregate Offering Amount of
Securities to be Registered Registered/(1)/ Offering Price per Share Price/(2)/ Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value 3,582,600 $1.50 $5,373,900 $1,493.94
=====================================================================================================================
</TABLE>
/(1)/ Includes 1,876,600 shares of common stock to be issued upon exercise of
warrants and an indeterminate number of additional shares of common stock as may
from time to time become issuable upon exercise of the warrants by reason of
stock splits, stock dividends and other similar transactions, which shares are
registered hereunder pursuant to Rule 416.
/(2)/ The price of $1.50 per share, which was the average of the high and low
prices of the common stock reported by the American Stock Exchange on
February 11, 1999, is set forth solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) of the Securities Act of 1933,
as amended.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
Subject to Completion, dated February 12, 1999
CARDIOTECH INTERNATIONAL, INC.
3,582,600 SHARES OF COMMON STOCK
. We have registered up to 3,582,600 shares of our common stock for sale by
the selling stockholders listed on pages 12 and 13 of this prospectus.
. We will not receive any of the proceeds from the selling stockholders' sale
of their common stock.
Our common stock trades on the American Stock Exchange under the symbol "CTE."
On February 11, 1999, the closing sale price of one share of our common stock as
quoted on the American Stock Exchange was $1.50.
Our address is CardioTech International, Inc., 78E Olympia Avenue, Woburn,
Massachusetts 01801, and our telephone number is (781) 933-4772.
This Investment Involves A High Degree of Risk.
You Should Purchase Shares Only If You Can Afford A Complete Loss.
See "Risk Factors" Beginning on Page 3.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
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__________ ____, 1999
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CARDIOTECH'S BUSINESS
CardioTech develops and manufactures vascular grafts, or synthetic blood
vessels, made of ChronoFlex. chronoflex is a family of polyurethanes that has
been demonstrated to be durable, biologically compatible and non-toxic within
the human body. Vascular grafts are used to replace, bypass or provide a new
lining or arterial wall for clogged, damaged, dilated or severely diseased
arteries.
CardioTech is developing three types of vascular grafts:
. a graft to provide access for patients undergoing kidney dialysis
treatment;
. a below the knee bypass graft to restore blood flow to the legs in
persons suffering from diabetes; and
. a coronary artery bypass graft to treat the impairment of blood flow
to portions of the heart.
CardioTech is developing its grafts using specialized ChronoFlex
polyurethane materials that it believes will provide significantly improved
performance in the treatment of arterial disorders. The grafts have three
layers similar to natural arteries designed to replicate the physical
characteristics of human blood vessels.
CardioTech also develops, manufactures and markets polyurethane-based
materials for use in both short and long term implant devices such as stents,
which are tiny tubes inserted in coronary arteries to help keep them open,
artificial hearts, and vascular ports.
CardioTech was founded in 1993 as a subsidiary of PolyMedica Corporation.
In June 1996, Polymedica spun off CardioTech. The Company is headquartered in
Woburn, Massachusetts and also has production facilities in Brymbo, Wrexham,
U.K.
RECENT DEVELOPMENTS
CardioTech raised $2,332,500, including $200,000 in promissory notes from
CardioTech's executive officers, in a unit private placement which terminated on
December 15, 1998. CardioTech sold 1,866,000 units in the offering at a
purchase price of $1.25 per unit. Each unit consisted of one share of
CardioTech common stock and one warrant to purchase one share of CardioTech
common stock. Each warrant expires on December 15, 2003 and is exercisable at
$1.50 per share.
CardioTech paid Fechtor, Detwiler & Co., Inc., the exclusive placement
agent for the offering, a cash fee of $127,950, which was 6% of the amount that
they raised, along with a five-year warrant to purchase 170,600 shares of Common
Stock, which was 10% of the number of units which they sold. The exercise price
of this warrant was set at $1.475 per share, the average closing price of the
common stock for the five trading days prior to the date of the initial closing
on November 25, 1998.
Michael Szycher, John E. Mattern, Alan Edwards and Michael Adams,
CardioTech's executive officers, each purchased 40,000 units in the offering.
The officers paid for their units with promissory notes in the amount of $50,000
each, payable on December 15, 2003, with interest at a rate of 4.52 % per year
compounded annually and payable annually in arrears. The notes, which are with
recourse with respect to 25% of the initial principal amount, are secured by the
shares and warrants.
The selling stockholders were granted certain registration rights for the
resale of the shares underlying the units. They are exercising those rights
through this resale prospectus. CardioTech's executive officers are not
registering their shares for resale under this prospectus.
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RISK FACTORS
Investing in our common stock is very risky. You should be able to bear a
complete loss of your investment. This prospectus, including the documents
incorporated by reference, contains forward-looking statements that involve
risks or uncertainties. Actual events or results may differ materially from
those discussed in this prospectus and in the documents incorporated by
reference. Factors that could cause or contribute to such differences include,
but are not limited to, the factors discussed below as well as those discussed
elsewhere in this prospectus and in the documents incorporated by reference.
Early Stage of Development of Vascular Grafts.
CardioTech primarily develops and markets implantable synthetic vascular
grafts. Presently, CardioTech is conducting clinical testing of its first
product in development, the VascuLink Vascular Access Graft. CardioTech has not
begun to market this technology in the United States and has not generated any
revenue from the use of this technology. CardioTech recently received government
authority to sell its VascuLink Vascular Access Graft in Europe and has just
begun to market this product there. CardioTech cannot assure you that any of its
products in development:
. will be successfully developed;
. will meet applicable regulatory standards, if developed;
. will obtain required regulatory approvals;
. will be producible in commercial quantities at reasonable costs; or
. will be successfully marketed.
To succeed in this market, CardioTech will have to complete the
development of polyurethane-based vascular grafts which (1) will be safe and
effective and (2) will have benefits not available in human vein grafts or
presently available synthetic vascular grafts. CardioTech cannot assure you that
it will be successful in doing this. CardioTech's products in development will
require significant additional investment, research, development, pre-clinical
and clinical testing and regulatory approval prior to commercialization.
CardioTech will have to commit substantial additional resources to complete the
development of its synthetic grafts.
History of Operating Losses and Accumulated Deficit.
CardioTech cannot assure you that it will ever be profitable. For the nine
months ended December 31, 1998, and the years ended March 31, 1998, 1997 and
1996, CardioTech had net losses attributable to common stock holders of
$1,734,595, $1,808,955 $1,655,572 and $2,188,030, respectively, and as of
December 31, 1998, CardioTech had an accumulated deficit of $9,230,225.
CardioTech expects to incur additional operating losses over the next several
years from the development, testing and manufacturing of its vascular graft
technology as it:
. engages in additional research and development;
. conducts additional animal testing;
. continues clinical trials; and
. seeks regulatory approvals
CardioTech expects its cumulative deficit to increase for the forseeable
future as it expands its efforts in the areas indicated above.
CardioTech's ability to become profitable is dependent, in large part, on:
. completing product development and commercialization;
. obtaining regulatory approvals for its products; and
. making the transition from research and development to manufacturing
and marketing.
CardioTech cannot assure you that it will be able to achieve any of these
objectives. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Form 10-K for the year ended March 31, 1998
and in the Form 10-Q for the quarter ended September 30, 1998.
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Absence of Revenue from Vascular Grafts.
CardioTech's future growth will largely depend on its ability to
commercialize its vascular graft technology. CardioTech cannot assure you that
it will be able to accomplish this goal. To date, CardioTech has not generated
any revenue from the sale of vascular grafts in Europe and cannot assure you
that it will be successful in selling this product there. CardioTech is
currently in the initial stages of introducing its VascuLink Vascular Access
Graft for sale. CardioTech cannot assure you that it will be able to generate
sufficient revenue from product sales, sales of materials or development
services to fund its continuing operations.
Limited Revenue From Other Activities.
CardioTech is also engaged in the development of other uses for its premium
polymer-based materials in collaboration with other medical-device
manufacturers. Although such activities may generate revenues from medical
device manufacturers for development services performed by CardioTech or in
connection with the sale of materials, CardioTech's primary focus will be on its
vascular graft technology. Accordingly, CardioTech expects that revenues from
these other sources will be relatively small in the short term.
Access to Capital and Additional Financing Requirements.
CardioTech's future growth also will depend on its ability to raise
additional capital to support its research and development activities.
PolyMedica provided approximately $4.5 million in funding to CardioTech from
1991 through June 1996. In addition, CardioTech raised approximately $2,590,000
through the sale of (1) convertible notes and preferred stock to Dresdner
Kleinwort Benson Private Equity Partners LP and (2) convertible notes to
Freemedic PLC, a subsidiary of the Royal Free Hospital School of Medicine
(University of London). CardioTech also raised an additional $2,332,500,
including $200,000 in promissory notes from CardioTech's executive officers,
through a unit offering private placement which terminated on December 15, 1998.
The majority of these funds is being expended for research and development.
CardioTech cannot assure you that it will be able to raise sufficient additional
funds to adequately support its research and development efforts.
As of December 31, 1998, CardioTech had cash and cash equivalents of
approximately $3,161,613, which CardioTech expects to consume at a rate of
approximately $200,000 per month. Accordingly, such cash and cash equivalents
should be adequate to maintain CardioTech's currently planned operations until
approximately April 2000. CardioTech will need additional funding to
complete the clinical trials for, and market, its VascuLink Vascular Access
Graft in Europe and to begin clinical trials in the United States. CardioTech
will require substantial funds for:
. further research and development;
. future pre-clinical and clinical trials;
. regulatory approvals;
. establishment of commercial-scale manufacturing
capabilities; and
. the marketing of its products.
CardioTech will seek to obtain additional funds for these purposes through:
. public or private equity or debt financings;
. collaborative arrangements; or
. from other sources.
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CardioTech cannot assure you that it will be able to raise sufficient additional
funding at all or on acceptable terms to permit successful commercialization of
CardioTech's technology and products. If CardioTech cannot raise adequate
additional funds, it may be required to curtail significantly one or more of its
research or development programs, or obtain funds through arrangements with
collaborative partners or others that may require CardioTech to relinquish
rights to certain of its technologies, product candidates or products.
Registration Rights and Dilution.
Dresdner Kleinwort Benson and FreeMedic PLC have certain rights to cause
CardioTech to register under the Securities Act of 1933 (the "Act") the Common
Stock underlying the Dresdner Kleinwort Benson convertible notes and preferred
stock (currently 1,322,111 shares) and the FreeMedic PLC convertible notes
(currently 116,182 shares). Additionally, John Hancock Mutual Life Insurance
Company has certain registration rights with regard to 398,718 shares of common
stock underlying warrants which CardioTech issued to John Hancock.
As of December 31, 1998, CardioTech had 6,138,916 shares of common stock
outstanding, of which 4,035,093 shares are freely tradeable and 397,823 shares
are owned by certain of our executive officers and directors. 160,000 shares
owned by certain of our executive officers and directors are not currently
eligible for sale under Rule 144 under the Securities Act of 1933. 237,823
shares of common stock owned by certain of our executive officers and directors
are currently eligible for sale under Rule 144, subject to the volume trading
limitations under the rule.
In addition, as of December 31, 1998, CardioTech had options outstanding to
purchase 1,076,701 shares of common stock under its stock option plan. All
shares of common stock underlying CardioTech's option plan are registered and,
upon exercise, are freely tradable subject to volume trading limitations under
Rule 144 for those shares held by CardioTech's executive officers and directors.
These options entitle the holders to purchase shares of common stock at a
weighted average exercise price of $1.97 per share. The exercise of options and
warrants and the conversion of convertible notes and preferred stock and the
subsequent sale of underlying common stock could reduce the market price for
CardioTech's common stock and result in dilution to our then stockholders.
Possible Amex Delisting.
The common stock is listed on the American Stock Exchange, or the AMEX, and
CardioTech is subject to the AMEX's maintenance requirements. CardioTech's
failure to meet the AMEX's maintenance requirements may result in a delisting of
the common stock. CardioTech cannot assure you that its common stock will not be
delisted by the AMEX. The determination by the AMEX to delist a company is not
based on a precise mathematical formula, but rather on a review of all relevant
facts and circumstances in light of the AMEX's policies. The AMEX will normally
consider delisting a company which:
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(1) has stockholders' equity of less than $2,000,000 if such company has
sustained losses from continuing operations and/or net losses in two of its
three most recent fiscal years; or
(2) has sustained losses which are so substantial to its overall operations
or its existing financial resources, or its financial condition has become
so impaired that it appears questionable, in the opinion of the AMEX, as to
whether such company will be able to continue operations and/or meet its
obligations as they mature.
As of December 31, 1998, CardioTech had stockholders' equity of
$1,320,805, and losses in its last three fiscal years. If CardioTech is unable
to increase its stockholders' equity and its net losses continue, CardioTech's
common stock may be delisted. CardioTech's future financing activities may not
provide the company with sufficient stockholders' equity to avoid being
delisted.
CardioTech's failure to maintain the listing of its common stock on AMEX
would constitute an event of default under the convertible notes agreement with
Dresdner Kleinwort Benson and would entitle Dresdner Kleinwort Benson to demand
immediate payment of the $2,160,000, plus accrued interest, due under the notes.
Upon such a default, actions taken by Dresdner Kleinwort Benson might result in
a default under the approximately $429,875 loan agreement with Freemedic PLC. At
this time, repayment of its indebtedness to Dresdner Kleinwort Benson and
Freemedic PLC would deplete most of CardioTech's cash reserves.
Possible Volatility of Stock Price.
CardioTech cannot assure you of the prices at which its common stock will
trade. The market prices for securities of emerging companies historically have
been highly volatile. The following factors may have a significant impact on the
market price of the common stock:
. announcements of technological innovations or new commercial products
by CardioTech or its competitors;
. regulatory developments;
. disputes concerning patent or proprietary rights;
. publicity regarding actual or potential medical results relating to
products under development by CardioTech or its competitors;
. public concern as to the safety of CardioTech's products; and
. economic and other external factors, as well as period-to-period
fluctuations in financial results.
Limited Rights in Technology; Uncertainty of Patents and Proprietary Rights.
CardioTech owns two U.S. patents and four patents in various European
countries relating to vascular graft manufacturing technology. In addition,
PolyMedica granted CardioTech a perpetual, worldwide, royalty-free license to
use certain proprietary polyurethane technologies (the "Biomaterial Technology")
in the field consisting of development, manufacture and sale of implantable
medical devices and biodurable polymer materials to third parties for use in
medical applications (the "Implantable Devices and Materials Field"). However,
PolyMedica and CardioTech each have rights to use the Biomaterials Technology to
fabricate medical products (other than implantable medical devices) themselves
or in joint ventures with third parties. In addition, PolyMedica has retained
the rights to make sales of certain formulations of ChronoFlex and such
materials for non-medical applications. As a result, PolyMedica may compete with
CardioTech if CardioTech decides to commercialize applications of the
Biomaterials Technology in fields other than those in which it has been granted
an exclusive license. Also, Thermedics, Inc., as joint owner with PolyMedica of
a patent and patent applications relating to certain polyurethane technology, is
free to use such rights or license them to others in any field, including the
Implantable Devices and Materials Field.
CardioTech's success will depend, in large part, on the following
abilities:
. to maintain its existing patents;
. to obtain new patents;
. to maintain trade secret protection; and
. to operate without infringing on the proprietary rights of third
parties or having third parties circumvent CardioTech's rights.
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PolyMedica has filed and obtained U.S. and foreign patents covering aspects of
the Biomaterials Technology. CardioTech cannot assure you, however:
. that any of CardioTech's or PolyMedica's existing patents will not be
challenged or future patent applications will result in the issuance
of patents;
. that CardioTech will develop additional proprietary products that are
patentable;
. that any additional patents issued to CardioTech will provide
CardioTech with any competitive advantages or will not be challenged
by any third parties; or
. that the patents of others will not impede the ability of CardioTech
to do business or that third parties will not be able to circumvent
CardioTech's patents and licensed technology.
Furthermore, CardioTech cannot assure you that others will not independently
develop or duplicate similar technology or products, or, if patents are issued
or licensed to CardioTech, design around the patents issued or licensed to
CardioTech.
CardioTech might have to obtain licenses from third parties to avoid
infringing patents or other proprietary rights. CardioTech cannot assure you
that any licenses required under any such patents or proprietary rights would be
made available, if at all, on terms acceptable to CardioTech. If CardioTech does
not obtain such licenses, it could encounter delays in product introductions, or
could find that the development, manufacture or sale of products requiring such
licenses could be prohibited. In addition, CardioTech could incur substantial
costs in defending itself in suits brought against it with respect to patents it
might infringe or in filing suits against others to have such patents declared
invalid.
Some of CardioTech's know-how and technology may not be patentable. To
protect its rights, CardioTech requires employees, consultants, advisors and
collaborators to enter into confidentiality agreements. CardioTech cannot
assure you, however, that these agreements will protect CardioTech's trade
secrets, know-how or other proprietary information in the event of any
unauthorized use or disclosure. Further, CardioTech's business may be adversely
affected by competitors who independently develop competing technologies,
especially if CardioTech obtains no, or only narrow, patent protection.
Technological Change and Competition.
The medical device industry is subject to rapid and substantial
technological change. Several companies currently sell synthetic graft products
for certain specific applications in the United States and worldwide and have
done so for many years. Although CardioTech believes that the attributes of its
polyurethane-based grafts will allow its products to compete effectively, these
companies can be expected to defend their market positions vigorously. Moreover,
while CardioTech is aware of only two competitors developing polyurethane-based
vascular grafts currently, potential competitors of CardioTech in the United
States and abroad are numerous and include, among others:
. both large and small synthetic materials companies;
. medical device firms;
. universities; and
. other research institutions.
CardioTech cannot assure you that its potential competitors will not succeed in
developing technologies and products that are more effective than any that are
being developed by CardioTech or that would render CardioTech's technologies and
products obsolete or noncompetitive. Many of these potential competitors have
substantially greater financial and technical resources and production and
marketing capabilities than CardioTech.
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Additionally, many of CardioTech's competitors have significantly greater
experience than CardioTech in conducting pre-clinical testing and clinical
trials of medical devices and obtaining FDA and other regulatory approvals of
products for use in health care. Moreover, Thoratec Corporation, one of the
Company's competitors, has developed a polyurethane vascular access graft and
has begun limited clinical trials in the United States and foreign countries. In
addition, Thoratec Corporation has begun to sell its product in Japan and has
affixed a CE Mark (the approval marking of the European Community) on its
product which enables it to sell the product throughout Europe. Accordingly,
CardioTech's competitors may succeed in obtaining FDA approval for products more
rapidly than CardioTech. If CardioTech commences significant commercial sales of
its vascular graft products, it will also be competing with respect to
manufacturing efficiency and marketing capabilities, areas in which it has
limited experience.
Attraction and Retention of Key Employees and Scientific Collaborators.
CardioTech is highly dependent on the principal members of its management
and scientific staff, the loss of whose services could have a material adverse
effect on CardioTech. Furthermore, recruiting and retaining qualified
scientific personnel to perform research and development work in the future will
also be critical to CardioTech's success. Although CardioTech believes it will
be successful in attracting and retaining skilled and experienced scientific
personnel, CardioTech cannot assure you that it will be able to attract and
retain such personnel on acceptable terms given the competition among numerous
medical device companies, universities and non-profit research institutions for
experienced scientists. CardioTech's anticipated growth and expansion into areas
and activities requiring additional expertise such as clinical testing,
governmental approvals, production and marketing, are expected to place
increased demands on CardioTech's resources. These demands are expected to
require the addition of new management personnel and the development of
additional expertise by existing management personnel. The failure to acquire
such services or to develop such expertise could materially adversely affect
CardioTech's business.
Limited Manufacturing Capability.
The development and manufacture of CardioTech's products are subject to:
(1) the Quality System Requirements and other relevant requirements
prescribed by the FDA; or
(2) other standards prescribed by the appropriate regulatory agency in the
country of use.
Although CardioTech currently has the ability to produce quantities of synthetic
vascular grafts sufficient to support its current needs and its needs for early-
stage clinical trials, it may need to acquire additional manufacturing
facilities and improve its manufacturing technology to meet the volume and cost
requirements for later clinical trials. CardioTech will require additional
manufacturing facilities to undertake commercial production of vascular grafts
if it elects to do so. CardioTech cannot assure you:
. that it will be able to obtain or manufacture such products in a
timely fashion at acceptable quality and prices;
. that it or its suppliers can comply with the Quality System
Requirements or other relevant requirements prescribed by the FDA or
appropriate foreign regulatory agencies; or
. that it or its suppliers will be able to manufacture an adequate
supply of product.
Absence of Sales and Marketing Experience.
CardioTech expects to market its vascular grafts either through independent
distributors/sales agents or co-marketing arrangements with third parties. To
date, CardioTech has had no experience in sales, marketing or distribution of
vascular grafts or other implantable devices. In order to market vascular grafts
directly, CardioTech would need to develop a marketing and sales staff with
technical expertise. CardioTech cannot assure you:
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. that it will be able to build such a marketing staff or sales force;
. that the cost of establishing such a marketing staff or sales force
will not exceed any product revenue; or
. that CardioTech's direct sales and marketing efforts will be
successful.
In addition, if CardioTech succeeds in bringing one or more products to market,
it may compete with other companies that currently have extensive and well-
funded marketing and sales operations. CardioTech cannot assure you that its
marketing and sales efforts would compete successfully against such other
companies. To the extent CardioTech enters into co-marketing arrangements, any
revenue received by CardioTech will be dependent on the efforts of third parties
and CardioTech cannot assure you that such efforts will be successful.
Extensive Government Regulation.
The production and marketing of CardioTech's products and ongoing research
and development activities are subject to extensive regulation by numerous
governmental authorities in Europe, the United States and other countries.
Prior to marketing any synthetic vascular grafts developed by Cardiotech in
Europe, CardioTech must affix a CE Mark, or mark of approval from the European
Community, to its product. The CE Mark denotes conformity with European
standards and allows certified medical devices to be placed on the market in all
European countries. In order to obtain a CE Mark, CardioTech must meet:
. the essential safety requirements of the European Medical Device
Directive ("EMDD");
. maintain a technical file consisting of all research data and
information about the medical device;
. adopt a conformity route for its product; and
. choose a Notified Body, an independent third party, who will be
responsible for reviewing the manufacturer's technical file to verify
that the manufacturer has addressed the requirements of the EMDD and
has satisfied certain clinical trial requirements.
In November 1998, CardioTech was awarded the right to affix the CE Mark to
its VascuLink Vascular Access Graft. As a result of this award, CardioTech has
begun to market this product in Europe. CardioTech cannot assure you, however,
that it will be able maintain regulatory approval or clearance for the sale of
this product in Europe. Additionally, CardioTech cannot assure you that with
regard to its other products, a Notified Body will determine that CardioTech's
technical file satisfies the requirements of the EMDD or that its products other
than the VascuLink Vascular Access Graft meet the essential safety requirements
of the EMDD. As a result, CardioTech cannot assure you that it will be able to
. affix a CE Mark to its other implantable products;
. sell such other products in Europe; or
. maintain regulatory approval or clearance for its other products in
Europe.
Failure to obtain CE Marking or maintain regulatory approval or clearance for
its products could have a material adverse effect on CardioTech's business,
financial condition and results of operations.
Furthermore, prior to marketing any synthetic vascular grafts developed by
CardioTech in the United States, such products may undergo rigorous pre-clinical
testing and clinical trials, as well as an extensive regulatory approval process
mandated by the FDA. FDA approval may take many years and require the
expenditure of substantial resources. In addition, modifications to regulations
and changes in interpretation of regulations occur regularly and can materially
and adversely affect the timing and cost of the sale of CardioTech's product
introductions.
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CardioTech has limited experience in conducting and managing the pre-
clinical and clinical trials necessary to obtain government approvals.
CardioTech cannot assure you that the results of such clinical trials will be
consistent with the results obtained in pre-clinical studies or that the results
obtained in later phases of clinical trials will be consistent with those
obtained in earlier phases. CardioTech also cannot assure you that polyurethane-
based synthetic vascular grafts or other implantable products will be shown to
be safe and effective or that regulatory approval for any such product will be
obtained on a timely basis, if at all. Delays in obtaining regulatory approvals
would adversely affect the marketing of products developed by CardioTech and
CardioTech's ability to receive product revenue or royalties.
CardioTech's activities relating to the development of uses for its
polymer-based materials and implantable medical devices in collaboration with
other medical-device manufacturers may also be subject to regulatory approval
processes similar to those described above relating to vascular grafts.
Quarterly Fluctuations.
CardioTech's quarterly operating results are likely to vary significantly
depending on factors such as the results of pre-clinical or clinical trials and,
if CardioTech is able to commercialize its vascular graft products, the timing
of significant orders for vascular grafts. CardioTech's expense levels are based
in part on its expectations as to future revenue. If revenue levels are below
expectations, operating results will be adversely affected.
Health Care Reimbursement.
CardioTech's ability to commercialize vascular grafts successfully will
depend in part on the extent to which reimbursement for the cost of such
products and related treatment will be available from government health
administration authorities, private health coverage insurers and other
organizations. Third-party payers are increasingly challenging the price of
medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, and CardioTech
cannot assure you that adequate third-party coverage will be available to
maintain price levels sufficient for an appropriate return on its investment in
product development.
Product Liability.
The testing, marketing and sale of human healthcare products entail an
inherent risk of allegations or product liability, and CardioTech cannot assure
you that substantial product liability claims will not be asserted against it.
CardioTech currently has limited product liability insurance. CardioTech cannot
assure you that a product liability claim would not materially adversely affect
its business or financial condition.
Absence of Dividends.
CardioTech has never paid cash dividends on its common stock and does not
anticipate paying any cash dividends in the foreseeable future. CardioTech's
loan agreement with Dresdner Kleinwort Benson currently prohibits the payment of
cash dividends without Dresdner Kleinwort Benson's prior written consent.
Year 2000 Issues.
The Year 2000 Issue refers to potential problems with computer systems or
any equipment with computer chips or software that use dates where the date has
been stored as just two digits (e.g., 97 for 1997). On January 1, 2000, any date
recording mechanism incorporating the date sensitive software which uses only
two digits to represent the year may recognize a date using 00 as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including, among other things,
a temporary inability to process transactions, send invoices, or engage in
similar business activities. To address the Year 2000 Issue, CardioTech has
implemented a program with respect to its (1) internal information technology
systems, (2) non-information technology systems, and (3) external suppliers of
goods and services.
10
<PAGE>
CardioTech has completed a review of its internal information systems to
determine the extent of any Year 2000 problem. Based on this review, CardioTech
does not currently believe that it has material exposure to the Year 2000 Issue
with respect to its own information systems, since its core existing business
information systems correctly define the year 2000. Additionally, CardioTech has
completed an evaluation of its internal non-information systems and expects to
have its remediation and testing phases for these systems completed by the end
of September 1999.
CardioTech is contacting its major customers and suppliers regarding their
Year 2000 problems. To date, CardioTech is unaware of any such problems that
would materially adversely affect its operations or financial condition.
CardioTech cannot assure you, however:
. that it will be able to identify third party Year 2000 problems;
. that third party Year 2000 problems will be corrected on a timely
basis; or
. that a failure by such entities to correct a Year 2000 problem or a
correction which is incompatible with CardioTech's information systems
would not have a material adverse affect on CardioTech's operations or
financial condition.
In addressing Year 2000 issues, CardioTech estimates that total costs will
be approximately $17,500. To date, $5,000 of such expenses have been incurred
and expensed. Total costs consist primarily of external consulting fees and
personal computer replacements. The estimated costs are based on management's
current assessment and could change in the future. Further, the total estimated
costs are based on assumptions of future events such as the availability of Year
2000 compliant computers and independent consultants. CardioTech cannot assure
you that actual Year 2000 costs incurred will be equal to or less than those
estimated at this time.
Although CardioTech believes that its primary IT system correctly defines
the year 2000, prudent business practices call for the development of
contingency plans. CardioTech's contingency plans will include strategies for
dealing with Year 2000-related system failures or malfunctions due to
CardioTech's internal systems or from external parties. A Year 2000 system
failure, either internal or that of an external provider, could prevent
CardioTech from being able to continue its operations, or could disrupt
financial and management controls and reporting systems. The Company expects to
complete its contingency plans by September 30, 1999.
CardioTech does not expect the Year 2000 Issue to have a material adverse
effect on its results of operations or financial position; however, if not
effectively remediated, negative effects from Year 2000 Issues, including those
related to internal systems, vendors, or customers, could have a material
adverse effect on CardioTech's operations or financial condition. CardioTech
cannot assure you that even if all planned actions are completed, it will not
experience some adverse effects from Year 2000 related issues.
11
<PAGE>
USE OF PROCEEDS
All net proceeds from the sale of our common stock will go to the selling
stockholders who offer and sell their shares. Accordingly, we will not receive
any proceeds from the selling stockholders' sale of their common stock.
12
<PAGE>
SELLING STOCKHOLDERS
CardioTech issued 1,706,000 of the shares offered hereby to certain of the
selling stockholders in a private placement of units, each unit consisting of
one share of common stock and one warrant to purchase one share of common stock.
Sales of the units were made pursuant to Unit Purchase Agreements between
CardioTech and each of the unit purchasers, dated as of November 9, 1998 and
December 15, 1998. The private placement terminated on December 15, 1998.
Fechtor, Detwiler & Co., Inc. acted as placement agent for the offering.
CardioTech will issue 1,706,000 of the shares offered hereby to certain of
the selling stockholders upon exercise of the warrants issued to the unit
purchasers in the unit private placement. CardioTech will issue 170,600 of the
shares offered hereby to certain of the selling stockholders upon exercise of
the placement agent warrants issued to Fechtor, Detwiler & Co., Inc. These
shares are being offered hereby pursuant to certain registration rights granted
to Fechtor, Detwiler.
The following table lists the selling stockholders and other information
regarding the beneficial ownership of the common stock by each of the selling
stockholders as of January 22, 1999. The information provided in the table
below has been obtained from the selling stockholders. The selling stockholders
may sell all, some or none of their shares in this offering. See "Plan of
Distribution."
<TABLE>
<CAPTION>
Names Shares Beneficially Maximum Number Number of
of Selling Owned Prior to Offering/(1)/ of Shares Being Shares Beneficially
Stockholders Number Percent Offered Owned After Offering(2)
- ----------------------- --------------------------------- ---------------------- ------------------------------
<S> <C> <C> <C> <C>
Maho and Shinichiro 40,000 * 40,000 0
Abe
Nishan Atinizian 50,000 * 50,000 0
Anthony D. Autorino 100,000 1.6% 100,000 0
Richard E. Carter 100,000 1.6% 100,000 0
Steven J. Caruso 40,000 * 40,000 0
Janet R. Childs 40,000 * 40,000 0
Manuel R. Costa 40,000 * 40,000 0
Betsey L. Detwiler (3) 20,000 * 20,000 0
Robert R. Detwiler (3) 248,000 3.9% 248,000 0
Kenneth M. Dorros 150,000 2.4% 150,000 0
Judith H. Dorros 20,000 * 20,000 0
James P. Douglas 40,000 * 40,000 0
Richard Fechtor(4) 22,800 * 22,800 0
Sheldon Fechtor (4) 22,800 * 22,800 0
Peter Fenton (4) 55,000 * 55,000 0
Randy Fill (4) 5,000 * 5,000 0
Laurence B. Flood 50,000 * 50,000 0
Jacob Golbitz (4) 5,000 * 5,000 0
Barbara W. Hillman and 40,000 * 40,000 0
Richard A. Hillman,
JTWROS
Cathey A. Huffam 40,000 * 40,000 0
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Names Shares Beneficially Maximum Number Number of
of Selling Owned Prior to Offering/(1)/ of Shares Being Shares Beneficially
Stockholders Number Percent Offered Owned After Offering(2)
- ----------------------- -------------------------- --------------- --------------------------
<S> <C> <C> <C> <C>
Philip & Elizabeth 50,000 * 50,000 0
Joseph
Kester Family Trust U/A 80,000 1.3% 80,000
Linda Kester & Sharon
Kester, TTEE
William S. Kmon 62,000 1.0% 62,000 0
Lawrence Levine 50,000 * 50,000 0
Ronald Lewis 200,000 3.2% 200,000 0
Frederick F. Margosian 50,000 * 50,000 0
Carmine Martinetti 40,000 * 40,000 0
Rosalba A. McShane 40,000 * 40,000 0
Barrett Morgan 40,000 * 40,000 0
Robert M. & Rose A. 50,000 * 50,000 0
Mowbray
Pequot Scout Fund, L.P. 500,000 8% 500,000 0
William D. Petty 120,000 1.9% 120,000 0
Berry W. Phillips 40,000 * 40,000 0
Jeffrey R. Power (5) 164,000 2.6% 164,000 0
Douglas S. Roberts and 40,000 * 40,000 0
Elise C. Roberts,
JTWROS
Michael H. Salamon 40,000 * 40,000 0
Robert D. Sayrs 40,000 * 40,000 0
Sexton Family 40,000 * 40,000 0
Irrevocable Trust
John H. Sexton, IRA 40,000 * 40,000 0
Ross E. Sherbrooke 20,000 * 20,000 0
Trust
TJJ Corporation 160,000 2.6% 160,000 0
Laura Tze and Hsiung 50,000 * 50,000 0
Chia Tze, Tenants in
Common
John T. Walsh, Jr. 40,000 * 40,000 0
David I. J. Wang 300,000 4.8% 300,000 0
Barbara Whitney 50,000 * 50,000 0
Michael Wood (4) 8,000 * 8,000 0
Eric and Brenda Wood 40,000 * 40,000 0
Joel Yanowitz 60,000 * 60,000 0
Elizabeth Youngerman 40,000 * 40,000 0
</TABLE>
* Less than one percent of the outstanding shares of common stock.
(1) The number of shares of common stock issued and outstanding on January
22, 1999 was 6,138,916. The calculation of number of shares owned and
percentage ownership for each listed selling stockholder is based upon
the number of shares of common stock issued and outstanding at January
22, 1999, plus the shares of common stock issuable upon exercise of
currently exercisable warrants held by such selling stockholder. Unless
otherwise indicated, the number of shares of common stock owned by each
listed selling stockholder equals the number of shares issued in the unit
private placement and an equal number of shares issuable upon exercise of
the warrants sold in the unit private placement.
14
<PAGE>
(2) Assumes that all of the shares held by the selling stockholders and being
offered under this prospectus are sold, that the shares are sold to
unaffiliated third parties and that the selling stockholders acquire no
additional shares of common stock before the completion of this offering.
(3) Betsey L. Detwiler and Robert R. Detwiler are husband and wife. The
number of shares listed above as beneficially owned by Mrs. Detwiler
does not include those shares beneficially owned by Mr. Detwiler and visa
versa. Shares beneficially owned by Mr. Detwiler include 48,000 shares
to be issued upon exercise of the placement agent warrant.
(4) Consists of shares to be issued upon the exercise of the placement agent
warrant.
(5) Includes 4,000 shares to be issued upon the exercise of the placement
agent warrant.
15
<PAGE>
PLAN OF DISTRIBUTION
CardioTech is registering the shares on behalf of the selling stockholders.
"Selling stockholders", as used in this prospectus, includes donees, pledgees
and distributees selling shares received from a named selling stockholder after
the date of this prospectus. The selling stockholders may offer their shares at
various times in one or more of the following transactions, or in other kinds of
transactions:
. transactions on the American Stock Exchange;
. in private transactions other than through the American Stock
Exchange;
. in connection with short sales of the CardioTech shares;
. by pledge to secure debts and other obligations;
. in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter options; or
. in a combination of any of the above transactions.
The selling stockholders may sell their shares at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The selling stockholders may use broker-dealers to sell their shares. If
this happens, broker-dealers will either receive discounts or commissions from
the selling stockholders, or they will receive commissions from purchasers of
shares for whom they acted as agents.
Selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of that Rule.
LEGAL MATTERS
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. of Boston,
Massachusetts, has delivered its opinion that the shares of common stock offered
in this prospectus have been validly issued and are fully paid and non-
assessable.
EXPERTS
CardioTech's consolidated balance sheet as of March 31, 1998 and 1997 and
the consolidated statements of income, retained earnings, and cash flows for
each of the three years in the period ended March 31, 1998, incorporated in this
Prospectus by reference from CardioTech's Annual Report on Form 10-K for the
year ended March 31, 1998 have been audited by PricewaterhouseCoopers LLP,
independent accountants, as stated in their report, which includes an
explanatory paragraph which states that CardioTech was a majority owned
subsidiary of PolyMedica Corporation from inception to June 12, 1996 and which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
16
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any document we file at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents by writing to the SEC and paying a fee for the
copying cost. Please call the SEC at 1-800-SEC-0330 for more information about
the operation of the public reference room. Our SEC filings are also available
to the public at the SEC's web site at "http://www.sec.gov." In addition, you
can read and copy our SEC filings at the office of the American Stock Exchange
at 86 Trinity Place, New York, New York 10006.
This prospectus is only part of a Registration Statement on Form S-3 that
we have filed with the SEC under the Securities Act and therefore omits certain
information contained in the Registration Statement. We have also filed exhibits
and schedules with the Registration Statement that are excluded from this
prospectus, and you should refer to the applicable exhibit or schedule for a
complete description of any statement referring to any contract or other
document. You may:
. inspect a copy of the Registration Statement, including the exhibits
and schedules, without charge at the public reference room, or
. obtain a copy from the SEC upon payment of the fees prescribed by
the SEC.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus and information we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934.
The documents we are incorporating by reference are:
. Annual Report on Form 10-K for the year ended March 31, 1998, filed
on June 29, 1998, as amended on October 22, 1998;
. Definitive Proxy Statement filed on July 29, 1998;
. Current Report on Form 8-K, filed on April 15, 1998;
. Quarterly Report on Form 10-Q, for the quarter ended June 30, 1998,
filed on August 13, 1998;
. Quarterly Report on Form 10-Q, for the quarter ended September 30,
1998, filed on November 16, 1998; and
. The description of the common stock contained in our Registration
Statement on Form 10 filed with the SEC on March 20, 1996, including
any amendments or reports filed for the purpose of updating such
description.
17
<PAGE>
<TABLE>
=========================================================== ======================================================
<S> <C>
You should rely only on the information 3,582,600 shares
contained in this prospectus. We have not
authorized anyone to provide you with
information different from that contained in CardioTech International, Inc.
this prospectus. The selling stockholders are
offering to sell and seeking offers to buy
shares of our common stock only in Common Stock
jurisdictions where offers and sales are ($.01 par value per share)
permitted. The information contained in this
prospectus is accurate only as of February
___, 1999. You should not assume that this -----------------
prospectus is accurate as of any other date. PROSPECTUS
-----------------
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
--
<S> <C>
CardioTech's Business.............................. 2
Recent Developments................................ 2
Risk Factors....................................... 3
Use of Proceeds.................................... 11
Selling Stockholders............................... 12
Plan of Distribution............................... 15
Legal Matters...................................... 15
Experts............................................ 15
Where You Can Find More Information................ 16
Incorporation of Documents by Reference............ 16
________, 1999
=========================================================== ======================================================
</TABLE>
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the Company's estimates (other than the SEC
and AMEX registration fees) of the expenses in connection with the issuance and
distribution of the shares of common stock being registered. None of the
following expenses are being paid by the selling stockholders.
<TABLE>
<CAPTION>
Item Amount
- ---- ---------
<S> <C>
SEC registration fee............................................................... $ 1,493.94
Amex listing fee................................................................... 17,500.00
Legal fees and expenses............................................................ 77,000.00
Accounting fees and expenses....................................................... 55,000.00
Placement Agent Fees............................................................... 129,656.00
Miscellaneous fees and expenses.................................................... 7,500.00
Total.............................................................................. $288,149.94
</TABLE>
Item 15. Indemnification of Directors and Officers.
Massachusetts General Laws, Chapter 156B, Section 67, empowers a
Massachusetts corporation to indemnify any person in connection with any action,
suit or proceeding brought or threatened by reason of the fact that such person
is or was a director, officer, employee or agent of the corporation or was
serving as such with respect to another corporation or other entity at the
request of such corporation, unless such person shall have been adjudicated in
any proceeding not to have acted in good faith in the reasonable belief that
such action was in the best interests of the corporation. CardioTech's Amended
and Restated Bylaws contain provisions that require the Company to indemnify its
directors and officers to the fullest extent permitted by Massachusetts law.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
2 Plan and Agreement of Distribution between PMI and CardioTech,
dated May 13, 1996 (filed as Exhibit 2 to CardioTech's Form 10
filed on March 20, 1996, as amended (the "Form 10"), and
incorporated herein by reference).
4.1 Restated Articles of Incorporation (filed as Exhibit 3.1 to the
Form 10 and incorporated herein by reference).
4.2 Amended and Restated Bylaws (filed as Exhibit 3.2 to the Form
10 and incorporated herein by reference).
4.3 Certificate of Vote of Directors Establishing a Class or Series
of Stock for Series A Preferred Stock. (Filed as Exhibit 3.1
to the Registrant's Quarterly Report on Form 10-Q for the
fiscal period ended September 30, 1998 filed with the
Securities and Exchange Commission on November 16, 1998 and
incorporated herein by reference.)
5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality
II-2
<PAGE>
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(see Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
99.1 Form of Unit Purchase Agreement between CardioTech
International, Inc. and each of the selling stockholders.
99.2 Form of Warrant to Purchase Shares of Common Stock of
CardioTech International, Inc. issued to each of the selling
stockholders.
99.3 Form of Warrant Agreement by and among CardioTech
International, Inc., Fechtor, Detwiler & Co., Inc., and certain
of Fechtor, Detwiler's employees, and related form of Warrant
Certificate to Purchase Shares of CardioTech International, Inc.
Common Stock.
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or any decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or
II-3
<PAGE>
otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(c) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Woburn and Commonwealth
of Massachusetts on the 11th day of February, 1999.
CARDIOTECH INTERNATIONAL, INC.
By: /s/Michael Szycher
-------------------------
Michael Szycher, Ph.D.
Chairman and Chief Executive Officer
POWER OF ATTORNEY
The registrant and each person whose signature appears below constitutes
and appoints Michael Szycher, Ph.D. and John E. Mattern and each of them singly,
his, her or its true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him, her or it and in his, her or its name,
place and stead, in any and all capacities, to sign and file (i) any and all
amendments (including post-effective amendments) to this Registration Statement,
with all exhibits thereto, and other documents in connection therewith, and (ii)
a registration statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he, she, or it
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------------- -------------------------------------------------------------------------- ----------------
<S> <C> <C>
/s/ Michael Szycher Chairman of the Board of Directors, Chief Executive Officer and Treasurer
- --------------------------------- (Principal Executive Officer) February 11, 1999
Michael Szycher, Ph.D.
/s/ John E. Mattern Chief Operating Officer, Chief Financial Officer and Clerk (Principal
- --------------------------------- Financial and Accounting Officer) February 11, 1999
John E. Mattern
/s/ Alan Edwards Executive Vice President and Director February 11, 1999
- --------------------------------
Alan Edwards
/s/ Michael Adams Vice President of Regulatory Affairs and Quality Assurance February 11, 1999
- ---------------------------------
Michael Adams
/s/ Michael L. Barretti Director February 11, 1999
- ---------------------------------
Michael L. Barretti
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------ -------
2 Plan and Agreement of Distribution between PMI and CardioTech, dated
May 13, 1996 (filed as Exhibit 2 to CardioTech's Form 10 filed on
March 20, 1996, as amended (the "Form 10"), and incorporated herein
by reference).
4.1 Restated Articles of Incorporation (filed as Exhibit 3.1 of the
Form 10 and incorporated herein by reference).
4.2 Amended and Restated Bylaws (filed as Exhibit 3.2 of the Form 10 and
incorporated herein by reference).
4.3 Certificate of Vote of Directors Establishing a Class or Series of
Stock for Series A Preferred Stock. (Filed as Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal period
ended September 30, 1998 filed with the Securities and Exchange
Commission on November 16, 1998 and incorporated herein by
reference.)
5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
99.1 Form of Unit Purchase Agreement between CardioTech International,
Inc. and each of the selling stockholders.
99.2 Form of Warrant to Purchase Shares of Common Stock of CardioTech
International, Inc. issued to each of the selling stockholders.
99.3 Form of Warrant Agreement by and among CardioTech International,
Inc., Fechtor, Detwiler & Co., Inc., and certain of Fechtor,
Detwiler's employees, and related form of Warrant Certificate to
Purchase Shares of CardioTech International, Inc. Common Stock.
<PAGE>
Exhibit 5.1
-----------
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
701 Pennsylvania Avenue, N.W. Telephone: 617/542-6000
Washington, D.C. 20004 Fax: 617/542-2241
Telephone: 202/434-7300 www.mintz.com
Fax: 202/434-7400
February 12, 1999
CardioTech International, Inc.
78E Olympia Avenue
Woburn, Massachusetts 01801
Ladies and Gentlemen:
We have acted as counsel to CardioTech International, Inc., a Massachusetts
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission of a Registration Statement on Form S-3
(the "Registration Statement"), pursuant to which the Company is registering
under the Securities Act of 1933, as amended, a total of 3,582,600 shares (the
"Shares") of its common stock, $.01 par value per share (the "Common Stock"),
for resale to the public. The Shares are to be sold by the selling stockholders
identified in the Registration Statement. This opinion is being rendered in
connection with the filing of the Registration Statement. All capitalized terms
used herein and not otherwise defined shall have the respective meanings given
to them in the Registration Statement.
In connection with this opinion, we have examined the Company's Restated
Articles of Organization and Amended and Restated By-Laws, both as currently in
effect, such other records of the corporate proceedings of the Company and
certificates of the Company's officers as we have deemed relevant, and the
Registration Statement and the exhibits thereto.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified, photostatic or facsimile copies and the
authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that (i) the Shares have
been duly and validly authorized by the Company and (ii) the Shares, when issued
and sold, will be duly and validly issued, fully paid and non-assessable shares
of the Common Stock.
Our opinion is limited to the General Corporation Laws of The Commonwealth
of Massachusetts, and we express no opinion with respect to the laws of any
other jurisdiction. No opinion is expressed herein with respect to the
qualification of the Shares under the securities or blue sky laws of any state
or any foreign jurisdiction.
We understand that you wish to file this opinion as an exhibit to the
Registration Statement, and we hereby consent thereto.
Very truly yours,
/s/ Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
<PAGE>
EXHIBIT 23.1
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to the incorporation by reference in this Registration Statement
on Form S-3 of our report, which includes an explanatory paragraph that
CardioTech was a majority owned subsidiary of PolyMedica Corporation from
inception to June 12, 1996, dated May 27, 1998, on our audits of the
consolidated financial statements of CardioTech International, which report
is included in the Company's Annual Report on Form 10-K for the year ended
March 31, 1998. We also consent to the reference to our firm under the caption
"Experts".
/S/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 12, 1999
<PAGE>
EXHIBIT 99.1
------------
UNIT PURCHASE AGREEMENT
THIS AGREEMENT is by and between CardioTech International, Inc. (the
"Company"), a Massachusetts corporation with an office at 78E Olympia Avenue,
Woburn, Massachusetts 01801, and the purchasers (each a "Purchaser" and,
collectively, the "Purchasers") named on the purchaser signature pages hereto
(the "Purchaser Signature Pages").
IN CONSIDERATION of the mutual covenants contained in this Agreement and
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
SECTION 1. Authorization of Shares. The Company has authorized (a) the
-----------------------
sale of up to 2,000,000 shares (the "Shares") of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), and (b) the sale of warrants (the
"Warrants" and, together with the Shares, the "Securities") to purchase up to an
aggregate of 2,000,000 shares (the "Warrant Shares") of Common Stock in a
private placement exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Offering").
SECTION 2. Agreement to Sell and Purchase the Securities. At each Closing
---------------------------------------------
(as defined below), the Company will sell to each Purchaser participating in
such Closing, and each such Purchaser will buy from the Company, upon the terms
and conditions hereinafter set forth, the Securities being purchased by such
Purchaser. The number of shares of Common Stock to be purchased by each
Purchaser, and the number of Warrant Shares to be purchasable under each
Purchaser's Warrant, shall be determined on the basis of the total amount
payable by such Purchaser (the "Purchase Price") as set forth on such
Purchaser's Purchaser Signature Page, based on an aggregate purchase price of
$1.25 for each share of Common Stock and Warrant to purchase one share of Common
Stock (together, a "Unit").
SECTION 3. Payment of Purchase Price. On or prior to each Closing Date,
-------------------------
as defined below, each Purchaser that is purchasing Units on such Closing Date
will deliver to the Company the full amount of the Purchase Price payable by
such Purchaser by check or wire transfer. Wire transfers should be directed as
follows:
BankBoston
100 Federal Street
Boston, MA
ABA No.: 01100390
For further credit to: account no.: 532-85391
account name: CardioTech International, Inc.
Payments by check should be delivered directly to the Company at the
following address:
CardioTech International, Inc.
78E Olympia Avenue
Woburn, MA 01801
Attention: John E. Mattern, Chief Financial Officer
<PAGE>
SECTION 4. The Closing. The consummation of the transactions
-----------
contemplated by this Agreement (the "Closings") shall occur as to each Purchaser
on the date that all conditions to Closing with respect to the Company and such
Purchaser have been satisfied or at such other time as shall be agreed by the
Company and the Purchasers (the "Closing Date"). Within thirty (30) days after
each Closing Date, the Company shall deliver to each Purchaser that purchased
Units on such Closing Date one or more certificates for the Securities
registered in the name of such Purchaser or its nominee.
SECTION 5. Representations, Warranties and Covenants of the Company.
--------------------------------------------------------
The Company hereby represents and warrants to, and covenants with, the
Purchasers as follows:
SECTION 5.1. Organization. The Company is duly organized, validly
------------
existing and in good standing under the laws of the Commonwealth of
Massachusetts. The Company has full power and authority to own and operate its
properties and to conduct its business as currently conducted and is registered
or qualified to do business and is in good standing in each jurisdiction in
which it owns or leases property or transacts business and where the failure to
be so qualified would have a material adverse effect upon the business,
financial condition, properties or operations of the Company.
SECTION 5.2. Due Authorization. The Company has all requisite power
-----------------
and authority to execute, deliver and perform its obligations under this
Agreement and the Warrants, and this Agreement and the Warrants have been duly
authorized and validly executed and delivered by the Company and constitute
valid and binding agreements of the Company enforceable against the Company in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 5.3. Non-Contravention. The execution and delivery of this
-----------------
Agreement and the Warrants, the issuance and sale of the Units to be sold by the
Company hereunder, and the consummation of the transactions contemplated hereby
will not conflict with or constitute a violation of, or default (with the
passage of time or otherwise) under, any material agreement or instrument to
which the Company is a party or by which it is bound or the Restated Articles of
Organization (the "Charter") or the Amended and Restated By-Laws (the "By-Laws")
of the Company nor result in the creation or imposition of any lien,
encumbrance, claim, security interest or restriction whatsoever upon any of the
material properties or assets of the Company or an acceleration of indebtedness
pursuant to any obligation, agreement or condition contained in any material
bond, debenture, note or any other evidence of indebtedness or any material
indenture, mortgage, deed of trust or any other agreement or instrument to which
the Company is a party or by which the Company is bound or to which any of the
property or assets of the Company is subject, nor conflict with, or result in a
violation of, any law, administrative regulation, ordinance or order of any
court or governmental agency, arbitration panel or authority
2
<PAGE>
applicable to the Company. No consent, approval, authorization or other order
of, or registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body in the United States, other
than with respect to "blue sky" laws and is required by the rules and
regulations of the American Stock Exchange ("AMEX"), is required for the valid
issuance and sale of the Securities to be sold pursuant to this Agreement (other
than such as have been made or obtained).
SECTION 5.4. The Shares; the Warrant Shares. The Shares have been
------------------------------
duly authorized, and when issued and paid for in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable. The
Warrant Shares have been duly authorized, and when issued and paid for in
accordance with the terms of the Warrants will be validly issued, fully paid and
nonassessable. The Company shall reserve and keep available, solely for issuance
or delivery upon exercise of such Purchaser's Warrants, the number of shares of
Common Stock as from time to time shall be receivable upon the exercise of the
Warrants.
SECTION 5.5. Legal Proceedings. Except as disclosed in the SEC
-----------------
Filings (as defined below), there is no material legal or governmental
proceeding pending or, to the knowledge of the Company, threatened or
contemplated to which the Company is or may be a party or of which the business
or property of the Company is or may be subject.
SECTION 5.6. No Violations. Except as disclosed in the SEC Filings,
-------------
the Company is not in violation of its Charter or By-Laws, in violation of any
law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company, which
violation, individually or in the aggregate, would have a material adverse
effect on the business or financial condition of the Company, or in default in
any material respect in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness in any indenture, mortgage, deed of trust or any other agreement or
instrument to which the Company is a party or by which the Company is bound or
by which the properties of the Company are bound or affected, and there exists
no condition which, with the passage of time or the giving of notice or both,
would constitute a material default under any such document or instrument or
result in the imposition of any material penalty or the acceleration of any
indebtedness.
SECTION 5.7. Governmental Permits, Etc. Except as disclosed in the
-------------------------
SEC Filings, the Company has all necessary franchises, licenses, certificates
and other authorizations from any foreign, federal, state or local government or
governmental agency, department, or body that are currently necessary for the
operation of the business of the Company as currently conducted, the absence of
which would have a material adverse effect on the business or operations of the
Company.
SECTION 5.8. Financial Statements. Except as disclosed in the SEC
--------------------
Filings, the financial statements of the Company and the related notes contained
in the Company's Annual Report on Form 10-K, as amended, for the fiscal year
ended March 31, 1998 and its Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998, present fairly the financial position of the Company as of the
dates indicated therein and its results of operations and cash flows for the
3
<PAGE>
periods therein specified. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods therein
specified and are true, correct and complete in all respects.
SECTION 5.9. No Material Adverse Change. Except as disclosed in the
--------------------------
SEC Filings, since June 30, 1998, the Company has not incurred any material
liabilities or obligations, direct or contingent, other than in the ordinary
course of business, and there has not been any material adverse change in its
business, financial condition or results of operations.
SECTION 5.10. Additional Information. The Company has filed in a
----------------------
timely manner all documents that the Company was required to file under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") during the 12
months preceding the date of this Agreement. The following documents
(collectively, the "SEC Filings") complied in all material respects with the
requirements of the Exchange Act or the Securities Act of 1933, as amended (the
"Securities Act"), as the case may be, as of their respective filing or
effective dates, and the information contained therein was true and correct in
all material respects as of the date or effective date of such documents, and
each of the following documents as of the date thereof did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading:
(a) The Company's Annual Report on Form 10-K, as amended, for the
fiscal year ended March 31, 1998 and its Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998;
(b) The Company's Proxy Statement for the Annual Meeting of
Stockholders held on September 3, 1998; and
(c) All other documents, if any, filed by the Company with the
Securities and Exchange Commission (the "SEC") since June 30, 1998 pursuant to
the reporting requirements of the Exchange Act.
SECTION 5.11. Intellectual Property. The Company has the right to
---------------------
use all intellectual property (the "Intellectual Property") now used by it in
its business. The Company owns all right, title and interest in and to, all of
the intellectual property it owns, free and clear of any liens or encumbrances.
In any case in which the Company does not own the Intellectual Property, it has
good and valid licenses for the same, which are in full force and effect. No
claims have been asserted with respect to the use of any such Intellectual
Property or challenging or questioning the validity or effectiveness of any such
license or agreement.
SECTION 5.12. Listing. The Company shall use its best efforts to
-------
comply with all requirements of AMEX with respect to the issuance of the Shares
and the listing of the Shares and the Warrant Shares on AMEX.
4
<PAGE>
SECTION 5.13. Use of Proceeds. The Company will use the net proceeds
---------------
of the sale of the Units to fund research and development activities including
preclinical studies and clinical trials, to purchase equipment, to fund working
capital and for general corporate purposes.
SECTION 6. Representations, Warranties and Covenants of the Purchasers.
-----------------------------------------------------------
(a) Each Purchaser, severally and not jointly, represents and
warrants to, and covenants with, the Company, as of the date hereof and as of
the Closing Date on which such Purchaser acquires the Units, that: (i) such
Purchaser is an "accredited investor" as defined in Rule 501 of Regulation D
promulgated under the Securities Act; (ii) such Purchaser is acquiring the Units
for its own account for investment and with no present intention of distributing
any of such Shares other than to any affiliate of such Purchaser; (iii) such
Purchaser will not, directly or indirectly, voluntarily offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Securities, except in
compliance with the Securities Act and the rules and regulations promulgated
thereunder; (iv) such Purchaser has received and reviewed copies of the SEC
Filings, (v) such Purchaser has had an opportunity to ask questions and receive
answers from the management of the Company regarding the Company, its business
and the offering of the Units; (vi) such Purchaser has, in connection with its
decision to purchase Shares, relied solely upon the documents described in
Section 5.10 and the representations and warranties of the Company contained
herein; and (v) in evaluating the suitability of the acquisition of the Units,
such Purchaser has not relied upon any representations or other information
(whether oral or written) other than as set forth in the SEC Filings, the
Offering Memorandum dated October 22, 1998, or as contained herein.
(b) Each Purchaser agrees not to make any sale of the Securities
except pursuant to an effective registration statement under the Securities Act
or an exemption from the registration requirements thereof.
(c) Each Purchaser, severally and not jointly, further represents and
warrants to, and covenants with, the Company that (i) such Purchaser has full
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and (ii) upon the execution and delivery of this Agreement, this Agreement shall
constitute a valid and binding obligation of such Purchaser enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(d) Each Purchaser, severally and not jointly, represents that it
understands and agrees that, until registered under the Securities Act or
transferred pursuant to the provisions of Rule 144 promulgated thereunder, all
certificates evidencing the Securities and the Warrant Shares, whether upon
initial issuance or upon any transfer thereof shall bear a legend, prominently
stamped or printed therein, reading substantially as follows:
5
<PAGE>
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON UNLESS
(1) EITHER (A) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, OR (B) THE COMPANY
SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS THEN AVAILABLE, AND (2) THERE
SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS.
SECTION 7. Survival of Representations. Warranties and Agreements.
------------------------------------------------------
Notwithstanding any investigation made by any party to this Agreement all
covenants, agreements, representations and warranties made by the Company and
the Purchasers herein shall survive the execution of this Agreement, the
delivery to the Purchasers of the Securities being purchased and payment
therefor.
SECTION 8. Registration Statement. No later than March 15, 1999 or 90 days
----------------------
following the termination of the Offering (whichever comes later) and, in any
event, subject to the receipt of necessary information from the Purchasers, the
Company shall file with the SEC a registration statement on Form S-3 (the
"Registration Statement"), which may include other selling stockholders,
providing for the resale of the Warrant Shares and the Shares (collectively, the
"Registrable Shares") by the Purchasers from time to time in accordance with
Rule 415 promulgated under the Securities Act. The Company shall use its best
efforts to cause the Registration Statement to become effective no later than
April 15, 1999 or within 120 days after the termination of the Offering
(whichever comes later) and the Company shall use its best efforts to keep the
Registration Statement effective until the earlier of (a) the time all the
Registrable Shares have been sold pursuant to the Registration Statement or (b)
the expiration of the Warrants. The Company shall furnish to each Purchaser such
number of copies of the prospectus contained in the Registration Statement as
such Purchaser shall reasonably require to facilitate the public sale of the
Registrable Shares.
SECTION 9. Conditions to Closing.
---------------------
(a) The obligations of each Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction by the Company of each
of the following conditions on or before the Closing Date on which such
Purchaser is to acquire Units, any one or more of which may be waived by such
Purchaser:
(i) The representations and warranties of the Company set
forth in this Agreement delivered to the Purchasers by or on behalf of the
Company shall be true and correct as if made on such Closing Date.
6
<PAGE>
(ii) Each of the covenants, agreements and conditions to be
performed and satisfied by the Company pursuant to this Agreement at or prior to
such Purchaser's Closing shall have been duly performed and satisfied.
(iii) The Company shall have delivered an executed counterpart
of this Agreement to such Purchaser.
(b) The obligations of the Company to consummate the transactions
contemplated hereby on each Closing Date shall be subject to the satisfaction by
each Purchaser acquiring Units on such Closing Date of each of the following
conditions on or before such Closing Date, any one or more of which may be
waived by the Company:
(i) The representations and warranties of such Purchaser set
forth in this Agreement shall be true and correct as if made on such Closing
Date.
(ii) Each of the covenants, agreements and conditions to be
performed and satisfied by such Purchaser pursuant to this Agreement at or prior
to such Purchaser's Closing shall have been duly performed and satisfied.
(iii) Such Purchaser shall have paid the Purchase Price to be
paid by it in accordance with Section 3.
(iv) Such Purchaser shall have delivered a completed and
executed Purchaser Signature Page to the Company.
(v) Such Purchaser shall have delivered a completed and
executed Investor Questionnaire to the Company.
(c) The Company and each Purchaser shall use their best efforts to
cause their respective conditions to closing set forth in this Section 10 to be
satisfied.
SECTION 10. No Brokers. The parties hereto hereby represent that there
----------
are no brokers or finders entitled to compensation in connection with the
transactions contemplated hereby, other than Fechtor, Detwiler & Co., Inc., who
will be paid a commission and issued warrants by the Company.
SECTION 11. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified mail, postage prepaid, or sent by facsimile and shall be
deemed given when actually received:
(a) if to the Company to:
CardioTech International, Inc.
78E Olympia Avenue
Woburn, MA 01801
Facsimile: (781) 933-3933
Attention: John E. Mattern, Chief Financial Officer
7
<PAGE>
(b) if to any Purchaser, to its address as set forth on such Purchaser's
Purchaser Signature Page, or to such other address or addresses as may have been
furnished to the Company in writing.
SECTION 12. Changes Any term of the Agreements may be amended or
-------
compliance therewith waived with the written consent of the Company and the
holders of a majority of the Shares purchased pursuant to this Agreement.
SECTION 13. Headings. The headings of the various sections of this
--------
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 14. Severability. If any provision contained in this Agreement
------------
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
SECTION 15. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of The Commonwealth of
Massachusetts and United States federal law.
SECTION 16. Counterparts. This Agreement may be executed in two
------------
counterparts, each of which shall constitute an original, but both of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Unit Purchase
Agreement to be executed by their duly authorized representatives as of the
following date.
Dated: _______________,1998 CARDIOTECH INTERNATIONAL, INC.
By:
-------------------------------
Title:
-----------------------------
[Purchaser Signature Page Continues on the Following Page]
8
<PAGE>
PURCHASER SIGNATURE PAGE
The undersigned Purchaser hereby executes the Unit Purchase Agreement with
CardioTech International, Inc. (the "Company") and hereby authorizes this
signature page to be attached to a counterpart of such document executed by a
duly authorized officer of the Company.
Purchaser Name:
------------------------
By:
-----------------------------------
Title:
---------------------------------
Amount of Investment: $
--------------------------
Name in which Securities are to be registered:
---------------------------
Address and facsimile number of registered holder:
- -------------------------------------------------
- -------------------------------------------------
- -------------------------------------------------
- -------------------------------------------------
facsimile number:
-------------------------------
Social Security or Tax ID Number:
--------------------------
Contact name and telephone number
regarding settlement and registration:
------------------------------------
------------------------------------
9
<PAGE>
EXHIBIT 99.2
------------
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON UNLESS (1) EITHER (A) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, OR (B) THE COMPANY SHALL HAVE RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
THEN AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE
STATE SECURITIES LAWS.
For the Purchase of
___________shares of
No. W-____ Common Stock
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK
OF
CARDIOTECH INTERNATIONAL, INC.
(A Massachusetts Corporation)
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME, ON DECEMBER 15, 2003.
CardioTech International, Inc., a Massachusetts corporation (the "Company")
hereby certifies that ___________________, or his, her or its registered assigns
(the "Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time or from time to time on or before the
earlier of December 15, 2003, at not later than 5:00 p.m. (Eastern Standard
Time), and the termination of this Warrant as provided in Section 9 below,
__________ shares of Common Stock, $.01 par value, of the Company ("Common
Stock"), at a purchase price of $1.50 per share. The number of shares
purchasable upon exercise of this Warrant, and the purchase price per share,
each as adjusted from time to time pursuant to the provisions of this Warrant,
are hereinafter referred to as the "Warrant Stock" and the "Purchase Price,"
respectively.
1. Exercise.
--------
(a) This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the form of election to purchase
appended hereto as Exhibit I duly completed and executed by such Registered
---------
Holder, at the principal office of the Company, or at such other office or
agency as the Company may designate, accompanied by payment in full of the
Purchase Price payable in respect of the number of shares of Warrant Stock
purchased upon such exercise in lawful money of the United States of America.
Any exercise of this Warrant may be made subject to the satisfaction of one or
more conditions (including, without limitation, the consummation of a sale of
the capital stock of the Company or a merger or other business combination
involving the Company) which are set forth in a writing which is made a part of
or is appended to the aforementioned form of election to purchase notice (as the
case may be) by the Registered Holder.
<PAGE>
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in subsection
1(a) above. At such time, the person or persons in whose name or names any
certificates for Warrant Stock shall be issuable upon such exercise as provided
in subsection 1(c) below shall be deemed to have become the holder or holders of
record of the Warrant Stock represented by such certificates.
(c) As soon as practicable after the exercise of this Warrant in full
or in part, and in any event within 10 days thereafter, the Company at its
expense will cause to be issued in the name of, and delivered to, the Registered
Holder, or, subject to the terms and conditions hereof, as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full
shares of Warrant Stock to which such Registered Holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which such Registered
Holder would otherwise be entitled, cash in an amount determined pursuant to
Section 3 hereof, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on the face of this Warrant minus the number of such shares purchased by the
Registered Holder upon such exercise as provided in subsection 1(a) above.
2. Adjustments.
-----------
(a) If outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common Stock shall
be paid in respect of Common Stock, the Purchase Price in effect immediately
prior to such subdivision or at the record date of such dividend shall
simultaneously with the effectiveness of such subdivision or immediately after
the record date of such dividend be proportionately reduced. If outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Purchase Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the Purchase Price, the
number of shares of Warrant Stock purchasable upon the exercise of this Warrant
shall be changed to the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of this Warrant immediately prior to
such adjustment, multiplied by the Purchase Price in effect immediately prior to
such adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in par value
or a subdivision or combination as provided for in subsection 2(a) above), then,
as part of any such reorganization or
-2-
<PAGE>
reclassification, lawful provision shall be made so that the Registered Holder
of this Warrant shall have the right thereafter to receive upon the exercise
hereof the kind and amount of shares of stock or other securities or property
which such Registered Holder would have been entitled to receive if, immediately
prior to any such reorganization or reclassification, such Registered Holder had
held the number of shares of Common stock which were then purchasable upon the
exercise of this Warrant. In any such case, appropriate adjustment (as
reasonably determined by the Board of Directors of the Company) shall be made in
the application of the provisions set forth herein with respect to the rights
and interests thereafter of the Registered Holder of this Warrant such that the
provisions set forth in this Section 2 (including provisions with respect to
adjustment of the Purchase Price) and in Section 9 hereof shall thereafter be
applicable, as nearly as is reasonably practicable, in relation to any shares of
stock or other securities or property thereafter deliverable upon the exercise
of this Warrant.
(c) When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a certificate setting
forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which this Warrant shall be exercisable following the occurrence of any of the
events specified in subsection 2(a) or (b) above.
3. Fractional Shares. The Company shall not be required upon the
-----------------
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Current Market Price of the
Common Stock at the time of exercise.
4. Limitation on Sales, etc. The Registered Holder shall be bound by the
-------------------------
provisions of the following legend or a legend in substantially similar form
which shall be endorsed upon the certificate(s) evidencing the Warrant Stock
issued pursuant to such exercise:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON
UNLESS (1) EITHER (A) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, OR (B)
THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO
IT THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS THEN
AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL
APPLICABLE STATE SECURITIES LAWS.
5. Liquidating Dividends. If the Company pays a dividend or makes a
---------------------
distribution on the Common Stock payable otherwise than in cash out of earnings
or earned surplus (determined in accordance with generally accepted accounting
principles) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company will pay or distribute to the
Registered Holder of this Warrant, upon the exercise hereof, in addition to the
Warrant Stock purchased upon such exercise, the Liquidating Dividend which would
have
-3-
<PAGE>
been paid to such Registered Holder if it had been the owner of record of such
shares of Warrant Stock immediately prior to the date on which a record is taken
for such Liquidating Dividend or, if no record is taken, the date as of which
the record holders of Common Stock entitled to such dividends or distribution
are to be determined.
6. Notices of Record Date, etc. In case:
---------------------------
(a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to subscribe for or
purchase any shares of stock of any class or any other securities, or to receive
any other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then, and in each such case, the Company will mail or
cause to be mailed to the Registered Holder of this Warrant a notice specifying,
as the case may be, (i) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (ii) the effective date on
which such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or such other
stock or securities at the time deliverable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice.
7. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for issuance and delivery upon the exercise of this Warrant,
such shares of Warrant Stock and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
8. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
-4-
<PAGE>
9. Termination In Certain Events
-----------------------------
In the event of a sale of substantially all the assets of the Company or a
merger or consolidation of the Company with or into any other entity (other than
a merger the sole purpose of which is to change the state of incorporation of
the Company) or a dissolution or the adoption of a plan of liquidation of the
Company, this Warrant shall terminate on the effective date of such sale,
merger, consolidation, dissolution or adoption (the "Effective Date") and become
null and void, provided, however, that if this Warrant shall not have otherwise
-------- -------
terminated or expired, the Registered Holder hereof shall have the right until
5:00 p.m, Boston, Massachusetts time, on the day immediately prior to the
Effective Date to exercise its rights hereunder to the extent not previously
exercised.
If during any period the Current Market Price Per Share of the Common Stock
is equal to or greater than $3.50, then within 10 business days thereafter, the
Company may give written notice to the Registered Holder hereof that this
Warrant will terminate if it is not exercised within 20 business days after the
notice is sent.
10. Transfers, etc.
--------------
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change its, his or her address as shown on the warrant register by written
notice to the Company requesting such change.
(b) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
11. Mailing of Notices, etc. All notices and other communications from
-----------------------
the Company to the Registered Holder of this Warrant shall be mailed by first-
class certified or registered mail, postage prepaid, to the address furnished to
the Company in writing by the last Registered Holder of this Warrant who shall
have furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its offices at 78E Olympia Avenue,
Woburn, Massachusetts 01801, Attn: John E Mattern, Chief Financial Officer, or
such other address as the Company shall so notify the Registered Holder.
12. No Rights as Stockholder. Until the exercise of this Warrant, the
------------------------
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
-5-
<PAGE>
13. Change or Waiver. Any term of this Warrant may be changed or waived
----------------
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
14. Headings. The headings in this Warrant are for purposes of reference
--------
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
15. Governing Law. This Warrant will be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts.
CARDIOTECH INTERNATIONAL, INC.
By
----------------------------
Its
-6-
<PAGE>
EXHIBIT I
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
To: CardioTech International, Inc.
78 East Olympia Avenue
Woburn, MA 01801 Dated:
--------------------------
The undersigned pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase ____ shares of the
Common Stock (the "Common Stock") covered by such Warrant and herewith makes
payment of $ _____, representing the full purchase price for such shares at the
price per share provided for in such Warrant.
The undersigned is aware that the issuance of the Common Stock has not been
registered under the Securities Act of 1933, as amended (the "1933 Act") or any
state securities laws. The undersigned understands that the reliance by the
Company on exemptions under the 1933 Act is predicated in part upon the truth
and accuracy of the statements of the undersigned in this Purchase Form.
The undersigned represents and warrants that (1) it has been furnished with
all information which it deems necessary to evaluate the merits and risks of the
purchase of the Common Stock; (2) it has had the opportunity to ask questions
concerning the Common Stock and the Company and all questions posed have been
answered to its satisfaction; (3) it has been given the opportunity to obtain
any additional information it deems necessary to verify the accuracy of any
information obtained concerning the Common Stock and the Company; (4) it has
such knowledge and experience in financial and business matters that it is able
to evaluate the merits and risks of purchasing the Common Stock and to make an
informed investment decision relating thereto; and (5) it is purchasing the
Common Stock for its own account for investment and it will not resell the
Common Stock in violation of the 1933 Act. The undersigned understands that
because the Common Stock has not been registered under the 1933 Act, it must
continue to bear the economic risk of the investment for an indefinite time and
the Common Stock cannot be resold unless the Common Stock is registered under
applicable federal and state securities laws or an exemption from such
registration is available.
The undersigned agrees that it will in no event sell or distribute or
otherwise dispose of all or any part of the Common Stock unless (1) there is an
effective registration statement under the 1933 Act and applicable state
securities laws covering any such transaction involving the Common Stock or (2)
the Company receives an opinion of its legal counsel (concurred in by legal
counsel for the Company) stating that such transaction is exempt from
registration or the Company otherwise satisfies itself that such transaction is
exempt from registration.
II-1
<PAGE>
The undersigned consents to the placing of a legend on its certificate for
the Common Stock stating that the Common Stock has not been registered and
setting forth the restriction on transfer contemplated hereby and to the placing
of a stop transfer order on the books of the Company and with any transfer
agents against the Common Stock until the Common Stock may be legally resold or
distributed without restriction.
The undersigned has considered the Federal and state income tax
implications of the exercise of the Warrant and the purchase and subsequent sale
of the Common Stock.
Name:
-----------------------------
Dated:
---------------------------
-2-
<PAGE>
EXHIBIT 99.3
-------------
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of December 15, 1998 between CARDIOTECH
INTERNATIONAL, INC., a Massachusetts corporation (the "Company"), FECHTOR,
DETWILER & Co., INC. (the "Agent") and the Holders (as defined herein) listed on
Schedule I hereto.
W I T N E S S E T H :
-------------------
WHEREAS, the Company proposes to issue to the Agent warrants (the
"Warrants") to purchase 170,600 shares of Common Stock of the Company, $.01 par
value per share (the "Common Stock"), such number being equal to 10% of the
number of units, each unit consisting of one share of Common Stock and a warrant
to purchase one share of Common Stock (the "Units"), sold by the Company to
investors in the Private Placement (as defined below) through the Agent's
efforts;
WHEREAS, the Agent has advised the Company that it intends to immediately
transfer the Warrants to those Holders and in such amounts as indicated on
Schedule I hereto;
WHEREAS, the Agent agreed pursuant to the Engagement Letter dated as of
August 18, 1998, between the Agent and the Company (the "Engagement Letter") to
act as a placement agent in connection with the Company's private placement of
the Units (the "Private Placement"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued by the Company to the Agent and the Holders in consideration for, and as
part of the Agent's compensation in connection with, the Agent's acting as a
placement agent pursuant to the Engagement Letter.
NOW, THEREFORE, in consideration of these premises, the agreements herein
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Agent, the Holders or their registered assigns (the
-----
"Registered Holders") are hereby granted the right to purchase, at any time or
from time to time on or before the earlier of December 15, 2003, at no later
than 5:00 p.m. (Eastern Standard Time) and the termination of this Agreement as
provided in Section 12 below, an aggregate of up to 170,600 shares of Common
Stock, at an initial exercise price (subject to adjustment as provided in
Section 4 hereof) of $1.475 per share of Common Stock, subject to the terms and
conditions of this Agreement. The number of shares purchasable upon exercise of
the Warrants, and the purchase price per share, each as adjusted from time to
time pursuant to the provisions of this Agreement, are hereinafter referred to
as the "Warrant Stock" and the "Purchase Price," respectively.
2. Warrant Certificates. The warrant certificates (the "Warrant
--------------------
Certificates") delivered pursuant to this Agreement are attached hereto and are
made a part hereof.
<PAGE>
3. Exercise.
--------
(a) The Warrants may be exercised by a Registered Holder, in whole or
in part, by surrendering a Warrant Certificate, with the form of election to
purchase appended hereto as Exhibit I duly completed and executed by
---------
such Registered Holder, at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment in full of
the Purchase Price payable in respect of the number of shares of Warrant Stock
purchased upon such exercise in lawful money of the United States of America.
Any exercise of the Warrants may be made subject to the satisfaction of one or
more conditions (including, without limitation, the consummation of a sale of
the capital stock of the Company or a merger or other business combination
involving the Company) which are set forth in a writing which is made a part of
or is appended to the aforementioned form of election to purchase notice by the
Registered Holder.
(b) Each exercise of the Warrants shall be deemed to have been
effected immediately prior to the close of business on the day on which a
Warrant Certificate shall have been surrendered to the Company as provided in
subsection 3(a) above. At such time, the person or persons in whose name or
names any certificates for Warrant Stock shall be issuable upon such exercise as
provided in subsection 3(c) below shall be deemed to have become the holder or
holders of record of the Warrant Stock represented by such certificates.
(c) As soon as practicable after the exercise of the Warrants in full
or in part, and in any event within 10 days thereafter, the Company at its
expense will cause to be issued in the name of, and delivered to, the Registered
Holder, or, subject to the terms and conditions hereof, as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full shares
of Warrant Stock to which such Registered Holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which such
Registered Holder would otherwise be entitled, cash in an amount determined
pursuant to Section 5 hereof; and
(ii) in case such exercise is in part only, a new warrant
certificate or warrant certificates (dated the date hereof) of like tenor,
calling in the aggregate on the face or faces thereof for the number of
shares of Warrant Stock equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face of the Warrant
minus the number of such shares purchased by the Registered Holder upon
such exercise as provided in subsection 3(a) above.
4. Adjustments.
-----------
(a) If outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common Stock shall
be paid in respect of Common Stock, the Purchase Price in effect immediately
prior to such subdivision or
-2-
<PAGE>
at the record date of such dividend shall simultaneously with the effectiveness
of such subdivision or immediately after the record date of such dividend be
proportionately reduced. If outstanding shares of Common Stock shall be combined
into a smaller number of shares, the Purchase Price in effect immediately prior
to such combination shall, simultaneously with the effectiveness of such
combination, be proportionately increased. When any adjustment is required to be
made in the Purchase Price, the number of shares of Warrant Stock purchasable
upon the exercise of the Warrants shall be changed to the number determined by
dividing (i) an amount equal to the number of shares issuable upon the exercise
of the Warrants immediately prior to such adjustment, multiplied by the Purchase
Price in effect immediately prior to such adjustment, by (ii) the Purchase Price
in effect immediately after such adjustment.
(b) If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in par value
or a subdivision or combination as provided for in subsection 4(a) above), then,
as part of any such reorganization or reclassification, lawful provision shall
be made so that a Registered Holder of the Warrants shall have the right
thereafter to receive upon the exercise thereof the kind and amount of shares of
stock or other securities or property which such Registered Holder would have
been entitled to receive if, immediately prior to any such reorganization or
reclassification, such Registered Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of the Warrants. In any such
case, appropriate adjustment (as reasonably determined by the Board of Directors
of the Company) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the Registered
Holder of the Warrants such that the provisions set forth in this Section 4
(including provisions with respect to adjustment of the Purchase Price) and in
Section 11 hereof shall thereafter be applicable, as nearly as is reasonably
practicable, in relation to any shares of stock or other securities or property
thereafter deliverable upon the exercise of the Warrants.
(c) When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a certificate setting
forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which the Warrants shall be exercisable following the occurrence of any of the
events specified in subsection 4(a) or (b) above.
5. Fractional Shares. The Company shall not be required upon the
-----------------
exercise of the Warrants to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the mean between the low bid and
high asked prices of the Common Stock on the American Stock Exchange on the
trading day immediately prior to the date of exercise.
6. Limitation on Sales, etc.
-------------------------
The Registered Holder is aware that the Warrants and the Common Stock
underlying the Warrants have not been registered under the Securities Act of
1933, as amended (the "1933 Act") or any state securities laws. The Registered
Holder understands that the reliance by the Company on exemptions under the 1933
Act is predicated in part upon the truth and accuracy of the statements of the
Registered Holder in this Agreement.
-3-
<PAGE>
Each Registered Holder represents and warrants that: (1) he has been
furnished with all information which he deems necessary to evaluate the merits
and risks of the Warrants and a purchase of the Common Stock upon exercise of
the Warrants; (2) if he is not an accredited investor, as that term is defined
in Section 501 of Regulation D promulgated under the 1933 Act, he has received
and reviewed the Offering Memorandum dated October 22, 1998, distributed to each
of the investors in the Private Placement, along with a copy of the Company's
Form 10-K for the fiscal year ended March 31, 1998 and Forms 10-Q for the fiscal
quarters ended June 30, 1998 and September 30, 1998; (3) he has had the
opportunity to ask questions concerning the Common Stock and the Company and all
questions posed have been answered to his satisfaction; (4) he has been given
the opportunity to obtain any additional information he deems necessary to
verify the accuracy of any information obtained concerning the Common Stock and
the Company; (5) he has such knowledge and experience in financial and business
matters that he is able to evaluate the merits and risks of the Warrants and of
purchasing the Common Stock and to make an informed investment decision relating
thereto; and (6) he will be holding the Warrants and the Common Stock underlying
the Warrants for his own account for investment and it will not resell the
Warrants or the Common Stock in violation of the 1933 Act. The Registered Holder
understands that because the Warrants and the Common Stock will not have been
registered under the 1933 Act, he will be required to bear the economic risk of
the investment for an indefinite time and that the Warrants and the Common Stock
cannot be resold unless the transfer is registered under applicable federal and
state securities laws or an exemption from such registration is available.
The Registered Holder agrees that it will in no event sell or distribute or
otherwise dispose of all or any part of the Warrants or the Common Stock
underlying the Warrants unless (1) there is an effective registration statement
under the 1933 Act and applicable state securities laws covering any such
transaction involving the Warrants or the Common Stock or (2) the Company
receives an opinion of its legal counsel (concurred in by legal counsel for the
Company) stating that such transaction is exempt from registration or the
Company otherwise satisfies itself that such transaction is exempt from
registration.
The Registered Holder covenants and agrees that he shall be bound by the
provisions of the following legend or a legend in substantially similar form
which shall be endorsed upon the certificate(s) evidencing the Warrant Stock
issued pursuant to exercise of the Warrants:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON
UNLESS (1) EITHER (A) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, OR (B)
THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO
IT THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS THEN
AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL
APPLICABLE STATE SECURITIES LAWS.
-4-
<PAGE>
7. "Piggy Back" Registration.
--------------------------
(a) If the Company shall determine to register the sale of its Common
Stock either for its own account or the account of a security holder or holders
exercising their respective registration rights (other than a registration
relating solely to employee benefit plans or a Rule 145 (under the Securities
Act of 1933 (the "Act")) transaction or a registration on any registration form
that does not permit secondary sales), the Company agrees that it will: (1)
promptly give to the Registered Holders written notice thereof; and (2) use its
best efforts to include in such registration (and any related qualification
under blue sky laws or other compliance), except as set forth in Section 7(b)
below, and in any underwriting involved therein, all or any part of the Warrant
Stock which has been purchased on exercise of the Warrant (the "Registrable
Securities") specified in writing by a Registered Holder and received by the
Company within 15 days after the written notice from the Company described in
clause (1) above is mailed or delivered by the Company; provided, however, that
this Section 7 shall not apply to any Registrable Securities if such Registrable
Securities may then be sold under Rule 144 of the Act, assuming the Registered
Holder's compliance with the provisions of the Rule. The Company shall have the
right to postpone or withdraw any registration effected without obligation to a
Registered Holder.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the right to registration
hereunder shall be conditioned upon the Registered Holder's participation in
such underwriting, the inclusion of such Registered Holder's Registrable
Securities in the underwriting to the extent provided herein and the Registered
Holder entering into an underwriting agreement in customary form with the
representative of the underwriter selected by the Company.
If the representative of the underwriters advises the Company that a
limitation on the number of shares to be underwritten is advisable to facilitate
the success of the offering, the representative may (subject to the limitations
set forth below) exclude the Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and
the number of Registrable Securities that are entitled to be included in the
registration and underwriting shall be allocated first to the Company for
securities being sold for its own account and thereafter as set forth in Section
7(c). If any person does not agree to the terms of any such underwriting, he
shall be excluded therefrom by written notice from the Company or the
underwriter.
(c) In any circumstance in which all of the Registrable Securities
and other shares of Common Stock with registration rights (including any
security convertible into Common Stock) ("Other Shares") requested to be
included in a registration cannot be so included, the number of shares of
Registrable Securities and Other Shares that may be so included shall be
allocated among the Registered Holder and other selling stockholders requesting
inclusion of
-5-
<PAGE>
shares such that the selling holders of the Registrable Securities and Other
Shares shall have their shares included pro rata on the basis of the number of
shares of Registrable Securities and Other Shares that would be held by such
Registered Holders and other selling stockholders, assuming conversion, that
such Registered Holders and other selling stockholders had requested to be
included in the registration.
8. Liquidating Dividends. If the Company pays a dividend or makes a
---------------------
distribution on the Common Stock payable otherwise than in cash out of earnings
or earned surplus (determined in accordance with generally accepted accounting
principles) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Company will pay or distribute to the
Registered Holders of the Warrants, upon the exercise hereof, in addition to the
Warrant Stock purchased upon such exercise, the Liquidating Dividend which would
have been paid to such Registered Holder if it had been the owner of record of
such shares of Warrant Stock immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends or
distribution are to be determined.
9. Notices of Record Date, etc. In case:
---------------------------
(a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the
exercise of the Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or
any transfer of all or substantially all of the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then, and in each such case, the Company will
mail or cause to be mailed to the Registered Holders of the Warrants a
notice specifying, as the case may be, (i) the date on which a record is to
be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right,
or (ii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is
to take place, and the time, if any is to be fixed, as of which the holders
of record of Common Stock (or such other stock or securities at the time
deliverable upon the exercise of the Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation
or winding-up. Such notice shall be mailed at least 10 days prior to the
record date or effective date for the event specified in such notice.
-6-
<PAGE>
10. Reservation of Stock. The Company will at all times reserve and keep
--------------------
available, solely for issuance and delivery upon the exercise of the Warrant,
such shares of Warrant Stock and other stock, securities and property, as from
time to time shall be issuable upon the exercise of the Warrant.
11. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant Certificate and (in the case of loss, theft or destruction) upon
delivery of an indemnity agreement (with surety if reasonably required) in an
amount reasonably satisfactory to the Company, or (in the case of mutilation)
upon surrender and cancellation of the Warrant Certificate, the Company will
issue, in lieu thereof, a new Warrant Certificate of like tenor.
12. Termination In Certain Events. In the event of a sale of
-----------------------------
substantially all the assets of the Company or a merger or consolidation of the
Company with or into any other entity (other than a merger the sole purpose of
which is to change the state of incorporation of the Company) or a dissolution
or the adoption of a plan of liquidation of the Company, the Warrant shall
terminate on the effective date of such sale, merger, consolidation, dissolution
or adoption (the "Effective Date") and become null and void; provided, however,
that if the Warrant shall not have otherwise terminated or expired, the
Registered Holder hereof shall have the right until 5:00 p.m, Eastern Standard
Time, on the day immediately prior to the Effective Date to exercise its rights
hereunder to the extent not previously exercised.
13. Transfers, etc.
--------------
(a) The Company will maintain a register containing the names and
addresses of the Registered Holders of the Warrant. Any Registered Holder
may change its, his or her address as shown on the warrant register by
written notice to the Company requesting such change.
(b) Until any transfer of the Warrant is made in the warrant
register, the Company may treat the Registered Holder of the Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when
the Warrant is properly assigned in blank, the Company may (but shall not
be obligated to) treat the bearer hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
14. Mailing of Notices, etc. All notices and other communications
-----------------------
from the Company to the Registered Holder of the Warrant shall be mailed by
first-class certified or registered mail, postage prepaid, to the address
furnished to the Company in writing by the last Registered Holder of the Warrant
who shall have furnished an address to the Company in writing. All notices and
other communications from the Registered Holder of the Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its offices at 78E Olympia Avenue,
Woburn, Massachusetts 01801, Attn: John E. Mattern, Chief Financial Officer, or
such other address as the Company shall so notify the Registered Holder.
-7-
<PAGE>
15. No Rights as Stockholder. Until the exercise of the Warrant, a
------------------------
Registered Holder of the Warrant shall not have or exercise any rights by virtue
hereof as a stockholder of the Company.
16. Change or Waiver. Any term of this Agreement may be changed or waived
----------------
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
17. Headings. The headings in this Agreement are for purposes of
--------
reference only and shall not limit or otherwise affect the meaning of any
provision of this Agreement.
18. Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed, as of the day and year first above written.
CARDIOTECH INTERNATIONAL, INC.
By
------------------------------
Its
FECHTOR DETWILER & Co., INC.
By
------------------------------
Its
------------------------------------
Richard Fechtor
------------------------------------
Sheldon Fechtor
------------------------------------
Robert Detwiler
------------------------------------
Peter Fenton
------------------------------------
Jeffrey R. Power
------------------------------------
Randy Fill
------------------------------------
David McShane
------------------------------------
Michael Wood
------------------------------------
Jacob Golbitz
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<PAGE>
SCHEDULE I
----------
WARRANT HOLDERS
---------------
NAME NUMBER OF WARRANTS
---- ------------------
Richard Fechtor 22,800
Sheldon Fechtor 22,800
Robert Detwiler 40,000
Peter Fenton 55,000
Jeffrey R. Power 4,000
Randy Fill 5,000
David McShane 8,000
Michael Wood 8,000
Jacob Golbitz 5,000
Total 170,600
----- -------
-10-
<PAGE>
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON UNLESS (1) EITHER (A) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, OR (B) THE COMPANY SHALL HAVE RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
THEN AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE
STATE SECURITIES LAWS.
For the Purchase of
shares of
Common Stock
No. W-
WARRANT CERTIFICATE FOR THE PURCHASE OF
SHARES OF COMMON STOCK
OF
CARDIOTECH INTERNATIONAL, INC.
(A Massachusetts Corporation)
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME, ON DECEMBER 15, 2003.
CardioTech International, Inc., a Massachusetts Corporation (the "Company"),
hereby certifies that ____________, or his registered assigns (the "Registered
Holder"), is entitled, subject to the terms set forth below and in the Warrant
Agreement dated as of December 15, 1998 among the Company, Fechtor, Detwiler &
Co., Inc. and the undersigned (the "Warrant Agreement"), to purchase from the
Company, at any time or from time to time on or before the earlier of December
15, 2003, at not later than 5:00 p.m. (Eastern Standard Time), and the
termination of this Warrant as provided in Section 12 of the Warrant Agreement,
_____ shares of Common Stock, $.01 par value, of the Company ("Common Stock"),
at a purchase price of $1.475 per share. The purchase price per share, as
adjusted from time to time pursuant to the provisions of the Warrant Agreement,
is hereinafter referred to as the "Purchase Price."
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holder or registered holders) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events the
Purchase Price and the type and/or number of the Company's securities issuable
upon exercise of the
-11-
<PAGE>
Warrants may, subject to certain conditions, be adjusted. In such event, the
Company will, at the request of the holder and upon surrender of the holder's
Warrant Certificate, issue a new Warrant Certificate evidencing the adjustment
in the purchase price and the number and/or type of securities issuable upon the
exercise of the Warrants; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall issue to the holder hereof a new Warrant
Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the absolute
owner(s) of this Warrant Certificate (notwithstanding any notation of ownership
or other writing hereon made by anyone), for the purpose of an exercise hereof,
and of any distribution to the holder(s) hereof, and for all other purposes, and
the Company shall not be affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed under its corporate seal.
Dated as of February ___, 1999.
CARDIOTECH INTERNATIONAL, INC.
By
--------------------------
Its
-12-
<PAGE>
EXHIBIT I
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
To: CardioTech International, Inc.
78 East Olympia Avenue
Woburn, MA 01801 Dated:
---------
The undersigned, pursuant to the provisions set forth in the Warrant
Agreement dated as of December 15, 1998 among CardioTech International, Inc., a
Massachusetts corporation, Fechtor, Detwiler & Co., Inc. and the Holders listed
on Schedule I thereto, hereby irrevocably elects to purchase ____ shares of the
Common Stock (the "Common Stock") covered by the attached Warrant Certificate
(Certificate No. __) and herewith makes payment of $______, representing the
full purchase price for such shares at the price per share provided for in such
Agreement.
The undersigned is aware that the issuance of the Common Stock has not been
registered under the Securities Act of 1933, as amended (the "1933 Act") or any
state securities laws. The undersigned understands that the reliance by the
Company on exemptions under the 1933 Act is predicated in part upon the truth
and accuracy of the statements of the undersigned in this Purchase Form.
The undersigned represents and warrants that: (1) it has been furnished
with all information which it deems necessary to evaluate the merits and risks
of the purchase of the Common Stock; (2) it has had the opportunity to ask
questions concerning the Common Stock and the Company and all questions posed
have been answered to its satisfaction; (3) it has been given the opportunity to
obtain any additional information it deems necessary to verify the accuracy of
any information obtained concerning the Common Stock and the Company; (4) it has
such knowledge and experience in financial and business matters that it is able
to evaluate the merits and risks of purchasing the Common Stock and to make an
informed investment decision relating thereto; and (5) it is purchasing the
Common Stock for its own account for investment and it will not resell the
Common Stock in violation of the 1933 Act. The undersigned understands that
because the Common Stock has not been registered under the 1933 Act, it must
continue to bear the economic risk of the investment for an indefinite time and
the Common Stock cannot be resold unless the Common Stock is registered under
applicable federal and state securities laws or an exemption from such
registration is available.
The undersigned agrees that it will in no event sell or distribute or
otherwise dispose of all or any part of the Common Stock unless (1) there is an
effective registration statement under the 1933 Act and applicable state
securities laws covering any such transaction involving the Common Stock or (2)
the Company receives an opinion of its legal counsel (concurred in by legal
counsel for the Company) stating that such transaction is exempt from
registration or the Company otherwise satisfies itself that such transaction is
exempt from registration.
II-1
<PAGE>
The undersigned consents to the placing of a legend on its certificate for
the Common Stock stating that the Common Stock has not been registered and
setting forth the restriction on transfer contemplated hereby and to the placing
of a stop transfer order on the books of the Company and with any transfer
agents against the Common Stock until the Common Stock may be legally resold or
distributed without restriction.
The undersigned has considered the Federal and state income tax
implications of the exercise of the Warrant and the purchase and subsequent sale
of the Common Stock.
-----------------------------
Name:
Dated:
-----------------------
-2-
