<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CARDIMA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 3845 94-3177883
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
47266 BENICIA STREET
FREMONT, CA 94538
(510) 354-0300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
PHILLIP C. RADLICK, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CARDIMA, INC.
47266 BENICIA STREET
FREMONT, CA 94538
(510) 354-0300
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
JOSHUA L. GREEN ROBERT V. GUNDERSON, JR.
ROBERT V. W. ZIPP BENNETT L. YEE
ARNOLD E. BROWN II BRETT A. PLETCHER
VENTURE LAW GROUP GUNDERSON DETTMER STOUGH
A PROFESSIONAL CORPORATION VILLENEUVE FRANKLIN & HACHIGIAN, LLP
2800 SAND HILL ROAD 155 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025 MENLO PARK, CALIFORNIA 94025
(415) 854-4488 (415) 321-2400
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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, check the following box. [_]
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 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 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
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<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $0.001 par value per share... $28,750,000 $8,712
</TABLE>
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a).
----------------
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 13, 1997
PROSPECTUS
SHARES
[LOGO OF CARDIMA]
COMMON STOCK
-----------
All of the shares of Common Stock, $.001 par value per share (the "Common
Stock"), offered hereby are being sold by Cardima, Inc. ("Cardima" or the
"Company"). Prior to this offering (the "Offering"), there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $ and $ . See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Company has applied for listing of its Common Stock
on the Nasdaq National Market under the symbol "CRDM."
-----------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
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Total(3)................................... $ $ $
</TABLE>
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(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $950,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to additional shares at the Price to Public, less Underwriting
Discounts and Commissions, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
-----------
The shares of Common Stock are being offered severally by the Underwriters,
subject to prior sale, when, as and if accepted by the Underwriters and subject
to their right to reject orders in whole or in part. It is expected that
delivery of the shares will be made at the offices of Bear, Stearns & Co. Inc.,
245 Park Avenue, New York, New York 10167, on or about , 1997.
-----------
BEAR, STEARNS & CO. INC. DAIN BOSWORTH
INCORPORATED
-----------
The date of this Prospectus is , 1997
<PAGE>
[CARDIMA LOGO]
CARDIMA MICROCATHETER SYSTEMS
The Company's proprietary microcatheter systems are designed to map
(diagnose) and ablate (treat) atrial fibrillation (AF) and ventricular
tachycardia (VT) in a minimally invasive procedure using a single catheter.
[Graphic A] CARDIMA'S MICROCATHETER SYSTEMS FOR
[DEPICTION OF CROSS AF
SECTION OF HUMAN
HEART WITH CARDIMA Cardima's microcatheter systems for
MICROCATHETER AF are designed to be placed
SYSTEMS FOR AF] securely against the atrial wall in
order to deliver radiofrequency (RF)
energy to the atrial tissue to
create long, thin, continuous,
linear, transmural lesions that
restore the heart's normal
electrical function.
[Graphic B] CARDIMA'S MICROCATHETER SYSTEMS FOR
[DEPICTION OF VT
CARDIAC VEINS WITH
CARDIMA Cardima's microcatheter systems for
MICROCATHETER VT are designed to safely locate and
SYSTEMS FOR VT] ablate the VT causing tissue with RF
energy from within the cardiac
veins.
Cardima's microcatheter system for
venous mapping of VT has received
510(k) clearance from the FDA for
sale in the United States and
includes the Cardima Pathfinder
microcatheter and Venaport guiding
catheter. Cardima's other
microcatheter systems are under
development and have not been
approved by the FDA for sale in the
United States. Approval by the FDA
could take several years, and there
can be no assurance that such
approval will ever be obtained or,
if obtained, that the Company's
microcatheter systems will achieve
market acceptance. See "Risk
Factors--No Assurance of Obtaining
Required Regulatory Approvals;
Government Regulation."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING OVER-ALLOTMENT AND OTHER STABILIZING TRANSACTIONS. SEE
"UNDERWRITING."
Cardima(R) and the Company's logo are registered trademarks of the Company.
This Prospectus also contains the trademarks of other companies.
2
<PAGE>
CARDIMA MICROCATHETER SYSTEMS FOR AF
AF, the most common irregular electrical problem in the heart, is
characterized by chaotic electrical activity throughout both upper chambers of
the heart (right and left atria) that results in disorganized and quivering
spasms of atrial tissue that can lead to blood clots, stroke and even death.
[PICTURE OF CARDIMA PATHFINDER AF MICROCATHETER HELD IN HUMAN HAND]
CARDIMA PATHFINDER AF MICROCATHETER
[PICTURE OF ATRIAL ABLATION] [PICTURE OF ATRIAL ABLATION]
RIGHT ATRIAL ABLATION LEFT ATRIAL ABLATION
CARDIMA PATHFINDER AF MICROCATHETER DESIGN BENEFITS:
. Single catheter for mapping and ablation
. Thin profile for right and left atrial access
. Variable stiffness design for high flexibility and maximum
surface conformity
. Multiple, flexible electrodes for optimal effect
. Compatible with existing signal display systems for low cost
of use
<PAGE>
CARDIMA MICROCATHETER SYSTEMS FOR VT
VT is a potentially fatal, abnormally fast heartbeat originating from within
the walls of the lower chambers of the heart (right and left ventricles). It
is caused by electrical changes in the tissue of the ventricular wall,
typically resulting from coronary artery disease or prior heart attack.
[Graphic F]
CARDIMA PATHFINDER 1.5 FR. INTRAVASCULAR MICROCATHETER
PASSING THROUGH EYE OF NEEDLE (PICTURE MAGNIFIED)
[Picture of Cardima Pathfinder 1.5 Fr. Intravascular Microcatheter Passing
Through Eye of Needle (picture magnified)]
[Graphic G]
CARDIMA TRACER VT INTRAVASCULAR OVER-THE-WIRE MICROCATHETER
[Picture of Cardima Tracer VT Intravascular Over-The-Wire Microcatheter]
MAPPING AND ABLATING VT
Cardima VT microcatheters are [Graphic H]
designed to access the veins of the
ventricular wall and safely and
accurately locate and ablate the VT
causing tissue.
[Depiction of Mapping and Ablating Veins of Ventricular Wall]
CARDIMA VT MICROCATHETERS DESIGN BENEFITS:
. Single catheter for mapping and ablation
. Varying degrees of flexibility to enhance access to the
vasculature of the heart
. Multiple configurations of electrodes to facilitate accurate
mapping and focused ablation
. Intravascular, curative approach
. Compatible with existing signal display systems for low cost of
use
Cardima's microcatheter system for venous mapping of VT has received 510(k)
clearance from the FDA for sale in the United States and includes the Cardima
Pathfinder microcatheter and Venaport guiding catheter. Cardima's other
microcatheter systems are under development and have not been approved by the
FDA for sale in the United States. Approval by the FDA could take several
years, and there can be no assurance that such approval will ever be obtained
or, if obtained, that the Company's microcatheter systems will achieve market
acceptance. See "Risk Factors--No Assurance of Obtaining Required Regulatory
Approvals; Government Regulation."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the Financial Statements and Notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, all information contained in this
Prospectus (i) assumes that the Underwriters' over-allotment option is not
exercised and (ii) assumes the conversion of the Company's Preferred Stock into
Common Stock upon the closing of the Offering.
THE COMPANY
Cardima, Inc. designs, develops, manufactures and markets minimally invasive,
single-use, microcatheter-based systems for the mapping and ablation of the two
most common forms of cardiac arrhythmias: atrial fibrillation ("AF") and
ventricular tachycardia ("VT"). Arrhythmias are abnormal electrical heart
rhythms that adversely affect the mechanical activities of the heart and can
potentially be fatal. The Company is developing microcatheter systems designed
to provide enhanced access to arrhythmia causing tissue, to diagnose the
arrhythmia by locating its origin ("mapping") and to restore normal heart
rhythms by isolating and destroying the arrhythmia causing sites ("ablation")
using radiofrequency ("RF") energy. The Company's microcatheters incorporate
multiple electrodes in the catheter tip that are designed to receive electrical
signals for mapping and to emit RF energy for ablation, allowing physicians to
both map and ablate using a single catheter. Cardima's microcatheters are
designed with variable stiffness and a highly flexible distal tip to allow
enhanced access to the vasculature of the heart. In addition, they are designed
to be compatible with existing signal display systems and RF generators,
eliminating the need for significant new investment in capital equipment. The
Company's microcatheter technology was originally conceived at Advanced
Cardiovascular Systems, Inc. (now a division of Guidant Corporation), and
developed by Target Therapeutics, Inc. ("Target") for neurological
applications. Cardima has an exclusive, royalty-free license from Target to use
the microcatheter technology in the treatment of electrophysiological diseases
affecting areas other than the central nervous system.
AF is characterized by the irregular and very rapid beating of the heart's
atrial chambers and results when the normal electrical conduction malfunctions,
leading to irregular, disorganized and quivering spasms of atrial tissue. These
spasms may lead to reduced blood flow, blood clots, stroke and even death. AF
affects an estimated two million people in the United States alone, with
160,000 new cases being diagnosed each year. Drug therapy is the most common
treatment for AF, but is often associated with severe side effects and becomes
less effective over time, with approximately 50% of patients eventually
developing resistance to drug therapy. The Company believes that the only
curative therapy for AF in use today is an open heart operation, often referred
to as the "maze" procedure, which is used infrequently because of the high
risks and costs associated with open heart surgery. The Company is developing
the Cardima Pathfinder AF microcatheter system to provide a minimally invasive
ablation procedure that mimics the results of the maze procedure by isolating
and containing the arrhythmia causing tissue. The Company believes this
procedure will restore the normal electrical function of the heart by
controlling and reorganizing the random, chaotic electrical activity that
characterizes AF. Cardima's microcatheter systems have been designed to require
less RF energy and to create significantly thinner lesions than standard
electrophysiology ablation catheters, preserving a greater amount of atrial
tissue for improved atrial and heart function following the procedure. The
Company believes this approach has the potential to be as effective as the open
heart surgical cure for AF, but with significantly less trauma, fewer
complications, reduced pain, shorter hospital stays and lower procedure costs.
VT is a life-threatening condition in which heartbeats are improperly
initiated from within the ventricular wall, thus bypassing the heart's normal
conduction system. VT affects an estimated 450,000 people in the United States.
Similar to AF, current treatments for VT are primarily supportive and
palliative. Antiarrhythmic drugs are the most common treatment, although these
drugs have been shown to have a number of unwanted side effects, and in some
circumstances may actually induce VT. The implantable cardiac defibrillator is
a palliative
3
<PAGE>
treatment and is associated with a number of undesirable characteristics,
including the high cost of the implantation procedure. Existing catheter
technology is also being tested for the treatment of VT. The Company believes
that this endocardial approach (i.e., applied from within the heart's chamber)
is suboptimal because the muscle tissue of the ventricles is significantly
thicker than the muscle tissue in the atria, requiring the use of large amounts
of RF energy which increases the amount of ventricular tissue destroyed in the
procedure. The Company's intravascular approach (i.e., accessed from within the
veins of the heart wall) for the treatment of VT is designed to allow the
microcatheters to be positioned in close proximity to the arrhythmia causing
tissue, permitting accurate and precise mapping, and the creation of small,
focused lesions using RF energy. Once positioned, the Cardima Pathfinder AF and
Tracer VT microcatheter systems have the ability to map and ablate using the
same catheter, which the Company believes should result in a short, cost-
effective procedure.
The Company's microcatheter systems are being developed to offer the
following advantages: (i) a minimally invasive curative approach to AF and VT;
(ii) the ability to map and ablate arrhythmias using a single catheter; (iii)
smaller diameter catheters incorporating Target variable stiffness technology
and a highly flexible distal tip to allow enhanced access to the vasculature of
the heart; (iv) microcatheters designed with large numbers of electrodes to
gather more information; (v) compatibility with existing electrophysiology
signal display systems and RF ablation generators; and (vi) shorter procedure
times resulting in reduced exposure to fluoroscopy and more cost effective
treatment.
In January 1997, the Cardima Pathfinder microcatheter system received 510(k)
clearance from the United States Food and Drug Administration ("FDA") for use
in mapping VT, and it is currently being marketed for this application in the
United States, Europe, Japan, Australia and Canada. Also in January 1997, the
Company also filed an Investigational Device Exemption ("IDE") for clinical
testing of the Cardima Pathfinder AF microcatheter system for the mapping and
ablation of AF and subsequently received conditional approval from the FDA to
begin the mapping phase of the feasibility study. In March 1997, the Company
submitted a 510(k) premarket notification for the Cardima Pathfinder AF for
atrial mapping and expects to file an IDE for its Tracer VT microcatheter
system for the ablation of VT in late 1997.
THE OFFERING
Common Stock offered by shares
the Company........................
Common Stock to be outstanding
after the Offering (1)............. shares
Use of proceeds..................... To fund preclinical and clinical trials
of its microcatheter systems, research
and new product development, to continue
to expand its marketing and sales force,
to fund capital equipment investment to
increase manufacturing capabilities and
for working capital. See "Use of
Proceeds."
Proposed Nasdaq National CRDM
Market symbol......................
- --------
(1) Excludes, as of December 31, 1996, (i) 810,690 shares of Common Stock
issuable upon exercise of outstanding options with a weighted average price
of $1.25 per share, (ii) 513,745 shares of Common Stock issuable upon
exercise of outstanding warrants with a weighted average exercise price of
$1.62 per share, and (iii) 534,156 shares of Common Stock reserved for
future issuance under the Company's equity incentive plans. See
"Management--Stock Option and Incentive Plans" and "Description of Capital
Stock."
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 12,
1992
(INCEPTION) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------
1993(1) 1994 1995 1996
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<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales........................... $ -- $ 86 $ 362 $ 593
Cost of goods sold.................. -- 211 830 1,413
------- ------- ------- -------
Gross profit...................... -- (125) (468) (820)
Operating expenses:
Research and development.......... 1,083 2,205 2,581 3,319
Selling, general and
administrative................... 491 1,309 2,046 3,690
------- ------- ------- -------
Total operating expenses........ 1,574 3,514 4,627 7,009
------- ------- ------- -------
Operating loss...................... (1,574) (3,639) (5,095) (7,829)
Interest and other income (expense),
net................................ 33 (16) (105) 75
------- ------- ------- -------
Net loss............................ $(1,541) $(3,655) $(5,200) $(7,754)
======= ======= ======= =======
Pro forma net loss per share(2)..... $ (1.23)
=======
Shares used in computing pro forma
net loss per share(2).............. 6,325
=======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 907 $11,155 $
Working capital (deficit)................ (2,150) 9,780
Total assets............................. 3,964 14,212
Capital lease obligation, noncurrent
portion................................. 722 722
Total stockholders' equity (net capital
deficiency)............................. (10,368) 11,302
</TABLE>
- --------
(1) The Company's financial data for 1992 and 1993 is not presented separately
as the Company's operations from November 12, 1992 (inception) to December
31, 1992 were immaterial.
(2) See Note 1 of Notes to Financial Statements for information concerning
calculation of the pro forma net loss per share.
(3) Reflects (a) the completion of the sale of 2,356,741 shares of Series E
Preferred Stock in March 1997 for approximately $10.3 million in cash and
the conversion of approximately $3.3 million of outstanding short term
debt, $1.6 million of which was incurred after December 31, 1996 and (b)
the conversion of all outstanding shares of Preferred Stock, including the
Series E Preferred Stock, into Common Stock.
(4) Adjusted to reflect the sale of the shares of Common Stock offered
hereby at an assumed initial public offering price of $ per share and the
use of the estimated net proceeds therefrom. See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the risk factors set forth
below in evaluating an investment in the shares of Common Stock offered
hereby.
DEVELOPMENT STAGE COMPANY; HISTORY OF LOSSES AND EXPECTATION OF SUBSTANTIAL
FUTURE LOSSES
The Company is a development stage company and, since inception in November
1992, has engaged primarily in research and development of microcatheter
systems for the mapping and ablation of AF and VT. To date, sales of its
Cardima Pathfinder, Cardima Pathfinder AF and Tracer microcatheter systems
have been limited. The Company had net losses of approximately $5.2 million
and $7.8 million for 1995 and 1996, respectively, and an accumulated deficit
of approximately $18.2 million at December 31, 1996. The Company expects to
incur substantial net losses for the foreseeable future as a result of
research and product development, clinical trials, manufacturing, sales,
marketing and other expenses expected to be incurred as the Company further
develops, tests and distributes its microcatheter systems. The Company's
limited operating history makes accurate prediction of future operating
results difficult or impossible. There can be no assurance that the Company
will ever generate substantial net sales or achieve profitability. Failure by
the Company to generate substantial revenues or to reduce the research and
development, marketing, and manufacturing expenses below net sales would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
NO ASSURANCE OF SAFETY AND EFFECTIVENESS; EARLY STAGE OF PRODUCT DEVELOPMENT
The Company is currently developing versions of its Cardima Pathfinder and
Tracer microcatheter systems for mapping AF and VT. To date, the Company has
completed only one clinical trial and has received 510(k) premarket clearance
only with respect to its Cardima Pathfinder microcatheter system for venous
mapping of VT, including the Cardima Pathfinder microcatheter and Venaport
guiding catheter. While the Cardima Pathfinder AF microcatheter system for
mapping AF is currently being sold in certain foreign markets, the Company has
not received 510(k) clearance for sale of this product in the United States.
There can be no assurance that 510(k) clearance for the Cardima Pathfinder AF
mapping system will be obtained in a timely manner, or at all. Failure to
obtain such clearance on a timely basis would have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company is in the early stage of developing, testing and obtaining
regulatory approval for its microcatheter systems designed for ablation of AF
and VT. The Company is currently developing the Cardima Pathfinder AF
microcatheter system for ablation of AF and the Tracer VT microcatheter system
for ablation of VT. The Company is required to obtain an Investigational
Device Exemption ("IDE") from the FDA prior to conducting human clinical
trials of its microcatheter systems for ablation. The Company recently filed
an IDE for the Cardima Pathfinder AF microcatheter system for mapping and
ablation, which was conditionally approved by the FDA for Phase I, which will
consist of a feasibility study for AF mapping. The FDA has not approved any
studies for ablation, and the Company will be required to submit the results
of the Phase I mapping study prior to conducting clinical studies for
ablation. There is no assurance that the Company will successfully complete
its Phase I study, that the results will permit the Company to file an IDE for
the ablation of AF or that the FDA will approve any filed IDE for the ablation
of AF. Except for the IDE the Company filed for the Cardima Pathfinder AF
microcatheter system for mapping and ablation, the Company has not filed IDEs
or begun clinical trials for its microcatheter systems under development for
ablation. The Company must complete these clinical trials prior to the filing
of a Premarket Approval Application ("PMA"), and must receive PMA approval
prior to marketing such products for ablation in the United States. Clinical
trials of the Company's microcatheter systems will require substantial
financial and management resources of the Company and the completion of such
trials will take several years. There can be no assurance that necessary IDEs
will be granted by the FDA, that human clinical trials, if initiated, will be
completed or that these clinical studies will validate the results of the
6
<PAGE>
Company's preclinical animal studies or demonstrate that such products are
safe and effective. In addition, the clinical trials may identify significant
technical or other obstacles to be overcome prior to obtaining necessary
regulatory approvals or market acceptance. The failure of the Company to
initiate and complete clinical trials, demonstrate product safety and clinical
effectiveness, or obtain regulatory approval for the Cardima Pathfinder AF for
AF ablation or the Tracer VT for VT ablation would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "--No Assurance of Obtaining Required Regulatory Approvals;
Government Regulation" and "Business--Government Regulation."
UNCERTAINTY OF PRODUCT AND PROCEDURE ACCEPTANCE
The Company's microcatheter systems represent a novel approach to the
mapping and ablation of AF and VT. Acceptance of the Company's products and
procedures by physicians, patients and health care payors will be necessary in
order for the Company to be successful. The Company's microcatheter systems
for the mapping and ablation of AF and VT are new technologies that must
compete with more established treatments such as drugs, external electrical
cardioversion and defibrillation, implantable defibrillation, purposeful
destruction of the Atrio-Ventricular ("AV") node followed by implantation of a
pacemaker, and open heart surgery. It is likely that physicians will not
recommend the use of the Company's microcatheter systems unless they conclude,
based on clinical data and other factors, that these systems provide a safe,
effective and cost-efficient alternative to established or emerging approaches
to the mapping and ablation of AF and VT. Except for the Cardima Pathfinder
microcatheter system for mapping VT, none of the products currently being
developed by Cardima for the mapping and ablation of AF and VT has obtained
regulatory clearance or approval in the United States. Even if the Company's
products are successfully developed and the required regulatory clearance or
approval is obtained, there can be no assurance that such products and the
associated procedures will ultimately gain any significant degree of market
acceptance. Since the Company's sole product focus is to design and market
microcatheter systems to map and ablate AF and VT, the failure to successfully
commercialize these systems would materially and adversely affect the
Company's business, financial condition and results of operations.
Cardima is developing its Cardima Pathfinder AF microcatheter system for
mapping and ablation of AF. Currently, there is considerable clinical debate
about the need for mapping AF prior to ablation, and no mapping is performed
during the open heart surgical maze procedure. However, the Company believes
that mapping prior to ablation may be useful to identify different segments of
the AF population, each of which could require slightly different mapping and
ablation procedures. For example, some electrophysiologists believe most AF
patients will need to be mapped and ablated in both the left and right atria,
while others believe only the right atrial intervention is warranted. Market
acceptance of this product for mapping will depend largely on a determination
that there is a clinical need for diagnostic mapping prior to ablation of AF.
The Cardima Pathfinder AF ablation procedure requires the use of RF energy in
the right and left atria to produce lesions. In general, the use of RF energy
in the left atrium has the potential to create blood clots, which could travel
through the vasculature to the brain and cause a stroke. Consequently,
physicians may not recommend this procedure, in which event the Cardima
Pathfinder AF would be unlikely to gain market acceptance. The failure of the
Company to complete development of the Cardima Pathfinder AF or to gain
regulatory approval, demonstrate safety, clinical effectiveness or cost
effectiveness, gain wide market acceptance or successfully commercialize the
Cardima Pathfinder AF for the mapping and ablation of AF would have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Cardima Pathfinder and Tracer microcatheter systems for VT mapping are
designed for use inside the vasculature of the heart wall and to provide
access to the vasculature of the heart through the venous system.
Microcatheters are not currently used inside the vasculature of the heart wall
for diagnostic purposes. To achieve market acceptance, the Company will need
to demonstrate the safety, clinical effectiveness and cost effectiveness of
the Cardima Pathfinder and Tracer microcatheter systems for VT mapping, of
which there can be no assurance. In addition, electrophysiologists will need
to be specially trained to perform this procedure, which may further impede
market acceptance. There can be no assurance that the Cardima Pathfinder or
Tracer microcatheter systems for VT mapping will ever achieve market
acceptance, or in the case of the Tracer microcatheter system, be cleared for
marketing by U.S. regulatory authorities, or be successfully commercialized in
the United States
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or internationally. The inability of the Company to gain wide market
acceptance or successfully commercialize the Cardima Pathfinder and Tracer
microcatheter systems for VT mapping would have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company's Tracer VT microcatheter system is being developed for ablation
of VT using RF energy, which could cause damage to the arteries and veins of
the heart, potentially leading to myocardial infarction and even death.
Consequently, physicians may not recommend this procedure, in which event the
Tracer VT would be unlikely to gain market acceptance. Failure of the Company
to gain market acceptance or successfully commercialize the Tracer VT would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "--Early Stage of Product Development; No
Assurance of Safety and Effectiveness," "--No Assurance of Obtaining Required
Regulatory Approvals; Government Regulation," "--Rapid Technological Change;
Significant Competition" and "--Limited Sales, Marketing and Distribution
Experience."
FLUCTUATIONS IN OPERATING RESULTS
The Company's results of operations may fluctuate significantly from quarter
to quarter or year to year depending upon a number of factors, including
actions relating to regulatory matters, progress of preclinical and clinical
trials, the extent to which the Company's products gain market acceptance, the
scale-up of manufacturing capabilities, the expansion of sales and marketing
activities, competition, the timing of new product introductions by the
Company or its competitors and the ability of the Company to market its
products successfully in the United States and internationally. Although the
Cardima Pathfinder and Tracer microcatheter systems are labeled for single use
only, the Company is aware that some physicians in international markets are
reusing these products. Reuse of the Company's microcatheter systems would
reduce revenues from product sales and could have a material adverse effect on
future performance and periodic operating results. Due to such fluctuations in
operating results, period to period comparisons of the Company's revenues and
operating results are not necessarily meaningful and should not be relied upon
as indicators of likely future performance or annual operating results.
NO ASSURANCE OF OBTAINING REQUIRED REGULATORY APPROVALS; GOVERNMENT REGULATION
The preclinical and clinical testing, manufacturing, labeling, distribution
and promotion of the Company's products are subject to extensive and rigorous
government regulation in the United States and other countries. Noncompliance
with applicable requirements can result in enforcement actions by the FDA
including, among other things, fines, injunctions, civil penalties, recall or
seizure of products, refusal of the FDA to grant premarket clearances or
approvals, withdrawal of marketing approvals and criminal prosecution. Any
such action would have a material adverse affect on the Company's business,
financial condition and results of operations.
The Company is prohibited from marketing its products in the United States
unless it obtains 510(k) clearance or PMA approval from the FDA. The Company
believes that it usually takes from four to 12 months from submission to
obtain 510(k) clearance, but that it can take longer. The Cardima Pathfinder
microcatheter system for mapping VT has received 510(k) clearance. The Company
believes that its current mapping products will also be eligible for 510(k)
clearance, and has submitted a 510(k) premarket notification for the Cardima
Pathfinder AF and intends to seek 510(k) clearance for the Cardima Pathfinder
1.5 Fr. and Tracer products. These submissions may need to include clinical
trial data. There can be no assurance, however, that any of these products
will receive 510(k) clearance in a timely fashion, if at all. Delays in market
introduction resulting from the 510(k) clearance process could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company will be required to seek PMA approval for its ablation products,
including the Cardima Pathfinder AF and the Tracer VT microcatheters for
ablation. The process of obtaining PMA approval is much more costly, lengthy
and uncertain than the 510(k) clearance process. The Company believes that the
FDA's review of a PMA application after filing can last from one to three
years, or even longer. In order to prepare a PMA application, the Company will
be required to complete clinical trials to demonstrate the safety and
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effectiveness of these products. In January 1997, the Company submitted an IDE
for the Cardima Pathfinder AF microcatheter system for mapping and ablation of
AF and received conditional approval from the FDA to begin its Phase I
feasibility study for mapping AF. The FDA has not approved any clinical
studies for ablation, and the Company will be required to submit the results
of the Phase I mapping study prior to conducting clinical studies for
ablation. The Company expects to begin Phase I clinical trials for the Cardima
Pathfinder AF microcatheter system in the first half of 1997 and to file an
additional IDE and begin its clinical trials for the Tracer VT microcatheter
system in the second half of 1997. There can be no assurance that any clinical
study that the Company proposes will be permitted by the FDA, will be
completed or, if completed, will provide data and information that supports
additional clinical investigations of the type necessary to obtain PMA
approval. The Company expects that a PMA application will not be submitted for
at least two years, if at all. No assurance can be given that the Company will
ever be able to obtain PMA approval for any of its ablation products. Failure
of the Company to obtain timely PMA approval would have a material adverse
effect on the Company's business, financial condition and results of
operations.
The Company is subject to periodic inspection by the FDA and the California
Department of Health Services, and must comply with various other regulatory
requirements that apply to medical devices marketed in the United States,
including labeling regulations, the Quality System Regulation ("QSR"), the
Medical Device Reporting regulation (which requires that a manufacturer report
to the FDA certain types of adverse events involving its products), and the
FDA's prohibitions against promoting approved products for unapproved ("off-
label") uses. The Company's failure to comply with applicable regulatory
requirements could result in enforcement action by the FDA, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Sales of medical devices outside the United States are subject to
international regulatory requirements that vary from country to country. The
time required for approval varies from country to country and may be longer or
shorter than the time required in the United States. The Company has obtained
the requisite approvals by means of the CE mark to sell the Cardima
Pathfinder, Cardima Pathfinder 1.5 Fr., Cardima Pathfinder AF, Tracer and
Venaport for mapping in the European Union ("EU") and Australia, to sell the
Cardima Pathfinder, Cardima Pathfinder 1.5 Fr., Cardima Pathfinder AF and
Tracer in Japan and to sell the Cardima Pathfinder, Tracer and Venaport in
Canada. The Company plans to commence clinical trials in the EU, Canada and
Japan for its ablation products, including certification to enable CE marking.
There can be no assurance the Company will be successful in obtaining such
approvals. Failure to receive approval to affix the CE mark would prohibit the
Company from selling these products in member countries of the EU, and would
require significant delays in obtaining individual country approvals. No
assurance can be given that such approvals will ever be obtained. In such
event, the Company's business, financial condition and results of operations
would be materially and adversely affected. See "Business--Government
Regulation."
RAPID TECHNOLOGICAL CHANGE; SIGNIFICANT COMPETITION
The medical device industry is characterized by rapid and significant
technological change. Accordingly, the Company's success will depend in part
on its ability to respond quickly to medical and technological changes,
including changes in the capital equipment with which the Company's
microcatheter systems are designed to be compatible. Product development
involves a high degree of risk, and there can be no assurance that the
Company's new product development efforts will result in any commercially
successful products. Failure by the Company to respond to and develop new
technologies could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Research and New
Product Development."
The Company's microcatheter systems for the mapping and ablation of AF and
VT are new technologies that must compete with more established treatments
such as drugs, external electrical cardioversion and defibrillation,
implantable defibrillation, purposeful destruction of the AV node followed by
implantation of a pacemaker, and open heart surgery. In the market for cardiac
mapping and ablation devices, the Company believes that the primary
competitive factors are safety, effectiveness, ease of use and overall system
cost. In
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addition, the length of time required for products to be developed and to
receive regulatory and, in some cases, reimbursement approval are important
competitive factors. Several of the Company's competitors are currently
marketing and selling catheters in the United States and internationally that
map and ablate a type of arrhythmia known as supraventricular tachycardia
("SVT"). In addition, several competitors are also developing new approaches
and new products for the mapping and/or ablation of AF and VT. These
approaches include mapping systems using contact mapping, single-point spatial
mapping and non-contact, multisite electrical mapping technologies, and
ablation systems using RF, ultrasound, microwave, laser and cryoablation
technologies. In addition, companies are developing surgical procedures that
could potentially be used by physicians to perform the open heart surgical
maze procedure for the treatment of AF in a minimally invasive manner.
Many of the Company's competitors have an established presence in the field
of interventional cardiology and electrophysiology, including Boston
Scientific Corporation ("Boston Scientific"), C.R. Bard, Inc., Johnson &
Johnson, through its Cordis division, St. Jude Medical, Inc., through its Daig
division, and Medtronic, Inc. These competitors have substantially greater
financial and other resources than the Company, including larger research and
development staffs and more experience and capabilities in conducting research
and development activities, testing products in clinical trials, obtaining
regulatory approvals, and manufacturing, marketing and distributing products.
In addition, other companies are developing proprietary systems for the
diagnosis and/or treatment of cardiac arrhythmias, including Biosense, Inc.,
Cardiac Pathways, Inc. and Endocardial Solutions, Inc. There can be no
assurance that the Company will succeed in developing and marketing
technologies and products that are more clinically effective and cost-
effective than the more established treatments or the new approaches and
products being developed and marketed by its competitors. Furthermore, there
can be no assurance that the Company will succeed in developing new
technologies and products that are available prior to its competitors'
products. Failure of the Company to demonstrate the competitive advantages of
its products would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Competition."
FUTURE ADDITIONAL CAPITAL REQUIREMENTS; NO ASSURANCE FUTURE CAPITAL WILL BE
AVAILABLE
The Company's future liquidity and capital requirements will depend on
numerous factors, including the progress of the Company's clinical research
and product development programs; the receipt of, and the time required to
obtain, regulatory clearances and approvals; the costs and timing of expansion
of product development, manufacturing and sales and marketing activities; the
extent to which the Company's products gain market acceptance; competitive
developments; and other factors. The timing and amount of such capital
requirements cannot be accurately predicted. In addition, if unforeseen
difficulties arise in the course of developing its products, performing
clinical trials, obtaining necessary regulatory clearances and approvals or
other aspects of the Company's business, the Company may be required to invest
greater-than-anticipated funds. Consequently, although the Company believes
that the proceeds of this Offering, together with available cash and cash
generated from operations, will be sufficient to meet the Company's operating
expenses and capital requirements through at least the end of 1998, the
Company may be required to raise additional funds through public or private
debt or equity financings, collaborative relationships, bank facilities or
other arrangements. If additional financing is needed, there can be no
assurance that it will be available on terms acceptable to the Company, if at
all. Any additional equity financing may be dilutive to stockholders, and debt
financing, if available, may involve restrictive covenants. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
DEPENDENCE ON PATENTS AND PROPRIETARY AND LICENSED TECHNOLOGY; RISK OF PATENT
INFRINGEMENT
The Company's success will depend in part on its ability to obtain patent
protection for its products and processes, to preserve its trade secrets,
trademarks and copyrights and to operate without infringing or violating the
proprietary rights of others. The Company's strategy is to actively pursue
patent protection in the United States and foreign jurisdictions for
technology that it believes to be proprietary and that offers a potential
competitive advantage for its products. The patent positions of medical device
companies, including the
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Company, are uncertain and involve complex and evolving legal and factual
questions. The coverage sought in a patent application either can be denied or
significantly reduced before or after the patent is issued. In addition, the
U.S. patent laws were recently amended to exempt physicians, other health care
professionals and affiliated entities from infringement liability for medical
and surgical procedures performed on patients. The Company cannot predict
whether this amendment might have a material adverse effect on the Company's
ability to protect its proprietary methods and procedures.
In addition, there can be no assurance that competitors will not seek to
apply for and obtain patents that will prevent, limit or interfere with the
Company's ability to make, use or sell its products either in the United
States or internationally. Further, the laws of certain foreign countries do
not protect the Company's intellectual property rights to the same extent as
do the laws of the United States. In addition to patents, trademarks and
copyrights, the Company relies on trade secrets and proprietary know-how to
compete, which it seeks to protect, in part, through appropriate
confidentiality and proprietary information agreements. There can be no
assurance that proprietary information or confidentiality agreements with
employees, consultants and others will not be breached, that the Company will
have adequate remedies for any breach, or that the Company's trade secrets
will not otherwise become known to, or independently developed by,
competitors. The Company also relies on certain license agreements through
which it licenses certain technology from others, including technology of
Target that is integrated into the Company's microcatheter systems for mapping
and ablation. The Company has also licensed a proprietary surface coating
material used on certain of its catheters. There can be no assurance that
these licenses will continue to be available to the Company. The loss of or
inability to maintain any of these licenses could result in delays in
commercial shipments by the Company until equivalent technology could be
developed internally or identified, licensed and integrated, which would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "--Influence of Target Therapeutics, Inc." and "--
Risks Associated with International Sales."
The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights, and companies in the
medical device industry have employed intellectual property litigation to gain
a competitive advantage. While the Company's patents have not been the subject
of any litigation, the Target patent that relates to the variable stiffness
design of Target's Tracker microcatheters (the "Tracker Patent") has been the
subject of four reexamination proceedings in the United States Patent and
Trademark Office ("USPTO"). Following the completion of the first such
proceeding, the USPTO issued a reexamination certificate and confirmed the
patentability of the patent claims set forth in the certificate. Requests for
second, third and fourth reexamination of the Tracker Patent were initiated by
one of Target's competitors, SciMed Life Systems, Inc. ("SciMed"), a
subsidiary of Boston Scientific, and after the USPTO's review of such
petitions, Target received notice from the USPTO that it had reaffirmed the
patentability of the claims of the Tracker Patent.
In addition, the Company is aware that in 1994 Target filed a lawsuit
against SciMed and Cordis Endovascular Systems, Inc. (now a division of
Johnson & Johnson) in the U.S. District Court, seeking damages and preliminary
and permanent injunctive relief against further infringing sales. After
various court actions, the Court of Appeals has temporarily stayed the
preliminary injunction, which had been granted prohibiting Cordis and SciMed
from infringing on the Tracker Patent, while it considers a motion opposing
the injunction filed by Cordis and SciMed. In January 1997, Target entered
into an agreement with Boston Scientific pursuant to which Target agreed to be
merged with a wholly-owned subsidiary of Boston Scientific. Pursuant to the
agreement, the merger, if consummated, would result in the termination of the
lawsuit between Target and SciMed. The merger is expected to close during the
second quarter of 1997. There can be no assurance that the merger will be
consummated or that the lawsuit will be terminated, or if the lawsuit is not
terminated that Target will ultimately be successful in the lawsuit or that
SciMed will not mount a legal challenge to the validity of the Tracker Patent.
If the Tracker Patent is ultimately determined to be invalid, the Company's
proprietary rights in the variable stiffness technology could be compromised,
and the Company's competitors could have the ability to incorporate such
technology in their products. The erosion of this competitive advantage could
have a material adverse effect on the Company's business, financial condition
and results of operations.
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Although the Company has not received any significant letters from others
threatening to enforce intellectual property rights against the Company, there
can be no assurance that the Company will not become subject to patent
infringement claims or litigation, to interference proceedings in the USPTO to
determine the priority of inventions or to oppositions to patent grants in
foreign jurisdictions. An adverse determination in litigation, interference or
opposition proceedings to which the Company may become a party could subject
the Company to significant liabilities to third parties, require disputed
rights to be licensed from third parties or require the Company to cease using
such technology. Under the Company's license agreement with Target, the
Company is not indemnified against claims brought by third parties alleging
infringement of patent rights. Consequently, the Company could bear the
liability resulting from such claims. There can be no assurance that the
Company will have the financial resources to protect and defend its
intellectual property, as such defense is often costly and time consuming.
Failure of the Company to protect its patent rights, trade secrets, know-how
or other intellectual property could have a material adverse effect on the
Company's business, financial condition and results of operations.
The validity and breadth of claims in medical technology patents involve
complex legal and factual questions and, therefore, may be highly uncertain.
There can be no assurance that any issued patent or patents based on pending
patent applications or any future patent application will exclude competitors
or provide competitive advantages to the Company, that any of the Company's
patents or patents in which it has licensed rights will be held valid if
subsequently challenged or that others will not claim rights in or ownership
of the patents and other proprietary rights held or licensed by the Company.
There can be no assurance that others have not developed or will not develop
similar products, duplicate any of the Company's products or design around any
patents issued to or licensed by the Company or that may be issued in the
future to the Company. Since patent applications in the United States are
maintained in secrecy until patents issue, the Company cannot be certain that
others were not the first to file applications for inventions covered by the
Company's pending patent applications, nor can the Company be certain that it
will not infringe any patents that may issue to others on such applications.
The Company periodically reviews the scope of patents of which it is aware.
Although Cardima does not believe that it infringes patents known to the
Company, the question of patent infringement involves complex legal and
factual issues and there can be no assurance that any conclusion reached by
the Company regarding infringement will be consistent with the resolution of
any such issues by a court. See "Business--Patents and Proprietary Rights."
INFLUENCE OF TARGET THERAPEUTICS, INC.
Upon completion of this Offering, Target will beneficially own approximately
% of the Company's outstanding Common Stock. In addition, Target currently
has a representative on the Company's Board of Directors, as it has since the
Company's inception. Accordingly, Target may be able to exercise influence
over the business and financial affairs of the Company. In January 1997,
Target entered into an agreement with Boston Scientific pursuant to which
Target agreed to be merged with a wholly-owned subsidiary of Boston
Scientific. If the merger is consummated, there can be no assurance that
Boston Scientific, as a significant stockholder of the Company through its
ownership of Target and as a company that develops, sells and markets products
that compete with the Company's products, will not take actions or engage in
activities that are adverse to the Company or the Company's stockholders. Any
such actions or activities of Boston Scientific could have an adverse material
impact on the Company's business, financial condition and results of
operations.
The Company and Target have entered into a license agreement (the "Target
License Agreement"), pursuant to which Target has granted the Company an
exclusive license (the "Target License") under certain issued United States
patents to certain technologies upon which the Company's products are based.
The Target License covers the diagnosis and treatment of electrophysiological
disorders in areas other than the central nervous system. The Target License
will terminate upon the expiration or invalidation of all claims under the
underlying patents. In addition, the Company has obtained a non-exclusive
license to use Target's technology, provided it has made a substantial
improvement of such technology, for the diagnosis or treatment of diseases of
the heart, other than using balloon angioplasty. Under the Target License
Agreement, Cardima has granted Target an exclusive, royalty-free license to
use any technology developed by Cardima prior to May 1996 in the fields of
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neurology, interventional neuroradiology, interventional radiology, diagnosis
and treatment of male and female reproductive disorders and vascular
prostheses. The Target License Agreement imposes various commercialization,
sublicensing, insurance, royalty, product liability, indemnification, non-
competition and other obligations on the Company. Failure by the Company to
comply with certain of these requirements could result in a termination of the
Target License. The loss of the Company's exclusive rights to the Target-based
microcatheter technology would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Patents and Proprietary Rights" and "Certain Transactions."
RISKS ASSOCIATED WITH INTERNATIONAL SALES
International sales have accounted for virtually all of the Company's
revenues to date and will continue to account for a substantial portion of the
Company's revenues for the foreseeable future. A number of risks are inherent
in international transactions. International sales may be limited or disrupted
by the imposition of government controls, export license requirements,
economic or political instability, trade restrictions, changes in tariffs or
difficulties in staffing and management. Additionally, although the Company's
sales are denominated in U.S. dollars, Cardima's business, financial condition
and results of operations may be adversely affected by fluctuations in
currency exchange rates as well as increases in duty rates and difficulties in
obtaining export licenses. The financial condition, expertise and performance
of the Company's international distributors and any future international
distributors could affect sales of the Company's products internationally and
could have a material adverse effect on the Company's business, financial
condition and results of operations. The international nature of the Company's
business also subjects it and its representatives, agents and distributors to
laws and regulations of the international jurisdictions in which they operate
or in which the Company's products may be sold. The regulation of medical
devices in a number of such jurisdictions, particularly in the EU, continues
to develop, and there can be no assurance that new laws or regulations will
not have an adverse effect on the Company's business, financial condition and
results of operations. Foreign regulatory agencies often establish product
standards different from those in the United States and any inability to
obtain foreign regulatory approvals on a timely basis could have a material
adverse effect on the Company's international business and its financial
condition and results of operations. In addition, the laws of certain foreign
countries do not protect the Company's intellectual property rights to the
same extent as do the laws of the United States. There can be no assurance
that the Company will be able to successfully commercialize any of its current
microcatheter products, including the Cardima Pathfinder and Tracer
microcatheter systems, or any future product in any foreign market. See
"Business--Marketing and Distribution."
UNCERTAINTY RELATED TO THIRD-PARTY REIMBURSEMENT
U.S. health care providers, including hospitals and physicians, that
purchase medical devices generally rely on third-party payors, principally
federal Medicare, state Medicaid and private health insurance plans, to
reimburse all or a part of the costs and fees associated with the procedures
performed using these devices. The Company's success will depend upon, among
other things, the ability of health care providers to obtain satisfactory
reimbursement from third-party payors for medical procedures in which the
Company's microcatheter systems are used. Third-party payors may deny
reimbursement if they determine that a prescribed device has not received
appropriate regulatory clearances or approvals, is not used in accordance with
cost-effective treatment methods as determined by the payor, or is
experimental, unnecessary or inappropriate. If FDA clearance or approval is
received, third-party reimbursement would also depend upon decisions by the
United States Health Care Financing Administration for Medicare, as well as by
individual health maintenance organizations, private insurers and other
payors. Reimbursement systems in international markets vary significantly by
country and by region within some countries, and reimbursement approvals may
be obtained on a country-by-country basis. Many international markets have
government managed health care systems that control reimbursement for new
devices and procedures. In most markets, there are private insurance systems
as well as government managed systems. There can be no assurance that
reimbursement for the Company's products will be available or, if available,
that such reimbursement will be available in sufficient amounts in the United
States or in international markets under either government or private
reimbursement systems, or that physicians will support and advocate
reimbursement for procedures using the Company's products. Failure by
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hospitals and other users of the Company's products to obtain reimbursement
from third-party payors or changes in government and private third-party payor
policies toward reimbursement for procedures employing the Company products
would have a material adverse effect on the Company's business, financial
condition and results of operations. Moreover, the Company is unable to
predict what additional legislation or regulation, if any, relating to the
heath care industry or third-party coverage and reimbursement may be enacted
in the future, or what effect such legislation or regulation would have on the
Company. See "Business--Third-Party Reimbursement."
LIMITED MANUFACTURING EXPERIENCE; SCALE-UP RISK; NEED TO COMPLY WITH UNITED
STATES MANUFACTURING STANDARDS; DEPENDENCE ON KEY SUPPLIERS
The Company has only limited experience in manufacturing its microcatheter
systems. The Company currently manufactures its microcatheter systems in
limited quantities for U.S. and international sales and preclinical and
clinical trials. The Company has no experience manufacturing its products in
the volumes that will be necessary for the Company to achieve significant
commercial sales, and there can be no assurance that reliable, high-volume
manufacturing capacity can be established or maintained at commercially
reasonable costs. The Company has recently increased the number of
microcatheters manufactured and expects that, if U.S. sales for the Cardima
Pathfinder microcatheter system increase or if the Company receives FDA
clearance or approvals for other products, it will need to expend significant
capital resources and develop manufacturing expertise to establish large-scale
manufacturing capabilities. Manufacturers often encounter difficulties in
scaling up production of new products, including problems involving production
yields, quality control and assurance, component supply shortages, shortages
of qualified personnel, compliance with FDA regulations, and the need for
further FDA approval of new manufacturing processes. In addition, the Company
believes that substantial cost reductions in its manufacturing operations will
be required for it to commercialize its microcatheter systems on a profitable
basis. Any inability of the Company to establish and maintain large-scale
manufacturing capabilities would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's manufacturing facilities are subject to periodic inspection by
regulatory authorities, and its operations must either undergo QSR compliance
inspections conducted by the FDA or receive an FDA exemption from such
compliance inspections in order for the Company to be permitted to produce
products for sale in the United States. The Company's facilities and
manufacturing processes have recently successfully undergone a combined
inspection by the FDA and by the State of California and an annual
reinspection by TUV. The Company has demonstrated compliance with ISO 9001 (EN
46001) quality standards, as well as compliance with 93/42/EEC, the Medical
Device Directive and is in compliance with procedures to produce products for
sale in Europe. Any failure by the Company to comply with QSR requirements or
to maintain its compliance with ISO 9001 (EN 46001) standards may result in
the Company being required to take corrective actions, such as modification of
its policies and procedures. In addition, the Company may be required to cease
all or part of its operations for some period of time until it can demonstrate
that appropriate steps have been taken to comply with QSR or ISO 9001 (EN
46001) standards. There can be no assurance that the Company will be found in
compliance with QSR by regulatory authorities, or that it will continue to
comply with ISO 9001 (EN 46001) standards in future audits or that the Company
will not experience difficulties in the course of developing its manufacturing
capability. Any failure of the Company to comply with state or FDA QSR
requirements or to maintain compliance with ISO 9001 (EN 46001) standards, or
to develop its manufacturing capability in compliance with such standards,
would have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company purchases certain key components of its products, including the
hydrophilic coating for certain of its microcatheters, from sole, single or
limited source suppliers. For certain of these components there are relatively
few alternative sources of supply. Establishing additional or replacement
suppliers for any of the numerous components used in the Company's products,
if required, may not be accomplished quickly and could involve significant
additional costs. Any supply interruption from vendors or failure of the
Company to obtain alternative vendors for any of the numerous components used
to manufacture the Company's products would
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limit the Company's ability to manufacture its products and would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Manufacturing."
LIMITED SALES, MARKETING AND DISTRIBUTION EXPERIENCE
The Company has only limited experience marketing and selling its products
in commercial quantities. Expanding the Company's marketing and sales
capability to adequately support sales in commercial quantities will require
substantial effort and require significant management and financial resources.
There can be no assurance that the Company will be able to continue to build a
marketing staff or sales force, that expanding such a marketing staff or sales
force will be cost-effective or that the Company's sales and marketing efforts
will be successful. The Company's Cardima Pathfinder, Cardima Pathfinder AF
and Tracer microcatheter systems for mapping of AF and VT have obtained
regulatory approval in certain international markets, and sales and marketing
of these products is conducted primarily through distributors. The Company
currently has a number of exclusive distributors that cover certain European
countries and Japan and has sold only a limited number of Cardima Pathfinder,
Cardima Pathfinder AF and Tracer microcatheter systems through these
distributors. The Company does not have written agreements with certain of its
exclusive distributors. Consequently, the terms of such arrangements, such as
length of arrangements and minimum purchase obligations are uncertain. In
addition, the laws in certain international jurisdictions may make it
difficult for the Company to terminate such distribution arrangements absent
specific written termination terms. There can be no assurance that these
distributors will be able to market and sell the Company's products in these
markets. There can be no assurance that the Company will be able to enter into
additional agreements with desired distributors on a timely basis or at all,
or that such distributors will devote adequate resources to selling the
Company's products. Failure to establish an adequate sales force or to
establish and maintain appropriate distribution relationships would have a
material adverse effect upon the Company's business, financial condition and
results of operations. See "Business--Marketing and Distribution."
DEPENDENCE UPON KEY PERSONNEL
The Company's ability to operate successfully depends in significant part
upon the continued service of certain key scientific, technical, clinical,
regulatory and managerial personnel, and its continuing ability to attract and
retain additional highly qualified personnel in these areas. Competition for
such personnel is intense, especially in the San Francisco Bay Area, and there
can be no assurance that the Company can retain such personnel or that it can
attract or retain other highly qualified scientific, technical, clinical,
regulatory and managerial personnel in the future, including key sales and
marketing personnel. See "Management--Limitation of Liability and
Indemnification Matters."
RISK OF PRODUCT LIABILITY; ADEQUACY OF INSURANCE COVERAGE
The development, manufacture and sale of the Company's microcatheter systems
may expose the Company to product liability claims. Although the Company has
not experienced any claims to date, there can be no assurance that the Company
will not experience losses due to product liability claims in the future.
Although the Company currently has general liability insurance with coverage
in the amount of $1.0 million per occurrence, subject to a $2.0 million annual
limitation, and product liability insurance with coverage in the amount of
$5.0 million per occurrence, subject to a $5.0 million annual limitation,
there can be no assurance that such coverage will continue to be available to
the Company on reasonable terms, if at all. In addition, there can be no
assurance that all of the activities encompassed within the Company's business
are or will be covered under the Company's policies. Although the Cardima
Pathfinder and Tracer products are labeled for single use only, the Company is
aware that some physicians are reusing such products. Moreover, there can be
no assurance that, despite labeling of the Company's microcatheters for
diagnostic use only, physicians will not use such mapping microcatheters for
ablation. Multiple use or "off-label" use of the Company's microcatheters
could subject the Company to increased exposure to product liability claims,
which could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company may require
additional product liability coverage if the Company significantly expands
commercialization of its products. Such additional coverage is
15
<PAGE>
expensive, difficult to obtain and may not be available in the future on
acceptable terms, if at all. Any claims or series of claims against the
Company, regardless of their merit or eventual outcome, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Product Liability and Insurance."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market for the
Common Stock will develop or be sustained. The initial public offering price
of the Common Stock will be determined by negotiations between the Company and
the representatives of the Underwriters. The factors considered in making such
determination will include the prevailing market conditions, the Company's
financial and operating history and condition, its prospects and the prospects
for its industry in general, the management of the Company and the market
price of securities for companies in businesses similar to that of the
Company. The securities markets have, from time to time, experienced
significant price and volume fluctuations that may be unrelated to the
operating performance of particular companies. These fluctuations often
substantially affect the market price of a company's common stock. The market
prices for securities of medical device companies have in the past been, and
can in the future be expected to be, particularly volatile. The market price
of the Common Stock may be subject to volatility from quarter to quarter
depending upon announcements regarding the results of regulatory approval
filings, clinical studies or other testing, technological innovations or new
commercial products by the Company or its competitors, government regulations,
developments or disputes concerning proprietary rights, changes in
reimbursement levels, public concern as to the safety of products developed by
the Company or others, changes in health care policy in the United States and
internationally, the issuance of stock market analyst reports and
recommendations, and economic and other external factors, as well as continued
operating losses by the Company and fluctuations in the Company's financial
results. See "--Fluctuations in Operating Results" and "Underwriting."
CONTROL BY EXISTING STOCKHOLDERS
Upon completion of this Offering, officers and directors of the Company,
together with entities affiliated with them, will beneficially own
approximately % of the Common Stock (approximately % if the Underwriters'
over-allotment option is exercised in full). These stockholders, acting as a
group, will continue to be able to control the election of all members of the
Company's Board of Directors and to determine all corporate actions after the
sale of the shares offered hereby. The voting power of these stockholders
could also have the effect of delaying or preventing a change in control of
the Company. See "-- Influence of Target Therapeutics, Inc.," "Principal
Stockholders" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering and based on the shares outstanding as of
March 7, 1997, there will be shares of Common Stock outstanding. Of these
shares, the shares sold in this Offering (assuming no exercise of the
underwriters' over-allotment option) will be freely tradeable without
restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), unless purchased by "affiliates" of the
Company, as that term is defined in Rule 144 of the Securities Act. The
remaining 5,801,541 shares will be "restricted securities" as that term is
defined under Rule 144 (the "Restricted Shares").
Of the Restricted Shares, an aggregate of 3,953,712 shares of Common Stock
(including 508,912 shares issuable upon exercise of vested stock options) will
be eligible for sale in the public market subject to Rule 144 and Rule 701
under the Securities Act after expiration of a contractual lock-up beginning
180 days after the date of the Prospectus, unless earlier released, in whole,
or in part, by Bear, Stearns & Co. Inc. In addition, an aggregate of 2,356,741
shares of Common Stock will become eligible for resale in the public market,
upon expiration of a one-year holding period, subject to certain volume and
resale restrictions set forth in Rule 144, in the first quarter of fiscal
1998.
16
<PAGE>
The Company intends to register on a Form S-8 registration statement under
the Securities Act, during the 180-day lockup period, the resale of 1,344,846
shares of Common Stock reserved for issuance under its equity incentive plans
or currently subject to outstanding options. See "Shares Eligible For Future
Sale."
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS AND DELAWARE LAW
Certain provisions of the Company's Certificate of Incorporation and Bylaws
may have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire, control of the
Company. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the Common Stock. Certain of these
provisions allow the Company to issue Preferred Stock without any vote or
further action by the stockholders, and eliminate the right of stockholders to
act by written consent without a meeting. Certain provisions of Delaware law
applicable to the Company could also delay or make more difficult a merger,
tender offer or proxy contest involving the Company, including Section 203 of
the Delaware General Corporation Law, which prohibits a Delaware corporation
from engaging in any business combination with any interested stockholder for
a period of three years unless certain conditions are met. See "Description of
Capital Stock."
SUBSTANTIAL DILUTION AND ABSENCE OF DIVIDENDS
Purchasers of shares of Common Stock in the Offering will experience
immediate and substantial dilution of $ in the net tangible book value per
share of Common Stock from the initial public offering price. In addition, the
exercise of outstanding options and warrants will result in further dilution.
The Company has never paid any cash dividends and does not anticipate paying
cash dividends on its Common Stock in the foreseeable future. See "Dilution"
and "Dividend Policy."
17
<PAGE>
THE COMPANY
The Company was incorporated in November 1992 in the State of Delaware. The
Company's principal executive offices are located at 47266 Benicia Street,
Fremont, California 94538, and its telephone number is (510) 354-0300.
USE OF PROCEEDS
The net proceeds from the sale of the shares of Common Stock offered
hereby, assuming an initial public offering price of $ per share, are
estimated to be $ ($ if the overallotment option is exercised in full),
after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company.
The Company currently intends to use approximately 25% of the net proceeds
from this Offering to fund preclinical and clinical trials of its
microcatheter systems, approximately 25% to fund research and new product
development, approximately 10% to continue to expand its marketing and sales
force in the United States, and approximately five percent to fund capital
equipment investment to increase manufacturing capabilities. The balance of
the net proceeds will be added to working capital and used for general
corporate purposes. The portion of the net proceeds actually expended for each
purpose may vary depending upon a number of factors, including the progress of
the Company's research and clinical development programs, the time required to
obtain regulatory clearances and approvals, the extent to which the Company's
products achieve market acceptance, the resources the Company devotes to
developing, manufacturing and marketing its products, the ability to continue
to establish a sales force and other factors.
The Company estimates the net proceeds of this Offering, together with its
existing capital resources, will be sufficient to fund the Company's
requirements at least through the end of 1998. The Company may also use a
portion of the net proceeds to acquire or invest in businesses, products and
technologies that are complementary to those of the Company, although no such
acquisitions or investments are planned or being negotiated as of the date of
this Prospectus, and no portion of the net proceeds has been allocated for any
specific acquisition or investment. Pending such uses, the Company intends to
invest the net proceeds from this Offering in short-term, government
securities and other investment-grade, interest-bearing securities.
DIVIDEND POLICY
The Company has never paid cash dividends on its capital stock and does not
anticipate paying cash dividends in the foreseeable future. Any future
determination to pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon the Company's financial condition,
results of operations, capital requirements and such other factors as the
Board of Directors deems relevant.
18
<PAGE>
DILUTION
The pro forma net tangible book value of the Common Stock as of December 31,
1996, was $ million, or approximately $ per share. Pro forma net
tangible book value per share represents the amount of the Company's
stockholders' equity, less intangible assets, divided by shares of Common
Stock outstanding after giving effect to (i) the sale of 2,356,741 shares of
Series E Preferred Stock in March 1997 for approximately $10.3 million in cash
and the conversion of approximately $3.3 million of outstanding short-term
debt, $1.6 million of which was incurred after December 31, 1996, and (ii) the
conversion of all outstanding shares of Preferred Stock, including the Series
E Preferred Stock, into Common Stock.
Pro forma net tangible book value dilution per share represents the
difference between the amount per share paid by purchasers of shares of Common
Stock in this Offering and the pro forma net tangible book value per share of
Common Stock immediately after this Offering. After giving effect to the sale
of the shares of Common Stock in this Offering at an assumed initial
public offering price of $ per share, and after deducting underwriting
discounts and commission and estimated offering expenses payable by the
Company, the Company's pro forma net tangible book value at December 31, 1996,
would have been $ , or $ per share. This represents an immediate increase
in pro forma net tangible book value of $ per share to existing
stockholders and an immediate dilution in pro forma net tangible book value of
$ per share to new investors purchasing Common Stock in this Offering, as
illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
Pro forma net tangible book value per share at December 31, 1996... $
Increase per share attributable to new investors...................
Pro forma net tangible book value after the Offering.................
Pro forma net tangible book value dilution to new investors.......... $
</TABLE>
The following table sets forth, on a pro forma basis as of December 31,
1996, after giving effect to (i) the sale of 2,356,741 shares of Series E
Preferred Stock in March 1997 for approximately $10.3 million and the
conversion of approximately $3.3 million of outstanding short-term debt, $1.6
million of which was incurred after December 31, 1996, and (ii) the conversion
of all outstanding shares of Preferred Stock, including the Series E Preferred
Stock, into Common Stock, the number of shares purchased from the Company, the
total consideration paid and the average price per share paid by existing
stockholders and by new investors (at an assumed initial public offering price
of $ per share before deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... % % $
-------- -------- --------- --------- ----
New investors...........
-------- -------- --------- --------- ----
Total................. 100% 100%
======== ======== ========= =========
</TABLE>
The foregoing computations assume no exercise of outstanding options or
warrants. At December 31, 1996, 810,690 shares of Common Stock were issuable
upon exercise of outstanding options at a weighted average exercise price of
$1.25, and 513,745 shares of Common Stock were issuable upon exercise of
outstanding warrants at a weighted average exercise price of $1.62. If all
options and warrants outstanding at December 31, 1996 were exercised for cash,
the pro forma net tangible book value per share immediately after completion
of the Offering would be $ . See "Management--Executive Compensation,"
"Certain Transactions" and "Description of Capital Stock."
19
<PAGE>
CAPITALIZATION
The following table sets forth at December 31, 1996 (i) actual
capitalization of the Company, (ii) such capitalization on a pro forma basis
to reflect the gross proceeds of approximately $13.6 million from the sale of
2,356,741 shares of Series E Preferred Stock in March 1997 for approximately
$10.3 million in cash and the conversion of approximately $3.3 million of
outstanding short-term debt, $1.6 million of which was incurred after
December 31, 1996, and the conversion of all outstanding shares of the
Company's Preferred Stock, including the Series E Preferred Stock, into Common
Stock, and (iii) such pro forma capitalization as adjusted to reflect the sale
of the shares of Common Stock offered hereby at an assumed initial public
offering price of $ per share, after deducting underwriting discounts and
commissions and estimated offering expenses, and the application of the
estimated net proceeds therefrom. This table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Financial Statements and related Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Notes payable--current......................... $ 1,682 $ -- $
Capital lease obligation-noncurrent portion.... 722 722
Series D redeemable Convertible Preferred
Stock, 1,919,052 shares issued and
outstanding; no shares issued and outstanding,
pro forma and as adjusted..................... 9,740 --
Stockholders' equity:
Convertible Preferred Stock, $0.001 par value,
5,141,436 shares authorized, issuable in
series, of which Series D and Series E are
redeemable convertible preferred stock;
5,000,000 shares authorized, pro forma and as
adjusted; 1,220,145 shares issued and
outstanding, no shares issued and
outstanding, pro forma or as adjusted........ 7,713 --
Common Stock, $0.001 par value, 7,500,000
shares authorized, 74,999 issued and
outstanding; 25,000,000 shares authorized,
pro forma and as adjusted, 5,801,541 shares
issued and outstanding, pro forma and
shares issued and outstanding, as
adjusted(1).................................. 595 31,580
Deferred compensation......................... (526) (526)
Deficit accumulated during development stage.. (18,150) (18,150)
-------- -------- ----
Total stockholders' equity (net capital
deficiency)................................. (10,368) 12,904
-------- -------- ----
Total capitalization......................... $ 1,776 $ 13,626 $
======== ======== ====
</TABLE>
- --------
(1) Excludes, as of December 31, 1996, (i) 810,690 shares of Common Stock
issuable upon exercise of outstanding options with a weighted average
price of $1.25 per share, (ii) 513,745 shares of Common Stock issuable
upon exercise of outstanding warrants with a weighted average exercise
price of $1.62 per share, and (iii) 534,156 shares reserved for future
issuance under the Company's equity incentive plans. See "Management--
Stock Option Plans" and "Description of Capital Stock."
20
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements
and Notes thereto included elsewhere in this Prospectus. The statements of
operations data set forth below for each of the years ended December 31, 1994,
1995 and 1996 and for the period from November 12, 1992 (inception) to
December 31, 1996 and the balance sheet data at December 31, 1995 and 1996 are
derived from, and are qualified by reference to, the Financial Statements,
which have been audited by Ernst & Young LLP, independent auditors, included
elsewhere in this Prospectus and should be read in conjunction with those
Financial Statements and the Notes thereto. The statement of operations data
set forth below for the period from November 12, 1992 (inception) to December
31, 1993 and the balance sheet data at December 31, 1993 and 1994 are derived
from the Company's audited financial statements not included in this
Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 12, PERIOD FROM
1992 NOVEMBER 12,
(INCEPTION) TO YEAR ENDED DECEMBER 31, 1992 (INCEPTION)
DECEMBER 31, ------------------------- TO DECEMBER 31
1993(1) 1994 1995 1996 1996
-------------- ------- ------- ------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net sales............... $ -- $ 86 $ 362 $ 593 $ 1,041
Cost of goods sold...... -- 211 830 1,413 2,454
------- ------- ------- ------- --------
Gross profit........... -- (125) (468) (820) (1,413)
Operating expenses:
Research and
development........... 1,083 2,205 2,581 3,319 9,188
Selling, general and
administrative........ 491 1,309 2,046 3,690 7,536
------- ------- ------- ------- --------
Total operating
expenses............. 1,574 3,514 4,627 7,009 16,724
------- ------- ------- ------- --------
Operating loss.......... (1,574) (3,639) (5,095) (7,829) (18,137)
Interest and other
income (expense), net.. 33 (16) (105) 75 (13)
------- ------- ------- ------- --------
Net loss................ $(1,541) $(3,655) $(5,200) $(7,754) $(18,150)
======= ======= ======= ======= ========
Pro forma net loss per
share(2)............... $ (1.23)
=======
Shares used in computing
pro forma net loss per
share(2)............... 6,325
=======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1993 1994 1995 1996
------- ------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 1,472 $ 713 $ 2,993 $ 907
Working capital (deficit).................. 1,318 571 2,647 (2,150)
Total assets............................... 1,701 2,284 4,735 3,964
Capital lease obligation, noncurrent
portion................................... 50 308 317 722
Deficit accumulated during the development
stage..................................... (1,541) (5,196) (10,396) (18,150)
Total stockholders' equity (net capital
deficiency)............................... 1,412 1,316 (2,675) (10,368)
</TABLE>
- --------
(1) The Company's financial data for 1992 and 1993 is not presented separately
as the Company's operations from November 12, 1992 (inception) to December
31, 1992 were immaterial.
(2) See Note 1 of Notes to Financial Statements for an explanation of the
computation of pro forma net loss per share.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis contains certain statements of a forward-
looking nature relating to future events or the future financial performance
of the Company. Such statements are only predictions and the actual events or
results may differ materially from the results discussed in the forward-
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in "Risk Factors" as well as
those discussed elsewhere in this Prospectus. The historical results set forth
in this discussion and analysis are not necessarily indicative of trends with
respect to any actual or projected future financial performance of the
Company. This discussion and analysis should be read in conjunction with the
Financial Statements and the related Notes thereto included elsewhere in this
Prospectus.
OVERVIEW
Since its incorporation in November 1992, Cardima has been engaged in the
design, research and development, manufacturing and testing of microcatheter
systems for the mapping and ablation of cardiac arrhythmias. The Company has a
limited history of operations and has experienced significant operating losses
since inception. The Company has never been profitable and, as of December 31,
1996, had an accumulated deficit of $18.2 million. Cardima expects that its
operating losses will continue for the foreseeable future as the Company
continues to invest substantial resources in product development, preclinical
and clinical trials, obtaining regulatory approval, sales and marketing and
manufacturing.
To date, Cardima has generated limited revenues, substantially all of which
have been in Europe and Japan, from sales of the Cardima Pathfinder and Tracer
for VT mapping and the Cardima Pathfinder AF for AF mapping. The Company has
obtained the right to affix the CE mark to its Cardima Pathfinder, Tracer and
Cardima Pathfinder AF microcatheter systems, permitting the Company to market
these products in the member countries of the EU. The Company's international
sales are made through distributors who sell the Company's products to
physicians and hospitals. In January 1997, the Company received a 510(k)
clearance in the United States and began to market and sell the Cardima
Pathfinder system for VT mapping. In order to begin shipping the Tracer
microcatheter systems for VT mapping or the Cardima Pathfinder AF for AF
mapping in the United States, the Company will need to receive 510(k)
clearance for these products from the FDA. The Company has submitted a 510(k)
premarket notification for the Cardima Pathfinder AF and intends to seek
510(k) clearance for its other mapping products, including the Cardima
Pathfinder 1.5 Fr. and Tracer products. The Company will be required to
conduct clinical trials, demonstrate safety and effectiveness, and obtain PMA
approval from the FDA for any of the Company's products designed for ablation
of AF or VT. Specifically, PMA approval will be required prior to the
introduction in the United States of the Cardima Pathfinder AF microcatheter
system for ablation of AF or Tracer VT microcatheter system for ablation of
VT. In January 1997, the Company submitted an IDE for the Cardima Pathfinder
AF microcatheter system for mapping and ablation of AF and received
conditional approval from the FDA to begin a Phase I feasibility study for
mapping AF. The Company expects to begin Phase I clinical trials for its
Cardima Pathfinder AF microcatheter system in the first half of 1997 and to
file an additional IDE and begin clinical trials for its Tracer VT
microcatheter system in the second half of 1997.
There can be no assurance that the Company's research and development
efforts will be successful. Given that testing is at an early stage, there can
be no assurance that any of the Company's microcatheter systems will be shown
to be safe or effective. Accordingly, the Company is unable to predict the
likelihood that its products, other than the Cardima Pathfinder microcatheter
system for venous mapping of VT, including the Cardima Pathfinder
microcatheter and Venaport guiding catheter, which has received 510(k)
clearance, will be cleared or approved for marketing by the FDA and there can
be no assurance that such approvals will be obtained or that any of the
Company's microcatheter systems or any other product developed by the Company
will be successfully introduced or achieve any significant degree of market
acceptance. There can be no assurance that the Company will ever achieve
either significant revenues from sales of any of its microcatheter systems or
ever achieve or sustain profitability.
22
<PAGE>
Future revenues and results of operations may fluctuate significantly from
quarter to quarter or year to year and will depend upon numerous factors,
including actions relating to regulatory approvals, the progress of
preclinical and clinical trials, the extent to which the Company's products
gain market acceptance, the scale-up of manufacturing capabilities, the
expansion of sales and marketing activities, competition, the timing and
success of new product introductions by the Company or its competitors and the
ability of the Company to market its products successfully in the United
States and internationally. Due to fluctuations in operating results, quarter
to quarter comparisons of the Company's operating results are not necessarily
meaningful and should not be relied upon as indicators of likely future
performance or annual operating results. The Company expects to increase its
research and development activities in connection with the need for additional
clinical evaluations and supervision during clinical trials. The Company also
expects to increase its sales and marketing capacity and continue to expand
its direct sales force in the United States in order to support future sales
of its microcatheter systems. In addition, the Company expects to increase
manufacturing operations in order to meet future product demand, control
product costs and increase gross margins. The Company's limited operating
history makes accurate prediction of future operating results difficult or
impossible.
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Net Sales
Net sales increased to $593,000 for 1996, from $362,000 in 1995 and $86,000
in 1994. The increase in net sales in 1996 compared with 1995 was primarily
due to increased international sales of the Cardima Pathfinder and Tracer
microcatheter systems and reflects a growing user base for the Company's
microcatheter systems in Europe and Japan. The increase in product sales in
1995 compared with 1994 was due primarily to the fact that product sales did
not begin until July 1994, and was also attributable to an increase in the
average selling price of the Company's products in 1995, resulting from the
introduction of the Cardima Pathfinder AF, and the growing market for and
increased sales of the Company's products in Europe and Japan.
Research and Development Expenses
Research and development expenses consist primarily of personnel costs,
consulting costs, costs related to preclinical studies and facilities costs.
The Company's research and development expenses increased to $3.3 million in
1996, from $2.6 million and $2.2 million in 1995 and 1994, respectively. The
increase in research and development expenses in 1996 compared with 1995 was
primarily due to increases in regulatory and quality systems' personnel and,
to a lesser extent, to an increase in expenses associated with preclinical
studies. The increase in 1995 compared with 1994 was primarily due to the
hiring of additional engineering personnel, expenses associated with the
development of product prototypes and expenses associated with preclinical and
clinical studies.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $3.7 million in
1996, from $2.0 million and $1.3 million in 1995 and 1994, respectively. The
increase in selling, general and administrative expenses in 1996 compared with
1995 was primarily due to expenses associated with increased sales and
marketing activities, including the hiring of additional personnel to support
growth of the Company's sales and marketing efforts. The increase in selling,
general and administrative expenses in 1995 compared with 1994 was primarily
due to the addition of personnel.
Loss from Operations
For the reasons stated above, loss from operations increased to $7.8 million
in 1996 from $5.1 million and $3.6 million in 1995 and 1994, respectively.
23
<PAGE>
Interest and Other Income, Interest Expense
Interest and other income increased to $132,000 in 1996 from $12,000 and
$15,000 in 1995 and 1994, respectively. The increase in interest and other
income was primarily due to an increase in the average investment balances as
a result of the Series D Preferred Stock financing in December 1995 and
February 1996. Interest expense decreased to $57,000 in 1996 from $117,000 in
1995, primarily as a result of decreased borrowing in 1996. Interest expense
was $31,000 in 1994.
Deferred Compensation Expense
The Company records and amortizes over the related vesting periods deferred
compensation representing the difference between the exercise price of options
granted and the deemed fair market value of its Common Stock at the time of
grant. Options generally vest over four years. Deferred compensation of
approximately $580,000, primarily associated with option grants in May and
September 1996, was recorded in the year ended December 31, 1996, of which the
Company amortized deferred compensation expenses of approximately $54,000 for
the year ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date principally through private
placements of equity securities which had yielded net proceeds of $17.5
million as of December 31, 1996, together with interest income on proceeds
from such financings, and equipment leases (which have totalled $1.3 million
to acquire certain capital equipment). As of December 31, 1996, the Company
had approximately $1.2 million in cash and cash equivalents, of which $275,000
was restricted in order to secure letters of credit issued in connection with
the Company's facilities lease. In March 1997, the Company sold 2,356,741
shares of Series E Preferred Stock for approximately $10.3 million in cash and
the conversion of approximately $3.3 million of short-term debt, $1.6 million
of which was incurred after December 31, 1996.
Net cash used in operating activities was approximately $6.6 million, $4.5
million and $4.1 million for the years ended December 31, 1996, 1995 and 1994,
respectively, resulting primarily from losses incurred during such periods.
Net cash used in investing activities was approximately $388,000, $78,000 and
$184,000 for the years ended December 31, 1996, 1995 and 1994, respectively,
attributable primarily to capital expenditures during such periods. Net cash
provided by financing activities was approximately $5.0 million, $6.9 million
and $3.5 million during the years ended December 31, 1996, 1995 and 1994,
respectively, attributable primarily to the sale of equity securities in
private placement transactions and proceeds from bridge loans during such
periods.
The Company believes that the net proceeds from this Offering, together with
available cash and cash generated from operations, will be sufficient to meet
the Company's operating expenses and capital requirements at least through the
end of 1998. There can be no assurance, however, that the Company will not
require additional financing during that period, or that if required, such
additional financing will be available on terms acceptable to the Company, if
at all. In any event, the Company may in the future seek to raise additional
funds through bank facilities, debt or equity offerings or other sources of
capital. The Company's future liquidity and capital requirements will depend
upon numerous factors, including the progress of the Company's product
development efforts, the progress of the Company's clinical trials, actions
relating to regulatory matters, the costs and timing of expansion of product
development, manufacturing, sales and marketing activities, the extent to
which the Company's products gain market acceptance, and competitive
developments. The Company may be required to raise additional funds through
public or private financing, collaborative relationships or other
arrangements. There can be no assurance that such additional funding, if
needed, will be available on terms acceptable to the Company, if at all.
Furthermore, any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may involve restrictive covenants.
Collaborative arrangements, if necessary to raise additional funds, may
require the Company to relinquish its rights to certain of its technologies,
products or marketing territories. The failure of the Company to raise capital
when needed would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Risk Factors--Development
Stage Company; History of Losses and Expectation of Substantial Future
Losses," "--Uncertainty of Product and Procedure Acceptance," "--Fluctuations
in Operating Results" and "--No Assurance of Obtaining Required Regulatory
Approvals; Government Regulation."
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At December 31, 1996, the net operating losses available to offset future
taxable income for federal income tax purposes were approximately $17.5
million. Utilization of the net operating losses and credits may be subject to
a substantial annual limitation due to the "change in ownership" provisions of
the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
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BUSINESS
OVERVIEW
Cardima, Inc. designs, develops, manufactures and markets minimally
invasive, single-use, microcatheter-based systems for the mapping and ablation
of the two most common forms of cardiac arrhythmias: atrial fibrillation
("AF") and ventricular tachycardia ("VT"). Arrhythmias are abnormal electrical
heart rhythms that adversely affect the mechanical activities of the heart and
can potentially be fatal. The Company is developing microcatheter systems
designed to provide enhanced access to arrhythmia causing tissue, to diagnose
the arrhythmia by locating its origin ("mapping") and to restore normal heart
rhythms by isolating and destroying the arrhythmia causing sites ("ablation")
using radiofrequency ("RF") energy. The Company's microcatheters incorporate
multiple electrodes in the catheter tip that are designed to both receive
electrical signals for mapping and to emit RF energy for ablation, allowing
physicians to both map and ablate using a single catheter. Cardima's
microcatheters are designed with variable stiffness and a highly flexible
distal tip to allow enhanced access to the vasculature of the heart. In
addition, they are designed to be compatible with existing signal display
systems and RF generators, eliminating the need for significant new investment
in capital equipment. The Company's microcatheter technology was originally
conceived at Advanced Cardiovascular Systems, Inc. (now a division of Guidant
Corporation), and developed by Target Therapeutics, Inc. ("Target") for
neurological applications. Cardima has an exclusive, royalty-free license from
Target to use the microcatheter technology in the treatment of
electrophysiological diseases affecting areas other than the central nervous
system.
In January 1997, the Cardima Pathfinder microcatheter system received 510(k)
clearance from the United States Food and Drug Administration ("FDA") for use
in mapping VT, and it is currently being marketed for this application in the
United States, Europe, Japan, Australia and Canada. Also in January 1997, the
Company filed an Investigational Device Exemption ("IDE") for clinical testing
of the Cardima Pathfinder AF microcatheter system for the mapping and ablation
of AF and subsequently received conditional approval from the FDA to begin the
mapping phase of the feasibility study. In March 1997, the Company submitted a
510(k) premarket notification for the Cardima Pathfinder AF for atrial mapping
and expects to file an IDE for its Tracer VT microcatheter system for the
ablation of VT in late 1997.
DISCUSSION OF THE HEART AND ARRHYTHMIC DISORDERS
The heart is an electro-mechanical pump that relies on self-generated
electrical signals to contract its muscle fibers and pump blood throughout the
body. It is divided into four chambers: the two upper chambers called the
atria, and the two lower chambers called the ventricles. The heart consists of
two pumps working side by side, each with its own atrium and ventricle. The
pump on the right side collects venous blood from the body and sends it to the
lungs for oxygenation. The pump on the left side receives the oxygenated blood
from the lungs and pumps it through the body. The process is repeated as
venous blood returns to the right side of the heart.
The heart, as with any other organ, requires oxygen and nutrients to
function. Because the heart has large oxygen and nutrient demands, it requires
an extensive, well developed vascular network to bring blood to and carry
blood away from its tissue. This coronary vascular network is located
throughout the majority of the heart's walls to nourish the heart tissue
directly. This network is comprised of an arterial system and a venous system,
both of which originate on the epicardium, or outer surface, of the ventricles
and penetrate into the tissues of the ventricular walls. Thus, the anatomy of
the ventricular walls consists of a thick mass of contracting muscle cells
with a framework of coronary blood vessels.
The heart's pumping action is controlled by an electrical conduction system
comprised of a specialized network of cells within the heart muscle tissue
(see Figure 1 below). This conduction system allows electrical signals to
propagate through the heart in a systematic and organized way. These
specialized conduction cells are placed throughout the walls of the chambers,
from just underneath the inner, or endocardial, surface of the heart to the
outer, or epicardial, surface. This conduction system carries electrical
signals, in a properly timed sequence, to the muscle cells throughout the
heart. The electrical conduction cycle that results in a normal heart beat
starts in the right atrium, which contains a specialized group of cells called
the Sino-Atrial ("SA") node.
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The SA node is the heart's "natural pacemaker," regularly discharging an
electrical signal that, under normal circumstances, is responsible for setting
the heart rate, usually 60 to 100 beats per minute. The signal generated in
the SA node is propagated through the atria until it is delayed in the Atrio-
Ventricular ("AV") node. This delay provides enough time for the atria to fill
the ventricles with blood before they contract.
FIGURE 1: THE NORMAL HUMAN CARDIAC CONDUCTION SYSTEM
[DEPICTION OF HEART AND CONDUCTION SYSTEM]
Once the electrical signal exits the AV node, it is rapidly conducted down
the His Bundle, and is distributed widely throughout both ventricles via the
Purkinje Fibers, delivering the electrical signal to both ventricles at the
same time, causing them to contract in unison. Since the ventricles pump blood
to the lungs and the body (while the atria only pump blood to the ventricles),
the ventricles are composed of a larger amount of muscle tissue than the
atria. The left ventricle, in particular, is the stronger of the two
ventricles, generating higher pressure and working harder in order to pump
oxygenated blood through the entire body against a high vascular resistance.
In the normal heart, the four chambers work in rhythm with each other to
ensure that properly oxygenated blood is delivered throughout the body.
ARRHYTHMIAS
Arrhythmias are abnormal electrical heart rhythms that adversely affect the
mechanical activities of the heart. Arrhythmias result in insufficient blood
flow, which may cause dizziness, inadequate function of important organs in
the body, stroke or even death. Arrhythmias have numerous causes, including
congenital defects, tissue damage from heart attacks or arteriosclerosis and
other conditions that accelerate, delay or redirect the normal transmission of
electrical activity, thereby disrupting the normal coordinated contractions of
heart muscle cells. There are two general types of arrhythmias: tachycardia, a
fast resting heart rate, typically more than 100 beats per minute, and
bradycardia, a slow resting heart rate, typically less than 60 beats per
minute. Tachycardias fall into one of two major categories: supraventricular
tachycardia ("SVT"), which has its origin above the ventricles (typically in
the atria) with AF being the most common form of SVT, and VT, which has its
origin in the wall of the ventricles. Generally, arrhythmias degenerate and
worsen over time.
Atrial Fibrillation
AF is characterized by the irregular and very rapid beating of the heart and
results when the normal electrical conduction system of the atria
malfunctions, leading to irregular and chaotic electrical signals. During
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AF, the regular pumping action of the atria is replaced by irregular,
disorganized and quivering spasms of atrial tissue. Symptoms of AF typically
include a rapid and irregular heartbeat, palpitations, discomfort and
dizziness. This malfunction results in the failure of the atria to fill the
ventricles completely and, consequently, the failure of the heart to pump
adequate amounts of blood to the body. Once AF becomes symptomatic, it is
typically associated with significant morbidity related to reduced blood flow.
Often, the greatest concern is that the reduced cardiac output can lead to
blood pooling in the atria and the formation of blood clots. Blood clots in
the left atrium can dislodge and travel through the bloodstream to the brain,
resulting in stroke and even death.
In the United States, AF affects an estimated two million people, with
approximately 160,000 new cases being diagnosed each year. It is estimated
that about 1.5 million outpatient visits per year in the United States are
associated with AF and there are more than 200,000 admissions to hospitals for
AF each year. The American Heart Association estimates that AF is responsible
for over 70,000 strokes each year in the United States. The Company estimates
that the cost of treating these patients is more than $3.6 billion annually.
The cost of drug treatment for AF alone is estimated to be in excess of $400
million worldwide each year.
AF is routinely diagnosed using an electrocardiogram, in which electrodes
are placed on the skin to record the irregular beating of the heart. However,
electrocardiograms are unable to locate the origin, or focus, of the AF.
Another diagnostic method, called mapping, involves placing catheters with
electrodes on their tips inside the chambers of the heart to record the
electrical signals generated by the heart in order to locate the focus of the
arrhythmia. Since AF is an arrhythmia that typically affects both the right
and left atria at the same time, the Company believes that optimal mapping of
AF requires the simultaneous evaluation of electrophysiological information
from both atria. The Company believes electrophysiologists do not routinely
map AF because currently available catheters are inadequate to map either the
entire right or left atrium, or both simultaneously.
Current AF treatments are directed at trying to reestablish a normal
heartbeat and prevent stroke, and are primarily supportive and palliative,
rather than curative. Antiarrhythmic and anticoagulant drugs, the most common
treatment for AF, are typically used to attempt to control AF by restoring the
heart's natural rhythm and limiting the natural clotting mechanism of the
blood. However, antiarrhythmic drug therapy often becomes less effective over
time, with approximately half of the patients eventually developing
resistance. In addition, antiarrhythmic drugs can have severe side effects,
including pulmonary fibrosis and impaired liver function. Another palliative
procedure for AF is external cardioversion, or the application of strong
electrical current under general anesthesia. This treatment is usually
effective for a limited period of time as well. Implantable atrial
defibrillators are being investigated to detect the onset of AF internally and
then deliver an electrical shock to convert the heart back to normal rhythm.
Although the preliminary results of clinical studies indicate that this
approach may be feasible, AF is not cured with this approach. There are
significant problems including pain tolerance, reversion to AF and creation of
VT as a result of the electrical shock. Purposeful destruction of the AV node
followed by implantation of a pacemaker is typically a treatment of last
resort for AF patients, but does not cure or treat the AF itself. Since atrial
function remains poor following the procedure, chronic anticoagulant therapy
is generally required.
The Company believes that the only curative therapy for AF used today is an
open heart operation. The most common procedure is the "maze" procedure, in
which a surgeon makes several slices through the wall of the atrium with a
scalpel and then sews the cuts back together creating a scar pattern. The
scars isolate and contain the chaotic electrical impulses to control and
channel the electrical signal emanating from the SA node. This open heart
operation is expensive and associated with long hospital stays and high
morbidity and mortality. Although this approach is not commonly used because
it is highly invasive, containing the movement of the chaotic impulses in the
atrium through scar creation is generally considered effective in controlling
AF.
Electrophysiologists are also experimenting with less invasive, catheter-
based ablation procedures that attempt to mimic the results of the maze
procedure. Although these procedures offer the benefit of a minimally invasive
approach, they are difficult to perform because of the shortcomings of
existing catheter technology and appear unable to create lesions that
effectively isolate portions of the atria where the arrhythmia causing tissue
is located.
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Ventricular Tachycardia
VT is a life-threatening condition in which heartbeats are improperly
initiated from within the ventricular wall, rather than from the SA node, thus
bypassing the heart's normal conduction system. The typical VT patient has
experienced a myocardial infarction, or heart disease, which leads to the
formation of a scar or electrical barrier inside the ventricular wall,
resulting in improper electrical conduction in the cells immediately bordering
the scar. During episodes of VT, the ventricles beat at such an abnormally
rapid rate that they are unable to fill completely with blood, thus impairing
the ventricles' ability to pump oxygenated blood throughout the body. The
resulting reduction in the amount of oxygen transported to the tissues and
organs of the body can cause dizziness and loss of consciousness. VT can often
progress into ventricular fibrillation ("VF"), which is an irregular, chaotic
and ineffective spasming of the ventricles. VF is fatal within a few minutes
of its occurrence, unless orderly contractions of the ventricles are restored.
It is estimated that more than 300,000 people in the United States suffer
from sudden cardiac death each year. Of these, approximately 50,000 people
survive, primarily through emergency defibrillation. These survivors are at
risk of developing VT or subsequently VF. The Company estimates that each year
over 100,000 people in the United States who have never suffered VF are
diagnosed with symptomatic VT. The American Heart Association estimates that
approximately 1.5 million people in the United States suffer myocardial
infarctions each year, of which approximately one million survive.
Approximately 30% of the survivors of a myocardial infarction suffer an
episode of VT within the following year. The Company believes all of these
individuals are potential candidates for a safe and cost-effective mapping and
ablation procedure.
VT may be diagnosed using a standard electrocardiogram in a manner similar
to the diagnosis of AF. The cardiac electrophysiologist typically attempts to
map VT to locate the focus of the arrhythmia within the heart's structure.
However, locating the arrhythmia causing tissue, which can occur at any point
in the thickness of the ventricular wall (see Figure 2 below), from the
endocardium, or inner surface of the heart wall, to the intramyocardium,
inside of the heart wall itself, to the epicardium, or outer surface of the
heart wall, can be difficult.
FIGURE 2: CROSS SECTION OF THE HEART SHOWING THE VENTRICULAR WALL
[DEPICTION OF CROSS SECTION OF HUMAN HEART AND ARRYTHMIA CAUSING TISSUE]
Similar to AF, current treatments for VT are primarily supportive and
palliative. Antiarrhythmic drugs are the most common treatment, although these
drugs have been shown to have a number of unwanted side effects,
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and in some circumstances may actually induce VT. The implantable cardioverter
defibrillator is also a common therapy, although it has a number of
undesirable consequences, such as patient reliance on an implantable device
with a limited battery life, the high cost of the implantation procedure and
the risks associated with implanting foreign objects. In addition, the
implantable cardioverter is only palliative and does not cure the VT or
destroy the arrhythmia causing tissue.
Similar to the treatment of AF, electrophysiologists are also experimenting
with less invasive, catheter-based ablation procedures for the treatment of
VT. However, access limitations and shortcomings of existing endocardial
catheter technology for ablation have limited the use of catheter technology
to treat VT.
Limitations of Current Catheter-Based Diagnosis and Therapy
The demonstrated medical benefits and cost efficiency of minimally invasive
surgical procedures have encouraged electrophysiologists to seek a means of
employing new, minimally invasive techniques for the diagnosis and treatment
of arrythmias. In the case of AF, electrophysiologists are experimenting with
a treatment technique, often referred to as the "drag and burn procedure," in
which conventional RF ablation catheters are dragged along the inside surface
of an atrium while applying RF energy. However, creating continuous, linear,
transmural lesions to isolate portions of the atria using this experimental
procedure with standard catheters has proven time consuming and difficult.
Endocardial catheter technology is also being tested for the treatment of VT.
The Company believes that an endocardial approach is suboptimal because the
muscle tissue of the ventricles is significantly thicker than the muscle
tissue in the atria, requiring the use of large amounts of RF energy. As a
consequence, the endocardial approach generates larger, less focused lesions,
increasing the amount of ventricular tissue destroyed in the procedure.
The Company believes that the disadvantages of existing catheter based
approaches for AF and VT are attributable not to the minimally invasive
approach of the procedure, but instead to existing catheter technology. The
catheters currently used are relatively large (typically six to seven French
in diameter) and stiff, increasing the risk of trauma to the heart during the
procedure, and restricting access primarily to the chambers of the heart. When
attempting to diagnose and treat VT using standard electrophysiology
catheters, the electrophysiologist is unable to access smaller blood vessels
within the ventricular wall. As a result, generally only signals generated
within one to two millimeters of the inner wall can be recorded. The current
technology is inadequate because the normal ventricular wall is five to 20
millimeters thick, and arrhythmia causing tissue, especially tissue causing
VT, can reside anywhere within that thickness. In addition, the information
generated by the endocardial diagnostic procedure is limited, as the
electrophysiologist can observe and evaluate only a limited number of signals
in a confined area. In order to observe more signals, the user must
mechanically manipulate the catheter to change its location. As a result, the
standard endocardial electrophysiology procedure is extremely laborious and
time consuming, in some cases requiring up to 30 or more RF energy deliveries
per treatment. Although there are endocardial basket-type catheters in
development that enable the electrophysiologist to record information from
multiple points in the ventricle at once, the Company believes that these
catheters suffer the same access limitations to arrhythmia causing tissue
located in the intramyocardium and epicardium as standard endocardial
catheters and often require additional investments in capital equipment.
Based on experience with standard endocardial catheters,
electrophysiologists recognize the need to record and evaluate a greater
amount of electrical information from various areas in the heart
simultaneously during AF or VT procedures. In the case of AF, the Company
believes there is a need for catheters that are able to map both right and
left atria at the same time, if warranted, and then immediately and
appropriately ablate the AF causing tissue. In the case of VT, the Company
believes there is a need for catheters that are able to map safely the entire
thickness of the ventricular wall, not just the endocardial surface, and
appropriately ablate the VT causing tissue with minimal trauma to normal
conducting heart tissue.
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THE CARDIMA MICROCATHETER SYSTEM SOLUTION
The primary clinical goal in the diagnosis and treatment of AF and VT is
precise mapping and effective, less destructive ablation. To achieve this, the
electrophysiologist must be able to access areas of the heart that are
currently inaccessible, using techniques that are easy to perform and that do
not increase the trauma to the patient. The Company's microcatheter systems
are designed to achieve this goal by providing enhanced access to the
arrhythmia causing tissue, by mapping the location of the arrhythmia and then
ablating the arrhythmia causing tissue using RF energy to cure the patient,
all in one procedure using the same catheter. The Company's microcatheter
systems are designed to offer the following advantages:
. MINIMALLY INVASIVE, CURATIVE APPROACH. The Cardima microcatheter systems
are designed to provide a minimally invasive approach to the treatment
of both AF and VT, resulting in decreased procedure time, shorter
hospital stays, lower procedure costs and fewer complications than the
surgical procedures currently in use.
. SINGLE CATHETER FOR RAPID MAPPING AND ABLATION. By using microcatheters
that can map, as well as ablate, the Company believes the
electrophysiologist need only access the arrhythmia causing tissue once
in order to map it, verify that it is causing the arrhythmia and then,
using the same device, ablate the tissue to cure the patient. The
Company believes this single catheter, dual function characteristic of
its microcatheter systems will decrease procedure times and improve
treatment of both AF and VT.
. ENHANCED ACCESS TO THE VASCULATURE OF THE HEART. Cardima's
microcatheters feature a significantly smaller diameter than standard
electrophysiology catheters, and incorporate Target variable stiffness
technology and a highly flexible distal tip. As a result, the Company's
microcatheters are more flexible and torqueable than standard
electrophysiology catheters and have varying degrees of flexibility at
the distal end to allow enhanced access to the vasculature of the heart,
to conform easily to the contours of the heart wall and to maintain
controlled, regular contact even in a fast beating heart.
. ABILITY TO GATHER MORE INFORMATION. The Company's microcatheter system
designs include a large number (up to 16) of narrow electrodes, while
maintaining a high degree of flexibility. The Company believes that this
design permits the electrophysiologist to acquire and evaluate far more
information in a mapping procedure than is available using standard
electrophysiology catheters, which typically incorporate fewer
electrodes. The increased amount of information recorded using the
microcatheter approach should enable the electrophysiologist to target
the arrhythmia causing tissue with greater precision, in order to permit
effective ablation.
. CURATIVE TREATMENT FOR AF. The Cardima Pathfinder AF microcatheter
system is designed to treat AF by creating long, thin, continuous,
linear, transmural lesions in both the right and left atria to isolate
and contain the arrhythmia causing tissue, thereby restoring normal
electrical function by controlling and reorganizing the random, chaotic
electrical activity that characterizes AF. In animal studies, the
Company's microcatheter systems have required less RF energy and created
significantly thinner lesions than standard electrophysiology catheters,
preserving a greater amount of atrial tissue following the procedure.
The Company believes this will result in a significant improvement in
atrial function and a reduction in the risk of blood clotting, reducing
or eliminating the need for chronic anticoagulant therapy. The Company
believes this approach has the potential to offer the effectiveness of
the open heart surgical cure for AF, but with significantly less trauma,
fewer complications, reduced pain, shorter hospital stays and lower
procedure costs.
. CURATIVE APPROACH FOR VT. The Company's microcatheter systems for the
mapping and ablation of VT are designed for use inside the vasculature
of the heart wall, facilitating access to arrhythmia causing tissue
through the venous system. Cardima believes that at least half of VT
foci are located in the intramyocardium and the epicardium, areas that
are ineffectively accessed using standard endocardial catheters or
basket type catheters in development. The intravascular approach to VT
ablation should permit the microcatheters to be positioned in close
proximity to the arrhythmia causing tissue, facilitating the creation of
smaller, more focused lesions. The Company believes that this approach
has the potential to be more effective than standard endocardial
ablation procedures, with
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reduced destruction of surrounding healthy tissue, thus maximizing and
optimizing the normal function of the heart after the procedure. The
Company is not aware of any epicardial mapping catheters other than the
Cardima Pathfinder and Tracer under development.
. COMPATIBLE WITH EXISTING CAPITAL EQUIPMENT. The Company's microcatheter
systems are designed to be compatible with leading electrophysiology
signal display systems and RF generators, in order to eliminate the need
for significant new investment in additional capital equipment. By
facilitating the rapid and precise location of the arrhythmia causing
tissues using a system that is compatible with standard laboratory
equipment, the Company believes its products will be rapidly adopted by
electrophysiologists.
. REDUCED PROCEDURE AND RADIATION EXPOSURE TIMES. The Company believes
that its microcatheter systems will reduce procedure times and thereby
decrease cumulative x-ray exposure to both patients and lab personnel.
Standard electrophysiology procedures, in many cases, expose both the
patient and the lab personnel to over one hour of accumulated x-ray time
during flouroscopy, which is used to visualize the placement of the
catheters. The Company believes that the total procedure and fluoroscopy
time associated with the use of its microcatheter systems are less than
those using standard electrophysiology catheters, thereby reducing
procedure costs and the risk of disease resulting from extended exposure
to x-ray flouroscopy.
STRATEGY
Cardima's objective is to establish its microcatheter systems as the
standard of electrophysiological care for mapping and ablating AF and VT. To
achieve its objective, the Company is pursuing the following strategies:
DEVELOP MICROCATHETER TECHNOLOGY TO ADDRESS UNMET CLINICAL NEEDS FOR BOTH
MAPPING AND ABLATION. Cardima is developing microcatheter systems to address
clinical needs that are not adequately addressed by current technology.
Cardima is focused on both endocardial access for AF and intravascular access
for VT, and provides a microcatheter systems approach to addressing AF and VT.
Cardima has designed systems incorporating variable stiffness technology
originally developed at Target, including guiding catheters, fixed-wire and
over-the-wire systems, in order to optimize the physician's ability to access
the areas of interest in the heart easily and safely. By using microcatheters
that can map as well as ablate, the Company believes the electrophysiologist
need only access the arrhythmia causing tissue once in order to map it, verify
that it is causing the arrhythmia and then ablate the tissue using the same
catheter.
PROVIDE MICROCATHETER SYSTEMS THAT LOWER THE COST OF TREATING
ELECTROPHYSIOLOGICAL DISORDERS. The Company's microcatheter systems are
designed to reduce the average time required for AF and VT diagnostic and
treatment procedures significantly. As a result, time spent in high cost
electrophysiology laboratories should be reduced, lowering the overall cost of
AF or VT treatments. The shorter procedure time that the Company believes will
result from the use of its microcatheter systems should enable physicians to
perform a greater number of AF or VT procedures and reduce the overall cost
per procedure. In addition, the Company intends to use data derived from its
clinical studies to establish reimbursement for AF and VT procedures using the
Company's microcatheter systems. The Company believes that its microcatheter
systems will appeal to patients and third party payors seeking a cost-
effective solution to the diagnosis and treatment of AF and VT.
ACCELERATE ACCEPTANCE AND ADOPTION OF THE COMPANY'S MICROCATHETER SYSTEMS BY
LEADING ELECTROPHYSIOLOGISTS. The Company has formed relationships with
leading medical centers in the United States, Europe and Japan to perform
clinical trials of its microcatheter systems for the diagnosis and treatment
of AF and VT. Cardima believes that successful acceptance and adoption of
these systems by widely recognized experts in the field of electrophysiology
is a critical step in the overall market acceptance of its microcatheter
systems. In addition, the Company has established a Scientific Advisory Board
composed of leading electrophysiologists at medical centers in the United
States to consult with the Company concerning the preclinical and clinical
development of the Company's microcatheter systems. The Company intends to
continue to work with leading
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physicians and medical centers and to initiate clinical trials to demonstrate
the safety and effectiveness of its microcatheter systems and ultimately to
establish broad market acceptance. In addition, Cardima intends to accelerate
physician education and adoption through peer-reviewed publications concerning
the clinical trials of the Company's microcatheter systems.
BUILD MARKET LEADERSHIP THROUGH STAGED INTRODUCTION OF MICROCATHETER
SYSTEMS. In the United States, the Company intends to first introduce
microcatheter systems for mapping while continuing to develop its
microcatheter systems for ablating AF and VT. The Company has received 510(k)
premarket clearance for its Cardima Pathfinder microcatheter system for VT
mapping in January 1997 and submitted a 510(k) premarket notification for the
Cardima Pathfinder AF microcatheter system for AF mapping in March 1997. The
Company expects to establish the benefits of its microcatheter systems by
encouraging their use initially as a diagnostic complement to standard
ablation catheters. As a result, the Company's strategy is to establish the
utility of these diagnostic systems in advance of regulatory approval for the
Company's microcatheter systems for the treatment of AF and VT.
INCREASE SALES BY FURTHER PENETRATING INTERNATIONAL MARKETS. The Company
intends to devote significant resources to further penetrate international
markets, given their substantial size and the relatively lower regulatory
barriers. The Company has received ISO 9001 (EN 46001) Quality Systems
certification, as well as the right to affix the CE Mark to a number of its
products. The Company has received regulatory approval in the United States,
Europe, Japan, Australia and Canada for the Cardima Pathfinder microcatheter
system for mapping VT and has received regulatory approval in Europe, Japan
and Australia for the Cardima Pathfinder AF microcatheter system for mapping
AF. The Company is pursuing additional regulatory approvals in Europe, Canada
and Japan necessary to market its microcatheter systems for ablation. In
addition, the Company has trained electrophysiologists in Europe, Canada and
Japan in the use of its products.
PRODUCTS
Cardima is developing the Cardima Pathfinder and Tracer families of
microcatheter systems for the diagnosis and treatment of AF and VT. These
systems are designed, in the case of AF, to access both the right and left
atria and, in the case of VT, to be positioned within the coronary vasculature
using a guiding catheter in a system similar to that used in angioplasty
procedures. Cardima's microcatheter systems are designed to be used
endocardially in the atria to map and then ablate AF through the creation of
long, thin, continuous, linear, transmural lesions to treat AF. For VT, these
systems are designed to provide intravascular access to the heart to map and
ablate within the wall of the ventricles. The Cardima Pathfinder and Tracer
families of microcatheters are available in a variety of electrode numbers,
electrode spacing configurations and outer diameters. These microcatheter
systems are smaller in diameter and are designed to be more flexible and
torqueable than standard electrophysiology catheters, providing better
steerability for the electrophysiologist. In addition, these systems have a
series of electrodes at their distal ends that can both receive electrical
signals for mapping and emit RF energy for ablation. The Company's Cardima
Pathfinder and Tracer microcatheters are designed for single use. The Company
is designing its products to be used with existing electrophysiology computer
systems and RF ablation generators. The Company's ancillary products,
including guidewires and connecting cables, support these families of
microcatheter systems.
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The following table describes the Company's products and their intended
indications and regulatory status:
<TABLE>
<CAPTION>
INTERNATIONAL
AF PRODUCTS DESCRIPTION INDICATION U.S. REGULATORY STATUS(1) REGULATORY STATUS(1)
----------- ------------------- ---------- ------------------------- --------------------
<S> <C> <C> <C> <C>
Cardima Fixed-wire multi- Mapping 510 (k) Approved in Europe
Pathfinder electrode submission filed in (CE Mark) and
AF microcatheter March 1997. Japan.
system designed to
create long, thin,
continuous, linear,
transmural lesions
in both right and
left atria.
Ablation IDE submission European and
filed in January Japanese ablation
1997. Conditional submissions
approval for Phase necessary for
I (mapping) clinical trials
obtained in January expected in 1997.
1997.
<CAPTION>
INTERNATIONAL
VT PRODUCTS DESCRIPTION INDICATION U.S. REGULATORY STATUS(1) REGULATORY STATUS(1)
----------- ------------------- ---------- ------------------------- --------------------
<S> <C> <C> <C> <C>
Cardima Fixed-wire multi- Mapping 510(k) clearance Approved in Europe
Pathfinder electrode obtained. (CE Mark) and
microcatheter Japan.
system designed for
accessing coronary
vasculature to
locate the
arrhythmia causing
tissue.
Cardima Smallest Cardima Mapping 510(k) submission Approved in Europe
Pathfinder Pathfinder expected in first (CE Mark) and
1.5 Fr. microcatheter (1.5 half of 1997. Japan.
French) designed to
provide more distal
access to smaller
blood vessels in
the heart wall.
Tracer Over-the-wire Mapping 510(k) submission Approved in Europe
and multi-electrode expected in first (CE Mark) and
Tracer VT microcatheter half of 1997 for Japan.
system designed to mapping using
be used in the Tracer.
veins of the heart
wall over a
steerable
guidewire.
Ablation IDE submission European and
expected in late Japanese ablation
1997 for ablation submissions
using Tracer VT. necessary for
clinical trials
expected in 1997.
<CAPTION>
INTERNATIONAL
ANCILLARY PRODUCT DESCRIPTION INDICATION U.S. REGULATORY STATUS(1) REGULATORY STATUS(1)
- ----------------- ------------------- ---------- ------------------------- --------------------
<S> <C> <C> <C> <C>
Venaport Coronary sinus Venous 510(k) clearance Approved in Europe
guiding catheters access obtained. (CE Mark). Japanese
with a family of submission expected
curved shapes and first half of 1997.
lengths. Designed
to deliver Cardima
Pathfinder and
Tracer
microcatheter
systems to desired
coronary veins.
</TABLE>
- --------
(1) The regulatory status of the Company's microcatheter systems reflects the
Company's current estimates of the timing of regulatory submission in the
Unites States, Europe or Japan. See "--Government Regulation." The actual
submission times could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including
failure to complete development of microcatheter systems or to demonstrate
safety or effectiveness in clinical studies, as well as the other factors
set forth under "Risk Factors" and elsewhere in this Prospectus.
34
<PAGE>
Products Designed for Mapping and Ablating AF
The Company believes its microcatheter systems can access the right and left
atria in a minimally invasive procedure and are designed to effectively ablate
AF by creating long, thin, continuous, linear, transmural lesions in the atria.
Cardima Pathfinder AF for AF Mapping. The Cardima Pathfinder AF microcatheter
system is designed to facilitate mapping of both the right and left atria. The
Cardima Pathfinder AF is a thin, flexible, multi-electrode microcatheter. The
Cardima Pathfinder AF microcatheter system utilizes a three French diameter
microcatheter that incorporates Target variable stiffness technology that both
permits access to any area of the atria and enhances contact to surrounding
heart tissue, and also has three millimeter long platinum coil electrodes for
added flexibility. Because the Cardima Pathfinder AF is one of the smallest
electrophysiology catheters ever developed, the Company believes several
catheters can be positioned in the right atrium and the left atrium at the same
time to map both atria simultaneously. This microcatheter system is being sold
for mapping AF in Europe and Japan. In March 1997, the Company submitted a
510(k) premarket notification for this microcatheter system for mapping AF,
based in part on results of the Company's laboratory and animal studies.
There is considerable clinical debate regarding the need for mapping AF prior
to ablation, because, among other reasons, the electrical characteristics of
the arrhythmia causing tissue cannot be assessed adequately using current
technology. No mapping is performed during the open heart surgical maze
procedure. However, the Company believes that mapping prior to ablation may be
useful to identify different segments of the AF population, each of which could
require slightly different mapping and ablation procedures. For example, some
electrophysiologists believe most AF patients will need to be mapped and
ablated in both the left and right atria, while others believe only right
atrial intervention is warranted. The Company believes that its products will
have clinical utility in either of these situations.
Cardima Pathfinder AF for AF Ablation. The multiple electrodes of the Cardima
Pathfinder AF microcatheter are closely grouped and can be used to create a
continuous lesion that extends through the thickness of the atrial wall. The
Company believes that the electrophysiologist will be able to use the Cardima
Pathfinder AF microcatheter system to create long, thin, continuous, linear,
transmural lesions in both the right and left atria, thereby restoring normal
electrical function in the atria by isolating the arrhythmia causing tissue in
a manner similar to the open heart surgical maze procedure, without the
associated risk and expense. Unlike other proposed catheter-based ablation
techniques, such as the "drag and burn" approach, the Cardima approach does not
involve resetting the catheter position during the linear ablation procedure.
As a result, the Cardima Pathfinder AF may have the ability to more effectively
and rapidly ablate the arrhythmia causing tissue.
The Cardima Pathfinder AF microcatheters are designed with narrow electrodes
that are able to deliver ablation level energy to the atrial tissue at much
lower power settings than documented with standard electrophysiology catheters.
The Company's animal studies have demonstrated the ability of the Cardima
Pathfinder AF to create the thinnest linear lesions that the Company believes
have ever been documented and presented generally to the electrophysiology
community. The Company has designed its Cardima Pathfinder AF microcatheter
system to be used with leading cardiac electrophysiology RF generators and
electrophysiology mapping computer systems.
The Company filed an IDE with the FDA for the Cardima Pathfinder AF
microcatheter system for mapping and ablation of AF in January 1997. The
protocol for this feasibility study was divided into two parts, one focusing on
mapping and one focusing on ablation. The Company has subsequently received
conditional approval for the mapping phase of the study and expects to begin
human mapping clinical trials in the first half of 1997. This feasibility study
will not be sufficient to support a PMA, and the Company will need to conduct
additional studies prior to submission of a PMA application. The Company
expects to submit an IDE for the Phase II pivotal clinical trials for the
Cardima Pathfinder AF microcatheter system for ablation in the second half of
1997. The Company believes that PMA approval will be required before the
Cardima Pathfinder AF for atrial ablation can be marketed in the United States.
See "--Government Regulation."
Products Designed for Mapping and Ablating VT
The Company's intravascular approach allows its microcatheters to be
positioned in close proximity to the VT causing tissue and provides stable
positioning within the vascular system. The Company believes this
35
<PAGE>
approach will result in greater accuracy of diagnosis and more effective
treatment. The Company is not aware of any other epicardial mapping catheters
in development.
Cardima Pathfinder and Tracer for VT Mapping. The Company's microcatheter
systems used for diagnosing and treating VT are designed to be positioned
within the coronary vasculature using a guiding catheter in a system similar
to that used in angioplasty procedures and also have a series of electrodes at
their distal ends in order to perform as electrophysiology catheters. The
Cardima Pathfinder and Tracer microcatheter systems can be used to subselect
vessels and access the small veins located at the apex (lower tip) of the
heart. The Cardima Pathfinder microcatheter systems are configured with either
four, eight or 16 electrodes, that enable the physician to perform a narrow
focus evaluation using a smaller number of electrodes, if there is reason to
believe the VT causing tissue is located in a specific area, or a wider focus
evaluation using larger number of electrodes, if there is little indication
regarding the location of the VT causing tissue.
The Company received 510(k) clearance for the Cardima Pathfinder
microcatheter system for VT in January 1997 and has begun marketing and
selling the product in the United States. The Company is also currently
selling the Cardima Pathfinder product for VT mapping in Europe, Japan,
Australia and Canada. The Company's animal studies have shown that the Cardima
Pathfinder can safely map via the vessels of the coronary venous system and
have demonstrated the ability to simultaneously position five different
Cardima Pathfinders in various vessels of the coronary system. To date, the
Cardima microcatheter systems have been used to map VT in more than 30
patients in Europe, South America and Japan. See "--Government Regulation."
Cardima Pathfinder 1.5 Fr. for VT Mapping. The Cardima Pathfinder 1.5 Fr.,
the Company's smallest microcatheter system, is being developed for VT mapping
in the venous system. The Cardima Pathfinder 1.5 Fr. is 1.5 French in diameter
(the typical catheter is six or seven French) and provides more distal access
to smaller vasculature of the heart. Similar to the Cardima Pathfinder
microcatheter, the Cardima Pathfinder 1.5 Fr. microcatheter is constructed
around a finely ground core-wire to provide the steerability necessary to
access distal vasculature. The Cardima Pathfinder 1.5 Fr. microcatheter has a
flexible platinum tip coil and contains a variable number of electrodes with
different spacing options. The Company expects to submit a 510(k) premarket
notification for this product in the first half of 1997.
Tracer VT for VT Ablation. The Company's epicardial approach to VT ablation
is intended to address the shortcomings of standard endocardial ablation
catheters. Once a VT focus has been identified as being epicardial or
intramyocardial, the electrophysiologist must decide whether or not to attempt
to ablate that focus from the endocardial side of the heart wall. Physicians
using existing ablation systems are faced with a fundamental problem: the
further the VT focus is from the endocardial side of the heart wall, the
larger the lesion size necessary to cure the condition. Traditionally,
electrophysiologists have had to use catheters and generators capable of
making larger lesions since they can only ablate the arrhythmia causing tissue
from the endocardial side. A large number of VT ablation cases required
multiple endocardial RF energy deliveries (up to 30 or more in one
electrophysiology study). Increased endocardial RF energy in ablation may
result in greater risk that the patient will develop blood clots, which may
dislodge and travel to the brain causing stroke and decreased cardiac output.
Cardima's microcatheter systems are intended to offer an alternative approach
to current ablation techniques by facilitating access to the arrhythmia
causing tissue and providing greater ablation accuracy using less RF energy.
The Company is not aware of any epicardial RF ablation catheter other than its
Tracer VT microcatheter system under development.
The Tracer VT microcatheter tracks over a guidewire in the coronary veins
and can access the important distal vasculature regions of the heart and
deliver RF energy to the epicardium. The Tracer VT is designed to map, locate
and ablate the VT focus using RF energy directly applied through the veins.
The Company is currently conducting animal studies to demonstrate the ability
of the Tracer VT to access the distal venous system and safely release RF
energy with no damage to the adjacent arteries. In these experiments the
Tracer VT has required significantly less energy to ablate VT than standard
endocardial catheters.
36
<PAGE>
The Company believes that it will submit an IDE for the Tracer VT
microcatheter system in 1997 and begin clinical trials if the IDE is approved.
The Company expects that PMA approval will be required before the Tracer VT
for VT ablation can be marketed in the United States. See "--Government
Regulation."
The Company's intravascular electrophysiology catheters are coated with a
hydrophilic coating. This coating has been used on Target's products designed
to access the vessels of the brain. The Company believes the coating
significantly improves mechanical function. The Company has an exclusive
license to use the hydrophilic coating technology in products designed to map
and ablate cardiac arrhythmias while positioned within coronary vasculature.
Cardima's microcathether system for venous mapping of VT has received 510(k)
clearance from the FDA for sale in the United States and includes the Cardima
Pathfinder microcatheter and Venaport guiding catheter. The Company's other
microcatheter systems for mapping or ablation have not received FDA clearance
or approval for marketing and distribution in the United States. The Company's
microcatheter systems for ablation are at an early stage of testing. There can
be no assurance that the results of the Company's human clinical studies will
validate the results of its animal studies. The Company has not received
approval to begin clinical trials of any of its microcatheter systems for
ablation and there can be no assurance that any such approvals will be
received. See "Risk Factors--Early Stage of Product Development; No Assurance
of Safety and Effectiveness" and "--No Assurance of Obtaining Required
Regulatory Approvals; Government Regulation."
RESEARCH AND NEW PRODUCT DEVELOPMENT
The Company believes its future success will depend in large part on its
ability to develop and introduce clinically advanced diagnostic and
therapeutic systems that are effective, easy to use, safe and reliable. The
Company's research and new product development department focuses on the
continued development and refinement of its existing diagnostic devices,
systems and procedures, as well as on the development of new devices, systems
and procedures for treating cardiac arrhythmias. The Company's primary
research and development programs involve completing the development of
microcatheter systems for AF and VT ablation and developing smaller second
generation microcatheter systems for multi-catheter mapping of VT.
Research and development expenses for the years ended December 31, 1994,
1995 and 1996, were $2.2 million, $2.6 million and $3.3 million, respectively.
The Company intends to make significant investments in research and new
product development for the foreseeable future.
MARKETING AND DISTRIBUTION
The Company markets and sells its Cardima Pathfinder, Tracer and Venaport
microcatheter systems internationally through medical device distributors, and
currently sells its approved devices in the United States through a direct
sales force. The Company believes there are between 500 and 600 hospitals in
the United States and an additional 600 hospitals internationally that perform
electrophysiology procedures on a routine basis. Further, the Company believes
there are over 600 board certified electrophysiologists in the United States,
and an equal number of practicing electrophysiologists internationally. The
Company believes that a small sales force can serve its target market
effectively due to the relatively small number of physicians performing a
significant percentage of electrophysiology procedures.
United States
The Company's sales strategy in the United States involves the use of both
direct sales representatives and clinical specialists. The Company intends to
use its clinical specialists to support U.S. clinical trials for the AF and VT
microcatheter systems. The Company currently sells the Cardima Pathfinder for
VT mapping through a direct sales force in the United States consisting of
five sales personnel and two clinical specialists.
The Company is currently establishing regional training hospitals in order
to provide physicians with both a clinical perspective on the use of the
Company's products as well as the appropriate technical training for the
37
<PAGE>
handling of its products. The Company intends to continue to develop
relationships with key academic institutions and physicians who are well
recognized in the field of electrophysiology for the quality of their research
and their ability to influence medical opinion. The Company intends to utilize
these product champions in the United States, as it is internationally, to
assist it in gaining broad market acceptance and adoption of its products.
Several of these physicians have been involved in the development of the
Company's products, and the Company intends to continue to build these
relationships through its Scientific Advisory Board, participation in regional
training centers and physician-oriented symposia.
International
The Company's international distributors are experienced in cardiovascular
products and many have prior experience with electrophysiology. The Company
currently uses distributors in Germany, France, Italy, Spain, Portugal, the
United Kingdom, Belgium, The Netherlands and Japan. These countries accounted
for 70% of the Company's total sales in 1995 and 91% of total sales in 1996.
In addition, the Company has distribution in other countries in Europe and the
Pacific Rim.
The Company operates under written distribution agreements in Spain,
Portugal, Belgium, The Netherlands and Japan. These agreements grant exclusive
rights to sell the Company products within a defined territory for periods
ranging from approximately two to three years. These agreements generally
reserve for the Company the right to terminate the distribution agreement for
cause, which includes failure to meet specified minimum performance
obligations, or the failure of the distributor to obtain required governmental
approvals to distribute the Company's products in the territory. The Company
has retained the right to terminate the distribution agreement should the
distributor begin to market medical devices that compete directly with those
of the Company. In Germany, France, Italy and the United Kingdom, where there
are significant sales of the Company's products, the Company is currently
negotiating distribution agreements on similar terms; however, there can be no
assurance that the Company will be able to complete these negotiations and
enter into agreements with these distributors on commercially reasonable
terms. In other countries where the Company's products are sold, the Company's
distributors operate under letter or oral arrangements. In the territories
where the Company does not have written agreements with its exclusive
distributors, the terms of the arrangements, such as length of arrangements
and minimum purchase obligations are uncertain. In addition, the laws in
certain international jurisdictions may make it difficult for the Company to
terminate such distribution arrangements absent specific written termination
terms. These distributors also sell medical products manufactured by other
companies. Distributors typically purchase the Company's products at a
discount to list price and resell the products to hospitals and physicians at
a price determined by the distributor. Sales to the international distributors
are denominated in U.S. dollars.
The Company currently has a limited sales organization. The Company's Vice
President, World Wide Sales and the Company's Director, European Sales manage
distributor relationships on a worldwide basis. In addition, the Company has
hired two clinical specialists (based in the United States) to support the
global sales effort.
Establishing a sales organization with the ability to support sales in
significant volumes will require significant management and financial
resources. To date, the Company has not established all of the international
distribution alliances necessary to fully market these products on a worldwide
basis, nor does the Company have written distribution agreements with all of
its international distributors. There can be no assurance the Company will be
able to enter into agreements with the desired distributors on a timely basis,
or that such distributors will devote adequate resources to selling the
Company's products.
Since the Company introduces its products initially in foreign markets, the
Company expects to continue to derive a substantial portion of its revenues
from international sales. The Company expects that international sales will
continue to account for a significant portion of the Company's total revenues
for the foreseeable future. As a result, a significant portion of the
Company's revenues will be subject to the risks associated with international
sales. See "Risk Factors--Risk of International Sales."
38
<PAGE>
MANUFACTURING
The Company fabricates certain proprietary components of the Company's
products and assembles, inspects, tests and packages most components into
finished products. Designing and manufacturing its products from raw materials
allows the Company to maintain greater control of quality and manufacturing
process changes and the ability to limit outside access to its proprietary
technology.
The Company believes its custom-designed, proprietary process equipment is
an important component of its manufacturing strategy. In some cases, the
Company has developed proprietary enhancements for existing production
machinery to facilitate the manufacture of its products to exacting standards.
The Company has also developed core manufacturing technologies and processes,
including proprietary extrusion techniques and equipment, polymer processing
capabilities, including composite lamination, welding of dissimilar materials,
balloon forming and proprietary precision guidewire grinding techniques
enabling fabrication of a large variety of guidewire core profiles.
Furthermore, the Company's technological expertise includes braiding,
hydrophilic coating, material cleaning and surface preparation.
The manufacture of catheters is a complex operation involving a number of
separate processes and components. Catheters are assembled and tested by the
Company prior to sterilization. The manufacturing process for the connecting
cable consists primarily of packaging and testing purchased units. The Company
has no experience manufacturing its products in the volumes that will be
necessary for the Company to achieve significant commercial sales, and there
can be no assurance that reliable, high-volume manufacturing capacity can be
established or maintained at commercially reasonable costs. If the Company
receives additional FDA clearance or approval for its products, it will need
to expend significant capital resources and develop additional manufacturing
expertise to establish large-scale manufacturing capabilities.
Components and raw materials are purchased from various qualified suppliers
and subjected to stringent quality specifications. The Company expects to
conduct supplier quality audits and is establishing a supplier certification
program. A number of the components such as the laminate tubing, core wiring
mandrels, connector components and hydrophilic coating are provided by sole
source suppliers. For certain of these components, there are relatively few
alternative sources of supply, and establishing additional or replacement
suppliers for such components, particularly the laminate tubing, could not be
accomplished quickly. The Company plans to qualify additional suppliers if and
as future production volumes increase. Because of the long lead time for some
components which are currently available from a single source, a supplier's
inability to supply such components in a timely manner could have a material
adverse effect on the Company's ability to manufacture products and therefore
on its business, financial condition and ability to test or market its
products on a timely basis.
The Company's manufacturing facilities are subject to periodic inspection
from regulatory authorities, and its operations must undergo QSR and ISO 9001
(EN 46001) compliance inspections conducted by the FDA and TUV, a notified
body (a regulatory agency) in the European Union ("EU"), respectively. In
addition, the Company has obtained ISO 9001 (EN 46001) Quality Systems
certification from TUV and has obtained the right to affix the CE Mark to its
electrophysiology mapping catheters and accessories. The Company's facilities
and manufacturing processes have recently successfully undergone a combined
inspection by the FDA and California Department of Health Services and an
annual reinspection by TUV. See "--Government Regulation."
PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in part on its ability to obtain patent
and copyright protection for its products and processes, to preserve its trade
secrets and to operate without infringing or violating the proprietary rights
of third parties. The Company's strategy is to actively pursue patent
protection in the United States and foreign jurisdictions for technology it
believes to be proprietary and which offers a potential competitive advantage
for its products. The Company holds one issued patent covering a number of
aspects of the Cardima Pathfinder and Tracer microcatheter systems for
detecting electrical activity in the heart. In addition, the Company has 17
pending United States patent applications, and has filed eight international
patent applications which are currently pending. The Company's patents and
patent applications relate to a number of aspects of the
39
<PAGE>
Company's technology, including the technology for the Company's atrial
ablation system, intravascular mapping catheters and the method of use,
guiding catheters for coronary sinus access and intravascular ablation
systems. The Company intends to file additional patent applications to seek
protection for other proprietary aspects of the technology in the future. No
assurance can be given that the patent applications owned by the Company will
provide competitive advantages for the Company's products or that any patent
application owned by the Company will issue as a patent. In addition, there
can be no assurance any of the Company's patents or patent applications will
not be challenged, invalidated, or circumvented in the future. There can also
be no assurance that competitors, many of whom have greater resources than the
Company and have substantial investments in competing technologies, will not
apply for and obtain patents which will prevent, limit or interfere with the
Company's ability to make, use, or sell its products either in the United
States or internationally.
The Company has also obtained rights to certain technology by entering into
license arrangements. Pursuant to a license agreement with Target (the
"License Agreement"), the Company obtained an exclusive, royalty-free,
worldwide license under certain patents issued in the United States and
corresponding international patents to use Target's technology and to make,
use and sell or otherwise distribute products for the diagnosis and treatment
of electrophysiological diseases in the body, other than in the central
nervous system, including the brain. The exclusive license applies to any
Target technology developed through May 1996 and will terminate upon the last-
to-issue licensed patents issued prior to May 21, 1996. In addition, the
Company has obtained a non-exclusive license to use Target's technology,
provided it has made a substantial improvement on such technology, for the
diagnosis or treatment of diseases of the heart other than using balloon
angioplasty. As defined in the License Agreement, a substantial improvement is
any modification, improvement or enhancement of Target technology that results
in a material change in the function, purpose or application of a particular
product incorporating Target technology. The Company believes that the
incorporation of electrodes in its microcatheter systems, together with other
modifications, satisfies the substantial improvement requirements.
Under the License Agreement, Cardima granted back to Target an exclusive,
royalty-free, worldwide license to use technology developed by Cardima through
May 1996 in the fields of neurology, interventional neurology, interventional
reproductive disorders and vascular prostheses (the "Target Field"). In
addition, the Company agreed not to conduct material research and development,
acquire corporate entities or make or sell products in the Target Field or to
sell products, other than products utilizing Target's technology, for use in
diagnosis or treatment of diseases related to the production of electrical
current in tissue located in areas of the body other than the heart, without
first notifying Target and negotiating a distribution agreement. Cardima also
agreed that it would not sell products utilizing Target's technology for use
in diagnosis or treatment of diseases related to the production of electrical
current in tissue located in areas of the body other than the heart without,
if selling to a distributor, first notifying Target and offering Target the
right of first refusal with respect to the terms of the distribution, or if
selling directly to the consumer, paying to Target an amount equal to 40% of
the gross profit for such product. See "Risk Factors--Influence of Target
Therapeutics, Inc."
The Company obtained rights to its biocompatible hydrophilic coating
material and process through an exclusive, royalty bearing license to use the
hydrophilic coating technology in products designed to map and ablate cardiac
arrhythmias while positioned within the coronary arteries and coronary veins.
The license will terminate upon the later of 15 years from first commercial
sale of catheters treated with the coating material or the expiration of the
last-to-issue licensed patent, unless terminated earlier for material breach.
In addition to patents and licenses, the Company also relies upon trade
secrets, technical know-how and continuing technical innovation to develop and
maintain its competitive position. The Company typically requires its
employees, consultants, and advisors to execute confidentiality and assignment
of invention agreements in connection with their employment, consulting or
advisory relationships with the Company. There can be no assurance, however,
that the agreements will not be breached or that the Company will have
adequate remedies for any breach. Furthermore, no assurance can be given that
competitors will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to the
Company's proprietary knowledge, or that the Company can meaningfully protect
its rights in unpatented proprietary technology.
40
<PAGE>
Patent applications in the United States Patent and Trademark Office
("USPTO") are maintained in secrecy until patents issue, and patent
applications in the patent offices of foreign countries are maintained in
secrecy for a period of 18 months from the priority date. Publication of
discoveries in the scientific or patent literature tend to lag behind actual
discoveries and related patent applications, and the large number of patents
and applications and the fluid state of the Company's development activities
make comprehensive patent searches and analysis impractical or not cost-
effective. Although the Company has made patent and publication searches in
the United States and in foreign countries to determine whether materials,
processes or designs used by it or its potential products infringe or will
infringe third-party patents, such searches have not been comprehensive.
Patents issued and patent applications filed relating to medical devices are
voluminous and there can be no assurance that current and potential
competitors and other third parties have not filed or will not file
applications for, or have not received or will not receive, patents and will
not obtain additional proprietary rights relating to products, materials or
processes used or proposed to be used by the Company.
The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights, and companies in the
medical device industry have employed intellectual property litigation to gain
a competitive advantage. While the Company's patents have not been the subject
of any litigation, the Target patent which relates to the variable stiffness
design of Target's Tracker microcatheters (the "Tracker Patent") has been the
subject of four reexamination proceedings in the USPTO. Following the
completion of the first such proceeding, the USPTO issued a reexamination
certificate and confirmed the patentability of the patent claims set forth in
the certificate. Requests for second, third and fourth reexaminations of the
Tracker Patent were initiated by one of Target's competitors, SciMed, a
subsidiary of Boston Scientific. After the USPTO's review of such petitions,
Target received notice from the USPTO that it had reaffirmed the patentability
of the claims of the Tracker Patent.
In addition, the Company is aware that in 1994 Target filed a lawsuit
against SciMed and Cordis Endovascular Systems, Inc. (now a division of
Johnson & Johnson) in the U.S. District Court, seeking damages and preliminary
and permanent injunctive relief against further infringing sales. After
various court actions, the Court of Appeals has temporarily stayed the
preliminary injunction, which had been granted prohibiting Cordis and SciMed
from infringing on the Tracker Patent, while it considers a motion opposing
the injunction filed by Cordis and SciMed. In January 1997, Target entered
into an agreement with Boston Scientific whereby Target agreed to be merged
with a wholly-owned subsidiary of Boston Scientific. Pursuant to the
agreement, the merger, if consummated, would result in the termination of the
lawsuit between Target and SciMed. The merger is expected to close during the
second quarter of 1997. There can be no assurance that the merger will be
consummated or that the lawsuit will be terminated or if the lawsuit is not
terminated that Target will ultimately be successful in the lawsuit or that
SciMed will not mount a legal challenge to the validity of the Tracker Patent.
If the Tracker Patent is ultimately determined to be invalid, the Company's
proprietary rights in the variable stiffness technology could be compromised,
and the Company's competitors would have the ability to incorporate such
technology in their products. This erosion of this competitive advantage could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Although there are no claims against the Company, any such claims, whether
with or without merit, could be time-consuming and expensive to respond to and
could divert the Company's technical and management personnel. If any claims
of third party patents are upheld as valid and enforceable in any litigation
or administrative proceeding, the Company could be prevented from practicing
the subject matter claimed in such patents, or could be required to obtain
licenses from the patent owners of each patent, or redesign its products or
processes to avoid infringement. There can be no assurance the licenses will
be available or, if available, will be available on terms acceptable to the
Company or that the Company will be successful in any attempt to redesign its
products or processes to avoid infringement. Accordingly, an adverse
determination in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent the Company from manufacturing and selling
its products, which would have a material adverse effect on the Company's
business, financial condition, and results of operations. The Company intends
to vigorously protect and defend its intellectual property. Costly and time-
consuming litigation brought by the Company may be necessary to enforce
patents
41
<PAGE>
issued to the Company, to protect trade secrets or know-how owned by the
Company or to determine the enforceability, scope and validity of the
proprietary rights of others.
The validity and breadth of claims in medical technology patents involve
complex legal and factual questions and, therefore, may be highly uncertain.
There can be no assurance that any issued patent or patents based on pending
patent applications or any future patent application will exclude competitors
or provide competitive advantages to the Company, that any of the Company's
patent or patents in which it has licensed rights will be held valid if
subsequently challenged or that others will not claim rights in or ownership
of the patents and other proprietary rights held or licensed by the Company.
There can be no assurance that others have not developed or will not develop
similar products, duplicate any of the Company's products or design around any
patents issued to or licensed by the Company or that may be issued in the
future to the Company. Since patent applications in the United States are
maintained in secrecy until the patent issues, the Company also cannot be
certain that others did not first file applications for inventions covered by
the Company's pending patent applications, nor can the Company be certain that
it will not infringe any patents that may issue to others on such
applications. The Company periodically reviews the scope of patents of which
it is aware. Although Cardima does not believe that it infringes patents known
to the Company, the question of patent infringement involves complex legal and
factual issues and there can be no assurance that any conclusion reached by
the Company regarding infringement will be consistent with the resolution of
any such issues by a court.
In addition, the U.S. patent laws were recently amended to exempt
physicians, other heath care professionals and affiliated entities from
infringement liability for medical and surgical procedures performed on
patients. The Company cannot predict whether this amendment might have a
material adverse effect on the Company's ability to protect its proprietary
methods and procedures.
COMPETITION
The Company believes it currently has the only intravascular approach to VT
and considers its primary competition to be companies involved in more
established therapies for the treatment of AF and VT, including drugs,
external electrical cardioversion and defibrillation, implantable
defibrillators and purposeful destruction of the AV node followed by
implantation of a pacemaker and open-heart surgery. Several competitors are
also developing new approaches and new products for the mapping and/or
ablation of AF and VT. These approaches include mapping systems using contact
mapping, single-point spacial mapping and non-contact, multisite electrical
mapping technologies and ablation systems using ultrasound, microwave, laser
and cryoablation technologies. In addition, companies are developing surgical
procedures that could potentially be used by physicians to perform the open
heart surgical maze procedure in a minimally invasive manner.
Many of the Company's competitors have an established presence in the field
of interventional cardiology and electrophysiology, including Boston
Scientific, C.R. Bard, Inc., Johnson & Johnson, through its Cordis division,
St. Jude Medical, Inc., through its Daig division, and Medtronic, Inc. These
competitors have substantially greater financial and other resources than the
Company, including larger research and development staffs and more experience
and capabilities in conducting research and development activities, testing
products in clinical trials, obtaining regulatory approvals, and
manufacturing, marketing and distributing products. Other companies are
developing proprietary systems for the diagnosis and treatment of cardiac
arrhythmias, including Biosense, Inc., Cardiac Pathways, Inc. and Endocardial
Solutions, Inc. There can be no assurance that the Company will succeed in
developing and marketing technologies and products that are more clinically
effective and cost-effective than the more established treatments or the new
approaches and products being developed and marketed by its competitors.
Furthermore, there can be no assurance that the Company will succeed in
developing new technologies and products that are available prior to its
competitors' products. Failure of the Company to demonstrate the competitive
advantages of its products would have a material adverse effect on the
Company's business, financial condition and results of operations.
In the market for cardiac mapping and ablation devices, the Company believes
that the primary competitive factors are safety, clinical effectiveness, ease
of use and overall cost to the health care system. In addition, the
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length of time required for products to be developed and to receive regulatory
and, in some cases, reimbursement approval is an important competitive factor.
The medical device industry is characterized by rapid and significant
technological change. Accordingly, the Company's success will depend in part
on its ability to respond quickly to medical and technological changes through
the development and introduction of new products. Product development involves
a high degree of risk and there can be no assurance that the Company's new
product development efforts will result in any commercially successful
products. The Company believes it competes favorably with respect to these
factors, although there is no assurance that it will be able to continue to do
so. See "Risk Factors--Rapid Technological Change; Significant Competition."
GOVERNMENT REGULATION
The preclinical and clinical testing, manufacturing, labeling, distribution
and promotion of the Company's products are subject to extensive and rigorous
government regulation in the United States and other countries. Noncompliance
with applicable requirements can result in enforcement action by the Food and
Drug Administration ("FDA") or comparable foreign regulatory bodies including,
among other things, fines, injunctions, civil penalties, recall or seizure of
products, refusal to grant premarket clearances or approvals, withdrawal of
marketing approvals and criminal prosecution.
United States
A medical device may be marketed in the United States only with the FDA's
prior authorization. Devices classified by the FDA as posing less risk are
placed either in Class I or II and require the manufacturer to seek 510(k)
clearance from the FDA prior to marketing. Such clearance generally is granted
when submitted information establishes that a proposed device is
"substantially equivalent" in intended use and safety and effectiveness to a
Class I or II device already legally on the market or to a "preamendment"
Class III device (i.e., one that has been in commercial distribution since
before May 28, 1976) for which the FDA has not called for PMA applications.
The FDA recently has been requiring a more rigorous demonstration of
substantial equivalence than in the past, including in some cases requiring
clinical trial data. The Company believes that it usually takes from four to
12 months from the date of submission to obtain 510(k) clearance, but it may
take longer, and there can be no assurance that 510(k) clearance will ever be
obtained. During this process, the FDA may determine that it needs additional
information or that a proposed device is precluded from receiving clearance
because it is not substantially equivalent to a legally marketed Class I or II
device. After a device receives clearance, any modification that could
significantly affect its safety or effectiveness, or would constitute a major
change in the intended use of the device, will require a new 510(k)
submission.
The Company believes that its current mapping products, including the
Cardima Pathfinder, will be Class II devices and will require 510(k) clearance
prior to marketing. To date, the Company has received 510(k) clearance for its
Cardima Pathfinder microcatheter system for mapping VT, Venaport guiding
catheter and certain cabling systems and has submitted a 510(k) premarket
notification for the Cardima Pathfinder AF microcatheter system for mapping.
The Company also intends to seek 510(k) clearance for its Cardima Pathfinder
1.5 Fr. and Tracer products for mapping uses. These submissions may need to
include clinical trial data, which could lengthen the time necessary to
prepare a 510(k) submission and in which the Company could receive 510(k)
clearance. There can be no assurance that any of these products will receive
510(k) clearance in a timely fashion, or at all. Delays in market introduction
resulting from the 510(k) clearance process would have a material adverse
effect on the Company's business, financial condition and results of
operation.
A device that does not qualify for 510(k) clearance is placed in Class III,
which is reserved for devices classified by the FDA as posing the greatest
risk (e.g., life-sustaining, life-supporting or implantable devices, or
devices that are not substantially equivalent to a legally marketed Class I or
Class II device). A Class III device generally must receive PMA approval,
which requires the manufacturer to establish the safety and effectiveness of
the device to the FDA's satisfaction. A PMA application must provide extensive
preclinical and clinical trial data and also include information about the
device and its components regarding, among other things,
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manufacturing, labeling and promotion. As part of the PMA review, the FDA will
inspect the manufacturer's facilities for compliance with the Quality System
Regulation ("QSR"), which includes elaborate testing, control, documentation
and other quality assurance procedures.
Upon submission, the FDA determines if the PMA application is sufficiently
complete to permit a substantive review, and, if so, the application is
accepted for filing. The FDA then commences an in-depth review of the PMA
application, which the Company believes typically takes one to three years,
but may take longer. The review time is often significantly extended as a
result of the FDA asking for more information or clarification of information
already provided. The FDA also may respond with a "not approvable"
determination based on deficiencies in the application and require additional
clinical trials that are often expensive and time consuming and can delay
approval for months or even years. Recently, the FDA has heightened its
scrutiny of clinical trial data submitted in support of PMA applications.
During the review, an FDA advisory committee, typically a panel of clinicians,
likely will be convened to review the application and recommend to the FDA
whether, or upon what conditions, the device should be approved. Although the
FDA is not bound by the advisory panel decision, the panel's recommendation is
important to the FDA's overall decision making process.
If the FDA's evaluation of the PMA application is favorable, the FDA
typically issues an "approvable letter" requiring the applicant's agreement to
comply with specific conditions (e.g., changes in labeling) or to supply
specific additional data (e.g., longer patient follow up) or information
(e.g., submission of final labeling) in order to secure final approval of the
PMA application. Once the approvable letter is satisfied, the FDA will issue a
PMA for the approved indications, which can be more limited than those
originally sought by the manufacturer. The PMA can include postapproval
conditions that the FDA believes necessary to ensure the safety and
effectiveness of the device including, among other things, restrictions on
labeling, promotion, sale and distribution. Failure to comply with the
conditions of approval can result in enforcement action, including withdrawal
of the approval, which in turn would have a material adverse effect on the
Company. The PMA process can be expensive and lengthy, and no assurance can be
given that any PMA application will ever be approved for marketing. Even after
approval of a PMA, a new PMA or PMA supplement generally is required for any
modification to the device, its labeling or its manufacturing process.
The Company anticipates that its ablation products, including the Cardima
Pathfinder AF and Tracer VT, will be Class III devices requiring PMA approval.
There can be no assurance that a PMA application will be submitted for any
such products or that, once submitted, the PMA application will be accepted
for filing, found approvable, or, if found approvable, will not take longer
than expected to obtain, or will not include unfavorable restrictions.
A clinical trial in support of a 510(k) submission or PMA application
generally requires an IDE application approved in advance by the FDA for a
specific number of patients. The IDE application must be supported by
appropriate data, such as animal and laboratory testing results. Clinical
trials may begin if the IDE application is approved by the FDA and by the
appropriate institutional review boards at the clinical trial sites. During a
clinical trial, the Company would be permitted to sell products used for the
study for an amount that does not exceed recovery of the costs of manufacture,
research, development and handling. The Company's failure to adhere to
regulatory requirements generally applicable to clinical trials and to the
conditions of an IDE approval could result in a material adverse effect on the
Company, including an inability to obtain marketing clearance or approval for
its products.
In January 1997, the Company submitted an IDE for the Cardima Pathfinder AF
microcatheter system for mapping and ablation of AF and received conditional
approval from the FDA to begin its Phase I feasibility study for mapping AF.
The Company expects to begin its Phase I clinical trials for its Cardima
Pathfinder AF microcatheter system in the first half of 1997 and to file an
additional IDE and begin its clinical trials for its Tracer VT microcatheter
systems in the second half of 1997. These studies are not expected to supply
pivotal evidence of safety and effectiveness; rather, they are intended to
generate data to help finalize the device's design and determine its potential
for further development, if any. Additional clinical trials will be necessary
to support PMA applications by the Company. There can be no assurance that any
clinical study proposed by the
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Company will be approved by the FDA, will be completed or, if completed, will
provide data and information that supports PMA approval or additional clinical
investigations of the type necessary to obtain PMA approval.
Any devices manufactured or distributed by the Company pursuant to FDA
clearances or approvals will be subject to pervasive and continuing regulation
by the FDA and certain state agencies. The Company will be subject to
inspection by the FDA and the California Department of Health Services and,
once it commences marketing products, will have to comply with various other
regulatory requirements that usually apply to medical devices marketed in the
United States, including labeling regulations, the QSR, the Medical Device
Reporting ("MDR") regulation (which requires that a manufacturer report to the
FDA certain types of adverse events involving its products), and the FDA's
prohibitions against promoting approved products for unapproved ("off-label")
uses. In addition, Class II devices, such as the Company's mapping products,
can be subject to additional special controls (e.g., performance standards,
postmarket surveillance, patient registries, and FDA guidelines) that do not
apply to Class I devices. The Company's failure to comply with applicable
regulatory requirements could result in enforcement action by the FDA, which
could have a material adverse effect on the Company.
Unanticipated changes in existing regulatory requirements, failure of the
Company to comply with such requirements or adoption of new requirements could
have a material adverse effect on the Company. The Company also is subject to
numerous federal, state and local laws relating to such matters as safe
working conditions, manufacturing practices, environmental protection, fire
hazard control and hazardous substance disposal. There can be no assurance the
Company will not be required to incur significant costs to comply with such
laws and regulations in the future or that such laws or regulations will not
have a material adverse effect upon the Company's business, financial
condition and results of operations.
International
In order for the Company to market its products in Europe and certain other
foreign jurisdictions, the Company must obtain required regulatory approvals
and clearances and otherwise comply with extensive regulations regarding
safety and manufacturing processes and quality. These regulations, including
the requirements for approvals or clearance to market and the time required
for regulatory review, vary from country to country. In addition, there may be
foreign regulatory barriers other than premarket approval. There can be no
assurance the Company will obtain regulatory approvals in such countries or
that it will not be required to incur significant costs in obtaining or
maintaining its foreign regulatory approvals. Under certain circumstances, FDA
approval is required for the Company to export its products. Delays in receipt
of approvals to market the Company's products, failure to receive these
approvals or loss of previously received approvals could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The EU has promulgated rules that require medical products to bear the CE
mark by mid-1998. The CE mark is recognized by the EU as a symbol of adherence
to strict quality systems requirements set forth in the ISO 9001 (EN 46001)
quality standards, as well as compliance with 93/42/EEC, the Medical Device
Directive. A CE mark allows the Company to avoid the costly and cumbersome
requirements to obtain approvals in each EU country. In December 1995, the
Company received ISO 9001 (EN 46001) Quality Systems certification for its
manufacturing facilities in Fremont, California. This certification provides
approval for the Company to apply the CE mark to the Tracer and Cardima
Pathfinder mapping products and to the Venaport guiding catheter.
The Company plans to commence clinical trials in the EU, Canada and Japan
for its ablation products. Although the Company intends to seek international
approvals for its ablation products, including certification to enable CE
marking, there can be no assurance the Company will be successful in obtaining
such approvals. Failure to receive approval to affix the CE mark would
prohibit the Company from selling these products in member countries of the
EU, and would require significant delays in obtaining individual country
approvals. There can be no assurance that such approvals will ever be
obtained. In such event, the Company would be materially and adversely
affected. See "Risk Factors--No Assurance of Obtaining Required Regulatory
Approvals; Government Regulation."
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THIRD-PARTY REIMBURSEMENT
In the United States, health care providers, including hospitals and
physicians, that purchase medical products for treatment of their patients,
generally rely on third-party payors, principally federal Medicare, state
Medicaid and private health insurance plans, to reimburse all or a part of the
costs and fees associated with the procedures performed using these products.
The Company's success will be dependent upon, among other things, the ability
of health care providers to obtain satisfactory reimbursement from third-party
payors for medical procedures in which the Company's products are used. Third-
party payors may deny reimbursement if they determine that a prescribed device
has not received appropriate regulatory clearances or approvals, is not used
in accordance with cost-effective treatment methods as determined by the
payor, or is experimental, unnecessary, inappropriate or used for a
nonapproved indication. If FDA clearance or approval is received, third-party
reimbursement would also depend upon decisions by the U.S. Health Care
Financing Administration ("HCFA") for Medicare, as well as by individual
health maintenance organizations, private insurers and other payors.
Government agencies, private insurers and other payors determine whether to
provide coverage for a particular procedure based on its medical necessity for
the patient in question. The Federal Medicare Program, many state Medicaid
programs and other payors reimburse health care providers for medical
treatment at a fixed rate based on, or adapted from the diagnosis-related
group ("DRG") established by the HCFA. The fixed rate of reimbursement is
typically based on the patient's diagnosis and the procedure performed, and
unrelated to the specific type or number of devices used in a procedure. The
Company intends to seek an appropriate Medicare DRG assignment by HCFA for
procedures performed using its devices. As part of this process, during
clinical trials the Company intends to collect economic data regarding
resources expended in performing procedures with the devices. The Company
expects to use this data to document differences in resource use between
procedures performed with the Company's devices and procedures currently
categorized under existing DRGs. The Company intends to meet with HCFA policy
staff to request and support development of appropriate hospital payment
policies for the procedures performed using the Company's devices. In
addition, the Company may also collect resource use data regarding physician
services to support establishment of appropriate fee schedules by third-party
payers. The Company believes these efforts may also support reimbursement
among private payors. However, there can be no assurance that reimbursement
for the Company's products will be available in sufficient amounts if, at all,
or that future reimbursement policies of payors will not adversely affect the
Company's ability to sell its products on a profitable basis
In addition, Medicare traditionally has considered items or services
involving devices that have not been approved or cleared for marketing by FDA
to be precluded from Medicare coverage. However, under a new policy which has
been in effect since November 1, 1995, Medicare coverage will not be precluded
for items and related services involving devices that have been classified by
FDA as "non-experimental/investigational" (Category B) devices and that are
furnished in accordance with the FDA-approved IDE governing clinical trials.
Even with items or services involving Category B devices, however, Medicare
coverage may be denied if any other coverage requirements are not met, for
example if the treatment is not medically needed for the specific patient.
There can be no assurance that the Company's systems will be covered when they
are used in clinical trials and, if covered, whether the payment amounts for
their use will be considered to be adequate by hospitals and physicians. If
the devices are not covered or the payments are considered to be inadequate,
the Company may need to bear additional costs to sponsor such trials, and such
costs could have a material adverse effect on the Company's business,
financial condition and results of operations.
In addition, there is proposed federal legislation that would change the
traditional Medicare payment system by creating a new visit-based payment
system called ambulatory patient groups ("APG") that establishes fixed
payments for specific medical procedures that are performed on an outpatient
basis. If the Company's products increase the cost per procedure above the
fixed rate under the APG system, market acceptance of such products could be
impaired.
Reimbursement systems in international markets vary significantly by country
and by region within some countries, and reimbursement approvals must be
obtained on a country-by-country basis. Many international markets have
government managed health care systems that control reimbursement for new
products and procedures. In most markets, there are private insurance systems
as well as government managed systems.
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Market acceptance of the Company's products will depend on the availability
and level of reimbursement in international markets targeted by the Company.
There can be no assurance that the Company will obtain reimbursement in any
country within a particular time, for a particular time, for a particular
amount, or at all.
Regardless of the type of reimbursement system, the Company believes that
physician advocacy of the Company's products will be required to obtain
reimbursement. The Company believes that less invasive procedures generally
provide less costly overall therapies as compared to conventional drug,
surgery and other treatments. In addition, the Company believes that a
patient's underlying arrhythmia should typically not recur after treatment
with the Company's procedures. The Company anticipates that hospital
administrators and physicians would justify the use of the Company's products
by the attendant cost savings and clinical benefits that the Company believes
would be derived from the use of its products. However, there can be no
assurance this will be the case. There can be no assurance reimbursement for
the Company's products will be available in the United States or in
international markets under either government or private reimbursement
systems, or that physicians will support and advocate reimbursement for
procedures using the Company's products. Failure by hospitals and other users
of the Company's products to obtain reimbursement from third-party payors, or
changes in government and private third-party payors' policies toward
reimbursement for procedures employing the Company's products, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
PRODUCT LIABILITY AND INSURANCE
The development, manufacture and sale of the Company's microcatheter systems
may expose the Company to product liability claims. Although to date no claim
has been asserted against the Company, there can be no assurance that the
Company will not experience losses due to product liability claims in the
future. Although the Company currently has general liability insurance with
coverage in the amount of $1.0 million per occurrence, subject to a $2.0
million annual limitation, and product liability insurance with coverage in
the amount of $5.0 million per occurrence, subject to a $5.0 million annual
limitation, there can be no assurance that such coverage will be available to
the Company in the future on reasonable terms, if at all. In addition, there
can be no assurance that all of the activities encompassed within the
Company's business are or will be covered under the Company's policies.
Although the Cardima Pathfinder and Tracer products are labeled for single use
only, the Company is aware that some physicians are reusing such products.
Moreover, there can be no assurance that, despite labeling of the Company's
microcatheters for diagnostic use only, physicians will not use such mapping
microcatheters for ablation. Multiple use or "off-label" use of the Company's
microcatheters could subject the Company to increased exposure to product
liability claims, which could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company may
require additional product liability coverage if the Company significantly
expands commercialization of its products. Such additional coverage is
expensive, difficult to obtain and may not be available in the future on
acceptable terms, if at all. Any claims or series of claims against the
Company, regardless of their merit or eventual outcome, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Risk Factors--Risk of Product Liability; Adequacy of
Insurance Coverage."
EMPLOYEES
At March 7, 1997, the Company had 75 employees, 16 of whom were engaged
directly in research and new product development, seven in regulatory affairs,
quality assurance and clinical activities, 25 in manufacturing, 15 in sales
and marketing and 12 in finance and administration. The Company maintains
compensation, benefit, equity participation, and work environment policies
intended to assist in attracting and retaining qualified personnel. The
Company believes the success of its business will depend, in significant part,
on its ability to attract and retain such personnel. No employee of the
Company is represented by a collective bargaining agreement, nor has the
Company experienced any work stoppage. The Company considers its relations
with its employees to be good. See "Risk Factors--Dependence on Key
Personnel."
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FACILITIES
The Company leases approximately 44,000 square feet in Fremont, California.
The Company's facility includes a 4,000 square foot cleanroom, a machine shop
for prototyping and tooling, extrusion and braiding capability, wire grinding
operations, general assembly/test/inspection areas, and a materials area. The
Company is currently subleasing approximately 6,700 square feet of this
facility to Target under a sublease expiring in November 1997. The facility is
leased through November 1999, at which time the Company has the option to
extend the lease for an additional five-year term. The Company believes this
facility will be adequate to meet its requirements for the foreseeable future.
SCIENTIFIC ADVISORY BOARD
The Company has established a Scientific Advisory Board consisting of
medical, clinical and scientific advisors to consult with the Company's
scientists and research staff and to advise the Company on its research and
development program, the design of its products and on other medical and
scientific matters relating to the Company's business. Each member of the
Scientific Advisory Board has entered into an agreement with the Company,
pursuant to which he agrees to provide services to the Company on an as-needed
basis. Members receive a fee for each meeting of the Scientific Advisory Board
attended, except for Dr. Wang who receives no fee, and are compensated for
reasonable out-of-pocket expenses incurred in connection with such attendance.
In addition, each member of the Scientific Advisory Board generally receives
options to purchase shares of the Company's Common Stock, subject to vesting
and other customary restrictions. Most members of the Scientific Advisory
Board are employed by institutions other than the Company and may have
commitments to, or consulting or advisory agreements with, other entities that
may limit their availability to the Company. The Company's advisors include
the following individuals:
Tim A. Fischell, M.D., Director of Cardiovascular Research at Heart
Institute at Borgess Medical Center, Kalamazoo, Michigan, Professor of
Medicine at Michigan State University, formerly Research Director,
Cardiovascular Interventions at Vanderbilt University.
Laszlo Littmann, M.D., Medical Director of Cardiology Unit at Carolinas
Medical Center, Charlotte, North Carolina, Director of Experimental
Electrophysiology Research, Laser & Applied Technologies Laboratory at
Carolinas Medical Center.
Jeremy N. Ruskin, M.D., Director Cardiac Arrhythmia Service and
Electrophysiology Laboratory, Massachusetts General Hospital, Committee
Member, American College of Cardiology, Committee on Electrocardiology and
Electrophysiology.
William G. Stevenson, M.D., Co-Director, Cardiac Arrhythmias Service and
Clinical Electrophysiology Laboratory, Brigham and Women's Hospital.
Ruey J. Sung, M.D., Professor and Director of Cardiac Electrophysiology,
Stanford University School of Medicine, formerly Associate Professor and
Director of Cardiac Electrophysiology, San Francisco General Hospital.
Paul J. Wang, M.D., Attending Physician, Pratt Medical Group/New England
Medical Center, Boston, Massachusetts.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
March 7, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Phillip C. Radlick, 59 President, Chief Executive Officer and Director
Ph.D. .................
Gabriel B. Vegh......... 57 Chief Operating Officer, Executive Vice President and Director
Allan L. Abati, Ph.D. .. 52 Vice President, Regulatory Affairs and Quality Assurance
Omar Amirana, M.D. ..... 32 Vice President, Marketing
Ronald E. Bourquin...... 46 Vice President and Chief Financial Officer
Duane D. Dickens........ 51 Vice President, New Product Development
David A. Smith.......... 43 Vice President, World Wide Sales
Joseph S. Lacob(1)(2)... 41 Chairman of the Board of Directors
Gary R. Bang............ 50 Director
Michael J.F. Du Cros 59 Director
(2)....................
Neal Moszkowski......... 31 Director
Charles P. Waite, Jr. 41 Director
(1)....................
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
The executive officers of the Company are elected annually by the Board of
Directors of the Company (the "Board") and serve at the discretion of the
Board.
Dr. Radlick has been the President, Chief Executive Officer and a Director
of Cardima since November 1994. Prior to joining the Company, from November
1992 until October 1994, Dr. Radlick was the President and Chief Executive
Officer of Hepatix, Inc., a start-up medical device company. From November
1986 until November 1992, Dr. Radlick was the President of Edwards
Cardiovascular Surgery Division, a division of Baxter Healthcare responsible
for the development, manufacture and sale of cardiovascular products. Dr.
Radlick received a B.S. in Chemistry and a Ph.D. in Organic Chemistry from
University of California, Los Angeles.
Mr. Vegh, the founder of the Company, has been a Director of Cardima since
November 1992. Mr. Vegh has been the Chief Operating Officer of Cardima since
November 1994, and the Executive Vice President since January 1995. From May
1993 until November 1994, Mr. Vegh was the Company's President, and from May
1993 until July 1996, he served as the Company's Chief Financial Officer.
Prior to joining the Company, from August 1985 until May 1993, Mr. Vegh was
the Vice President, Operations of Target, and from February 1983 until August
1985, Mr. Vegh was General Manager, Pilot Operations of Advanced
Cardiovascular Systems. Mr. Vegh received a B.S. in Mechanical Engineering
from the New Jersey Institute of Technology.
Dr. Abati has been the Vice President, Regulatory Affairs and Quality
Assurance of Cardima since February 1996. Prior to joining the Company, from
February 1992 until February 1996, Dr. Abati was the Vice President,
Regulatory Affairs and Quality Assurance of Johnson & Johnson Professional,
Inc., a manufacturer of neurosurgical and orthopaedic medical devices. From
August 1989 until February 1992, Dr. Abati was the Director, Regulatory and
Clinical Affairs of Shiley Inc., a Pfizer company and manufacturer of
interventional cardiology products. From June 1986 until August 1989, Dr.
Abati was the Manager, Regulatory Affairs and Clinical Programs, and from
November 1982 until June 1986 he was Senior Regulatory and Clinical Affairs
Specialist, of Edwards Critical-Care Division, a division of Baxter Healthcare
responsible for the development, manufacture and sale of critical care and
interventional cardiology products. Dr. Abati received a B.S. in Zoology and
an M.A. in Biology from California State University, Long Beach and a Ph.D. in
Physiology from Rutgers University.
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Dr. Amirana has been the Vice President, Marketing of Cardima since
September 1995. From June 1993 until September 1995, Dr. Amirana was the
Company's Director of Marketing, and from March 1993 until June 1993, he
served as a consultant to the Company. Prior to joining the Company, from May
1992 until November 1992, Dr. Amirana was the Program Manager of the Advanced
Development Group of EP Technologies, Inc. ("EPT"), an electrophysiology
catheter manufacturer that was acquired by Boston Scientific in January 1996.
Prior to that time, Dr. Amirana was enrolled at Eastern Virginia Medical
School. Dr. Amirana received a B.S. in Mechanical Engineering from Tufts
University and an M.D. from Eastern Virginia Medical School.
Mr. Bourquin has been the Vice President and Chief Financial Officer of
Cardima since July 1996. Prior to joining the Company, from July 1993 until
July 1996, Mr. Bourquin was the Corporate Controller of EPT, and from April
1993 until July 1993, he served as a consultant to EPT. From December 1991
until February 1993, Mr. Bourquin was the Controller of the Endoscopy Division
of Stryker Corporation, a medical instrument company. From January 1979 until
December 1991, Mr. Bourquin held various positions of increasing
responsibility at Coherent, Inc., a manufacturer of lasers, ultimately serving
as the Director of Finance of the Medical Group from November 1985 to December
1991. Mr. Bourquin is a Certified Management Accountant and received a B.A. in
Accounting and a M.B.A. in Finance from Golden Gate University.
Mr. Dickens has been the Vice President, New Product Development of Cardima
since May 1993. From March 1992 until June 1993, Mr. Dickens was the President
of Rhythmetrix, Inc., a medical device company. From September 1990 until
March 1992, Mr. Dickens was the Director of Science, Technology and Business
Development of Medtronic Inc., a medical device company. Mr. Dickens received
a B.S. in Mechanical Engineering from University of Nebraska.
Mr. Smith has been the Vice President, World Wide Sales of Cardima since
March 1996. Prior to joining the Company, from January 1994 until December
1995, Mr. Smith was the Director of Marketing of Baxter Healthcare,
International Cardiology Division, a manufacturer and distributor of
interventional cardiology products. From June 1991 until December 1993, Mr.
Smith was the Business Unit Manager, Germany, and from April 1990 until May
1991, he was the National Sales Manager, Endovascular Products, of Baxter
Healthcare, Less Invasive Surgery Division. Mr. Smith has a B.S. in Business
Administration from Michigan State University.
BOARD OF DIRECTORS
In addition to Messrs. Radlick and Vegh, the Board includes:
Mr. Lacob has served as Chairman of the Board of Directors of Cardima since
May 1993. Mr. Lacob has been a general partner of Kleiner Perkins Caufield &
Byers, a venture capital firm, since May 1992, and was a venture partner from
May 1987 until May 1992. Mr. Lacob serves as a director of several public
companies, including: CellPro, Incorporated, a medical systems company
("CellPro"); Heartport, Inc., a developer of systems and procedures for
minimally invasive cardiac surgery; Microcide Pharmaceuticals, Inc., a
developer of antibiotics for treatment of serious bacterial infections; and
Pharmacyclics, Inc., a developer of macrocylic chemistry for treatment of
diseases such as cancer and atherosclerosis, and for diagnostic imaging
procedures. Mr. Lacob received a B.S. in Biochemistry from University of
California, Irvine, a M.P.H. from University of California, Los Angeles and a
M.B.A. from Stanford University Graduate School of Business.
Mr. Bang has served as a Director of Cardima since April 1994. Since May
1993, Mr. Bang has been the President, Chief Executive Officer and a director
of Target. Prior to joining Target, Mr. Bang worked for Baxter International,
a diversified multinational manufacturer of health care products, for 19
years, most recently serving from April 1990 to April 1993 as the President of
the Pharmaseal Surgical Division. Mr. Bang received a B.A. in Economics from
Northwestern University and a M.B.A. in Finance from University of Chicago.
Mr. Bang also serves as a director of the Spectranetics Corporation, a
publicly traded medical device company.
50
<PAGE>
Mr. Du Cros has served as a Director of the Company since March 1997. Mr. Du
Cros has served as a partner of Atlas Venture, a venture capital firm, since
1993, and as a general partner of Aspen Venture Partners, L.P., a limited
partnership formed to carry on the venture capital activities of 3i Ventures
in the United States, since 1991. Mr. Du Cros served as Chief Executive
Officer of Protein Databases, Inc., a life sciences instrumentation company,
from 1984 to 1988. Mr. Du Cros received a B.Sc. in Industrial Chemistry from
the City University of London.
Mr. Moszkowski has served as a Director of the Company since March 1997.
Since 1993, Mr. Moszkowski has been an associate in the Principal Investment
Area of Goldman, Sachs & Co. Prior to joining Goldman, Sachs & Co., Mr.
Moszkowski was enrolled in the Stanford University Graduate School of
Business. Mr. Moszkowski received a B.A. from Amherst College and a M.B.A.
from the Stanford Graduate School of Business.
Mr. Waite has served as a Director of Cardima since February 1996. Mr. Waite
joined Olympic Venture Partners, a venture capital firm, as a general partner
in 1987, having previously been a general partner at Hambrecht & Quist Venture
Partners from 1984 to 1987. Mr. Waite also serves as a director of CellPro and
Verity, Inc., which develops and markets tools for locating information on the
Internet and other databases. He received an A.B. in History from Kenyon
College and a M.B.A. from Harvard University.
In 1976, Dr. Radlick was convicted of a felony, conspiracy to manufacture a
controlled substance and was sentenced, following appeal, to five years
probation and 500 hours of community service. The Company's Board of Directors
has concluded that this incident has no material bearing on Dr. Radlick's
business integrity or his fitness to serve as an officer and director of the
Company.
The Company's Bylaws authorize the Board of Directors to determine the size
of the Company's Board. The Company's Board has authorized between four and
nine members of the Board and has set the exact number at eight. Currently,
the Company's Board consists of seven directors and there is one vacancy.
Directors hold office until their terms expire or until their successors have
been elected and qualified. The current directors were elected pursuant to a
voting agreement between the Company and certain stockholders of the Company,
which will terminate upon the completion of the Offering.
There are two standing committees of the Board of Directors, the Audit
Committee and Compensation Committee. The Audit Committee, which consists of
Messrs. Du Cros and Lacob, reviews the Company's annual audit and meets with
the Company's independent auditors to review the Company's internal controls
and financial management practices. The Compensation Committee, which consists
of Messrs. Lacob and Waite, makes recommendations to the Board regarding
compensation for certain of the Company's personnel and, together with the
Board of Directors, administers the Company's stock and option plans.
Directors are reimbursed for reasonable expenses incurred in attending Board
meetings. Nonemployee directors of the Company are eligible to participate in
the Company's 1997 Directors' Stock Option Plan. See " --Stock Option and
Incentive Plans--1997 Directors' Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between the Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past. See "Certain Transactions."
51
<PAGE>
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid to the Company's Chief Executive Officer and each of the
other most highly compensated executive officers who were serving as executive
officers on December 31, 1996 (the "Named Executive Officers") whose aggregate
annual compensation exceeded $100,000 for the year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
1996 ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- -------------------------------------
SECURITIES OTHER
NAME AND PRINCIPAL POSITION(1) SALARY($) BONUS($) UNDERLYING OPTIONS COMPENSATION($)(2)
- ------------------------------ ------------ ----------- ------------------ ------------------
<S> <C> <C> <C> <C>
Phillip C. Radlick,
Ph.D.(3) .............. $ 177,832 $ 25,000 127,559 $29,718
President and Chief
Executive Officer
Gabriel B. Vegh(4)...... 166,561 60,000 127,559
Chief Operating Officer
and Executive Vice
President
Allan L. Abati,
Ph.D.(5)............... 116,383 60,696 111,884
Vice President,
Regulatory Affairs and
Quality Assurance
Omar Amirana, M.D. ..... 110,173 50,286
Vice President,
Marketing
Duane D. Dickens........ 109,292 42,115
Vice President, New
Product Development
</TABLE>
- --------
(1) Ronald Bourquin, the Company's Vice President and Chief Financial Officer,
joined the Company in July 1996 and currently receives an annual base
salary of $110,000, and David Smith, the Company's Vice President, World
Wide Sales, joined the Company in March 1996 and currently receives an
annual base salary of $125,000.
(2) Drs. Radlick and Abati were reimbursed for relocation expenses in the
amount of $29,718 and $111,884, respectively. Mr. Smith was reimbursed in
1996 for relocation expenses in the amount of $62,762.
(3) The Company has entered into an employment agreement with Dr. Radlick
which provides for, among other things, a current annual salary of
$175,000, bonus compensation as may from time to time be awarded by the
Board of Directors and participation in all employee benefit plans
sponsored by the Company. If Dr. Radlick's employment is terminated other
than for "good cause" (as defined in the agreement), Dr. Radlick will
enter into a six month consulting arrangement with the Company, and stock
options held by Dr. Radlick would continue to vest over such six month
period. Under this consulting arrangement, Dr. Radlick would be paid a
consulting fee in an amount equal to the salary in effect at the time of
his resignation, and would be eligible to continue to receive Company
benefits. If Dr. Radlick were to obtain new employment during such period,
the consulting fee payable to Dr. Radlick would be reduced by the amount
of compensation payable to Dr. Radlick under such new arrangement.
(4) The Company has entered into an employment agreement with Mr. Vegh which
provides for, among other things, an annual salary, bonus compensation as
may from time to time be awarded by the Board of Directors and
participation in all employee benefit plans sponsored by the Company. If
Mr. Vegh's employment is terminated other than for "good cause" (as
defined in the agreement), Mr. Vegh will enter into a six month consulting
arrangement with the Company, and stock options held by Mr. Vegh would
continue to vest over such six month period. Under this consulting
arrangement, Mr. Vegh would be paid a consulting fee in an amount equal to
the salary in effect at the time of his resignation, and would be eligible
to continue to receive Company benefits. If Mr. Vegh were to obtain new
employment during such period, the consulting fee payable to Mr. Vegh
would be reduced by the amount of compensation payable to Mr. Vegh under
such new arrangement and the continued vesting of his options would
terminate.
(5) Represents salary amounts paid to Dr. Abati in fiscal 1996 beginning from
February 1996, when he joined the Company.
52
<PAGE>
The following table provides certain summary information concerning options
granted during the fiscal year ended December 31, 1996 to the Named Executive
Officers.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1) POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS GRANTED STOCK PRICE
SECURITIES TO EMPLOYEES APPRECIATION FOR
UNDERLYING IN FISCAL OPTION TERM ($)(2)
OPTIONS YEAR ENDED EXERCISE PRICE EXPIRATION --------------------
NAME GRANTED DECEMBER 31, 1996(%) ($ PER SHARE) DATE 5% 10%
---- ---------- -------------------- -------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Phillip C. Radlick,
Ph.D................... 127,559 19.0% $1.40 5/30/06 $ 72,723 $ 115,799
Gabriel B. Vegh......... 127,559 19.0 1.40 5/30/06 72,723 115,799
Allan L. Abati, Ph.D.... 52,667 7.8 0.56 3/13/06 37,747 60,106
8,029 1.1 1.40 5/30/06 4,577 7,289
Omar Amirana, M.D....... 50,286 7.5 1.40 5/30/06 28,669 45,650
Duane D. Dickens........ 42,115 6.2 1.40 5/30/06 24,010 38,232
</TABLE>
- --------
(1) Consists of stock options granted pursuant to the Company's 1993 Stock
Option Plan. Options generally become exercisable over a four-year period
subject to continued employment with the Company. The maximum term of each
option granted is ten years from the date of grant. The exercise price is
equal to the fair market value of the Common Stock on the grant date as
determined by the Board of Directors. See "--Stock Option and Incentive
Plans."
(2) The 5% and 10% assumed compounded annual rates of stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
The following table provides certain summary information concerning the
shares of Common Stock represented by outstanding stock options held by each
of the Named Officers as of December 31, 1996.
FISCAL 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END(1)(2) AT FISCAL YEAR-END($)(2)
------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE(3) UNEXERCISABLE
---- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Phillip C. Radlick,
Ph.D. ................. 194,226 -- $907,062 $--
Gabriel B. Vegh......... 127,559 -- 580,393 --
Allan L. Abati, Ph.D. .. 60,696 -- 320,407 --
Omar Amirana, M.D. ..... 73,144 -- 344,806 --
Duane D. Dickens........ 61,259 -- 292,129 --
</TABLE>
- --------
(1) No stock appreciation rights or options were exercised by the Named
Executive Officers during the fiscal year ended December 31, 1996.
(2) Options generally become exercisable over a four-year period subject to
continued employment with the Company. The maximum term of each option
granted is ten years from the date of grant. The exercise price is equal
to the fair market value of the Common Stock on the grant date as
determined by the Board of Directors. See "--Stock Option and Incentive
Plans."
(3) Based on the deemed fair market value of the option shares at December 31,
1996 ($5.95 per share as determined in good faith by the Board of
Directors), less the option exercise price payable for such shares.
53
<PAGE>
STOCK OPTION AND INCENTIVE PLANS
1993 Stock Plan
The Company's 1993 Stock Option Plan (the "1993 Stock Plan") was adopted by
the Board of Directors in June 1993 and approved by the Company's stockholders
in September 1993. The 1993 Stock Plan was amended in June 1996, subject to
stockholder approval, and in March 1997, subject to the effectiveness of the
Offering. An aggregate of 903,185 shares of Common Stock are authorized for
issuance under the 1993 Stock Plan. At March 7, 1997, 820,477 shares were
issuable on the exercise of outstanding options and 74,369 shares were
available for issuance. The number of authorized shares is subject to
automatic increase, on the first trading day of each of the five years from
1998 to 2002, in an amount equal to three percent of the number of shares of
Common Stock outstanding on December 31 of the immediately preceding calendar
year, up to a maximum of 300,000 shares each year--over the five year period.
The 1993 Stock Plan provides for the grant to employees (including officers
and employee directors) of "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
for the grant to employees, non-employee directors and consultants of
nonstatutory stock options.
The 1993 Stock Plan may be administered by the Board of Directors or the
Compensation Committee of the Board (the "Administrator"). The Administrator
determines the terms of options granted under the 1993 Stock Plan, including
the number of shares subject to the option exercise price, term and
exercisability. However, in no event may any one person participating in the
1993 Stock Plan receive options for more than 500,000 shares beginning in any
calendar year beginning with the 1996 calendar year, subject to adjustment as
provided in the 1993 Stock Plan. The exercise price of all incentive stock
options granted under the 1993 Stock Plan must be at least equal to the fair
market value of the Common Stock on the date of grant. The exercise price of
nonstatutory stock options must be at least 85% of fair market value on the
date of grant. The exercise price of any incentive stock option granted to an
optionee who owns stock representing more than 10% of the voting power of the
Company's outstanding capital stock must equal at least 110% of the fair
market value of the Common Stock on the date of grant. Payment of the exercise
price may be made in cash, stock, promissory notes, or other consideration
determined by the Administrator. The Administrator determines the term of
options. With respect to any participant who owns stock possessing more than
10% of the voting power of the Company's outstanding capital stock, the
maximum term of an incentive stock option must not exceed five years. The term
of all other options may not exceed ten years.
If the Company consolidates or merges with another corporation, then each
option will accelerate so that each option will be fully exercisable for all
of the shares subject to such option immediately prior to the transaction and,
if not exercised or assumed by the successor corporation, each option will
terminate on the effective date of the transaction. In addition, upon the
occurrence of such a transaction, the 1993 Stock Plan provides that all of the
outstanding repurchase rights of the Company with respect to shares of Common
Stock acquired upon exercise of options granted under the 1993 Stock Plan will
terminate. If not terminated earlier, the 1993 Stock Plan will terminate in
2003. The Administrator has the authority to amend or terminate the 1993 Stock
Plan as long as such action does not adversely affect any outstanding option
and as long as stockholder approval is obtained, if required under applicable
law.
1997 Directors' Stock Option Plan
The 1997 Directors' Stock Option Plan (the "Directors' Plan") was adopted by
the Board of Directors in March 1997, subject to stockholder approval. A total
of 200,000 shares of Common Stock has been reserved for issuance under the
Directors' Plan. The Directors' Plan provides for the grant of nonstatutory
stock options to nonemployee directors of the Company. The Directors' Plan is
designed to operate automatically, without administration; however, to the
extent administration is necessary, the administrator will be the Board of
Directors. Any conflicts of interest will be addressed by abstention of the
interested director from both deliberations and voting regarding matters in
which he has a personal interest.
The Directors' Plan provides that each person who first becomes a
nonemployee director of the Company after the Offering will be granted a
nonstatutory stock option to purchase 20,000 shares of Common Stock (the
54
<PAGE>
"First Option") on the date on which the optionee first becomes a nonemployee
director of the Company. Thereafter, on the date of each subsequent annual
meeting of the Company's stockholders during the period in which a nonemployee
director is serving on the Board, each nonemployee director will be granted an
additional option to purchase 2,000 shares of Common Stock (a "Subsequent
Option") if, on such date, he has served on the Board for at least three
months.
The Directors' Plan sets neither a maximum nor a minimum number of shares
for which options may be granted to any one nonemployee director, but does
specify the number of shares that may be included in any grant and the method
of making a grant. No option granted under the Directors' Plan is transferable
by the optionee other than by will or the laws of descent or distribution or
pursuant to a qualified domestic relations order, and each option is
exercisable, during the lifetime of the optionee, only by such optionee or a
transferee permitted under the Directors' Plan. The Directors' Plan provides
that the First Option will become exercisable in installments as to 25% of the
total number of shares subject to the First Option on each of the first,
second, third and fourth anniversaries of its date of grant, and each
Subsequent Option will become exercisable in full on the first anniversary of
its date of grant. If a nonemployee director ceases to serve as a director, he
may, but only within 90 days after the date he ceases to be a director of the
Company, exercise options granted under the Directors' Plan to the extent that
he was entitled to exercise such options at the date of such termination. To
the extent he was not entitled to exercise any such option at the date of such
termination, or if he does not exercise such option (which he was entitled to
exercise) within such 90-day period, the option will terminate. In the event a
nonemployee director is unable to continue to serve as a director as a result
of his or her total and permanent disability, he or she may exercise his or
her option within six months from the date of such termination, but only to
the extent such option is exercisable. In the event of a director's death
while serving as a director or within three months of termination of such
service, options may be exercised at any time within six months following the
date of death, but only to the extent the right to exercise had accrued at the
time of death, unless the director died while serving on the Board, in which
case the option is exercisable to the extent of the right to exercise that
would have accrued had the director continued living and remained a director
without interruption for 12 months after the date of death. The exercise price
of all stock options granted under the Directors' Plan will be equal to the
fair market value of a share of the Common Stock on the date of grant of the
option. Options granted under the Directors' Plan have a term of ten years.
In the event of a merger of the Company with another corporation or a sale
of all or substantially all of the Company's assets, the Company will give to
each nonemployee director either (i) a reasonable time within which to
exercise the option, including any part of the option that would not otherwise
be exercisable, prior to the effectiveness of any such transaction at the end
of which time the option will terminate, or (ii) the right to exercise the
option, including any part of the option that would not otherwise be
exercisable (or grant a substitute option with comparable terms) as to an
equivalent number of shares of stock of the corporation succeeding the Company
or acquiring its business by reason of any such transaction. The Board of
Directors may amend or terminate the Directors' Plan; provided, however, that
no such action may adversely affect any outstanding option. If not terminated
earlier, the Directors' Plan will have a term of ten years.
1997 Employee Stock Purchase Plan
The Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in March 1997, subject to stockholder
approval. A total of 250,000 shares of Common Stock has been reserved for
issuance under the Purchase Plan.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, will be implemented by a series of offering periods of 12 months
duration with new offering periods (other than the first offering period)
commencing on or about February 1 and August 1 of each year. Each offering
period will consist of two consecutive purchase periods of six months
duration, with the last day of each purchase period being designated a
purchase date. The first such offering period is expected to commence on the
date of this Offering and continue through July 31, 1998, with the first
purchase date occurring on January 31, 1998. The Purchase Plan will be
administered by the Board of Directors or by a committee appointed by the
Board. Employees (including officers
55
<PAGE>
and employee directors) of the Company, or of any majority-owned subsidiary
designated by the Board, are eligible to participate in the Purchase Plan if
they are employed by the Company or any such subsidiary for at least 20 hours
per week and more than five months per year. The Purchase Plan permits
eligible employees to purchase Common Stock through payroll deductions, which
may not exceed 10% of an employee's compensation (excluding payments for
overtime, shift premium, incentive compensation, bonuses, commissions and
other cash compensation), at a price equal to the lower of 85% of the fair
market value of the Common Stock at the beginning of the offering period or
the purchase date. If the fair market value of the Common Stock on a purchase
date is less than the fair market value at the beginning of the offering
period, a new 12-month offering period will automatically begin on the first
business day following the purchase date with a new fair market value.
Employees may end their participation in an offering period at any time within
ten days of the end of a purchase period during such offering period, and
participation ends automatically on termination of employment with the
Company.
The Purchase Plan provides that in the event of a consolidation or merger of
the Company with another corporation or a sale of substantially all of the
Company's assets, each right to purchase stock under the Purchase Plan will be
assumed or an equivalent right substituted by the successor corporation,
unless the Board of Directors shortens the offering period so that employees'
rights to purchase stock under the Purchase Plan are exercised prior to the
merger or sale of assets. The Board of Directors has the power to amend or
terminate the Purchase Plan as long as such action does not adversely affect
any outstanding rights to purchase stock thereunder and provided that
stockholder approval is obtained, as required under applicable law. If not
terminated earlier, the Purchase Plan will have a term of 20 years.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (i)
any breach of their duty of loyalty to the Company or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) unlawful payments of dividends or unlawful
stock repurchases or redemptions, or (iv) any transaction from which the
director derived an improper personal benefit.
The Company's Certificate of Incorporation and Bylaws provide that the
Company will indemnify its directors and officers against any damages arising
from their actions as an agent of the Company to the fullest extent permitted
by Delaware law. The Bylaws further provide that the Company may similarly
indemnify its other employees and agents. In addition, each director has
entered into an indemnification agreement with the Company which may require
the Company, among other things, to indemnify its directors against certain
liabilities that may arise by reason of their status or service as directors
(other than liabilities arising from willful misconduct of a culpable nature),
to advance their expenses incurred as a result of any proceeding against them
as to which they could be indemnified, and to obtain directors' and officers'
insurance, if available on reasonable terms.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company in respect of which
indemnification would be required or permitted. The Company is not aware of
any threatened litigation or proceeding which might result in a claim for such
indemnification.
56
<PAGE>
CERTAIN TRANSACTIONS
In June 1994 and July 1994, the Company sold an aggregate of 85,713 shares
of Series C Preferred Stock at $10.50 per share. Additionally, during the
period from September through November 1994, the Company issued convertible
promissory notes in the aggregate principal amount of $999,667 and warrants to
purchase an aggregate number of shares of Series A Preferred Stock to be
determined based upon a formula relating to the monthly principal amount
outstanding under the convertible promissory notes at an exercise price of
$7.00 per share. In December 1994, the convertible promissory notes, together
with the accrued interest, were cancelled and converted into an aggregate of
96,394 shares of Series C Preferred Stock and the warrants were cancelled and
reissued for an aggregate of 18,410 shares of Series A Preferred Stock at an
exercise price of $7.00 per share. At that time, an additional 165,863 shares
of Series C Preferred Stock were issued for $10.50 per share. From March 1995
through August 1995, the Company also issued an additional 85,666 shares of
Series C Preferred Stock at $10.50 per share.
During the period from April through December 1995, the Company issued
promissory notes in the aggregate principal amount of $2,263,000 and warrants
to purchase an aggregate number of shares of Common Stock to be determined
based upon a formula relating to the monthly principal dollar amount
outstanding under these notes at an exercise price of $1.05 per share. In
December 1995, the notes, together with the accrued interest, were cancelled
and converted into an aggregate of 423,402 shares of Series D Preferred Stock
at $5.11 per share and the warrants were cancelled and reissued for an
aggregate of 456,523 shares of Common Stock at an exercise price of $1.05 per
share, including a warrant reissued to Gabriel B. Vegh, an executive officer
and director of the Company, exercisable for 37,301 shares of Common Stock. At
that time, an additional 792,516 shares of Series D Preferred Stock were
issued and sold to certain investors at $5.11 per share, including 1,957
shares of Series D Preferred Stock to Omar Amirana, an executive officer of
the Company and 19,569 shares of Series D Preferred Stock to Gabriel B. Vegh.
In October 1996, the Company entered into a $2.5 million note purchase
agreement with certain of its existing investors, including Gabriel B. Vegh.
During the period from November 1996 to January 1997, the Company borrowed
$2.5 million under this note purchase agreement at an annual interest rate
equal to the applicable Internal Revenue Service imputed rate in effect at the
time of the borrowing. In March 1997, the holders of these notes converted the
principal amount of these notes, together with accrued interest, into 440,963
shares of Series E Preferred Stock.
In February 1997, the Company entered into a note purchase agreement with
certain investors and borrowed $750,000 under this note purchase agreement at
an annual interest rate of 5.66%. In March 1997, the holders of these notes
converted the principal amount of these notes, together with accrued interest,
into 130,955 shares of Series E Preferred Stock. At such time, an additional
1,784,823 shares of Series E Preferred Stock were issued and sold to certain
investors at $5.74 per share.
57
<PAGE>
The purchasers of the Company's Preferred Stock included, among others, the
following five percent stockholders and associated entities:
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK PURCHASED OR ACQUIRED
-------------------------------------------------------
NAME SERIES A SERIES B SERIES C SERIES D SERIES E
- ---- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Kleiner Perkins Caufield
& Byers VI............. 285,714 -- 143,455 300,164 147,126
New Enterprise
Associates V, L.P. and
Catalyst Ventures
Limited Partnership.... 119,285 -- 82,087 85,941 47,060
Target Therapeutics,
Inc.................... -- 333,333 47,824 254,403 91,884
Atlas Venture Fund II,
L.P. and Atlas Venture
Europe Fund B.V........ -- -- -- 489,236 65,137
Olympic Venture Partners
III, L.P. and OVP III
Entrepreneur's Fund.... -- -- -- 391,389 52,111
GS Capital Partners II,
L.P. and affiliated
entities............... -- -- -- -- 1,132,050
Chase Venture Capital
Associates, L.P........ -- -- -- -- 505,069
</TABLE>
In addition, Kleiner Perkins Caufield & Byers VI was granted warrants to
purchase 9,245 shares of Series A Preferred Stock and warrants to purchase
308,512 shares of Common Stock, New Enterprise Associates V, L.P. was granted
a warrant to purchase 4,362 shares of Series A Preferred Stock and warrants to
purchase 79,340 shares of Common Stock and Catalyst Ventures Limited
Partnership was granted a warrant to purchase 857 shares of Series A Preferred
Stock and warrants to purchase 15,685 shares of Common Stock.
During the years 1994, 1995 and 1996 Target administered the Company's
employee benefit plans, and Cardima reimbursed Target for administrative
expenses incurred by Target on the Company's behalf. The Company has
terminated this administrative arrangement and currently administers its
employee benefit plans. During 1994, the Company occupied a portion of
Target's facilities and paid Target $1,000 per month for each Cardima employee
using the facility. In April 1994, the Company ended this facility sharing
arrangement, when it entered into a lease relating to its current facility. In
1994, 1995 and 1996, expenses incurred by the Company under these arrangements
totaled approximately $532,000, $183,000 and $194,000, respectively. All
amounts have been paid to Target under these arrangements. In December 1994,
Target agreed to sublet certain facilities from the Company for approximately
$3,000 per month. In November 1996, the Company subleased certain facilities
to Target for approximately $4,500 per month.
All future transactions, including any loans from the Company to its
officers, directors, principal stockholders or affiliates, will be approved by
a majority of the Board of Directors, including a majority of the independent
and disinterested members of the Board of Directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to the Company than could be obtained from unaffiliated third parties.
58
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of March 7, 1997, and as adjusted to reflect
the sale of shares offered by this Prospectus (i) by each person who is known
by the Company to beneficially own five percent or more of the Common Stock,
(ii) by each of the Company's directors and Named Executive Officers and (iii)
by all executive officers and directors as a group. Unless otherwise indicated
below, to the knowledge of the Company, all persons listed below have sole
voting and investment power with respect to their shares of Common Stock,
except to the extent authority is shared by spouses under applicable law.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED
SHARES -----------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OWNED(1) OFFERING(%) OFFERING(%)
---------------- ------------ ----------- -----------
<S> <C> <C> <C>
Kleiner Perkins Caufield & Byers VI(2).. 1,252,056 20.5%
2750 Sand Hill Road
Menlo Park, CA 94025
The Goldman Sachs Group, L.P.(3)........ 1,132,050 19.5
85 Broad Street
New York, NY 10004
Target Therapeutics, Inc.(4)............ 786,381 13.5
47201 Lakeview Blvd.
Fremont, CA 94537
Atlas Venture(5)........................ 554,373 9.6
222 Berkeley Street
Boston, MA 02116
Chase Venture Capital Associates, 505,069 8.7
L.P. ..................................
380 Madison Avenue, 12th Floor
New York, NY 10017
New Enterprise Associates V, L.P.(6).... 469,800 8.0
1119 St. Paul Street
Baltimore, MD 21202
Olympic Venture Partners III, L.P.(7)... 443,500 7.6
2420 Carillon Point
Kirkland, WA 98033
Phillip C. Radlick, Ph.D.(8)............ 194,226 3.2
Gabriel B. Vegh(9)...................... 253,700 4.3
Gary R. Bang(4)......................... 786,381 13.5
Michael J.F. Du Cros (10)............... -- *
Joseph S. Lacob(2)...................... 1,252,056 20.5
Neal Moszkowski(3)...................... 1,132,050 19.5
Charles P. Waite, Jr.(7)................ 443,500 7.6
Allan L. Abati, Ph.D.(11)............... 60,696 1.0
Omar Amirana, M.D.(12).................. 75,101 1.3
Duane D. Dickens(13).................... 61,259 1.0
All executive officers and directors as 4,351,227 64.2
a group (12 persons)(14)...............
</TABLE>
- --------
* Less than one percent.
59
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In determining the number of shares
beneficially owned by a person, options or warrants to purchase Common
Stock held by that person that are currently exercisable, or become
exercisable within 60 days following March 7, 1997, are deemed
outstanding; however, such shares are not deemed outstanding for purposes
of computing the percentage ownership of any other person.
(2) Includes 317,321 shares issuable upon the exercise of outstanding
warrants exercisable within 60 days of March 7, 1997. Joseph S. Lacob,
the Chairman of the Board of Directors, is a general partner of KPCB VI
Associates, the general partner of Kleiner Perkins Caufield & Byers VI,
and, as such, may be deemed to share voting and investment power with
respect to such shares. Mr. Lacob disclaims beneficial ownership of such
shares, except to the extent of his pecuniary interest in such shares.
(3) Represents 1,132,050 shares owned by certain investment partnerships, of
which affiliates of The Goldman Sachs Group, L.P. ("GS Group") are the
general partner, managing general partner or investment manager. Includes
710,248 shares held of record by GS Capital Partners II, L.P. and 421,802
shares held by other investment partnerships. GS Group disclaims
beneficial ownership of the shares owned by such investment partnerships
to the extent attributable to partnership interests therein held by
persons other than GS Group and its affiliates. Each of such investment
partnerships shares voting and investment power with certain of its
respective affiliates. Mr. Moszkowski disclaims beneficial ownership of
such shares, except to the extent of his pecuniary interest in such
shares.
(4) Includes 13,370 shares issuable upon the exercise of outstanding warrants
exercisable within 60 days of March 7, 1997. Gary R. Bang, a director of
the Company, is the President, Chief Executive Officer and a director of
Target, and, as such, may be deemed to share voting and investment power
with respect to such shares. Mr. Bang disclaims beneficial ownership of
such shares.
(5) Includes 304,907 shares held by Atlas Venture Fund II, L.P. and 249,466
shares held by Atlas Venture Europe Fund B.V. The shares of each of these
funds may be deemed to be beneficially owned by each other fund, because
the parent entity of Atlas Venture Europe Fund B.V., Atlas Investerings
Group N.V., holds an approximate 80% interest in Atlas Venture Fund II,
L.P. Mr. Du Cros, a director of the Company, is a limited partner of
Atlas Venture Associates II, L.P., the general partner of Atlas Venture
Fund II, L.P. Mr. Du Cros disclaims beneficial ownership of such shares,
except to the extent of his pecuniary interests in such shares.
(6) Includes 400,494 shares held by New Enterprise Associates V, L.P. ("NEA
V") and 83,497 shares held by NEA V issuable upon the exercise of
outstanding warrants exercisable within 60 days of March 7, 1997. Also
includes 52,804 shares held by Catalyst Ventures Limited Partnership
("Catalyst") and 16,502 shares held by Catalyst issuable upon the
exercise of outstanding warrants exercisable within 60 days of March 7,
1997. Some of the general partners of NEA Partners V, Limited
Partnership, the general partner of NEA V, are also the general partners
of NEA Partners IV, Limited Partnership, the general partner of New
Enterprise Associates IV, Limited Partnership, which is a general partner
of Catalyst, and as such, may be deemed to share voting and investment
power with respect to such shares. Beneficial ownership of such shares is
disclaimed except to the extent of the respective pecuniary interests in
such shares.
(7) Includes 421,326 shares held by Olympic Venture Partners III, L. P. and
22,174 shares held by OVP III Entrepreneurs Fund. Mr. Waite, a director
of the Company, is a general partner OVMC III, L.P., the general partner
of Olympic Venture Partners III, L.P. and OVP III Entrepreneurs Fund,
and, as such, may be deemed to share voting and investment power with
respect to such shares. Mr. Waite disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest in such shares.
(8) Represents 194,226 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 7, 1997, at which date 107,997 shares
were fully vested.
(9) Includes 127,559 shares issuable upon exercise of an outstanding option
exercisable within 60 days of March 7, 1997, at which date 66,331 shares
were fully vested, and 37,301 shares issuable upon the exercise of an
outstanding warrant exercisable within 60 days of March 7, 1997.
(10) Excludes 554,373 shares held by entities affiliated with Atlas Venture.
Mr. Du Cros, a director of the Company, is a limited partner of Atlas
Venture Associates II, L.P., the general partner of Atlas Venture
60
<PAGE>
Fund II, L.P. Mr. Du Cros disclaims beneficial ownership of such shares,
except to the extent of his pecuniary interests in such shares.
(11) Represents 60,696 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 7, 1997, at which date 17,703 shares
were fully vested.
(12) Includes 73,144 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 7, 1997, at which date 41,863 shares
were fully vested.
(13) Represents 61,259 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 7, 1997, at which date 40,132 shares
were fully vested.
(14) Includes shares referred to in footnotes (2)-(5), (7)-(9) and (11)-(13).
Also includes 43,701 and 48,557 shares issuable upon exercise of
outstanding options held directly by Ronald E. Bourquin and David A.
Smith, respectively, executive officers of the Company, exercisable
within 60 days of March 7, 1997, at which date 8,194 and 14,162 shares,
respectively, were fully vested.
61
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of this Offering, after giving effect to the amendment of
the Company's Certificate of Incorporation to delete references to the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series
D Preferred Stock and Series E Preferred Stock and to increase the authorized
number of shares of Common Stock, the authorized capital stock of the Company
will consist of 25,000,000 shares of Common Stock, par value $0.001 per share,
and 5,000,000 shares of Preferred Stock, par value $0.001 per share.
COMMON STOCK
As of March 7, 1997, there were shares of Common Stock outstanding (as
adjusted to reflect the conversion of all outstanding shares of Preferred
Stock into an aggregate of shares of Common Stock) held of record by
approximately 52 stockholders. After giving effect to this Offering, there
will be shares of Common Stock outstanding (assuming no exercise of the
Underwriters' over-allotment option). The holders of Common Stock are entitled
to one vote for each share held of record on all matters submitted to a vote
of the stockholders. Subject to preferential rights with respect to any
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of
funds legally available therefor. In the event of a liquidation, dissolution
or winding up of the Company, the holders of Common Stock are entitled to
share ratably in all assets remaining after payment of liabilities and
satisfaction of preferential rights of any outstanding Preferred Stock. The
Common Stock has no preemptive or conversion rights or other subscription
rights, and there are no redemption or sinking fund provisions available to
the Common Stock. The outstanding shares of Common Stock are, and the shares
of Common Stock to be issued upon completion of this Offering will be, fully
paid and nonassessable.
PREFERRED STOCK
Upon completion of this Offering, the Board of Directors will be authorized
to issue 5,000,000 shares of Preferred Stock in one or more series and to fix
the rights, preferences, privileges and restrictions thereof, including
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of
shares constituting any such series, without further vote or action by the
stockholders. The issuance of Preferred Stock may have the effect of delaying,
deterring or preventing a change in control of the Company without further
action by the stockholders. The issuance of Preferred Stock with voting and
conversion rights may adversely affect the voting power of the holders of
Common Stock, including the loss of voting control to others. At present, the
Company has no plans to designate or issue any shares of Preferred Stock.
WARRANTS AND OTHER RIGHTS
As of March 7, 1997, there were outstanding warrants to purchase 456,523
shares of Common Stock at an exercise price of $1.05 per share, 25,918 shares
of Common Stock at an exercise price of $5.11 per share and 31,303 shares of
Common Stock at an exercise price of $7.00 per share.
REGISTRATION RIGHTS
The holders of 5,793,208 shares of Common Stock and the holders of warrants
to acquire 489,968 additional shares of Common Stock (the "Registrable
Securities") or their transferees are entitled to certain rights with respect
to the registration of such shares under the Securities Act, under the terms
of an agreement between the Company and the holders of Registrable Securities
(the "Rights Agreement"). The holders of at least 25% of the Registrable
Securities may require, on three occasions at any time after six months
following the effective date of this Offering, that the Company use its best
efforts to register the Registrable Securities for public resale. The Company
may delay such registration by up to 120 days for business reasons (but not
more than once in any 12-month period). If the Company registers the sale of
any of its Common Stock either for its own account
62
<PAGE>
or for the account of other security holders, the holders of Registrable
Securities are entitled to include their shares of Common Stock in the
registration, subject to certain conditions and limitations, including lock-up
agreements restricting the sale of such shares for 180 days after the
effective date of the registration statement filed in connection with this
offering and the right of the underwriters to limit the number of shares
included in such registration. Holders of the Registrable Securities may also
require the Company, on no more than two occasions over any 12-month period,
to register the resale of all or a portion of their Registrable Securities on
Form S-3 when use of such form becomes available to the Company; provided,
among other limitations, that the proposed aggregate selling price is at least
$1.0 million. The right of holders of Registrable Securities to have the
resale of such shares registered on Form S-3 is subject to the right of any
underwriter of the offering to limit the number of shares included in such
registration. The Company may delay such registration on Form S-3 by up to 60
days for business reasons (but not more than once in any 12-month period). All
fees, costs and expenses of registrations effected pursuant to the Rights
Agreement must be borne by the Company, and all selling expenses (including
underwriting discounts and selling commissions) relating to Registrable
Securities must be borne by the holders of the securities being registered.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
Certain provisions of law, and the Company's Certificate of Incorporation
and Bylaws, as they will be amended effective upon the completion of this
Offering, could make more difficult the acquisition of the Company by means of
a tender offer, proxy contest or otherwise and the removal of incumbent
officers and directors. These provisions include the authority of the Board of
Directors to designate and issue up to 5,000,000 shares of Preferred Stock.
The issuance of Preferred Stock, while providing desirable flexibility in
connection with potential future financings, acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire a majority of the outstanding voting stock of the Company, thereby
delaying, deferring, or preventing a change in control of the Company.
Furthermore, such Preferred Stock may have other rights, including economic
rights, senior to the Common Stock, and, as a result, the issuance of such
Preferred Stock could have a material adverse effect on the market value of
the Common Stock and may result in significant additional dilution to
purchasers in this Offering. The Company has no present plan to issue shares
of Preferred Stock. In addition, upon completion of this Offering, certain
provisions of the Company's charter documents, including a provision
eliminating the ability of stockholders to take actions by written consent,
may have the effect of delaying or preventing changes in control or management
of the Company, which could have an adverse effect on the market price of the
Common Stock.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporate Law. In general, the statute prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date that the
person became an interested stockholder unless (with certain exceptions) the
business combination or the transaction in which the person became an
interested stockholder is approved in a prescribed manner. Generally, a
"business combination" includes a merger, asset or stock sale or other
transaction resulting in a financial benefit to the stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's outstanding voting stock. This provision may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is U.S. Stock Transfer
Corporation. Its telephone number is (818) 502-1404.
63
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering and based on the shares outstanding as of
March 7, 1997, there will be shares of Common Stock outstanding. Of these
shares, the shares sold in this Offering (assuming no exercise of the
underwriters' over-allotment option) will be freely tradeable without
restriction or further registration unless purchased by "affiliates" of the
Company as that term is defined in Rule 144 under the Securities Act. The
remaining 5,801,541 shares will be "restricted securities" as that term is
defined under Rule 144 (the "Restricted Shares"). Sales of Restricted Shares
in the public market, or the availability of such shares for sale, could
adversely affect the market price of the Common Stock.
Of the Restricted Shares, an aggregate of 3,953,712 shares of Common Stock
(including 508,912 shares issuable upon exercise of vested stock options) will
be eligible for sale in the public market subject to Rule 144 and Rule 701
under the Securities Act after expiration of a contractual lock-up beginning
180 days after the date of the Prospectus, unless earlier released, in whole
or in part, by Bear, Stearns & Co. Inc. In addition, an aggregate of 2,356,741
shares of Common Stock will become eligible for resale in the public market
upon expiration of a one-year holding period, subject to certain volume and
resale restrictions set forth in Rule 144, in the first quarter of fiscal
1998.
On April 29, 1997 an amendment to Rule 144 will become effective that
reduces the holding period requirements of Rule 144 to permit the resale of
limited amounts of restricted securities after a one-year, rather than a two-
year, holding period. Such amendment also permits unlimited resales of
restricted securities held by non-affiliates of an issuer after a holding
period of two years, rather than three years. In general, under the revised
Rule 144, beginning 90 days after the date of this Prospectus, a person (or
persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least one year, including persons who may be deemed to be
"affiliates" of the Company, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of: (i) one percent
of the number of shares of Common Stock then outstanding (which will equal
approximately shares immediately after this Offering); or (ii) the average
weekly trading volume of the Common Stock as reported through the Nasdaq
National Market during the four calendar weeks preceding the filing of a Form
144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned
the Restricted Shares proposed to be sold for at least two years (including
the holding period of any prior owner except an affiliate), is entitled to
sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Rule 701 permits resales of shares issued pursuant to certain compensatory
benefit plans and contracts and prior to the date the issuer becomes subject
to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), subject to certain limitations on the aggregate
offering price of a transaction and certain other conditions, commencing 90
days after the issuer becomes subject to the reporting requirements of the
Exchange Act, in reliance upon Rule 144, but without compliance with certain
restrictions, including the holding period requirements, contained in Rule
144. In addition, the Securities and Exchange Commission has indicated that
Rule 701 will apply to typical stock options granted by an issuer before it
becomes subject to the reporting requirements of the Exchange Act, along with
the shares acquired upon exercise of such options (including exercises after
the date of this Prospectus). Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this Prospectus, may be sold by
persons other than affiliates subject only to the manner of sale provisions of
Rule 144 and by affiliates under Rule 144 without compliance with its one-year
minimum holding period requirements.
The Company has agreed that it will not issue, sell or grant options to
purchase or otherwise dispose of any shares of its Common Stock or securities
convertible into or exchangeable for its Common Stock, except with respect to
options or other rights outstanding on the date of this Prospectus or pursuant
to the Company's stock plans, for a period of 180 days after the Effective
Date without the prior written consent of Bear, Stearns & Co. Inc.
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<PAGE>
The Company intends to register on a Form S-8 registration statement under
the Securities Act, during the 180-day lockup period, the resale of 894,846
shares of Common Stock issuable upon exercise of outstanding options or
reserved for issuance under the 1993 Stock Plan, 200,000 shares of Common
Stock reserved for issuance under the 1997 Directors' Stock Option Plan and
250,000 shares reserved for issuance under the 1997 Employee Stock Purchase
Plan. Such registration will permit the resale of shares so registered by non-
affiliates in the public market without restriction under the Securities Act.
Prior to this Offering, there has been no public market for the Common
Stock, and any sale of substantial amounts of Common Stock in the open market
may adversely affect the market price of the Common Stock offered hereby. In
addition, after this Offering, the holders of 5,793,208 shares of Common Stock
and the holders of warrants to acquire 489,968 additional shares of Common
Stock are entitled to certain rights with respect to registration of such
shares under the Securities Act. Registration of such shares under the
Securities Act would result in such shares becoming freely tradeable without
restriction under the Securities Act (except for shares purchased by
affiliates of the Company) immediately upon the effectiveness of such
registration. See "Description of Capital Stock--Registration Rights." If such
holders, by exercising their demand registration rights, cause a large number
of securities to be registered and sold in the public market, such sales could
have an adverse effect on the market price for the Common Stock. If the
Company were to include in a Company-initiated registration, any Registrable
Securities pursuant to the exercise of piggyback registration rights, such
sales may have an adverse effect on the Company's ability to raise needed
capital.
65
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company, Bear, Stearns & Co. Inc. and Dain Bosworth Incorporated as the
Representatives of the Underwriters, each of the Underwriters named below has
severally agreed to purchase from the Company, and the Company has agreed to
sell to the Underwriters, the respective number of shares of Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Bear, Stearns & Co. Inc..................................
Dain Bosworth Incorporated...............................
----
Total..................................................
====
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to approval of
certain legal matters by counsel and to certain other conditions precedent. If
any of the shares of Common Stock are purchased by the Underwriters pursuant
to the Underwriting Agreement, all such shares of Common Stock (other than
shares of Common Stock covered by the over-allotment option described below)
must be so purchased.
The Underwriters propose to offer the shares of Common Stock directly to the
public at the public offering price set forth on the cover page of this
Prospectus, and at such price less a concession not in excess of per share
of Common Stock to certain others dealers who are members of the National
Association of Securities Dealers, Inc. The Underwriters may allow, and such
dealers may reallow, concessions not in excess of per share to certain
other dealers. After the public offering, the offering price and other selling
terms may be changed by the Underwriters. The Company's Common Stock will be
quoted on the Nasdaq National Market.
The Underwriters have been granted a 30-day over-allotment option to
purchase up to additional shares of Common Stock of the Company
exercisable at the public offering price less the underwriting discount. If
the Underwriters exercise such over-allotment option, then each of the
Underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage thereof as the number of shares of
Common Stock to be purchased by it as shown in the above table bears to the
shares of Common Stock offered hereby. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of the
shares of Common Stock offered hereby.
The officers and directors of the Company and certain holders of the Common
Stock have agreed not to offer, sell, transfer, assign or otherwise dispose of
any of the Common Stock owned by them prior to the expiration of 180 days from
the Effective Date without the prior written consent of Bear, Stearns & Co.
Inc. After such 180-day period, such persons will be entitled to sell,
distribute or otherwise dispose of the Common Stock that they hold subject to
the provisions of applicable securities laws.
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<PAGE>
The Company has agreed that it will not issue, sell or grant options to
purchase or otherwise dispose of any shares of its Common Stock or securities
convertible into or exchangeable for its Common Stock, except with respect to
options or other rights outstanding on the date of this Prospectus or pursuant
to the Company's stock plans, for a period of 180 days after the Effective
Date without the prior written consent of Bear, Stearns & Co. Inc.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters and controlling persons, if any, against certain civil
liabilities, including liabilities under the Securities Act, or will
contribute to payments that the Underwriters or any such controlling persons
may be required to make in respect thereof.
The Representatives of the Underwriters have informed the Company that the
Underwriters do not intend to confirm sales in excess of five percent of the
number of shares of Common Stock offered hereby to accounts over which they
exercise discretionary authority.
Prior to this Offering, there was no public market for the Common Stock.
Consequently, the initial public offering price was determined by negotiations
among the Company and the Representatives. Among the factors considered in
such negotiations were the history of, and the prospects for, the Company and
the industry in which it competes, an assessment of the Company's management,
its past and present operations, its past and present earnings and the trend
of such earnings, the prospects for future earnings of the Company, the
present state of the Company's development, the general condition of the
economy and the securities markets at the time of this Offering, the market
conditions for new offerings of securities and the recent market prices and
price/earnings multiples of publicly traded common stocks of comparable
companies.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Venture Law Group, A Professional Corporation, Menlo Park,
California. As of the date of this Prospectus, a director and an employee of
Venture Law Group and an investment partnership of which certain employees of
Venture Law Group are general partners beneficially own an aggregate of 5,311
shares of Common Stock and options to purchase 11,430 shares of Common Stock.
Certain legal matters in connection with this Offering will be passed upon for
the Underwriters by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP, Menlo Park, California.
EXPERTS
The financial statements of the Company included in this Prospectus and
elsewhere in the Registration Statement as of December 31, 1995 and 1996, for
each of the three years in the period ended December 31, 1996 and for the
period from inception (November 12, 1992) to December 31, 1996 have been
audited by Ernst & Young LLP, independent auditors (period from inception to
December 31, 1993 and as of December 31, 1993 and 1994 not separately
presented in this Prospectus or Registration Statement), as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The statements in this Prospectus under the captions "Risk Factors--
Dependence on Patents and Proprietary and Licensed Technology; Risk of Patent
Infringement" and "Business--Patents and Proprietary Rights" and other
references herein to intellectual property of the Company have been reviewed
and approved by Heller Ehrman White & McAuliffe, patent counsel for the
Company, as experts on such matters, and are included herein in reliance upon
that review and approval.
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<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the Common Stock offered hereby (the "Registration
Statement"). This Prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and such Common Stock,
reference is made to the Registration Statement and the exhibits and schedules
filed as a part thereof. Statements contained herein as to the contents of any
documents are not necessarily complete. In each instance, reference is made to
the copy of such document filed as an exhibit to the Registration Statement,
and each such statement is qualified in its entirety by such reference. Copies
of the Registration Statement, including exhibits and schedules filed
therewith, may be inspected without charge at the Commission's principal
office in Washington, D.C. or obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding companies that file electronically with the
Commission. The Company has filed the Registration Statement, including the
exhibits and schedules thereto, electronically with the Commission via the
Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR)
system. The Company intends to distribute to its stockholders annual reports
containing audited financial statements examined by an independent public
accountant and will make available copies of quarterly reports for the first
three quarters of each fiscal year containing unaudited interim financial
information.
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<PAGE>
CARDIMA, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... F-2
Balance Sheets............................................................ F-3
Statements of Operations.................................................. F-4
Statements of Changes in Redeemable Preferred Stock and Stockholders'
Equity (Net Capital Deficiency).......................................... F-5
Statements of Cash Flows.................................................. F-7
Notes to Financial Statements............................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Cardima, Inc.
We have audited the accompanying balance sheets of Cardima, Inc. (a
development stage company) as of December 31, 1995 and 1996, and the related
statements of operations, changes in redeemable convertible preferred stock
and stockholders' equity (net capital deficiency), and cash flows for each of
the three years in the period ended December 31, 1996 and for the period from
inception (November 12, 1992) to December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cardima, Inc. (a
development stage company) at December 31, 1995 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996 and for the period from inception (November 12, 1992)
to December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Palo Alto, California
February 21, 1997
except as to Note 7, as to which the date is March 12, 1997
F-2
<PAGE>
CARDIMA, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------ DECEMBER 31,
1995 1996 1996
-------- -------- -------------
(NOTE 7)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................... $ 2,993 $ 907
Accounts receivable, net of allowance for
doubtful accounts of $30 at December 31,
1996 (none at December 31, 1995)............ 46 68
Receivable from Target Therapeutics, Inc..... 21 17
Inventory.................................... 268 377
Other current assets......................... 101 212
-------- --------
Total current assets...................... 3,429 1,581
Property and equipment, net.................. 747 1,400
Restricted cash.............................. 345 275
Other assets................................. 214 708
-------- --------
$ 4,735 $ 3,964
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET
CAPITAL DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable............................. $ 228 $ 1,113
Payable to Target Therapeutics, Inc.......... 31 42
Accrued compensation......................... 199 513
Other accrued liabilities.................... 59 52
Notes payable................................ -- 1,682
Capital lease obligation--current portion.... 265 329
-------- --------
Total current liabilities................ 782 3,731
Deferred rent................................ 129 139
Capital lease obligation--noncurrent
portion..................................... 317 722
COMMITMENTS
Redeemable convertible preferred stock at
amount paid in:
Series D redeemable convertible, 1,215,924
shares issued and outstanding at December
31, 1995 and 1,919,052 at December 31,
1996, respectively; aggregate liquidation
preference of $9,806 at December 31, 1996;
none pro forma............................. 6,182 9,740
Series D-1 redeemable convertible, none
issued and outstanding at December 31,
1996; none pro forma.......................
Stockholders' equity (net capital
deficiency):
Preferred stock, $0.001 par value, 5,155,158
shares authorized, aggregate liquidation
preference of $10,145 at December 31, 1996:
Series A convertible, 459,918 shares
authorized, 428,567 shares issued and
outstanding--amount paid in; none pro
forma...................................... 2,949 2,949 $ --
Series B convertible, 333,333 shares
authorized, issued and outstanding amount
paid in; none pro forma
Series C convertible, 458,245 shares
authorized, 458,245 shares issued and
outstanding at December 31, 1995 and
December 31, 1996 amount paid in; none pro
forma...................................... 4,764 4,764 --
Common stock, $0.001 par value, 7,500,000
shares authorized, 70,297 shares issued and
outstanding at December 31, 1995, 74,999 at
December 31, 1996 and 3,444,800 shares pro
forma...................................... 8 595 18,048
Deferred compensation....................... (526) (526)
Deficit accumulated during the development
stage...................................... (10,396) (18,150) (18,150)
-------- -------- --------
Total stockholders' equity (net capital
deficiency).............................. (2,675) (10,368) $ (628)
-------- -------- --------
$ 4,735 $ 3,964
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
CARDIMA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM
YEARS ENDED DECEMBER 31, INCEPTION
---------------------------- (NOVEMBER 12, 1992) TO
1994 1995 1996 DECEMBER 31, 1996
-------- -------- -------- ----------------------
<S> <C> <C> <C> <C>
Net sales............... $ 86 $ 362 $ 593 $ 1,041
Cost of goods sold...... 211 830 1,413 2,454
-------- -------- -------- --------
Gross Profit............ (125) (468) (820) (1,413)
Operating expenses:
Research and
development........... 2,205 2,581 3,319 9,188
Selling, general and
administrative........ 1,309 2,046 3,690 7,536
-------- -------- -------- --------
Total operating
expenses............... 3,514 4,627 7,009 16,724
-------- -------- -------- --------
Operating loss.......... (3,639) (5,095) (7,829) (18,137)
Interest and other
income................. 15 12 132 192
Interest expense........ (31) (117) (57) (205)
-------- -------- -------- --------
Net loss................ $ (3,655) $ (5,200) $ (7,754) $(18,150)
======== ======== ======== ========
Pro forma net loss per
share.................. $ (1.23)
========
Shares used in computing
pro forma net loss per
share.................. 6,325
========
</TABLE>
See accompanying notes.
F-4
<PAGE>
CARDIMA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
PERIOD FROM INCEPTION (NOVEMBER 12, 1992) TO DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
---------------------------------------------------------------------------------------------------
SERIES D TOTAL
REDEEMABLE DEFICIT STOCKHOLDERS'
CONVERTIBLE SERIES A SERIES B SERIES C ACCUMULATED EQUITY
PREFERRED CONVERTIBLE CONVERTIBLE CONVERTIBLE COMMON DEFERRED DURING THE (NET CAPITAL
STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK STOCK COMPENSATION DEVELOPMENT STAGE DEFICIENCY)
----------- --------------- --------------- --------------- ------ ------------ ----------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
66,666 shares
common stock to
founder for cash
at $0.07 per
share in May
1993............ $-- $ -- $-- $ -- $ 5 $-- $ -- $ 5
Issuance of
428,567 shares
of Series A
convertible
preferred stock
to investors for
cash at $7.00
per share in May
1993, net of
issuance costs
of $52.......... -- 2,948 -- -- -- -- -- 2,948
Issuance of
333,333 shares
of Series A
convertible
preferred stock
to Target
Therapeutics,
Inc. in
consideration of
the grant of a
fully paid
research license
in May 1993..... -- -- -- -- -- -- -- --
Issuance of
333,333 shares
of Series B
convertible
preferred stock
to Target
Therapeutics,
Inc. in June
1993 in exchange
for 333,333
shares of Series
A convertible
preferred stock
previously
issued.......... -- -- -- -- -- -- -- --
Issuance of a
warrant to
Target
Therapeutics,
Inc. to purchase
10,942 shares of
Series A
preferred stock
at $7.00 per
share in
connection with
a lease line
agreement in
December 1993,
for a
receivable...... -- 1 -- -- -- -- -- 1
Net loss........ -- -- -- -- -- -- (1,541) (1,541)
---- ------ ---- ------ --- ---- ------- -------
Balances at
December 31,
1993............ -- 2,949 -- -- 5 -- (1,541) 1,413
Issuance of
340,834 shares
of Series C
convertible
preferred stock
to investors for
cash and
conversion of
bridge loans at
$10.50 per share
in June, July
and December
1994, net of
issuance costs
of $21.......... -- -- -- 3,558 -- -- -- 3,558
Net loss........ -- -- -- -- -- -- (3,655) (3,655)
---- ------ ---- ------ --- ---- ------- -------
Balances at
December 31,
1994 (carried
forward)........ $-- $2,949 $-- $3,558 $ 5 $-- $(5,196) $ 1,316
</TABLE>
See accompanying notes.
F-5
<PAGE>
CARDIMA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)(CONTINUED)
PERIOD FROM INCEPTION (NOVEMBER 12, 1992) TO DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
---------------------------------------------------------------------------------------------
DEFICIT TOTAL
SERIES D ACCUMULATED STOCKHOLDERS'
REDEEMABLE SERIES A SERIES B SERIES C DURING THE EQUITY
CONVERTIBLE CONVERTIBLE CONVERTIBLE CONVERTIBLE COMMON DEFERRED DEVELOPMENT (NET CAPITAL
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK STOCK COMPENSATION STAGE DEFICIENCY)
--------------- --------------- --------------- --------------- ------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31,
1994 (brought
forward)........ $ -- $2,949 $-- $3,558 $ 5 $ -- $ (5,196) $ 1,316
Issuance of
117,411 shares
of Series C
convertible
preferred stock
to investors for
cash, exercise
of warrants and
conversion of
bridge loans at
$10.50 per share
in March and
July 1995, net
of issuance
costs of $27.... -- -- -- 1,206 -- -- -- 1,206
Issuance of
1,215,924 shares
of Series D
redeemable
convertible
preferred stock
to investors for
cash and
conversion of
bridge loans at
$5.11 per share
in December
1995, net of
issuance costs
of $31.......... 6,182 -- -- -- -- -- -- --
Issuance of
3,631 shares of
common stock
upon exercise of
employee stock
options for cash
at $0.70-$1.05
per share in
April, October
and December
1995............ -- -- -- -- 3 -- -- 3
Net loss........ -- -- -- -- -- -- (5,200) (5,200)
------ ------ ---- ------ ---- ----- -------- --------
Balances at
December 31,
1995............ 6,182 2,949 -- 4,764 8 -- (10,396) (2,675)
Issuance of
703,128 shares
of Series D
redeemable
convertible
preferred stock
to investors for
cash and
cancellation of
notes payable at
$5.11 per share
in February
1996, net of
issuance costs
of $35.......... 3,558 -- -- -- -- -- -- --
Issuance of
2,206 shares of
common stock for
cash upon
exercise of
employee stock
options at
$0.56-$2.10 per
share in
January-April,
July, September
and November.... -- -- -- -- 7 -- -- 7
Deferred
compensation
related to grant
of stock
options......... -- -- -- -- 580 (580) -- --
Amortization of
deferred
compensation.... -- -- -- -- -- 54 -- 54
Net loss........ -- -- -- -- -- -- (7,754) (7,754)
------ ------ ---- ------ ---- ----- -------- --------
Balance at
December 31,
1996............ $9,740 $2,949 $-- $4,764 $595 $(526) $(18,150) $(10,368)
====== ====== ==== ====== ==== ===== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
CARDIMA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEARS ENDED (NOVEMBER 12,
DECEMBER 31, 1992) TO
------------------------- DECEMBER 31,
1994 1995 1996 1996
------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS USED IN OPERATING
ACTIVITIES
Net loss.............................. $(3,655) $(5,200) $(7,754) $(18,150)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization........ 91 296 403 800
Amortization of deferred
compensation........................ -- -- 54 54
Loss on disposal of assets........... -- -- 15 15
Loss on sale/leaseback of capital
equipment -- -- 95 95
Issuance of preferred stock upon
conversion of various related party
payables and interest payable....... 12 339 -- 351
Changes in operating assets and
liabilities:
Accounts receivable.................. (44) (2) (22) (68)
Receivable from Target Therapeutics,
Inc................................. 17 31 4 62
Inventory............................ (268) -- (109) (377)
Other current assets................. (98) 11 (111) (212)
Restricted cash...................... (330) (15) 70 (275)
Other assets......................... (94) (128) (526) (784)
Accounts payable..................... 121 40 885 1,113
Payable to Target Therapeutics,
Inc................................. 9 (67) 11 42
Accrued compensation................. 106 52 314 513
Other accrued liabilities............ 10 19 1 42
Deferred rent........................ 22 107 10 139
------- ------- ------- --------
Cash flows used in operating
activities........................... (4,101) (4,517) (6,660) (16,640)
------- ------- ------- --------
CASH FLOWS USED IN INVESTING
ACTIVITIES
Capital expenditures.................. (184) (78) (388) (770)
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES
Net cash proceeds from issuance of
preferred stock...................... 2,546 5,189 2,984 13,668
Proceeds from issuance of bridge
loans................................ 1,000 2,263 1,674 4,937
Payments of bridge loans.............. -- (403) -- (403)
Payments under capital lease
obligations.......................... (52) (153) (286) (491)
Proceeds from issuance of notes
payable.............................. 32 -- -- 32
Payments under notes payable.......... -- (24) -- (24)
Proceeds from issuance of common
stock................................ -- 3 7 15
Proceeds from sale/leaseback of
capital equipment.................... -- -- 583 583
------- ------- ------- --------
Cash flows provided by financing
activities........................... 3,526 6,875 4,962 18,317
------- ------- ------- --------
Net increase (decrease) in cash and
cash equivalents..................... (759) 2,280 (2,086) 907
Cash and cash equivalents at the
beginning of the period.............. 1,472 713 2,993 --
------- ------- ------- --------
Cash and cash equivalents at the end
of the period........................ $ 713 $ 2,993 $ 907 $ 907
======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
INFORMATION
Cash paid during the year for
interest............................. $ 28 $ 43 $ 49 $ 120
======= ======= ======= ========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Receivable from Target Therapeutics,
Inc. recorded for sale-leaseback of
capital equipment and for issuance
for a warrant to purchase Series A
preferred stock...................... $ 52 $ -- $ -- $ 121
======= ======= ======= ========
Equipment acquired under capital
leases............................... $ 432 $ 286 $ 746 $ 1,464
======= ======= ======= ========
Conversion of various related party
payables, bridge loans and capital
lease obligations and related accrued
interest to convertible preferred
stock................................ $ 1,012 $ 2,199 $ 574 $ 3,785
======= ======= ======= ========
</TABLE>
See accompanying notes.
F-7
<PAGE>
CARDIMA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Cardima, Inc., (the "Company" or "Cardima") a development stage company, was
incorporated in the State of Delaware on November 12, 1992. The Company
designs, develops, manufactures and markets minimally invasive, single use,
microcatheter-based systems for the mapping and ablation of the two most
common forms of cardiac arrhythmias: atrial fibrillation and ventricular
tachycardia. The Company has licensed its microcatheter technology for use in
the treatment for electrophysiological diseases affecting areas other than the
central nervous system from a major stockholder, Target Therapeutics, Inc.
("Target").
The Company's activities to date have consisted principally of raising
capital, arranging for facilities, acquiring equipment and intellectual
property, recruiting managerial and technical personnel, conducting research
and development efforts, establishing a sales and marketing group, and minimal
sales of initial products. Accordingly, the Company is considered to be in the
development stage.
Since inception, the Company has accumulated a deficit of approximately
$18.2 million. Management expects to incur additional losses to complete
product development and commercialization, as necessary, and recognizes the
need to raise additional funds from outside sources. In March 1997, the
Company successfully consummated the sale of 2,356,741 shares of Series E
redeemable convertible preferred stock, from which the Company received gross
cash proceeds of approximately $10.3 million and converted approximately $3.3
million of outstanding short term debt, $1.6 million of which was incurred
after December 31, 1996. Management believes that it will be able to obtain
additional funds through either public or private equity or debt financings,
collaborative and other arrangements with corporate partners or from other
sources. If adequate funds are not available, the Company may be required to
reduce its level of spending, or eliminate one or more of its research and
development programs.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Revenues are recognized when products are shipped. To date, product sales
have been to distributors primarily in Europe, Japan and South America. One
distributor accounted for approximately 45% and two distributors each
accounted for 31% of the Company's net sales during the years ended December
31, 1995 and December 31, 1996, respectively. No one distributor accounted for
more than 10% of the Company's net sales during the year ended December 31,
1994.
Research and Development
Research and development costs, which include clinical and regulatory costs,
are charged to expense as incurred.
Net Loss Per Share
Except as noted below, net loss per share is computed using the weighted
average number of common shares outstanding. Common equivalent shares from
stock options and warrants are excluded from the computation as their effect
is antidilutive, except that, pursuant to the Securities and Exchange
Commission ("SEC") Staff Accounting Bulletins, common and common equivalent
shares (stock options, convertible notes
F-8
<PAGE>
CARDIMA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
payable and convertible preferred stock) issued during the 12 months prior to
the initial filing of the registration statement relating to the proposed
offering at prices below the assumed public offering price have been included
in the calculation as if they were outstanding for all periods presented
(using the treasury stock method for stock options and warrants).
Historical loss per share information is as follows (in thousands, except
per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
----------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net loss per share................................... $(1.22) $(1.73) $(2.57)
------ ------ ------
Shares used in computing net loss per share.......... 3,007 3,008 3,013
====== ====== ======
</TABLE>
Pro forma net loss per share has been computed as described above and also
gives effect, pursuant to SEC staff policy, to the conversion of convertible
preferred shares issued within 12 months from the proposed initial public
offering that will be converted upon completion of the initial public offering
(using the if-converted method) from the original date of issuance.
Cash Equivalents
The Company considers all highly liquid investments purchased with maturity
of three months or less at the date of acquisition to be cash equivalents. The
Company places its cash with high-credit-quality financial institutions and
invests primarily in money market accounts. By policy, the Company limits the
amount of credit exposure in any one financial instrument or institution. The
Company had no short term investments at year end. Cash and cash equivalents
are with a major financial institution and consist of money markets and
certificate of deposits.
Inventory
Inventories are stated at the lower of cost or market. Cost is based on
actual costs computed on a first-in, first-out basis. Inventories consist of
the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ ------
<S> <C> <C>
Raw material................................................... $ 110 $ 145
Work-in-process................................................ 40 131
Finished goods................................................. 118 101
------ ------
$ 268 $ 377
====== ======
</TABLE>
Property and Equipment
Property and equipment is stated at cost and consists of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
----- ------
<S> <C> <C>
Machinery and equipment....................................... $ 956 $1,927
Furniture and fixtures........................................ 77 81
Leasehold improvements........................................ 67 93
----- ------
1,100 2,101
Less accumulated depreciation and amortization................ (353) (701)
----- ------
$ 747 $1,400
===== ======
</TABLE>
F-9
<PAGE>
CARDIMA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Depreciation is provided using the straight-line method over the shorter of
their estimated useful lives or lease term of the respective assets, generally
three to five years. Property and equipment financed under a capital lease
include $787,000 and $1,523,000 at December 31, 1995 and 1996, respectively
(see Note 6). Accumulated amortization related to leased assets was $282,000
and $564,000 at December 31, 1995 and 1996, respectively. Amortization related
to capital leases are included in depreciation expense.
Concentrations of Risk
The Company purchases certain key components of its products, including the
hydrophilic coating for certain of its microcatheters, from sole, single or
limited source suppliers. For certain of these components there are relatively
few alternative sources of supply. Establishing additional or replacement
suppliers for any of the numerous components used in the Company's products,
if required, may not be accomplished quickly and could involve significant
additional costs. Any supply interruption from vendors or failure of the
Company to obtain alternative vendors for any of the numerous components used
to manufacture the Company's products would limit the Company's ability to
manufacture its products and would have a material adverse effect on the
Company's business, financial condition and results of operations.
Patents
Patents are amortized using the straight-line method over seven years,
beginning at their effective dates or over the remainder of such periods from
the dates acquired.
Reclassification
Certain prior period amounts have been reclassified to conform with current
period presentation.
2. LEASES
The Company leases facilities under an operating lease which commenced in
August 1994 and expires November 1999. The Company also leases certain
equipment under a noncancelable capital lease (see Note 6). Following is a
schedule of future minimum lease payments under both operating and capital
leases at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
Years ending December 31:
1997..................................................... 360 425
1998..................................................... 360 425
1999..................................................... 314 383
2000..................................................... -- 44
------ -----
Total minimum payments required............................ $1,034 1,277
======
Less amount representing interest.......................... (226)
-----
Present value of future lease payments..................... 1,051
Less current portion....................................... (329)
-----
Noncurrent portion......................................... $ 722
=====
</TABLE>
Rent expense, net of rental income was approximately $45,000 in 1994,
$312,000 in 1995, $295,000 in 1996 and $652,000 for the period from inception
to December 31, 1996 (see Note 5). In connection with its facilities lease
arrangements, the Company issued letters of credit to lessors which are
collateralized by certificates of deposit totaling approximately $275,000.
Accordingly, this restricted cash amount has been classified as a noncurrent
asset.
F-10
<PAGE>
CARDIMA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In January 1996, the Company entered into a lease line agreement with a
stockholder for $1,500,000 to finance capital expenditures, approximately
$1,236,000 of which was utilized as of December 31, 1996. As partial
consideration for this arrangement, a warrant to purchase 23,777 shares of
Series D convertible preferred stock was issued to the lender. The warrant is
exercisable at $5.11 per share for a period of ten years or five years from
the effective date of the Company's initial public offering, whichever is
longer.
3. STOCKHOLDERS' EQUITY
Stock Split
On October 3, 1996, the Company effected a 1-for-7 share reverse stock split
of its common stock and preferred stock. All share and per share amounts in
the accompanying financial statements have been retroactively adjusted to
reflect this event.
Convertible Preferred Stock and Redeemable Convertible Preferred Stock
Each share of Series A and B preferred stock has a liquidation preference of
$7.00 per share plus declared but unpaid dividends. Series C preferred stock
has a liquidation preference of $10.50 per share plus declared but unpaid
dividends. Series D preferred stock has a liquidation preference of $5.11 per
share plus declared but unpaid dividends, and is senior to Series A, B and C
preferred stock with respect to liquidation. Series A and C preferred stock
are senior to the Series B preferred stock with respect to liquidation.
Series A, B, C and D preferred stockholders are entitled to noncumulative
dividends at the rate of $0.70, $0.70, $1.05 and $0.511 per share,
respectively, per annum, if declared by the board of directors, in preference
to common stock dividends. No dividends have been declared to date.
Each share of Series A, B, C and D preferred stock automatically converts
into a specified number of common shares in the event of an underwritten
public offering of the Company's common stock in which the aggregate proceeds
are at least $10,000,000 and the price per share is at least $10.00, subject
to adjustment in the event of, among other things, stock splits and stock
dividends. The Company has amended and restated its articles of incorporation
to reserve sufficient shares of common stock for issuance upon conversion of
the Series A, B, C and D preferred stock.
Each share of Series D preferred stock is redeemable upon the request of at
least a majority of the holders of the then outstanding shares of Series D
preferred stock given at least 90 days prior to the seventh anniversary of the
date upon which any shares of Series D preferred stock were first issued. The
redemption is payable in three equal annual installments starting on the
seventh anniversary of the date upon which any shares of Series D preferred
stock were first issued. The redemption price is equal to the original
issuance price, plus all declared and unpaid dividends.
The holder of each share of preferred stock has voting rights equivalent to
the number of common shares assuming conversion.
In April and October 1996, the Company amended and restated its Certificate
of Incorporation to increase the total number of shares authorized to
12,641,436. Of the additional shares authorized, 1,944,970 were designated as
newly created Series D-1 preferred stock. The provisions regarding
liquidation, voting, dividends, redemption and conversion for the Series D-1
preferred stock are identical to the Series D preferred stock, except that the
Series D-1 preferred stock does not contain the protective antidilution
features of the Series D preferred stock. No Series D-1 preferred stock are
issued or outstanding.
Common Stock
In May 1993, 66,666 shares of common stock were issued to the Company's
founders at $0.07 per share. Certain of these shares were subject to
repurchase by the Company at the original issue price upon the occurrence of
certain events, including termination of employment. The Company's right of
repurchase expired ratably over three years. Shares subject to repurchase were
23,611 and 6,944 at December 31, 1994 and 1995, respectively. At December 31,
1996, no shares were subject to repurchase by the Company.
F-11
<PAGE>
CARDIMA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1993 Stock Option Plan
During 1993, the board of directors adopted the 1993 Stock Option Plan (the
"Plan") and, as amended, has reserved 263,106 shares of common stock for
issuance under the Plan. The Plan provides for both incentive and nonstatutory
stock options to be granted to employees, directors and consultants.
Exercisability, option price, fair value and other terms are determined by the
board of directors; however, the exercise price of each incentive stock option
shall be not less than 100% of the fair market value of the stock issuable
upon exercise of the option on the date the option is granted. The exercise
price of each nonstatutory stock option shall be not less than 85% of the fair
value of the stock subject to the option on the date the option is granted.
All options are generally exercisable upon grant, but shares received upon
exercise prior to vesting are subject to repurchase upon the stockholder's
termination of service to the Company. Shares purchased upon exercise of
options generally vest at the rate of 12.5% after six months from the date of
grant, and monthly thereafter over the following 48 months. No option shall
have a maximum term in excess of ten years from the grant date and no option
granted to a 10% stockholder shall have a maximum term in excess of five years
from the grant date.
Activity under the 1993 Stock Option Plan is as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-------------------------
SHARES NUMBER OF
AVAILABLE SHARES PRICE PER SHARE
--------- --------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1994............ 133,200 129,906 $0.70-$2.10
Options granted......................... (41,903) 41,903 $0.56-$2.10
Options exercised....................... -- (3,631) $0.70-$1.05
Options canceled........................ 19,923 (19,923) $0.70-$1.05
-------- -------
Balance at December 31, 1995............ 111,220 148,255 $0.56-$2.10
Additional shares reserved.............. 640,079 -- --
Options granted......................... (733,778) 733,778 $0.56-$1.75
Options exercised....................... -- (4,708) $0.56-$2.10
Options canceled........................ 66,635 (66,635) $0.56-$2.10
-------- -------
Balance at December 31, 1996............ 84,156 810,690
======== =======
</TABLE>
From March to December 1996, options to purchase a total of 670,174 shares
were granted at prices ranging from $0.56 to $1.75 per share. Deferred
compensation of approximately $580,000 was recorded for these option grants
based on the deemed fair value of common stock (ranging from $1.00 to $5.95
per share). In January, 1997, the Company granted options to purchase 10,175
shares of common stock at $1.75 per share for which deferred compensation of
$43,000 was recorded based on a deemed fair value of $5.95 per share.
In December 1996, the Board of Directors approved the repricing of incentive
stock options granted in September and October 1996. During this period,
63,604 shares were granted at prices in excess of $5.60. Employees could elect
to exchange their outstanding options for the new exercise price of $1.75. The
exchange of such options is included in grants and cancellations.
Warrants
At December 31, 1996, the Company had the following warrants outstanding:
warrants to purchase 456,523 shares of common stock at $1.05 per share issued
to certain investors in connection with bridge loans; warrants to purchase
1,428 shares of common stock at $7.00 per share issued in connection with the
facility lease; warrants to purchase 1,999 shares of Series A preferred stock
at $7.00 per share and 2,142 shares of Series D preferred stock at $5.11 per
share issued in connection with a letter of credit; warrants to purchase
23,776 shares
F-12
<PAGE>
CARDIMA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
of Series D convertible preferred stock at $5.11 per share issued in
connection with a capital lease; and warrants to purchase 18,410 shares of
Series A preferred stock at $7.00 per share issued to certain investors in
connection with bridge financings. These warrants are exercisable immediately
and expire at the earliest of (i) between 3 to 10 years after the date of
grant or (ii) the closing of the Company's sale of all or substantially all of
its assets or (iii) the acquisition of the Company by another entity by means
of a merger or other transaction.
In December 1994, the Company also issued warrants to Target to purchase
24,610 shares of the Company's Series C preferred stock at $10.50 per share in
connection with a guarantee of a letter of credit. These warrants were
exercised in March 1995 for cash. Also in connection with a capital lease line
agreement, the Company issued to Target in December 1993 a warrant for $766 to
purchase 10,942 shares of the Company's Series A preferred stock at $7.00 per
share. This warrant is exercisable immediately and expires at the earlier of
December 9, 1998 or the disposition of substantially all of the Company's
assets or the acquisition of the Company by another entity by means of merger
or other transaction (see Note 6).
The Company has reserved shares of common stock for issuance upon exercise
of the warrants described above.
Accounting for Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair-value accounting provided for under FASB
Statement No. 123, ("Statement 123") "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994, under the fair-value method of that
Statement. The Company has evaluated the effects of Statement 123 and
determined that it does not have a material effect on the Company's statement
of operations or loss per share.
4. NOTES PAYABLE
In October 1996, the Company entered into a $2.5 million note purchase
agreement with certain of its existing investors. During November and December
1996, the Company borrowed approximately $1.7 million from the investors under
the note purchase agreement at an annual interest rate equal to the applicable
Internal Revenue Service imputed rate in effect at the time of the borrowing
(5.6%-5.8%). The notes mature on January 31, 1997 (see Note 7).
F-13
<PAGE>
CARDIMA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES
As of December 31, 1995 and December 31, 1996, the Company had federal net
operating loss carryforwards of approximately $10,100,000 and $17,500,000,
respectively. The Company also had federal research and development tax credit
carryforwards of approximately $200,000 as of December 31, 1995 and 1996. The
net operating loss and credit carryforwards will expire at various dates
beginning on December 31, 2008 through December 31, 2011, if not utilized.
Significant components of the Company's deferred tax assets as of December
31 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Net operating loss carryforwards........................... $ 3,700 $ 6,500
Research credits carryforwards (federal and state)......... 250 300
Capitalized research and development....................... 300 500
Other, net................................................. 200 200
------- -------
Total deferred tax assets.................................. 4,450 7,500
Valuation allowance for deferred tax assets................ (4,450) (7,500)
------- -------
$ -- $ --
======= =======
</TABLE>
The valuation allowance increased by $1,600,000, and $2,350,000 in 1994 and
1995, respectively.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the "change in ownership" provisions of
the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
6. RELATED PARTY TRANSACTIONS
License Rights
In May 1993, Target granted the Company an exclusive royalty-free worldwide
license to use Target's technology and to make, use and sell or otherwise
distribute products for the diagnosis and treatment of electrophysiological
diseases in the body, other than in the central nervous system, including the
brain. The exclusive license grant applied to any Target technology developed
through May 1996 and will expire upon the expiration of the last of the
patents relating to the Target technology. Under the License Agreement,
Cardima granted back to Target an exclusive royalty-free license to use
technology developed through May 1996 in the fields of neurology,
interventional neurology, interventional reproductive disorders and vascular
prostheses (the "Target Field"). Such license will expire upon the expiration
of the last of the patents relating to the Target technology. Target granted
the Company a nonexclusive, royalty-free license to use Target technology to
make, use and sell or otherwise distribute the Company's products for use
within the cardiology field, provided the Company's products represent a
substantial improvement. A substantial improvement is any modification,
improvement or enhancement by the Company of Target technology in a particular
product that results in a material change in the function, purpose or
application of such product. The Company believes that the incorporation of
electrodes in its microcatheter systems, together with other modifications,
satisfies the substantial improvement requirements. As part of the same
agreement, the Company granted to Target an exclusive, royalty-free license to
use the Company's technology to make, have made, use and sell or otherwise
distribute products within the Target Field.
F-14
<PAGE>
CARDIMA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In addition, the Company agreed not to conduct material research and
development, acquire corporate entities or make or sell products in the Target
Field or to sell products, other than products utilizing Target's technology,
for use in diagnosis or treatment of diseases related to the production of
electrical current in tissue located in areas of the body other than the
heart, without first notifying Target and negotiating a distribution
agreement. Cardima also agreed that it would not sell products utilizing
Target's technology for use in diagnosis or treatment of diseases related to
the production of electrical current in tissue located in areas of the body
other than the heart without, if selling to a distributor, first notifying
Target and offering Target the right of first refusal with respect to the
terms of the distribution, or if selling directly to the consumer, paying to
Target an amount equal to 40% of the gross profit for such product. In
exchange for the license, the Company initially issued 333,333 shares of
Series A preferred stock to Target. In June 1993, the Company effected a
recapitalization pursuant to which Target exchanged its existing shares of
Series A preferred stock for shares of newly created Series B preferred stock.
Series C and D Preferred Stock
In December 1994, the Company issued 23,216 shares of Series C preferred
stock to Target at $10.50 per share for cash and conversion of bridge loans.
The Company also issued to Target warrants to purchase 24,610 shares of the
Company's Series C preferred stock in connection with a guarantee of a letter
of credit which were exercised in March 1995 (see Note 3). In January 1995,
the Company issued an additional 7,143 shares of Series C preferred stock to
Target at $10.50 per share for cash and conversion of bridge loans.
In December 1995, the Company issued 142,029 shares of Series D preferred
stock to Target at $5.11 per share for cash and conversion of various payable
amounts and bridge loans. In February 1996, the Company issued an additional
112,374 shares of Series D preferred stock to Target at $5.11 per share in
exchange for the conversion of outstanding capital lease obligations.
Operations and Facilities
In May 1993, in the Company entered into an agreement with Target whereby
Target agreed to supply and/or manufacture such products and components
necessary to proceed with research and development activity pursuant to the
license mentioned above. This Agreement expired in May 1996. Target still
supplies the Company with products and components on an as-needed basis.
The Company occupied a portion of Target's facilities during 1994 prior to
occupying their own facility. As consideration, the Company paid $1,000 per
month for each employee using Target's facilities, as well as other
miscellaneous administrative expenses incurred by Target on the Company's
behalf.
As of December 31, 1996, $234,000 has been paid and $38,000 is owed to
Target under these arrangements (approximately $152,000 and $466,000 was paid
and $31,000 and $66,000 owed at December 31, 1995 and 1994, respectively) (see
Note 2).
Target has sublet certain facilities from the Company which can be renewed
annually. Net monthly rental income is approximately $4,500 (see Note 2).
Capital Lease Arrangement
In December 1993, the Company entered into a $1,000,000 capital lease line
agreement with Target. The lease line remained open until fully utilized or
until March 31, 1995, whichever occurred first. As of December 31, 1994 and
1995, $501,000 and $787,000, respectively, of the lease line was utilized for
capital equipment. In connection with this lease line agreement, the Company
issued to Target a warrant to purchase
F-15
<PAGE>
CARDIMA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10,942 shares of the Company's Series A preferred stock (see Note 3). In
January 1996, the outstanding capital lease obligation, plus accrued interest,
was converted into shares of Series D convertible preferred stock (see Note
3).
7. SUBSEQUENT EVENTS
On March 12, 1997, the board of directors authorized the filing of a
registration statement with the Securities and Exchange Commission permitting
the Company to sell shares of its common stock to the public. If the offering
is consummated under terms presently anticipated, all of the currently
outstanding preferred stock will convert to 5,726,542 shares of common stock.
Unaudited pro forma stockholders' equity as adjusted for the matters described
above is set forth in the accompanying balance sheet. The board will also
approve an amendment to the Certificate of Incorporation to change the number
of authorized shares of common stock to 25,000,000 shares and preferred shares
to 5,000,000 shares upon the closing of the offering.
The Company received an additional $833,000 from Target Therapeutics, Inc.
and other investors in January 1997 under the note purchase agreement
discussed in Note 4. The notes were due on January 31, 1997, however, the
holders of the notes agreed to convert both principal and interest to Series E
preferred stock in March 1997. An additional $750,000 was received from
various investors in February 1997 in the form of bridge loans. The total of
these loans, plus the outstanding notes payable at December 31, 1996 and
accrued interest totalled approximately $3.3 million and was converted into
571,918 shares of Series E redeemable convertible preferred stock ("Series E
Preferred Stock").
In March 1997, entities affiliated with Goldman, Sachs & Co., Chase Venture
Capital Associates, L.P. and Premier Medical Partner Fund, L.P. purchased
1,784,823 shares of Series E redeemable preferred stock at a price of
approximately $5.74 per share. Total cash proceeds received in connection with
the purchase were approximately $10.3 million. In addition, the Company has
agreed to certain voting rights, including the right of the majority of the
Series E holders to designate a member on the Board of Directors. Each share
of Series E preferred stock is redeemable upon the request of at least a
majority of the holders of the then outstanding shares of Series E preferred
stock given at least 90 days prior to the seventh anniversary of the date upon
which any shares of Series E preferred stock were first issued. The redemption
is payable in three equal installments. The redemption price is equal to the
original issuance price, plus all declared and unpaid dividends.
1997 Directors' Stock Option Plan
In March 1997, the board of directors adopted the 1997 Directors' Stock
Option Plan (the "Directors' Plan), subject to stockholder approval. A total
of 200,000 shares of common stock has been reserved for issuance under the
Directors' Plan. The Plan provides for the grant of nonstatutory stock options
to nonemployee directors of the Company.
1997 Employee Stock Purchase Plan
In March 1997, the board of directors adopted the 1997 Employee Stock
Purchase Plan (the "Purchase Plan"), subject to stockholder approval. A total
of 250,000 shares of common stock has been reserved for issuance under the
Purchase Plan.
F-16
<PAGE>
[PICTURE OF VEINS AND ARTERIES OF HUMAN HEART]
VEINS (WHITE) AND ARTERIES (RED) WITHIN THE WALL OF AN ACTUAL HUMAN HEART
The wall of the heart. The vessels of this human heart have been injected
with a colored plastic polymer and the ventricular muscle has been eroded
away, exposing an extensive vascular network that provides access to most
areas of the ventricular wall for mapping and ablating VT using Cardima
microcatheters.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIR-
CUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Company.............................................................. 18
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Dilution................................................................. 19
Capitalization........................................................... 20
Selected Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 26
Management............................................................... 49
Certain Transactions..................................................... 57
Principal Stockholders................................................... 59
Description of Capital Stock............................................. 62
Shares Eligible for Future Sale.......................................... 64
Underwriting............................................................. 66
Legal Matters............................................................ 67
Experts.................................................................. 67
Additional Information................................................... 68
Index to Financial Statements............................................ F-1
</TABLE>
----------------
UNTIL , 1997 (25 DAYS AFTER THE EFFECTIVE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPAT-
ING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
CARDIMA, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
BEAR, STEARNS & CO. INC.
DAIN BOSWORTH
INCORPORATED
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fee and the Nasdaq National
Market listing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC registration fee.............................................. $ 8,712
NASD filing fee................................................... 3,375
Nasdaq National Market listing fee................................ 38,538
Printing fees and expenses........................................ 150,000
Legal fees and expenses........................................... 450,000
Accounting fees and expenses...................................... 150,000
Blue Sky fees and expenses........................................ 15,000
Transfer Agent and Registrar fees................................. 10,000
Miscellaneous fees and expenses................................... 124,375
--------
Total........................................................... $950,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware Law authorizes a court to award, or a
corporation's Board of Directors to grant, indemnification to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Act").
Article X of the Registrant's Amended and Restated Certificate of
Incorporation (Exhibit 3.1 hereto) provides for indemnification of its
directors and officers to the maximum extent permitted by the Delaware Law,
and Section 6 of Article VII of the Registrant's Bylaws (Exhibit 3.2 hereto)
provides for indemnification of its directors, officers, employees and other
agents to the maximum extent permitted by Delaware Law. As permitted by
Section 145 of the Delaware Law, the Registrant's Amended and Restated
Certificate of Incorporation also includes a provision that eliminates the
personal liability of its directors for monetary damages for breach or alleged
breach of their duty of care. In addition, the Registrant has entered into
Indemnification Agreements (Exhibit 10.4 hereto) with its directors and
officers. Reference is also made to Section 7 of the Underwriting Agreement,
contained in Exhibit 1.1 hereto, indemnifying officers and directors of the
Registrant against certain liabilities. The Indemnification Agreements include
provisions that are in some respects broader than the specific indemnification
provisions contained in the Delaware Law, and may require the Company, among
other things, to indemnify its directors against certain liabilities that may
arise by reason of their status or service as directors (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance,
if available on reasonable terms.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Since December 31, 1993, the Company has sold and issued the following
unregistered securities (without payment of any selling commission to any
person), as adjusted to give effect to a one-for-seven reverse split of
outstanding shares of Preferred Stock and Common Stock effective October 1996:
(1) The Company has sold and issued 8,339 shares of its Common Stock at
an aggregate offering price of $10,276 to employees and a former director
pursuant to the exercise of options under the 1993 Stock Plan.
II-1
<PAGE>
(2) In June 1994 and October 1994, the Company issued warrants to Silicon
Valley Bank to purchase 1,714 shares and 285 shares, respectively, of its
Series A Preferred Stock at an exercise price of $7.00 per share, and in
October 1995, the Company issued a warrant to Silicon Valley Bank to
purchase 2,142 shares of its Series D Preferred Stock at an exercise price
of $5.11 per share. All of these warrants were issued in connection with
letter of credit and equipment financing agreements.
(3) During the period from June 1994 through July 1994, the Company sold
and issued to certain investors an aggregate of 85,713 shares of its Series
C Preferred Stock for an aggregate of $900,000 in cash.
(4) In July 1994, the Company issued a warrant to the State of California
Public Employees' Retirement System to purchase 1,428 shares of its Common
Stock at an exercise price of $7.00 per share in connection with its
facilities lease.
(5) During the period from September 1994 through November 1994, the
Company issued and sold to certain investors convertible promissory notes
in the aggregate principal amount of $1.0 million and warrants to purchase
Series A Preferred Stock at an exercise price of $7.00 per share in an
amount to be determined based upon a formula relating to the monthly
principal dollar amount outstanding under the convertible promissory notes.
In December 1994, the convertible promissory notes, and accrued interest
thereunder, were converted into an aggregate of 96,394 shares of Series C
Preferred Stock, for an aggregate purchase price of $1.0 million, payable
in consideration of the cancellation of certain indebtedness, and the
warrants were cancelled and reissued as warrants to purchase an aggregate
of 18,410 shares of Series A Preferred Stock at an exercise price of $7.00
per share. At that time, an additional 165,863 shares of Series C Preferred
Stock were issued and sold to certain investors for an aggregate purchase
price of $1.7 million in cash.
(6) During the period from March 1995 through August 1995, the Company
issued and sold to certain investors an aggregate of 85,666 shares of its
Series C Preferred Stock for an aggregate of $900,000 in cash.
(7) During the period from April 1995 through December 1995, the Company
issued and sold to certain investors notes in the aggregate principal
amount of $2.3 million and warrants to purchase Common Stock at an exercise
price of $1.05 per share in an amount to be determined based upon a formula
relating to the monthly principal amount outstanding under the notes. In
December 1995, the outstanding principal amount of the notes, and accrued
interest thereon, were converted into an aggregate of 423,402 shares of
Series D Preferred Stock, and the warrants were cancelled and reissued as
warrant to purchase an aggregate of 456,523 shares of Common Stock at an
exercise price of $1.05 per share. At that time, an additional 792,516
shares of Series D Preferred Stock were issued and sold to certain
investors for an aggregate purchase price of $4.0 million in cash.
(8) In January 1996, the Company issued a warrant to Comdisco to purchase
23,776 shares of its Series D Preferred Stock at an exercise price of $5.11
per share in connection with an equipment financing agreement.
(9) In February 1996, the Company issued and sold to certain investors an
aggregate of 703,134 shares of Series D Preferred Stock for an aggregate
purchase price of $3.6 million, payable in cash and in cancellation of
certain indebtedness.
(10) During the period from October 1996 through January 1997, the
Company issued and sold to certain investors notes in the aggregate
principal amount of $2.5 million. In March 1997, the outstanding principal
amount of the notes, and accrued interest thereon, were converted into an
aggregate of 440,963 shares of Series E Preferred Stock.
(11) In February 1997, the Company issued and sold convertible notes to
certain investors in the aggregate amount of $750,000. In March 1997, the
outstanding principal amount of the notes, and accrued interest thereon,
were converted into an aggregate of 130,955 shares of Series E Preferred
Stock.
(12) In March 1997, the Company issued and sold to certain investors an
aggregate of 1,784,823 shares of Series E Preferred Stock for an aggregate
purchase price of approximately $10.3 million in cash.
II-2
<PAGE>
The sales and issuances of securities in the transaction described in
paragraph 1 were deemed to be exempt from registration under the Securities
Act of 1933, as amended (the "Securities Act"), by virtue of Rule 701
promulgated thereunder in that they were offered and sold either pursuant to
written compensatory benefit plans or pursuant to a written contract relating
to compensation, as provided by Rule 701. The sales and issuances of
securities in the transactions described in paragraphs 2 through 12 above were
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of such Securities Act as transactions by an issuer not involving
any public offering.
Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. In all such transactions, all recipients of
securities represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and all recipients either received adequate information
about the Registrant or had access, through employment or other relationships,
to such information.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of Registrant.
3.2 Bylaws of Registrant.
3.3* Form of Amended and Restated Certificate of Incorporation of Registrant
to become effective upon closing of this Offering.
3.4* Form of Bylaws of Registrant to become effective upon closing of this
Offering.
4.1 Form of Common Stock Certificate.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1 1993 Stock Option Plan.
10.2 1997 Directors' Stock Option Plan.
10.3 1997 Employee Stock Purchase Plan.
10.4 Form of Indemnification Agreement.
10.5 Fourth Amended and Restated Stockholders' Rights Agreement dated March
7, 1997, between Registrant and certain stockholders of Registrant.
10.6+ License Agreement dated May 21, 1993, between Registrant and Target
Therapeutics, Inc.
10.7 Lease dated April 25, 1994, between Registrant and State of California
Public Employees' Retirement System.
10.8 Sublease dated November 14, 1996, between Registrant and Target
Therapeutics, Inc.
10.9 Master Lease Agreement dated January 26, 1996, between Registrant and
Comdisco, Inc.,together with the Purchase Agreements.
10.10 Warrant Purchase Agreement dated December 9, 1993, between Registrant
and Target Therapeutics, Inc., together with the Series A Preferred
Stock Warrant.
10.11 Series A Preferred Stock Warrant dated June 10, 1994, issued to Silicon
Valley Bank.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
10.12 Warrant Purchase Agreement dated July 1, 1994, between Registrant and
California Public Employees' Retirement System, together with the
Common Stock Warrant.
10.13 Series A Preferred Stock Warrant dated October 26, 1994, issued to
Silicon Valley Bank.
10.14 Form of Series A Preferred Stock Warrant issued to certain investors in
December 1994.
10.15 Series D Preferred Stock Warrant dated October 31, 1995, issued to
Silicon Valley Bank.
10.16 Form of Common Stock Warrant issued to certain investors from April
1995 to December 1995.
10.17 Warrant Agreement dated January 23, 1996, between Registrant and
Comdisco, Inc., together with the Series D Preferred Stock Warrant.
10.18+ Electrophysiology Catheter License Agreement dated May 17, 1994,
between Registrant and BSI Corporation, together with the Credit Pool
Agreement of same date.
10.19 Distribution Agreement dated June 15, 1995, between Registrant and
Paramedic Co., Ltd.
10.20 Distribution Agreement dated July 14, 1995, between Registrant and
Werfen Distribution AG, together with the May 15, 1996 letter
amendment.
10.21 Employment Agreement dated May 21, 1993, between Registrant and Gabriel
B. Vegh.
10.22 Employment Letter Agreement dated October 31, 1994, between Registrant
and Phillip C. Radlick, Ph.D.
11.1 Statement of Computation of Loss Per Share.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Venture Law Group, A Professional Corporation (included in
Exhibit 5.1).
23.3 Consent of Heller Ehrman White & McAuliffe.
24.1 Power of Attorney (see page II-6).
</TABLE>
- --------
* To be supplied by amendment.
+ Certain portions of this Exhibit for which confidential treatment has been
requested, have been redacted and filed separately with the Securities and
Exchange Commission.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters,
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions referenced in Item 14 of this Registration
Statement or 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
hereunder, 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
II-4
<PAGE>
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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
Rule 497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus 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-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS
DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-1 TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FREMONT, STATE
OF CALIFORNIA ON THIS 12TH DAY OF MARCH, 1997.
Cardima, Inc.
/s/ Phillip C. Radlick
By: _________________________________
PHILLIP C. RADLICK,PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Phillip C. Radlick and Ronald E.
Bourquin and each of them acting individually, as his attorney in fact, each
with full power of substitution, for him in any and all capacities, to sign
any and all amendments to this Registration Statement (including post-
effective amendments), and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be
signed by our said attorneys to any and all amendments to said Registration
Statement, or any related registration statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities on March
12, 1997:
SIGNATURE TITLE
/s/ Phillip C. Radlick President, Chief Executive Officer and
- ------------------------------------- Director (Principal Executive
PHILLIP C. RADLICK Officer)
/s/ Ronald E. Bourquin Vice President and Chief Financial
- ------------------------------------- Officer(Principal Financial and
RONALD E. BOURQUIN Accounting Officer)
/s/ Joseph S. Lacob Chairman of the Board of Directors
- -------------------------------------
JOSEPH S. LACOB
Director
- -------------------------------------
GARY R. BANG
/s/ Michael J.F. Du Cros Director
- -------------------------------------
MICHAEL J.F. DU CROS
/s/ Neal Moszkowski Director
- -------------------------------------
NEAL MOSZKOWSKI
/s/ Gabriel B. Vegh Director
- -------------------------------------
GABRIEL B. VEGH
/s/ Charles P. Waite, Jr. Director
- -------------------------------------
CHARLES P. WAITE, JR.
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of Registrant.
3.2 Bylaws of Registrant.
3.3* Form of Amended and Restated Certificate of Incorporation of Registrant
to become effective upon closing of this Offering.
3.4* Form of Bylaws of Registrant to become effective upon closing of this
Offering.
4.1 Form of Common Stock Certificate.
5.1* Opinion of Venture Law Group, A Professional Corporation.
10.1 1993 Stock Option Plan.
10.2 1997 Directors' Stock Option Plan.
10.3 1997 Employee Stock Purchase Plan.
10.4 Form of Indemnification Agreement.
10.5 Fourth Amended and Restated Stockholders' Rights Agreement dated March
7, 1997, between Registrant and certain stockholders of Registrant.
10.6+ License Agreement dated May 21, 1993, between Registrant and Target
Therapeutics, Inc.
10.7 Lease dated April 25, 1994, between Registrant and State of California
Public Employees' Retirement System.
10.8 Sublease dated November 14, 1996, between Registrant and Target
Therapeutics, Inc.
10.9 Master Lease Agreement dated January 26, 1996, between Registrant and
Comdisco, Inc., together with the Purchase Agreements.
10.10 Warrant Purchase Agreement dated December 9, 1993, between Registrant
and Target Therapeutics, Inc., together with the Series A Preferred
Stock Warrant.
10.11 Series A Preferred Stock Warrant dated June 10, 1994, issued to Silicon
Valley Bank
10.12 Warrant Purchase Agreement dated July 1, 1994, between Registrant and
California Public Employees' Retirement System, together with the
Common Stock Warrant.
10.13 Series A Preferred Stock Warrant dated October 26, 1994, issued to
Silicon Valley Bank.
10.14 Form of Series A Preferred Stock Warrant issued to certain investors in
December 1994.
10.15 Series D Preferred Stock Warrant dated October 31, 1995, issued to
Silicon Valley Bank.
10.16 Form of Common Stock Warrant issued to certain investors from April
1995 to December 1995.
10.17 Warrant Agreement dated January 23, 1996, between Registrant and
Comdisco, Inc., together with the Series D Preferred Stock Warrant.
10.18+ Electrophysiology Catheter License Agreement dated May 17, 1994,
between Registrant and BSI Corporation, together with the Credit Pool
Agreement of same date.
10.19 Distribution Agreement dated June 15, 1995, between Registrant and
Paramedic Co., Ltd.
10.20 Distribution Agreement dated July 14, 1995, between Registrant and
Werfen Distribution AG, together with the May 15, 1996 letter
amendment.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
10.21 Employment Agreement dated May 21, 1993, between Registrant and Gabriel
B. Vegh.
10.22 Employment Letter Agreement dated October 31, 1994, between Registrant
and Phillip C. Radlick, Ph.D.
11.1 Statement of Computation of Loss Per Share.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Venture Law Group, A Professional Corporation (included in
Exhibit 5.1).
23.3 Consent of Heller Ehrman White & McAuliffe.
24.1 Power of Attorney (see page II-6).
</TABLE>
- --------
* To be supplied by amendment.
+ Certain portions of this Exhibit for which confidential treatment has been
requested, have been redacted and filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CARDIMA, INC.,
A DELAWARE CORPORATION
The undersigned, Phillip C. Radlick and Joshua L. Green, hereby
certify that:
ONE: They are the duly elected and acting President and Chief
Executive Officer and Secretary, respectively, of said corporation.
TWO: The Certificate of Incorporation of said corporation was
originally filed on November 12, 1992. The Certificate of Incorporation of said
corporation shall be amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is Cardima, Inc.
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, State of
Delaware 19805. The name of the corporation's registered agent at such address
is Corporation Service Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
------------ ---------
Stock." The total number of shares which the corporation is authorized to issue
- -----
is Fourteen Million Seven Hundred Sixty-Three Thousand Nine Hundred Sixty-Six
(14,763,966) shares, of which: Eight Million Five Hundred Thousand (8,500,000)
shares shall be Common Stock, par value $0.001 per share, and Six Million Two
Hundred Sixty-Three Thousand Nine Hundred Sixty-Six (6,263,966) shares shall be
Preferred Stock, par value $0.001 per share. Of such shares of Preferred Stock,
Four Hundred Fifty-Nine Thousand Nine Hundred Eighteen (459,918) shall be
designated "Series A Preferred
------------------
<PAGE>
Stock," Three Hundred Thirty-Three Thousand Three Hundred Thirty Three
- -----
(333,333) shall be designated "Series B Preferred Stock,"
------------------------
Four Hundred Fifty-Eight Thousand Two Hundred Forty-Five (458,245)
shall be designated "Series C Preferred Stock," One Million Nine Hundred Forty-
------------------------
Four Thousand Nine Hundred Seventy (1,944,970) shall be designated "Series D
--------
Preferred Stock and Three Million Sixty-Seven Thousand Five Hundred
- ---------------
(3,067,500) shall be designated "Series E Preferred Stock."
------------------------
B. Rights, Preferences and Restrictions of Preferred Stock. The
-------------------------------------------------------
Preferred Stock authorized by this Restated Certificate of Incorporation may be
issued from time to time. The rights, preferences, privileges and restrictions
granted to and imposed on the Series A Preferred, the Series B Preferred, the
Series C Preferred, the Series D Preferred and the Series E Preferred, are as
set forth below in this Article IV(B).
1. Dividend Provisions. The holders of shares of Series A,
-------------------
Series B, Series C, Series D and Series E Preferred Stock shall be entitled to
receive dividends, out of any assets legally available therefor, prior and in
preference to any declaration or payment of any dividend on the Common Stock of
this corporation, at the rate of $0.70 per share per annum with respect to the
Series A Preferred Stock and Series B Preferred Stock, $1.05 per share per annum
with respect to the Series C Preferred Stock, $0.511 per share per annum with
respect to the Series D Preferred Stock and $0.57418 per share per annum with
respect to the Series E Preferred Stock, payable quarterly when, as and if
declared by the Board of Directors. Such dividends shall not be cumulative.
2. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or
winding up of this corporation, either voluntary or involuntary, the holders
of Series E Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of this
corporation to the holders of Series A, Series B, Series C, Series D Preferred
Stock or Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of (i) $5.7418 for each outstanding share of Series E
Preferred Stock (the "Series E Issue Price") then held by them plus (ii) an
--------------------
amount equal to declared but unpaid dividends on such share (such amount of
declared but unpaid dividends being referred to herein as the "Series E
--------
Premium") for each share of Series E Preferred Stock then held by them. If
- -------
upon the occurrence of such event, the assets and funds thus distributed among
the holders of the Series E Preferred Stock shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then,
the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series E
Preferred Stock in proportion to the amount of such stock owned by each such
holder.
(b) If, upon the completion of the distribution required by
subparagraph (a) of this Section 2, assets or surplus funds remain in this
corporation, the holders of Series D Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the remaining
assets or surplus funds of this corporation to the holders of Series A, Series
B, Series C Preferred Stock or Common Stock by reason of their ownership
thereof, an
-2-
<PAGE>
amount per share equal to the sum of (i) $5.11 for each outstanding share of
Series D Preferred Stock (the "Series D Issue Price") then held by them plus
--------------------
(ii) an amount equal to declared but unpaid dividends on such share (such
amount of declared but unpaid dividends being referred to herein as the
"Series D Premium") for each share of Series D Preferred Stock then held by
----------------
them. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series D Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, the entire remaining assets and funds of the
corporation legally available for distribution shall be distributed ratably
among the holders of the Series D Preferred Stock in proportion to the amount
of such stock owned by each such holder.
(c) If, upon the completion of the distribution required by
subparagraphs (a) and (b) of this Section 2, assets or surplus funds remain in
this corporation, the holders of Series A and Series C Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
remaining assets or surplus funds of this corporation to the holders of Series B
Preferred Stock or Common Stock by reason of their ownership thereof, an amount
per share equal to the sum of (i) $7.00 for each outstanding share of Series A
Preferred Stock (the "Series A Issue Price") then held by them plus (ii) an
--------------------
amount equal to declared but unpaid dividends on such share (such amount of
declared but unpaid dividends being referred to herein as the "Series A
--------
Premium") for each share of Series A Preferred Stock then held by them, and an
amount per share equal to the sum of (i) $10.50 for each outstanding share of
Series C Preferred Stock (the "Series C Issue Price") then held by them plus
--------------------
(ii) an amount equal to declared but unpaid dividends on such share (such amount
of declared but unpaid dividends being referred to herein as the "Series C
--------
Premium") for each share of Series C Preferred Stock then held by them. If upon
- -------
the occurrence of such event, the assets and funds thus distributed among the
holders of the Series A and Series C Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then, the entire remaining assets and funds of the corporation legally available
for distribution shall be distributed ratably among the holders of the Series A
and Series C Preferred Stock in proportion to the preferential amount each such
holder is otherwise entitled to receive.
(d) If, upon the completion of the distributions required by
subparagraphs (a), (b) and (c) of this Section 2, assets or surplus funds remain
in this corporation, the holders of Series B Preferred Stock shall be entitled
to receive, prior and in preference to any distribution of any of the remaining
assets or surplus funds of this corporation to the holders of Common Stock by
reason of their ownership thereof, an amount per share equal to the sum of (i)
$7.00 for each outstanding share of Series B Preferred Stock (the "Series B
--------
Issue Price") and (ii) an amount equal to declared but unpaid dividends on such
- -----------
share (such amount of declared but unpaid dividends being referred to herein as
the "Series B Premium"). If upon the occurrence of such event, the assets and
----------------
funds thus distributed among the holders of the Series B Preferred Stock shall
be insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, the entire remaining assets and funds of the
corporation legally available for distribution shall be distributed ratably
among the holders of the Series B Preferred Stock in proportion to the amount of
such stock owned by each such holder.
-3-
<PAGE>
(e) If, upon the completion of the distribution required by
subparagraphs (a), (b), (c) and (d) of this Section 2, assets or surplus funds
remain in this corporation, such assets or surplus funds shall be distributed
ratably to the holders of the Series E, Series D, Series C, Series B, and Series
A Preferred Stock and the Common Stock, treating the Preferred Stock as if it
had been converted into Common Stock.
(f) (i) For purposes of this Section 2, a liquidation,
dissolution or winding up of this corporation shall be deemed to be occasioned
by, or to include:
(A) the acquisition of the corporation by another
entity by means of any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation
but, excluding any merger effected exclusively for the purpose of changing the
domicile of the corporation); and
(B) a sale of all or substantially all of the
assets of the corporation; unless the corporation's stockholders of record as
------
constituted immediately prior to such acquisition or sale will, immediately
after such acquisition or sale (by virtue of securities issued as
consideration for the corporation's acquisition or sale or otherwise) hold at
least fifty percent (50%) of the voting power of the surviving or acquiring
entity.
(ii) In any of such events, if the consideration
received by the corporation is other than cash, its value will be deemed its
fair market value. Any securities shall be valued as follows:
(A) Securities not subject to investment letter
or other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or
through the Nasdaq National Market, the value shall be deemed to be the
average of the closing prices of the securities on such exchange over the
thirty (30) day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period ending three (3)
days prior to the closing; and
(3) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by the
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.
(B) The method of valuation of securities
subject to investment letter or other restrictions on free marketability
(other than restrictions arising solely by virtue of a stockholder's status as
an affiliate or former affiliate) shall be to make an appropriate discount
from the market value determined as above in (A) (1), (2) or (3) to reflect
-4-
<PAGE>
the approximate fair market value thereof, as mutually determined by the
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of such Preferred Stock.
(iii) In the event the requirements of this subsection
2(e) are not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until such
time as the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Series A, Series B,
Series C, Series D and Series E Preferred Stock shall revert to and be the
same as such rights, preferences and privileges existing immediately prior to
the date of the first notice referred to in subsection 2(f)(iv) hereof.
(iv) The corporation shall give each holder of record
of Series A, Series B, Series C, Series D and Series E Preferred Stock written
notice of such impending transaction not later than twenty (20) days prior to
the stockholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section 2, and the
corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner than twenty (20)
days after the corporation has given the first notice provided for herein or
sooner than ten (10) days after the corporation has given notice of any
material changes provided for herein; provided, however, that such periods may
be shortened upon the written consent of the holders of Preferred Stock that
are entitled to such notice rights or similar notice rights and that represent
at least a majority of the voting power of all then outstanding shares of such
Preferred Stock.
3. Redemption.
----------
(a) Upon the receipt by this corporation of a written
request from the holders of at least a majority of the voting power of the
then outstanding shares of Series E Preferred Stock voting together as a
single series (the "Series E Notice"), that all Series E Preferred Stock be
---------------
redeemed, and concurrently with the surrender by such holders of the
certificates presenting such shares, this corporation shall, to the extent it
may lawfully so do, redeem the shares specified in such request in three (3)
equal annual installments by paying in cash therefor a sum equal to the sum of
(i) the Series E Issue Price per share of Series E and Preferred Stock to be
redeemed (as adjusted for any stock dividends, combinations or splits with
respect to such shares) plus (ii) the Series E Premium for each share of
Series E Preferred Stock to be redeemed (the "Series E Redemption Price").
-------------------------
(b) Upon the receipt by this corporation of written request
from the holders of at least a majority of the voting power of the then
outstanding shares of Series D
-5-
<PAGE>
Preferred Stock voting together as a single series (the "Series D Notice"),
---------------
that all Series D Preferred Stock be redeemed, and concurrently with the
surrender by such holders of the certificates presenting such shares, this
corporation shall, to the extent it may lawfully so do, redeem the shares
specified in such request in three (3) equal annual installments by paying in
cash therefor a sum equal to the sum of (i) the Series D Issue Price per share
of Series D Preferred Stock to be redeemed (as adjusted for any stock
dividends, combinations or splits with respect to such shares) plus (ii) the
Series D Premium for each share of Series D Preferred Stock to be redeemed
(the "Series D Redemption Price").
-------------------------
(c) The redemption option set forth in this Section 3 shall
be exercised by written notice to the corporation signed by a majority of the
voting power of the then outstanding shares of Series E Preferred Stock or
Series D Preferred Stock, as the case may be, voting as a single series,
delivered to the corporation at least ninety (90) days prior to the seventh
anniversary of the date upon which any shares of Series E Preferred Stock or
Series D Preferred Stock, as the case may be, were first issued. Within thirty
(30) days of the corporation's receipt of such notice, the corporation shall
mail a notice (the "Redemption Notice") to all holders of the Series E
-----------------
Preferred Stock or Series D Preferred Stock, as the case may be, by means of
first class mail, postage paid, addressed to the holders of record of the
shares of Series E Preferred Stock or Series D Preferred Stock, as the case
may be, at their respective addresses then appearing on the books of the
corporation. Each such Redemption Notice shall indicate that such holder's
shares of Series E Preferred Stock or Series D Preferred Stock, as the case
may be, shall be redeemed in three (3) equal annual installments and the dates
set for such redemption, the first date of which shall be the seventh
anniversary of the date upon which any shares of Series E Preferred Stock or
Series D Preferred Stock, as the case may be, were first issued and the second
and third dates of which shall be the second and third anniversaries
thereafter (the "Series E Redemption Dates" or the "Series D Redemption
------------------------- -------------------
Dates"). Any notice mailed in such manner shall be conclusively deemed to have
- -----
been duly given whether or not such notice is in fact received.
(d) From and after each Series E Redemption Date or Series D
Redemption Date, unless there shall have been a default in payment of the Series
E Redemption Price or Series D Redemption Price, all rights of the holders of
the shares of Series E Preferred Stock or Series D Preferred Stock designated
for redemption shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of this corporation or be deemed to
be outstanding for any purpose whatsoever. If the funds of the corporation
legally available for redemption of the shares of Series E Preferred Stock or
Series D Preferred Stock to be redeemed on the applicable Series E Redemption
Date or Series D Redemption Date are insufficient to redeem the total number of
shares of Series E Preferred Stock or Series D Preferred Stock to be redeemed on
such date, those funds which are legally available will be used to redeem the
maximum possible number of such shares ratably among the holders of such shares
to be redeemed based upon their holdings of Series E Preferred Stock or Series D
Preferred Stock. The shares of Series E Preferred Stock or Series D Preferred
Stock not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of
the corporation are legally available for the redemption of shares of Series E
Preferred Stock or Series D Preferred Stock, such funds will immediately be used
to redeem the balance of the shares which the corporation has become obliged to
redeem on
-6-
<PAGE>
the applicable Series E Redemption Date or Series D Redemption Date but which
it has not redeemed.
(e) Upon surrender of any certificates representing shares
of Series E Preferred Stock or Series D Preferred Stock to this corporation
for redemption pursuant to this Section 3, this corporation shall mail on each
Series E Redemption Date or Series D Redemption Date, a bank check payable to
the order of the entity whose name appears on such certificates as the owner
thereof in the amount due to such entity pursuant to this subsection 3. Such
bank check shall be mailed to such entity at the last address provided to this
corporation for such entity.
(f) In the event of default by this corporation of payment
of the Series E Redemption Price or Series D Redemption Price to the holders
of the shares of Series E Preferred Stock or Series D Preferred Stock to be
redeemed pursuant to this Section 3, any unpaid balance of the Series E
Redemption Price or Series D Redemption Price shall accrue interest at the
rate of fifteen percent (15%) per annum, payable quarterly, in arrears.
4. Conversion. The holders of the Series A, Series B, Series
----------
C, Series D and Series E Preferred Stock shall have conversion rights as follows
(the "Conversion Rights"):
-----------------
(a) Right to Convert. Each share of Series A, Series B,
----------------
Series C, Series D and Series E Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share at the office of this corporation or any transfer agent for such stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Series A Issue Price, the Series B Issue Price, the
Series C Issue Price, the Series D Issue Price or the Series E Issue Price,
respectively, by the Conversion Price applicable to such share, determined as
hereafter provided, in effect on the date the certificate is surrendered for
conversion. The initial Conversion Price per share for shares of Series A,
Series B and Series C and Series D Preferred Stock shall be $7.3458553,
$6.5729993, $7.00 and $5.11, respectively, and the initial Conversion Price
per share for shares of Series E Preferred Stock shall be the Series E Issue
Price, provided, however, that the Conversion Price for the Series A, Series
B, Series C, Series D and Series E Preferred Stock shall be subject to
adjustment as set forth in subsection 4(d).
(b) Automatic Conversion. Each share of Series A, Series B,
--------------------
Series C, Series D and Series E Preferred Stock shall automatically be
converted into shares of Common Stock at the Conversion Price at the time in
effect for such Series A, Series B, Series C, Series D and Series E Preferred
Stock immediately upon the earlier of (i) except as provided below in
subsection 4(c), the corporation's sale of its Common Stock in a firm
commitment underwritten public offering pursuant to a registration statement
on Form S-1 under the Securities Act of 1933, as amended, the public offering
price of which was not less than $10.00 per share (if such registration
statement becomes effective prior to June 30, 1997, or $11.00 per share if
such registration statement is filed on or after July 1, 1997) (adjusted to
reflect subsequent stock dividends, stock splits or recapitalization) and
generating proceeds to the corporation (net of underwriting discounts and
commissions and expenses) of $20,000,000 or (ii) subject to the voting
provisions set forth in Article IV, Section B(6) hereof, immediately before
any liquidation,
-7-
<PAGE>
dissolution or winding up of this corporation, whether voluntary or
involuntary (as defined in Article IV, Section B(2) above), in which the
aggregate value of the consideration which the holders of Series E Preferred
Stock are entitled to receive, in accordance with Article IV, Section B(2),
exceeds an aggregate of $17.2254 per share (adjusted to reflect subsequent
stock dividends, stock splits or recapitalization) of Series E Preferred Stock
sold by the corporation as of the date of the event contemplated in Article
IV, Section B(2). Each share of Series D and Series E Preferred Stock shall
automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such Series D and Series E Preferred Stock
immediately upon the date specified by written consent or agreement of the
holders of at least seventy-five percent (75%) of the then outstanding shares
of Series D or Series E Preferred Stock, as the case may be, each voting as a
separate series. Each share of Series A, Series B and Series C Preferred Stock
shall automatically be converted into shares of Common Stock at the Conversion
Price at the time in effect for such Series A, Series B and Series C Preferred
Stock immediately upon the date specified by written consent or agreement of
the holders of a majority of the then outstanding shares of Series A, Series B
and Series C Preferred Stock, voting together as a single class.
(c) Mechanics of Conversion. Before any holder of Series A, Series B,
-----------------------
Series C, Series D or Series E Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the Series A, Series B, Series C, Series D or Series E
Preferred Stock, and shall give written notice to this corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A, Series
B, Series C, Series D or Series E Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Series A, Series B, Series C, Series
D or Series E Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act of
1933, as amended, the conversion may, at the option of any holder tendering
Series A, Series B, Series C, Series D or Series E Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive the Common Stock upon conversion of the Series A, Series B, Series C,
Series D or Series E Preferred Stock shall not be deemed to have converted such
Series A, Series B, Series C, Series D or Series E Preferred Stock until
immediately prior to the closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain
-----------------------------------------------------------
Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series
- -------------------------------------------
A, Series B, Series C, Series D and Series E Preferred Stock shall be subject to
adjustment from time to time as follows:
-8-
<PAGE>
(i) (A) If the corporation shall issue after the date upon which
any shares of Series E Preferred Stock were first issued (the "Purchase
--------
Date"), any Additional Stock (as defined below) for a consideration per share
- ----
less than the Conversion Price for the Series E Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the Conversion
Price for the Series A, Series B, Series C, Series D and Series E Preferred
Stock in effect immediately prior to each such issuance shall forthwith
(except as otherwise provided in this clause (i)) be adjusted to a price
determined by multiplying such Conversion Price by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance (not including shares excluded from the definition of
Additional Stock by Section 4(d)(ii)(B)) plus the number of shares of Common
Stock that the aggregate consideration received by the corporation for such
issuance would purchase at such Conversion Price; and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issuance (not including shares excluded from the definition of Additional
Stock by subsection 4(d)(ii)(B)) plus the number of shares of such Additional
Stock.
However, the foregoing calculations shall not take into
account shares deemed issued pursuant to Section 4(d)(i)(D) on account of
options, rights or convertible or exchangeable securities (or the actual or
deemed consideration therefor), except to the extent (i) such options, rights
or convertible or exchangeable securities have been exercised, converted or
---------------------------------
exchanged or (ii) the consideration to be paid upon such exercise, conversion
- ---------
or exchange per share of underlying Common Stock is less than or equal to the
---------------------
per share consideration for the Additional Stock which has given rise to the
Conversion Price adjustment being calculated.
No adjustment of the Conversion Price for the Series A,
Series B, Series C, Series D or Series E Preferred Stock shall be made in an
amount less than one cent per share, provided that any adjustments which are
not required to be made by reason of this sentence shall be carried forward
and shall be either taken into account in any subsequent adjustment made prior
to three (3) years from the date of the event giving rise to the adjustment
being carried forward, or shall be made at the end of three (3) years from the
date of the event giving rise to the adjustment being carried forward. Except
to the limited extent provided for in subsections (D)(3) and (D)(4), no
adjustment of such Conversion Price pursuant to this subsection 4(d)(i) shall
have the effect of increasing the Conversion Price above the Conversion Price
in effect immediately prior to such adjustment.
(B) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(C) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined by
the Board of Directors irrespective of any accounting treatment.
-9-
<PAGE>
(D) In the case of the issuance (whether before, on
or after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe
for such convertible or exchangeable securities, the following provisions
shall apply for all purposes of this subsection 4(d)(i) and subsection
4(d)(ii):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of
time, but without taking into account potential antidilution adjustments) of
such options to purchase or rights to subscribe for Common Stock shall be
deemed to have been issued at the time such options or rights were issued and
for a consideration equal to the consideration (determined in the manner
provided in subsections 4(d)(i)(B) and (d)(i)(C)), if any, received by the
corporation upon the issuance of such options or rights plus the minimum
exercise price provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability,
including, without limitation, the passage of time, but without taking into
account potential antidilution adjustments) for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by the corporation
(without taking into account potential antidilution adjustments) upon the
conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the
manner provided in subsections 4(d)(i)(B) and (d)(i)(C)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to this
corporation upon exercise of such options or rights or upon conversion of or
in exchange for such convertible or exchangeable securities, including, but
not limited to, a change resulting from the antidilution provisions thereof,
the Conversion Price of the Series A, Series B, Series C, Series D and Series
E Preferred Stock, to the extent in any way affected by or computed using such
options, rights or securities, shall be recomputed to reflect such change, but
no further adjustment shall be made for the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price
-10-
<PAGE>
of the Series A, Series B, Series C, Series D and Series E Preferred Stock, to
the extent in any way affected by or computed using such options, rights or
securities or options or rights related to such securities, shall be
recomputed to reflect the issuance of only the number of shares of Common
Stock (and convertible or exchangeable securities which remain in effect)
actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the options
or rights related to such securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to subsections
4(d)(i)(D)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subsection
4(d)(i)(D)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 4(d)(i)(D)) by this
corporation after the Purchase Date other than
(A) Common Stock issued pursuant to a transaction
described in subsection 4(d)(iii) hereof;
(B) shares of Common Stock issued or issuable to
employees, consultants or directors of this corporation directly or pursuant to
a stock option plan or restricted stock plan unanimously approved by the Board
of Directors of this corporation;
(C) shares of Common Stock issued or issuable
upon exercise or conversion of warrants to purchase shares of the capital stock
of this corporation issued in connection with equipment lease financing
transactions or bank financing transactions unanimously approved by the Board of
Directors, where the issuance of such warrants is not principally for the
purpose of raising additional equity capital for this corporation;
(D) shares of Common Stock issued or issuable
pursuant to the acquisition of another corporation by this corporation or any
subsidiary of this corporation by merger, purchase of substantially all of the
assets, or other reorganization unanimously approved by the Board of Directors
whereby this corporation owns more than fifty percent (50%) of the voting power
of such other corporation following such acquisition;
(E) shares of Common Stock issued or issuable as
a dividend or distribution on the Series A, Series B, Series C or Series D or
Series E Preferred Stock;
(F) shares of Common Stock issued or issuable
(I) in a public offering before or in connection with which all outstanding
shares of Series A, Series B, Series C, Series D or Series E Preferred Stock
will be converted to Common Stock or (II) upon exercise of warrants or rights
granted to underwriters in connection with such a public offering; and
-11-
<PAGE>
(G) shares of Common Stock issued or issuable by
way of dividend or other distribution on shares of Common Stock excluded from
the definition of Additional Stock by the foregoing clauses (A), (B), (C), (D),
(E) or (F) or on shares of Common Stock so excluded.
(iii) In the event the corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
- -------------------------
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A, Series B, Series C, Series D and Series E Preferred Stock
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents
with the number of shares issuable with respect to Common Stock Equivalents
determined from time to time in the manner provided for deemed issuances in
subsection 4(d)(i)(D).
(iv) If the number of shares of Common Stock
outstanding at any time after the Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A, Series B, Series C, Series D
and Series E Preferred Stock shall be appropriately increased so that the number
of shares of Common Stock issuable on conversion of each share of such series
shall be decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of the
Series A, Series B, Series C, Series D and Series E Preferred Stock shall be
entitled to a proportionate share of any such distribution as though they were
the holders of the number of shares of Common Stock of the corporation into
which their shares of Series A, Series B, Series C, Series D and Series E
Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the corporation entitled to
receive such distribution.
(f) Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2) provision shall be made so that the holders of the
Series A, Series B, Series C, Series D and Series E Preferred
-12-
<PAGE>
Stock, respectively shall thereafter be entitled to receive upon conversion of
the Series A, Series B, Series C, Series D and Series E Preferred Stock the
number of shares of stock or other securities or property of the Company or
otherwise, to which a holder of Common Stock deliverable upon conversion would
have been entitled on such recapitalization. In any such case, adjustment shall
be made in the application of the provisions of this Section 4 with respect to
the rights of the holders of the Series A, Series B, Series C, Series D and
Series E Preferred Stock after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the Conversion Price then
in effect and the number of shares purchasable upon conversion of the Series A,
Series B, Series C, Series D and Series E Preferred Stock) shall be applicable
after that event as nearly equivalent as may be practicable.
(g) No Impairment. This corporation will not, by amendment
-------------
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A, Series B, Series C, Series D
and Series E Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A, Series B, Series C, Series D
or Series E Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of shares of Series A, Series B, Series C, Series D or Series E
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A, Series B, Series C, Series D
and Series E Preferred Stock, respectively pursuant to this Section 4, this
corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A, Series B, Series C, Series D and Series E Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. This corporation
shall, upon the written request at any time of any holder of Series A, Series B,
Series C, Series D or Series E Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price for such series of Preferred Stock at the
time in effect, and (C) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of a share of Series A, Series B, Series C, Series D or Series E Preferred
Stock.
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<PAGE>
(i) Notices of Record Date. In the event of any taking by
----------------------
this corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A, Series B, Series C, Series D
or Series E Preferred Stock, at least twenty (20) days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A, Series B, Series C, Series D and
Series E Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series A, Series B, Series C, Series D and Series E Preferred
Stock; and if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Series A, Series B, Series C, Series D and Series E Preferred
Stock, in addition to such other remedies as shall be available to the holder of
such Preferred Stock, this corporation will take such corporate action as may,
in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to these
articles.
(k) Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A, Series B, Series C,
Series D or Series E Preferred Stock shall be deemed given if deposited in the
United States mail, postage prepaid, and addressed to each holder of record at
his address appearing on the books of this corporation.
5. Voting Rights. The holder of each share of Series A, Series
-------------
B, Series C, Series D or Series E Preferred Stock shall have the right to one
vote for each share of Common Stock into which such Series A, Series B, Series
C, Series D or Series E Preferred Stock could then be converted, and with
respect to such vote, such holder shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock, and shall be
entitled, notwithstanding any provision hereof, to notice of any stockholders'
meeting in accordance with the Bylaws of this corporation, and shall be entitled
to vote, together with holders of Common Stock, with respect to any question
upon which holders of Common Stock have the right to vote. Fractional votes
shall not, however, be permitted and any fractional voting rights available on
an as-converted basis (after aggregating all shares into which shares of Series
A, Series B, Series C, Series D or Series E Preferred Stock held by each holder
could be converted) shall be rounded to the nearest whole number (with one-half
being rounded upward).
-14-
<PAGE>
6. Protective Provisions.
---------------------
(a) So long as any shares of Preferred Stock are outstanding,
this corporation shall not, without first obtaining the approval (by vote or
written consent, as provided by law) of at least a majority of the voting power
of the then outstanding shares of Preferred Stock:
(i) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the corporation is disposed of;
(ii) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on a
parity with, the Preferred Stock with regard to voting, dividends or upon
liquidation; or
(iii) redeem, purchase or otherwise acquire (or pay into
or set aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; provided, however, that this restriction shall
not apply to the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for this corporation
or any subsidiary pursuant to agreements under which the corporation has the
option to repurchase such shares at cost or at cost upon the occurrence of
certain events, such as the termination of employment; provided further,
however, that the total amount applied to the repurchase of shares of Common
Stock shall not exceed $100,000 during any twelve (12) month period; or
(iv) amend the corporation's Certificate of Incorporation.
(b) So long as any shares of Series A Preferred Stock are
outstanding, this corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of a majority of the voting
power of the then outstanding shares of the Series A Preferred Stock, voting as
a separate series:
(i) alter or change the rights, preferences or privileges of
the shares of Series A Preferred Stock so as to affect adversely the shares;
(ii) increase or decrease (other than by conversion) the
total number of authorized shares of Series A Preferred Stock; or
(iii) authorize or issue, or obligate itself to issue,
any other equity security, including any other security convertible into or
exercisable for any equity
-15-
<PAGE>
security having a preference over, or being on a parity with, the Series A
Preferred Stock with regard to voting, dividends or upon liquidation.
(c) So long as any shares of Series B Preferred Stock are
outstanding, this corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of a majority of the voting
power of the then outstanding shares of the Series B Preferred Stock, voting as
a separate series:
(i) alter or change the rights, preferences or privileges
of the shares of Series B Preferred Stock so as to affect adversely the shares;
(ii) increase or decrease (other than by conversion) the
total number of authorized shares of Series B Preferred Stock; or
(iii) authorize or issue, or obligate itself to issue,
any other equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on a
parity with, the Series B Preferred Stock with regard to voting, dividends or
upon liquidation.
(d) So long as at least fifteen percent (15%) of the total
number of shares of Series D Preferred Stock are outstanding, this corporation
shall not, without first obtaining the approval (by vote or written consent, as
provided by law) of at least a majority of the voting power of the then
outstanding shares of Series D Preferred Stock, voting together as a separate
series:
(i) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the corporation is disposed of;
(ii) redeem, purchase or otherwise acquire (or pay into or
set aside for a sinking fund for such purpose) any share or shares of Preferred
Stock or Common Stock; provided, however, that this restriction shall not apply
to the repurchase of shares of Common Stock from employees, officers, directors,
consultants or other persons performing services for this corporation or any
subsidiary pursuant to agreements under which the Company has the option to
repurchase such shares at cost or at cost upon the occurrence of certain events,
such as the termination of employment; provided further, however, that the total
amount applied to the repurchase of shares of Common Stock shall not exceed
$100,000 during any twelve (12) month period;
(iii) alter or change the rights, preferences or privileges of
the shares of Series D Preferred Stock so as to affect adversely the shares;
-16-
<PAGE>
(iv) increase or decrease (other than by conversion) the
total number of authorized shares of Series D Preferred Stock;
(v) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on a
parity with, the Series D Preferred Stock with regard to voting, dividends or
upon liquidation;
(vi) incur any indebtedness, other than accounts payable
incurred in the ordinary course of business appearing on a balance sheet
prepared in accordance with generally accepted accounting principals, in excess
of $500,000; or
(vii) liquidate or dissolve this corporation or effect a
winding up of the corporation's affairs.
(e) Subject to the rights of series of Preferred Stock which
may from time to time come into existence, so long as at least fifteen percent
(15%) of the total number of shares of Series E Preferred Stock are outstanding,
this corporation shall not, without first obtaining the approval (by vote or
written consent, as provided by law) of at least a majority of the voting power
of the then outstanding shares of Series E Preferred Stock, voting together as a
separate series:
(i) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the corporation is disposed of;
(ii) redeem, purchase or otherwise acquire (or pay into or
set aside for a sinking fund for such purpose) any share or shares of Preferred
Stock or Common Stock; provided, however, that this restriction shall not apply
to the repurchase of shares of Common Stock from employees, officers, directors,
consultants or other persons performing services for this corporation or any
subsidiary pursuant to agreements under which the Company has the option to
repurchase such shares at cost or at cost upon the occurrence of certain events,
such as the termination of employment; provided further, however, that the total
amount applied to the repurchase of shares of Common Stock shall not exceed
$100,000 during any twelve (12) month period;
(iii) alter or change the rights, preferences or privileges of
the shares of Series E Preferred Stock so as to affect adversely the shares;
(iv) increase or decrease (other than by conversion) the
total number of authorized shares of Series E Preferred Stock;
-17-
<PAGE>
(v) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on a
parity with, the Series E Preferred Stock with regard to voting, dividends or
upon liquidation;
(vi) incur any indebtedness, other than accounts payable
incurred in the ordinary course of business appearing on a balance sheet
prepared in accordance with generally accepted accounting principals, in excess
of $500,000; or
(vii) liquidate or dissolve this corporation or effect a
winding up of the corporation's affairs.
7. Status of Converted or Redeemed Stock. In the event any
-------------------------------------
shares of Series A, Series B, Series C, Series D or Series E Preferred Stock
shall be redeemed or converted pursuant to Sections 3 or 4 hereof, the shares so
redeemed or converted shall be canceled and shall not be issuable by the
corporation. The Certificate of Incorporation of this corporation shall be
appropriately amended to effect the corresponding reduction in the corporation's
authorized capital stock.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
------------------
winding up of the corporation, the assets of the corporation shall be
distributed as provided in Section 2 of Division (B) of Article IV hereof.
3. Redemption. The Common Stock is not redeemable; provided,
----------
however, that this restriction shall not apply to the repurchase of shares of
Common Stock from employees, officers, directors, consultants or other persons
performing services for this corporation or any subsidiary pursuant to
agreements under which the corporation has the option to repurchase such shares
at cost or at cost upon the occurrence of certain events, such as the
termination of employment.
4. Voting Rights. The holder of each share of Common Stock
-------------
shall have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
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ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the corporation.
ARTICLE VI
The number of directors of the corporation shall be fixed from time to
time by a Bylaw or amendment thereof duly adopted by the Board of Directors or
by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of the corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the corporation.
ARTICLE IX
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporation action
further eliminating or limiting the personal liability of directors then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this Article
IX by the stockholders of the corporation shall not adversely affect any right
or protection of a director of the corporation existing at the time of such
repeal or modification.
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ARTICLE X
To the fullest extent permitted by applicable law, this corporation is
also authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits this
corporation to provide indemnification) through Bylaw provisions, agreements
with such agents or other persons, vote of stockholders or disinterested
directors or otherwise, in excess of the indemnification and advancement
otherwise permitted by Section 145 of the General Corporation Law of the State
of Delaware, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to this
corporation, its stockholders, and others.
Any repeal or modification of any of the foregoing provisions of this
Article X shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification.
ARTICLE XI
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
* * *
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THREE: The foregoing Restatement has been duly adopted by the
corporation's Board of Directors and stockholders in accordance with the
applicable provisions of Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed this certificate on
March 6, 1997.
/s/ PHILLIP C. RADLICK
------------------------------------
Phillip C. Radlick, Ph.D., President
and Chief Executive Officer
/s/ JOSHUA L. GREEN
------------------------------------
Joshua L. Green, Secretary
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EXHIBIT 3.2
BYLAWS
OF
CARDIMA, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Dover,
County of Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place as may be fixed from time to time by the
Board of Directors, or at such other place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1994, shall be held at such date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
<PAGE>
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not fewer
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than ten (10) nor more than sixty (60) days before the date of the meeting, to
each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote there at, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
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Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office,
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though less than a quorum, or by a sole remaining director, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced. If there
are no directors in office, then an election of directors may be held in the
manner provided by statute. If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors,
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or in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
president on two (2) days' notice to each director by mail or forty-eight (48)
hours notice to each director either personally or by telegram; special meetings
shall be called by the president or secretary in like manner and on like notice
on the written request of two directors unless the board consists of only one
director, in which case special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of the sole
director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation of these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or
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committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the
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power or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
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ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a president, treasurer and a secretary. The
Board of Directors may elect from among its members a Chairman of the Board and
a Vice Chairman of the Board. The Board of Directors may also choose one or more
vice-presidents, assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these bylaws otherwise provide.
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Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, a treasurer, and a
secretary and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
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Section 8. The president shall be the chief operating officer or
chief executive officer of the corporation; and in the absence of the Chairman
and Vice Chairman of the Board he shall preside at all meetings of the
stockholders and the Board of Directors; he shall have general and active
management of the business of the corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any, (or in the event there
be more than one vice-president, the vice-presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform
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such other duties as may be prescribed by the Board of Directors or president,
under whose supervision he shall be. He shall have custody of the corporate seal
of the corporation and he, or an assistant secretary, shall have authority to
affix the same to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such assistant secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the corporation and to attest the affixing by his signature.
Section 12. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so
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requires, an account of all his transactions as treasurer and of the financial
condition of the corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the Board of Directors, or the president or a vice-
president and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation, certifying the number of shares owned by
him in the corporation.
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Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
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Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful
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action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or
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for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purposes as the directors shall think conducive
to the interest of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation, provided, however, that the
corporation shall indemnify any such agent in
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connection with a proceeding initiated by such agent only if such proceeding was
authorized by the Board of Directors of the corporation. The indemnification
provided for in this Section 6 shall: (i) not be deemed exclusive of any other
rights to which those indemnified may be entitled under any bylaw, agreement or
vote of stockholders or disinterested directors or otherwise, both as to action
in their official capacities and as to action in another capacity while holding
such office, (ii) continue as to a person who has ceased to be a director, and
(iii) inure to the benefit of the heirs, executors and administrators of such a
person. The corporation's obligation to provide indemnification under this
Section 6 shall be offset to the extent of any other source of indemnification
or any otherwise applicable insurance coverage under a policy maintained by the
corporation or any other person.
Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
General Corporation Law of Delaware. Notwithstanding the foregoing, the
corporation shall not be required to advance such expenses to an agent who is a
party to an action, suit or proceeding brought by the corporation and approved
by a majority of the Board of Directors of the corporation which alleges willful
misappropriation of corporate assets by such agent, disclosure of confidential
information in violation of such agent's fiduciary or
-18-
<PAGE>
contractual obligations to the corporation or any other willful and deliberate
breach in bad faith of such agent's duty to the corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action, suit or proceeding by reason of the fact that he, his testator or
intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of
-19-
<PAGE>
the plan; excise taxes assessed on a person with respect to an employee benefit
plan pursuant to such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate or incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
-20-
<PAGE>
AMENDMENT TO THE BYLAWS OF
CARDIMA, INC.
AS APPROVED BY THE BOARD OF DIRECTORS
Effective as of January 6, 1994, Article II, Section 5 of the Bylaws
of CaRDiMa, Inc., a Delaware Corporation, was amended to read in full as
follows:
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of stockholders owning ten
percent (10%) of the voting power of the entire voting stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 6th day of
January, 1994
/S/ Joshua L. Green
____________________________________
Joshua L. Green, Secretary
<PAGE>
EXHIBIT 4.1
================================================================================
================================================================================
COMMON STOCK [LOGO OF CARDIMA, INC. APPEARS HERE] COMMON STOCK
------------ CARDIMA, INC. ------------
NUMBER SHARES
LU
------------ ------------
SEE REVERSE FOR
STATEMENTS
RELATING TO RIGHTS,
PREFERENCES,
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE PRIVILEGES AND
RESTRICTIONS
CUSIP 14147M 10 6
--------------------------------------------------------------------------
THIS CERTIFIES THAT
is the owner of
--------------------------------------------------------------------------
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE, OF
-----------------------------------------------------------------
---------------------------- CARDIMA, INC. ------------------------------
-----------------------------------------------------------------
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
COUNTERSIGNED AND REGISTERED:
U.S. STOCK TRANSFER CORPORATION
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
Dated:
[CORPORATE SEAL
OF CARDIMA, INC.
APPEARS HERE]
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
================================================================================
================================================================================
<PAGE>
A statement of the rights, preferences, privileges and restrictions granted
to or imposed upon the respective classes or series of shares and upon the
holders thereof as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of determination, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge
from the Corporation as its principal office.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws and regulations:
<TABLE>
<S> <C>
TEN COM - as tenant in common UNIF GIFT MIN ACT - _______________ Custodian ____________________
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants Act __________________________________________
(State)
with right of survivorship UNIF TRF MIN ACT - _______________ Custodian (until age) ________
and not as tenants in _______________ under Uniform Transfers
common (Minor)
to Minors Act _______________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, hereby sell, assign and transfer unto
_____________________
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- ---------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
----------------------------
X
----------------------------------------
X
----------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
-------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
MEDALLION SIGNATURE GUARANTEE PROGRAM PURSUANT
TO S.E.C RULE 17Ad-15.
<PAGE>
EXHIBIT 10.1
CARDIMA, INC.
1993 STOCK OPTION PLAN
----------------------
(AS AMENDED THROUGH OCTOBER 2, 1996)
I. PURPOSES OF THE PLAN
This 1993 Stock Option Plan, as amended (the "Plan") is intended to
promote the interests of Cardima, Inc., a Delaware corporation (the
"Corporation"), by providing a method whereby eligible individuals who provide
valuable services to the Corporation (or its parent or subsidiary corporations)
may be offered incentives and rewards which will encourage them to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation and continue to render services to the Corporation (or its parent or
subsidiary corporations).
For purposes of the Plan, the following provisions shall be applicable
in determining the parent and subsidiary corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a PARENT corporation of the Corporation, provided each
such corporation in the unbroken chain (other than the Corporation) owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
(ii) Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a SUBSIDIARY of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
II. ADMINISTRATION OF THE PLAN
A. A Committee comprised of non-employee members of the Board who satisfy
the requirements of Rule 16b-3 of the Securities Exchange Act of 1934 (the "1934
Act") as it is then in effect to exempt stock awards made hereunder from the
short-swing profit recovery rules of Section 16(b) of the 1934 Act (the "Primary
Committee") and who satisfy the requirements of Section 162(m) of the Internal
Revenue Code shall have sole and exclusive authority to administer the Plan with
respect to Section 16 Insiders.
B. Administration of the Plan with respect to all other persons eligible
to participate in the Plan may, at the Board's discretion, be vested in the
Primary Committee or a second committee comprised of one or more Board members
(the "Secondary Committee"), or the Board may retain the power to administer the
Plan with respect to all such persons. The members of the Secondary Committee
may be individuals who are Employees eligible to receive option
<PAGE>
grants under the Plan or any stock option, stock appreciation, stock bonus or
other stock plan of the Corporation (or any Parent or Subsidiary) or who have
any other business relationship with the Company outside their roles as members
of the Board.
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions
of any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the provisions of the
Plan and any outstanding options thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Plan under its jurisdiction or any option
thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any grants under the Plan.
III. ELIGIBILITY FOR OPTION GRANTS
The persons eligible to receive option grants under the Plan are as
follows:
(i) key employees (including officers and directors) of the
Corporation (or its parent or subsidiary corporations);
(ii) the non-employee members of the Board or the non-employee
members of the board of directors of any parent or subsidiary corporation;
and
(iii) those consultants who provide valuable services to the
Corporation (or its parent or subsidiary corporations).
The Plan Administrator shall have full authority to determine which
eligible individuals are to receive option grants under the Plan, the number of
shares to be covered by each such grant, whether the granted option is to be an
incentive stock option ("Incentive Option") which satisfies the requirements of
Section 422 of the Internal Revenue Code or a non-statutory option not intended
to meet such requirements, the time or times at which each such option is to
become exercisable, and the maximum term for which the option is to remain
outstanding.
-2-
<PAGE>
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of the Corporation's
authorized but unissued or reacquired Common Stock. The aggregate number of
shares which may be issued over the term of the Plan shall not exceed 903,185/1/
shares (on a post-split basis). The total number of shares issuable under the
Plan shall be subject to adjustment from time to time in accordance with the
provisions of this Section IV.
B. The number of shares of Common Stock available for issuance under the
Plan shall automatically increase on the first trading day of the 1998, 1999,
2000, 2001 and 2002 calendar years by an amount equal to three percent (3%) of
the shares of Common Stock outstanding, on December 31 of the immediately
preceding calendar year; but in no event shall any such annual increase exceed
300,000 shares (on a post-split basis). For purposes of this provision, the
determination of the number of shares of Common Stock outstanding shall include
securities which are exercisable or convertible into shares of Common Stock,
including without limitation all outstanding stock options and warrants.
C. No one person participating in the Plan may receive options for more
than 500,000 shares of Common Stock per calendar year, beginning with the 1996
calendar year.
D. Shares subject to outstanding options shall be available for
subsequent option grants under the Plan to the extent (i) options expire or
terminate for any reason prior to exercise in full and (ii) options are
cancelled in accordance with the cancellation-regrant provisions of Section VIII
of the Plan. Shares subject to outstanding options shall not be available for
---
subsequent option grants under the Plan to the extent options are surrendered in
accordance with the limited cash-out rights provisions of Section IX of the
Plan. Shares repurchased by the Corporation pursuant to its repurchase rights
under the Plan shall not be available for subsequent option grants.
---
E. In the event any change is made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without receipt of consideration, appropriate adjustments shall be made to
(I) the aggregate number and/or class of shares issuable under the Plan and (II)
the aggregate number and/or class of shares and the option price per share in
effect under each outstanding option in order to prevent the dilution or
enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
V. TERMS AND CONDITIONS OF OPTIONS
A. Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or non-statutory options. Individuals who are not
Employees (as defined in subsection 3.C below) may
_____________________
/1/ This figure includes the 640,079 share (on a post-split basis) increase
approved by the Board on June 1, 1996 and to be submitted to the stockholders
for approval within twelve months of June 1, 1996.
-3-
<PAGE>
only be granted non-statutory options. Each granted option shall be evidenced by
one or more instruments in the form approved by the Plan Administrator;
provided, however, that each such instrument shall comply with and incorporate
- --------
the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section VI.
B. Option Price.
------------
1. The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the option price per share be less
than eighty-five percent (85%) of the fair market value of a share of Common
Stock on the date of the option grant.
2. The option price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section X and the instrument
evidencing the grant, be payable in one or more of the forms specified below:
(i) cash or check drawn to the Corporation's order
(ii) in shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at fair market value on the
Exercise Date; or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
optionee is to provide irrevocable written instructions (I) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, an amount sufficient to cover the
aggregate option price payable for the purchased shares plus all applicable
Federal and State income and employment taxes required to be withheld by
the Corporation by reason of such purchase and (II) concurrently to the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to effect the sale transaction.
For purposes of this subparagraph B, the Exercise Date shall be the
first date on which there shall have been delivered to the Corporation both
written notice of the exercise of the option and, except to the extent such sale
and remittance procedure is utilized, payment of the option price for the
purchased shares.
-4-
<PAGE>
3. The fair market value of a share of Common Stock on any relevant
date under subparagraph 1 above (and for all other valuation purposes under the
Plan) shall be determined in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or admitted
to trading on any stock exchange but is traded on the Nasdaq National
Market System, the fair market value shall be the closing selling price of
one share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers through its
Nasdaq system or any successor system. If there is no closing selling price
for the Common Stock on the date in question, then the closing selling
price on the last preceding date for which such quotation exists shall be
determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-
counter market, or if the Plan Administrator determines that the value
determined pursuant to subparagraphs (i) and (ii) above does not accurately
reflect the fair market value of the Common Stock, then such fair market
value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate,
including one or more independent professional appraisals.
C. Term and Exercise of Options.
----------------------------
Each option granted under the Plan shall be exercisable at such time
or times, during such period, and for such number of shares as shall be
determined by the Plan Administrator and set forth in the instrument evidencing
such option. No such option, however, shall have a maximum term in excess of
ten (10) years from the grant date and no Incentive Option granted to a 10%
Stockholder shall have a maximum term in excess of five (5) years from the grant
date. During the lifetime of the optionee, the option shall be exercisable only
by the optionee and shall not be assignable or transferable by the optionee
otherwise than by will or by the laws of descent and distribution.
-5-
<PAGE>
D. Effect of Termination of Employment.
-----------------------------------
1. Except to the extent otherwise provided pursuant to subparagraph
3.D below, the following provisions shall govern the exercise period applicable
to any options held by the optionee at the time of cessation of Service or
death.
(i) Should the optionee cease to remain in Service for any
reason other than death or Disability, then the period during which each
outstanding option held by such optionee is to remain exercisable shall be
limited to the three (3)-month period following the date of such cessation
of Service.
(ii) In the event such Service terminates by reason of
Disability, then the period during which each outstanding option held by
the optionee is to remain exercisable shall be limited to the six (6)-month
period following the date of such cessation of Service. However, should
such Disability be deemed to constitute Permanent Disability, then the
period during which each outstanding option held by the optionee is to
remain exercisable shall be extended by an additional six (6) months so
that the exercise period shall be limited to the twelve (12)-month period
following the date of the optionee's cessation of Service by reason of such
Permanent Disability. For all purposes under the Plan, DISABILITY shall
mean the inability of an individual to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under
the circumstances. Disability shall be deemed to constitute PERMANENT
DISABILITY in the event that such Disability is expected to result in death
or has lasted or can be expected to last for a continuous period of not
less than twelve (12) months.
(iii) Should the optionee die while holding one or more
outstanding options, then the period during which each such option is to
remain exercisable shall be limited to the twelve (12)-month period
following the date of the optionee's death. During such limited period,
the option may be exercised by the personal representative of the
optionee's estate or by the person or persons to whom the option is
transferred pursuant to the optionee's will or in accordance with the laws
of descent and distribution.
(iv) Each such option shall, during such limited exercise
period, be exercisable for any or all of the shares for which the option is
exercisable on the date of the optionee's cessation of Service. Upon the
expiration of such limited exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be
exercisable.
2. Under no circumstances shall any option be exercisable after the
specified expiration date of the option term.
3. For all purposes under the Plan, unless specifically provided
otherwise in the option agreement evidencing the option grant and/or the
purchase agreement evidencing the
-6-
<PAGE>
purchased shares, the optionee shall be deemed to remain in SERVICE for so long
as such individual renders services on a periodic basis to the Corporation or
any parent or subsidiary corporation in the capacity of an Employee, a non-
employee member of the board of directors or a consultant. The optionee shall be
considered to be an EMPLOYEE for so long as such individual remains in the
employ of the Corporation or one or more of its parent or subsidiary
corporations, subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of performance.
4. The Board shall have full power and authority to extend the
period of time for which the option is to remain exercisable following the
optionee's termination of Service from the three (3)-month (six (6) months in
the case of Disability and twelve (12) months in the case of death or Permanent
Disability) or shorter period set forth in the option agreement to such greater
period of time as the Board shall deem appropriate; provided, that in no event
--------
shall such option be exercisable after the specified expiration date of the
option term.
E. Stockholder Rights. An optionee shall have none of the rights of a
------------------
stockholder with respect to the shares subject to the option until such
individual shall have exercised the option and paid the option price.
F. Repurchase Rights. The shares of Common Stock acquired upon the
-----------------
exercise of options granted under the Plan may be subject to one or more
repurchase rights of the Corporation in accordance with the following
provisions:
1. The Plan Administrator may in its discretion determine that it
shall be a term and condition of one or more options exercised under the Plan
that the Corporation (or its assignees) shall have the right, exercisable upon
the optionee's cessation of Service, to repurchase at the option price all or
(at the discretion of the Corporation and with the consent of the optionee) part
of the unvested shares of Common Stock at the time held by the optionee. Any
such repurchase right shall be exercisable by the Corporation (or its assignees)
upon such terms and conditions (including the establishment of the appropriate
vesting schedule and other provision for the expiration of such right in one or
more installments over the optionee's period of Service) as the Plan
Administrator may specify in the instrument evidencing such right.
2. All of the Corporation's outstanding repurchase rights shall
automatically terminate upon the occurrence of any Corporate Transaction under
Section VII.
VI. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under the Plan. Incentive Options may only be granted
to individuals who are Employees of the Corporation. Options which are
specifically designated as "non-statutory" options when issued under the Plan
shall not be subject to such terms and conditions.
---
A. Option Price. The option price per share of the Common Stock subject
------------
to an Incentive Option shall in no event be less than one hundred percent
(100%) of the fair market
-7-
<PAGE>
value of a share of Common Stock on the date of grant. If the individual to whom
the option is granted is the owner of stock (as determined under Section 424(d)
of the Internal Revenue Code) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation or any one of
its parent or subsidiary corporations (such person to be herein referred to as a
10% Stockholder), then the option price per share shall not be less than one
hundred and ten percent (110%) of the Fair Market Value of one share of Common
Stock on the grant date.
B. Dollar Limitation. The aggregate fair market value (determined as of
-----------------
the respective date or dates of grant) of the Common Stock for which one or more
options granted to any Employee under this Plan (or any other option plan of the
Corporation or its parent or subsidiary corporations) may for the first time
become exercisable as incentive stock options under the Federal tax laws during
any one calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability thereof as incentive stock options under the
Federal tax laws shall be applied on the basis of the order in which such
options are granted.
Except as modified by the preceding provisions of this Section VI, all
the provisions of the Plan shall be applicable to the Incentive Options granted
hereunder.
VII. CORPORATE TRANSACTIONS
A. In the event of one or more of the following transactions (a
"Corporate Transaction"):
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State of the Corporation's incorporation,
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation in complete liquidation or dissolution
of the Corporation, or
(iii) any reverse merger in which the Corporation is the surviving
entity but in which all of the Corporation's outstanding voting stock is
transferred to the acquiring entity or its wholly-owned subsidiary,
then each option outstanding under the Plan shall automatically accelerate so
that each such option shall, immediately prior to the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares or
fully vested shares of Common Stock.
B. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor Corporation (or parent thereof).
-8-
<PAGE>
C. Each outstanding option which is assumed in connection with the
Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to such option immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same. Appropriate adjustments shall also
be made to the class and number of securities available for issuance under the
Plan following the consummation of such Corporate Transaction.
D. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
Federal tax laws.
E. The grant of options under this Plan shall in no way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
VIII. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock but having an option price per share not less
than eighty-five percent (85%) of the fair market value of the Common Stock on
the new grant date (or one hundred percent (100%)) of such fair market value in
the case of an Incentive Option or, in the case of a 10% Stockholder, not less
than one hundred and ten percent (110%) of such fair market value).
IX. CASH-OUT OF OPTIONS
A. Once the Corporation's outstanding Common Stock is registered under
Section 12(g) of the 1934 Act, one or more optionees subject to the short-swing
profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited cash-out rights to operate
in tandem with their outstanding options under the Plan. Any option with such a
limited right in effect for at least six (6) months shall automatically be
cancelled upon the acquisition of fifty percent (50%) or more of the
Corporation's outstanding Common Stock (excluding the Common Stock holdings of
officers and directors of the Corporation who participate in this Plan) pursuant
to a tender or exchange offer made by a person or group of related persons
(other than the Corporation or a person that directly or indirectly controls, is
controlled by or is under common control with the Corporation) which the Board
does not recommend the Corporation's stockholders to accept. In return for the
cancelled option, the
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<PAGE>
optionee shall be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Cash-Out Price of the shares of Common
Stock in which the optionee is vested under the cancelled option over (ii) the
aggregate exercise price payable for such vested shares. The cash distribution
payable upon such cancellation shall be made within five (5) days following the
completion of such tender or exchange offer, and neither the approval of the
Plan Administrator nor the consent of the Board shall be required in connection
with such cancellation and distribution.
B. For purposes of calculating the cash distribution, the Cash-Out Price
per share of the vested Common Stock subject to the cancelled option shall be
deemed to be equal to the greater of (i) the fair market value per share on the
-------
date of surrender, as determined in accordance with the valuation provisions of
subsection V.1.D, or (ii) the highest reported price per share paid in effecting
the tender or exchange offer. However, if the cancelled option is an Incentive
Option, then the Cash-Out Price shall not exceed the value per share determined
under clause (i) above.
C. The shares of Common Stock subject to any option cancelled for an
appreciation distribution in accordance with this Section IX shall not be
---
available for subsequent option grants under the Plan.
X. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or upon the vesting of such shares under the Plan shall
be subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan with the right to use shares of Common Stock in satisfaction of all or part
of the Taxes incurred by such holders in connection with the exercise of their
options. Such right may be provided to any such holder in either or both of the
following formats:
(i) Stock Withholding. The election to have the Corporation
-----------------
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the taxes
(not to exceed one hundred percent (100%)) designated by the holder.
(ii) Stock Delivery. The election to deliver to the Corporation, at
---------------
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the taxes) with
an aggregate Fair Market Value equal to the percentage of the taxes (not to
exceed one hundred percent (100%)) designated by the holder.
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<PAGE>
XI. LOANS
A. The Plan Administrator may assist any optionee (including an
optionee who is an officer or director of the Corporation) in the exercise of
one or more options granted to such optionee, including the satisfaction of any
Federal and State income and employment tax obligations arising therefrom, by
(i) authorizing the extension of a loan from the Corporation to such optionee,
or (ii) permitting the optionee to pay the option price for the purchased Common
Stock in installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
granted with or without security or collateral. However, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events, the maximum credit
available to each optionee may not exceed the sum of (i) the aggregate option
---
price payable for the purchased shares (less the par value) plus (ii) any
Federal and State income and employment tax liability incurred by the optionee
in connection with such exercise.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board in its discretion deems appropriate.
XII. NO EMPLOYMENT OR SERVICE RIGHTS
A. Nothing in the Plan shall confer upon the optionee any right to
continue in the service or employ of the Corporation (or any parent or
subsidiary corporation of the Corporation employing or retaining such optionee)
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any parent or subsidiary corporation
of the Corporation employing or retaining such optionee) or of the optionee,
which rights are hereby expressly reserved by each, to terminate the Service of
the optionee at any time for any reason, with or without cause.
XIII. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects whatsoever; provided,
--------
however, that no such amendment or modification shall, without the consent of
the stockholders, adversely affect the rights and obligations with respect to
options at the time outstanding under the Plan; and provided, further that the
--------
Board shall not, without the approval of the Corporation's stockholders, (i)
increase the maximum number of shares issuable under the Plan or the maximum
number of shares for which any person may be granted options per calendar year,
except for permissible adjustments under Section IV or (ii) materially modify
the eligibility requirements for the grant of options under the Plan.
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<PAGE>
B. Options may be granted under this Plan to purchase shares of
Common Stock in excess of the number of shares then available for issuance under
the Plan, provided (i) an amendment to increase the maximum number of shares
--------
issuable under the Plan is adopted by the Board prior to the initial grant of
any such option and within one year thereafter such amendment is approved by the
Corporation's stockholders and (ii) each option granted is not to become
exercisable, in whole or in part, at any time prior to the obtaining of such
stockholder approval.
XIV. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan became effective when adopted by the Board on June 10,
1993 and was approved by the Corporation's stockholders on September 20, 1993.
The Board amended the Plan on November 22, 1994 to (i) increase the number of
shares authorized for issuance thereunder by an additional 975,080 shares of
Common Stock (132,298 shares of Common Stock on a post-split basis) and (ii)
revise the limited period of exercisability when an optionee ceases to render
Services to the Corporation as a result of such optionee's Disability. The
Corporation's stockholders approved the 1994 Amendment on December 29, 1994.
The Board amended the Plan on June 1, 1996 to increase the number of shares
authorized for issuance thereunder by an additional 640,079 shares (on a post-
split basis) of Common Stock and on October 2, 1996, to revise certain
provisions in connection with the filing of a Registration Statement for the
initial public offering of the Company's Common Stock hereafter referred to
collectively as (the "1996 Amendments"), which revisions are contingent upon the
effectiveness of such offering. The 1996 Amendments will be submitted to the
Corporation's stockholders for approval as required by applicable law within
twelve months of June 1, 1996.
B. The provisions of the 1996 Amendments shall apply only to options
granted and shares issued under the Plan from and after the date the Amendments
were adopted by the Board. Each option issued and outstanding under the Plan
immediately prior to such adoption of the Amendments shall continue to be
governed by the terms and conditions of the Plan (and the instrument evidencing
such grant) as in effect on the date each such option was previously granted,
and nothing in the Amendments shall be deemed to affect or otherwise modify the
rights or obligations of the stockholders of such prior options with respect to
the acquisition of shares of Common Stock thereunder.
C. Unless sooner terminated in accordance with Section VII, the Plan
shall terminate upon the earlier of (i) November 21, 2004 or (ii) the date on
-------
which all shares available for issuance under the Plan shall have been issued
pursuant to the exercise or surrender of options granted hereunder. If the date
of termination is determined under clause (i) above, then options outstanding on
such date shall thereafter continue to have force and effect in accordance with
the provisions of the instruments evidencing such options.
XV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to options granted under the Plan shall be used for general corporate
purposes.
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<PAGE>
XVI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option hereunder,
and the issuance of stock upon the exercise or surrender of any such option
shall be subject to the procurement by the Corporation of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it and the stock issued pursuant to it.
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<PAGE>
Exhibit 10.2
CARDIMA, INC.
1997 DIRECTORS' STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available personnel for service
as Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be "nonstatutory stock options".
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock of the Company.
------------
(d) "Company" shall mean Cardima, Inc., a Delaware corporation.
-------
(e) "Continuous Status as a Director" shall mean the absence of any
-------------------------------
interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
--------
(g) "Employee" shall mean any person, including officers and
--------
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(i) "Option" shall mean a stock option granted pursuant to the Plan.
------
All options shall be nonstatutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).
(j) "Optioned Stock" shall mean the Common Stock subject to an Option
--------------
(k) "Optionee" shall mean an Outside Director who receives an Option.
--------
(l) "Outside Director" shall mean a Director who is not an Employee.
----------------
(m) "Parent" shall mean a "parent corporation", whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(n) "Plan" shall mean this 1997 Directors' Stock Option Plan.
----
<PAGE>
(o) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(p) "Subsidiary" shall mean a "subsidiary corporation", whether now
----------
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section
-------------------------
11 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 200,000 Shares (on a post-split basis) (the "Pool") of
Common Stock. The Shares may be authorized, but unissued, or reacquired Common
Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.
4. Administration of and Grants of Options under the Plan.
------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
--------------------
automatic and non discretionary and shall be made strictly in accordance with
the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase Shares 20,000 Shares (on a post-split basis) (the "First
Option") on the date on which such person first becomes an Outside Director,
whether through election by the shareholders of the Company or appointment by
the Board of Directors to fill a vacancy.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 2,000 Shares (on a post-split basis) (a "Subsequent Option")
on the date of each Annual Meeting of the Company's shareholders following which
such Outside Director is serving on the Board, provided that, on such date, he
or she shall have served on the Board for at least three (3) months prior to the
date of such Annual Meeting.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options plus the number of Shares previously purchased upon
exercise of Options to exceed the Pool, then each such automatic grant shall be
for that number of Shares determined by dividing the total number of Shares
remaining available for grant by the number of Outside Directors receiving an
Option on such date on the automatic grant date. Any further grants shall then
be deferred until such time, if
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<PAGE>
any, as additional Shares become available for grant under the Plan through
action of the shareholders to increase the number of Shares which may be issued
under the Plan or through cancellation or expiration of Options previously
granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
shareholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 17 hereof.
(vi) The terms of each First Option granted hereunder shall be
as follows:
(1) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof.
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option, determined in
accordance with Section 8 hereof.
(3) the First Option shall become exercisable in
installments cumulatively as to 25% of the Shares subject to the First Option on
each of the first, second, third and fourth anniversaries of the date of grant
of the Option.
(vii) The terms of each Subsequent Option granted hereunder shall
be as follows:
(1) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof.
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Subsequent Option, determined
in accordance with Section 8 hereof.
(3) the Subsequent Option shall become exercisable as to
one hundred percent 100% of the Shares subject to the Subsequent Option on the
first anniversary of the date of grant of the Subsequent Option.
(c) Powers of the Board. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per share of Options to be granted, which exercise price
shall be determined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
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<PAGE>
(d) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the President or his or
-----------------------------------
her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective on the
----------------------------
effectiveness of the registration statement under the Securities Act of 1933
relating to the Company's initial public offering of securities. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Options. The term of each Option shall be ten (10) years from
---------------
the date of grant thereof.
8. Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be 100% of the fair market value
per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be determined by
-----------------
the Board; provided, however, that where there is a public market for the Common
Stock, the fair market value per Share shall be the mean of the bid and asked
prices of the Common Stock in the over-the-
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<PAGE>
counter market on the date of grant, as reported in The Wall Street Journal (or,
if not so reported, as otherwise reported by the National Association of
Securities Dealers Automated Quotation ("Nasdaq") System) or, in the event the
Common Stock is traded on the Nasdaq National Market or listed on a stock
exchange, the fair market value per Share shall be the closing price on such
system or exchange on the date of grant of the Option, as reported in The Wall
Street Journal. With respect to any Options granted hereunder concurrently with
the initial effectiveness of the Plan, the fair market value shall be the Price
to Public as set forth in the final prospectus relating to such initial public
offering.
(c) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) hereof; provided, however, that no Options shall be exercisable prior to
shareholder approval of the Plan in accordance with Section 17 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be issued
to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as a Director. If an Outside Director
-----------------------------------
ceases to serve as a Director, he or she may, but only within ninety (90) days
after the date he or she ceases to be a Director of the Company, exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. Notwithstanding the foregoing, in no event may the Option
be exercised after its term set forth in Section 7 has expired. To the extent
that such
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<PAGE>
Outside Director was not entitled to exercise an Option at the date of such
termination, or does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding Section 9(b) above, in
----------------------
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Internal Revenue Code), he or she may, but only
within six (6) months (or such other period of time not exceeding twelve (12)
months as is determined by the Board) from the date of such termination,
exercise his or her Option to the extent he or she was entitled to exercise it
at the date of such termination. Notwithstanding the foregoing, in no event may
the Option be exercised after its term set forth in Section 7 has expired. To
the extent that he or she was not entitled to exercise the Option at the date of
termination, or if he or she does not exercise such Option (which he or she was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
-----------------
(i) During the term of the Option who is, at the time of his or
her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as Director for twelve (12) months (or such lesser period of time as is
determined by the Board) after the date of death. Notwithstanding the foregoing,
in no event may the Option be exercised after its term set forth in Section 7
has expired.
(ii) Within three (3) months after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within six (6)
months following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.
Notwithstanding the foregoing, in no event may the option be exercised after its
term set forth in Section 7 has expired.
10. Nontransferability of Options. The Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the shareholders
----------
of the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon
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<PAGE>
cancellation or expiration of an Option, and the number of shares of Common
Stock to be granted under the provisions set forth in Section 4 of the Plan, as
well as the price per share of Common Stock covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) Corporate Transactions. In the event of (i) a dissolution or
----------------------
liquidation of the Company, (ii) a sale of all or substantially all of the
Company's assets, (iii) a merger or consolidation in which the Company is not
the surviving corporation, or (iv) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, the Company shall give to the Eligible Director, at the time of
adoption of the plan for liquidation, dissolution, sale, merger, consolidation
or reorganization, either a reasonable time thereafter within which to exercise
the Option, including Shares as to which the Option would not be otherwise
exercisable, prior to the effectiveness of such liquidation, dissolution, sale,
merger, consolidation or reorganization, at the end of which time the Option
shall terminate, or the right to exercise the Option, including Shares as to
which the Option would not be otherwise exercisable (or receive a substitute
option with comparable terms), as to an equivalent number of shares of stock of
the corporation succeeding the Company or acquiring its business by reason of
such liquidation, dissolution, sale, merger, consolidation or reorganization.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with any
applicable law or regulation, the Company shall obtain approval of the
shareholders of the Company to Plan amendments to the extent and in the manner
required by such law or regulation.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
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<PAGE>
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan, will
---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
17. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
If such shareholder approval is obtained at a duly held shareholders' meeting,
it may be obtained by the affirmative vote of the holders of a majority of the
outstanding shares of the Company present or represented and entitled to vote
thereon. If such shareholder approval is obtained by written consent, it may be
obtained by the written consent of the holders of a majority of the outstanding
shares of the Company. Options may be granted, but not exercised, before such
shareholder approval.
-8-
<PAGE>
Exhibit 10.3
CARDIMA, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1997 Employee Stock Purchase
Plan of Cardima, Inc..
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Plan shall, accordingly,
be construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock of the Company.
------------
(d) "Company" shall mean Cardima, Inc., a Delaware corporation.
-------
(e) "Compensation" shall mean all regular straight time gross
------------
earnings and shall not include overtime, shift premiums, payments for incentive
compensation, incentive payments, bonuses, commissions and other compensation.
(f) "Continuous Status as an Employee" shall mean the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(g) "Contributions" shall mean all amounts credited to the account of
-------------
a participant pursuant to the Plan.
(h) "Designated Subsidiaries" shall mean the Subsidiaries which have
-----------------------
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(i) "Employee" shall mean any person, including an Officer, who is
--------
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
<PAGE>
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(k) "Purchase Date" shall mean the last day of each Purchase Period
-------------
of the Plan.
(l) "Offering Date" shall mean the first business day of each
-------------
Offering Period of the Plan.
(m) "Offering Period" shall mean a period of twelve (12) months
---------------
commencing on February 1 and August 1 of each year, except for the first
Offering Period as set forth in Section 4(a).
(n) "Officer" shall mean a person who is an officer of the Company
-------
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(o) "Plan" shall mean this Employee Stock Purchase Plan.
----
(p) "Purchase Period" shall mean a period of six (6) months within an
---------------
Offering Period, except for the first Purchase Period as set forth in Section
4(b).
(q) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. Eligibility.
-----------
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) if such option would permit
his or her rights to purchase stock under all employee stock purchase plans
(described in Section 423 of the Code) of the Company and its Subsidiaries to
accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of fair
market value of such stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time.
4. Offering Periods and Purchase Periods.
--------------------------------------
(a) Offering Periods. The Plan shall be implemented by a series of
----------------
Offering Periods of twelve (12) months duration, with new Offering Periods
commencing on or about February 1 and August 1 of each year (or at such other
time or times as may be determined by the
-2-
<PAGE>
Board of Directors). The first Offering Period shall commence on the beginning
of the effective date of the Registration Statement on Form S-1 for the initial
public offering of the Company's Common Stock (the "IPO Date") and continue
until July 31, 1998. The Plan shall continue until terminated in accordance
with Section 19 hereof. The Board of Directors of the Company shall have the
power to change the duration and/or the frequency of Offering Periods with
respect to future offerings without shareholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected. Eligible employees may not participate in
more than one Offering Period at a time.
(b) Purchase Periods. Each Offering Period shall consist of two (2)
----------------
consecutive purchase periods of six (6) months duration. The last day of each
Purchase Period shall be the "Purchase Date" for such Purchase Period. A
Purchase Period commencing on February 1 shall end on the next July 31. A
Purchase Period commencing on August 1 shall end on the next January 31. The
first Purchase Period shall commence on the IPO Date and shall end on January
31, 1998. The Board of Directors of the Company shall have the power to change
the duration and/or frequency of Purchase Periods with respect to future
purchases without shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Purchase Period
to be affected.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be not less than 1% and not more than 10%) to be paid
as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Period of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in Section
10.
6. Method of Payment of Contributions.
----------------------------------
(a) The participant shall elect to have payroll deductions made on
each payday during the Offering Period in an amount not less than one percent
(1%) and not more than ten percent (10%) of such participant's Compensation on
each such payday. All payroll deductions made by a participant shall be
credited to his or her account under the Plan. A participant may not make any
additional payments into such account.
(b) A participant may discontinue his or her participation in the
Plan as provided in Section 10, or, on one occasion only during the Offering
Period, may decrease the rate of his or her Contributions during the Offering
Period by completing and filing with the
-3-
<PAGE>
Company a new subscription agreement. The change in rate shall be effective as
of the beginning of the next calendar month following the date of filing of the
new subscription agreement, if the agreement is filed at least ten (10) business
days prior to such date and, if not, as of the beginning of the next succeeding
calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased to 0% at such time during any Offering
Period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such Offering
Period and any other Offering Period ending within the same calendar year equal
$21,250. Payroll deductions shall re-commence at the rate provided in such
participant's subscription Agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
7. Grant of Option.
---------------
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase Date a number of shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Purchase Date and retained in the participant's account as of the Purchase Date
by the lower of (i) eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date, or (ii) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Purchase Date; provided however, that the maximum number of shares an
Employee may purchase during each Offering Period shall be determined at the
Offering Date by dividing $25,000 by the fair market value of a share of the
Company's Common Stock on the Offering Date, and provided further that such
purchase shall be subject to the limitations set forth in Sections 3(b) and 13.
The fair market value of a share of the Company's Common Stock shall be
determined as provided in Section 7(b).
(b) The option price per share of the shares offered in a given
Offering Period shall be the lower of: (i) 85% of the fair market value of a
share of the Common Stock of the Company on the Offering Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Purchase Date. The fair market value of the Company's Common Stock on a given
date shall be determined by the Board in its discretion based on the closing
price of the Common Stock for such date (or, in the event that the Common Stock
is not traded on such date, on the immediately preceding trading date), as
reported by the National Association of Securities Dealers Automated Quotation
(Nasdaq) National Market or, if such price is not reported, the mean of the bid
and asked prices per share of the Common Stock as reported by Nasdaq or, in the
event the Common Stock is listed on a stock exchange, the fair market value per
share shall be the closing price on such exchange on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in The Wall Street Journal. For purposes of the
Offering Date under the first Offering Period under the Plan, the fair market
value of a share of the Common Stock of the Company shall be the Price to Public
as set forth in the final prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424 under the Securities Act of 1933, as amended.
-4-
<PAGE>
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in paragraph 10, his or her option for the purchase of shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full shares subject to the option will be purchased at the
applicable option price with the accumulated Contributions in his or her
account. The shares purchased upon exercise of an option hereunder shall be
deemed to be transferred to the participant on the Purchase Date. During his or
her lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Purchase Date of each
--------
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his or her option or the deposit of such number of shares with the broker
selected by the Company for administration of Plan stock purchases, as
determined by the Company. Any cash remaining to the credit of a participant's
account under the Plan after a purchase by him or her of shares at the
termination of the first Purchase Period of an Offering Period, or which is
insufficient to purchase a full share of Common Stock of the Company, shall be
carried over to the next Purchase Period of such Offering Period if the Employee
continues to participate in the Plan, or if the Employee does not continue to
participate, shall be returned to said participant.
10. Voluntary Withdrawal; Termination of Employment.
-----------------------------------------------
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time at least
ten (10) business days prior to each Purchase Date by giving written notice to
the Company. All of the participant's Contributions credited to his or her
account will be paid to him or her promptly after receipt of his or her notice
of withdrawal and his or her option for the current period will be automatically
terminated, and no further Contributions for the purchase of shares will be made
during the Offering Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
-5-
<PAGE>
11. Automatic Withdrawal. If the fair market value of the shares on the
--------------------
first Purchase Date of an Offering Period is less than the fair market value of
the shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period.
12. Interest. No interest shall accrue on the Contributions of a
--------
participant in the Plan.
13. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 250,000 shares (on a
post-split basis), subject to adjustment upon changes in capitalization of the
Company as provided in Section 18. If the total number of shares which would
otherwise be subject to options granted pursuant to Section 7(a) on the Offering
Date of an Offering Period exceeds the number of shares then available under the
Plan (after deduction of all shares for which options have been exercised or are
then outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of Contributions, if necessary.
(b) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Board, or a committee named by the Board, shall
--------------
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. The composition of the committee shall be in accordance with the
requirements to obtain or retain any available exemption from the operation of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period.
If a participant is
-6-
<PAGE>
married and the designated beneficiary is not the spouse, spousal consent shall
be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
16. Transferability. Neither Contributions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 10.
17. Use of Funds. All Contributions received or held by the Company under
------------
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
18. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees
promptly following the Purchase Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the shareholders
----------
of the Company, the number of shares of Common Stock covered by each option
under the Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but have not
yet been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no
-7-
<PAGE>
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) Corporate Transactions. In the event of the proposed dissolution
----------------------
or liquidation of the Company, the Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each option under the Plan shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary of
such successor corporation, unless the Board determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution, to shorten the
Offering Period then in progress by setting a new Purchase Date (the "New
Purchase Date"). If the Board shortens the Offering Period then in progress in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify each participant in writing, at least ten (10) days prior
to the New Purchase Date, that the Purchase Date for his or her option has been
changed to the New Purchase Date and that his or her option will be exercised
automatically on the New Purchase Date, unless prior to such date he or she has
withdrawn from the Offering Period as provided in Section 10. For purposes of
this paragraph, an option granted under the Plan shall be deemed to be assumed
if, following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately prior
to the sale of assets or merger, the consideration (whether stock, cash or other
securities or property) received in the sale of assets or merger by holders of
Common Stock for each share of Common Stock held on the effective date of the
transaction (and if such holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
shares of Common Stock); provided, however, that if such consideration received
in the sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consideration received by holders of Common Stock and the
sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time terminate
or amend the Plan. Except as provided in Section 19, no such termination may
affect options previously granted, nor may an amendment make any change in any
option theretofore granted which adversely affects the rights of any
participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Exchange Act, or under Section 423 of the Code (or any
-8-
<PAGE>
successor rule or provision or any applicable law or regulation), the Company
shall obtain shareholder approval in such a manner and to such a degree as so
required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan; Effective Date. The Plan shall become effective upon
----------------------------
the earlier to occur of its adoption by the Board of Directors or its approval
by the shareholders of the Company. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under Section 20.
24. Additional Restrictions of Rule 16b-3. The terms and conditions of
-------------------------------------
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
-9-
<PAGE>
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
-10-
<PAGE>
CARDIMA, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the
CARDIMA, INC. 1997 Employee Stock Purchase Plan (the "Plan") for the Offering
Period ______________, 19__ to _______________, 19__, and subscribe to purchase
shares of the Company's Common Stock in accordance with this Subscription
Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 10% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during
the Offering Period at the rate stated in Item 2 of this Subscription Agreement.
I understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the
Purchase Date my participation in the Plan as provided in Section 10 of the
Plan. I also understand that I can decrease the rate of my Contributions to not
less than 1% of my Compensation on one occasion only during any Offering Period
by completing and filing a new Subscription Agreement with such decrease taking
effect as of the beginning of the calendar month following the date of filing of
the new Subscription Agreement, if filed at least ten (10) business days prior
to the beginning of such month. Further, I may change the rate of deductions
for future Offering Periods by filing a new Subscription Agreement, and any such
change will be effective as of the beginning of the next Offering Period. In
addition, I acknowledge that, unless I discontinue my participation in the Plan
as provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
<PAGE>
5. I have received a copy of the Company's most recent description of
the Plan and a copy of the complete "CARDIMA, INC. 1997 Employee Stock Purchase
Plan." I understand that my participation in the Plan is in all respects
subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the
name(s) of (name of employee or employee and spouse only):
____________________________________
____________________________________
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) ____________________________________
(First) (Middle) (Last)
_________________________ ____________________________________
(Relationship) (Address)
____________________________________
8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after
--------------------------------------------------------------------
the date of any such disposition, and I will make adequate provision for
- ------------------------------------------------------------------------
federal, state or other tax withholding obligations, if any, which arise upon
- -----------------------------------------------------------------------------
the disposition of the Common Stock. The Company may, but will not be obligated
- -----------------------------------
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-
year and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the option, or (2) 15% of the fair market value of the
-2-
<PAGE>
shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is subject to
----------------------------------------------------------------------
change. I further understand that I should consult a tax advisor concerning the
- ------
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE: _________________________________
SOCIAL SECURITY #: _________________________
DATE: ______________________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
____________________________________________
(Signature)
____________________________________________
(Print name)
-3-
<PAGE>
CARDIMA, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my participation in
the CARDIMA, INC. 1997 Employee Stock Purchase Plan (the "Plan") for the
Offering Period _________. This withdrawal covers all Contributions credited to
my account and is effective on the date designated below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:___________________ ________________________________________
Signature of Employee
________________________________________
Social Security Number
<PAGE>
EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this DATE~ day of MONTH~,
19YEAR~ between Cardima, Inc., a Delaware corporation ("Corporation"), and NAME~
("Indemnitee").
RECITALS:
A. Indemnitee, a member of the Board of Directors or an officer of
Corporation, performs a valuable service in such capacity for Corporation; and
B. The stockholders of Corporation have adopted By-laws (the "By-
laws") providing for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware Corporations Code, as amended ("Code"); and
C. The By-laws and the Code, by their non-exclusive nature, permit
contracts between Corporation and the members of its Board of Directors or
officers with respect to indemnification of such directors and/or officers; and
D. In accordance with the authorization as provided by the Code,
Corporation has purchased and presently maintains a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance as directors and/or officers of Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance, there exists general uncertainty as to the
extent of protection afforded members of the Board of Directors or officers by
such D & O Insurance and by statutory and by-law indemnification provisions; and
F. In order to induce Indemnitee to continue to serve as a member
of the Board of Directors and/or an officer of Corporation, Corporation has
determined and agreed to enter into this contract with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's continued service as
a director and/or an officer after the date hereof, the parties hereto agree as
follows:
1. INDEMNITY OF INDEMNITEE. Corporation hereby agrees to hold
-----------------------
harmless and indemnify Indemnitee to the fullest extent authorized or permitted
by the provisions of the Code, as may be amended from time to time.
<PAGE>
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth
--------------------
in Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Indemnitee:
(a) against any and all expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Indemnitee in connection with any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including an action by or in the right of
Corporation) to which Indemnitee is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Indemnitee is, was
or at any time becomes a director, officer, employee or agent of Corporation,
or is or was serving or at any time serves at the request of Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Indemnitee by Corporation under the non-exclusivity provisions of Section 7 of
Article VII of the Bylaws of Corporation and the Code.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No 'indemnity pursuant to
-----------------------------------
Section 2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which the Indemnitee
is indemnified pursuant to Section 1 hereof or pursuant to any D & O Insurance
purchased and maintained by Corporation;
(b) in respect to remuneration paid to Indemnitee if it shall
be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any suit in which judgment is rendered
against Indemnitee for an accounting of profits made from the purchase or sale
by Indemnitee of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) on account of Indemnitee's conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest, or to
constitute willful misconduct;
(e) on account of Indemnitee's conduct which is the subject
of an action, suit or proceeding described in Section 7 (c)(ii) hereof;
(f) on account of any action, claim or proceeding (other than a
proceeding referred to in Section 8(b) hereof) initiated by the Indemnitee
unless such action, claim or proceeding was authorized in the specific case by
action of the Board of Directors;
-2-
<PAGE>
(g) if a final decision by a Court having jurisdiction in the
matter shall determine that such indemnification is not lawful (and, in this
respect, both Corporation and Indemnitee have been advised that the Securities
and Exchange Commission believes that indemnification for liabilities arising
under the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
4. CONTRIBUTION. If the indemnification provided in Sections 1
------------
and 2 hereof is unavailable by reason of a Court decision described in Section 3
(g) hereof based on grounds other than any of those set forth in paragraphs (b)
through (f) of Section 3 hereof, then in respect of any threatened, pending or
completed action, suit or proceeding in which Corporation is jointly liable with
Indemnitee (or would be if joined in such action, suit or proceeding),
Corporation shall contribute to the amount of expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred and paid or payable by Indemnitee in such proportion as is appropriate
to reflect (i) the relative benefits received by Corporation on the one hand and
Indemnitee on the other hand from the transaction from which such action, suit
or proceeding arose, and (ii) the relative fault of Corporation on the one hand
and of Indemnitee on the other in connection with the events which resulted in
such expenses, judgments, fines or settlement amounts, as well as any other
relevant equitable considerations. The relative fault of Corporation on the one
hand and of Indemnitee on the other shall be determined by reference to, among
other things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such expenses,
judgments, fines or settlement amounts. Corporation agrees that it would not be
just and equitable if contribution pursuant to this Section 4 were determined by
pro rata allocation or any other method of allocation which does not take
account of the foregoing equitable considerations.
5. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
---------------------------
Corporation contained herein shall continue during and pertain to the period
Indemnitee is or was a director, officer, employee or agent of Corporation (or
is or was serving at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative,
by reason of the fact that Indemnitee was a director and/or an officer of
Corporation or serving in any other capacity referred to herein.
6. NOTIFICATION AND DEFAMES OF CLAIM. Not later than thirty (30)
---------------------------------
days after receipt by Indemnitee of notice of the commencement of any action,
suit or proceeding, Indemnitee will, if a claim in respect thereof is to be made
against Corporation under this Agreement, notify Corporation of the commencement
thereof, but the omission so to notify Corporation will not relieve it from any
liability which it may have to Indemnitee otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Indemnitee
notifies Corporation of the commencement thereof.
-3-
<PAGE>
(a) Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, to the extent that it
may wish, Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee. After notice from Corporation to
Indemnitee of its election so as to assume the defense thereof, Corporation
will not be liable to Indemnitee under this Agreement for any legal or other
expenses subsequently incurred by Indemnitee in connection with the defense
thereof other than reasonable costs of investigation or as otherwise provided
below. Indemnitee shall have the right to employ its counsel in such action,
suit or proceeding but the fees and expenses of such counsel incurred after
notice from Corporation of its assumption of the defense thereof shall be at
the expense of Indemnitee unless (i) the employment of counsel by Indemnitee
has been authorized by Corporation, (ii) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between Corporation and
Indemnitee in the conduct of the defense of much action or (iii) Corporation
shall not in fact have employed counsel to assume the defense of much action,
in each of which cases the fees and expenses of Indemnitee's separate counsel
shall be at the expense of Corporation. Corporation shall not be entitled to
assume the defense of any action, suit or proceeding brought by or on behalf
of Corporation or as to which Indemnitee shall have made the conclusion
provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. Corporation shall be permitted to settle
any action except that it shall not settle any action or claim in any manner
which would impose any penalty or limitation on Indemnitee without
Indemnitee's written consent. Neither Corporation nor Indemnitee will
unreasonably withhold its consent to any proposed settlement.
7. Advancement and Repayment of Expenses.
-------------------------------------
(a) In the event that Indemnitee employs his own counsel
pursuant to Section 6 (b)(i) through (iii) above, Corporation shall advance to
Indemnitee, prior to any final disposition of any threatened or pending
action, suit or proceeding, whether civil, criminal, administrative or
investigative, any and all reasonable expenses (including legal fees and
expenses) incurred in investigating or defending any such action, suit or
proceeding within ten (10) days after receiving copies of invoices presented
to Indemnitee for such expenses.
(b) Indemnitee agrees that Indemnitee will reimburse
Corporation for all reasonable expenses paid by Corporation in defending any
civil or criminal action, suit or proceeding against Indemnitee in the event
and only to the extent it shall be ultimately determined by a final judicial
decision (from which there is no right of appeal) that Indemnitee is not
entitled,
-4-
<PAGE>
under the provisions of the Code, the By-laws, this Agreement or otherwise, to
be indemnified by Corporation for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be
required to advance such expenses to Indemnitee if Indemnitee (i) commences
any action, suit or proceeding as a plaintiff unless such advance is
specifically approved by a majority of the Board of Directors or (ii) is a
party to an action, suit or proceeding brought by Corporation and approved by
a majority of the Board which alleges willful misappropriation of corporate
assets by Indemnitee, disclosure of confidential information in violation of
Indemnitee's fiduciary or contractual obligations to Corporation, or any other
willful and deliberate breach in bad faith of Indemnitee's duty to Corporation
or its stockholders.
8. ENFORCEMENT.
-----------
(a) Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on Corporation
hereby in order to induce Indemnitee to continue as a director and/or an
officer of Corporation, and acknowledges that Indemnitee is relying upon this
Agreement in continuing in such capacity.
(b) In the event Indemnitee is required to bring any action
to enforce rights or to collect moneys due under this Agreement and is
successful in such action, the Corporation shall reimburse Indemnitee for all
Indemnitee's reasonable fees and expenses in bringing and pursuing such
action.
9. SUBROGATION. In the event of payment under this agreement,
-----------
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Indemnitee
-------------------------
by this Agreement shall not be exclusive of any other right which Indemnitee may
have or hereafter acquire under any statute, provision of Corporation's
Certificate of Incorporation or By-laws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office.
11. SURVIVAL OF RIGHTS. The rights conferred on Indemnitee by this
------------------
Agreement shall continue after Indemnitee has ceased to be a director, officer,
employee or other agent of Corporation and shall inure to the benefit of
Indemnitee's heirs, executors and administrators.
12. SEPARABILITY. Each of the provisions of this Agreement is a
------------
separate and distinct agreement and independent of the others, so that if any or
all of the provisions hereof shall be held to be invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect
-5-
<PAGE>
the validity or enforceability of the other provisions hereof or the
obligation of the Corporation to indemnify the Indemnitee to the full extent
provided by the By-laws or the Code.
13. GOVERNING LAW. This Agreement shall be interpreted and
-------------
enforced in accordance with the laws of the State of Delaware.
14. BINDING EFFECT. This Agreement shall be binding upon
--------------
Indemnitee and upon Corporation, its successors and assigns, and shall inure to
the benefit of Indemnitee, his heirs, personal representatives and assigns and
to the benefit of Corporation, its successors and assigns.
15. AMENDMENT AND TERMINATION. No amendment, modification,
-------------------------
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on and as of the day and year first above written.
CARDIMA, INC.,
A DELAWARE CORPORATION
By: _____________________________________
Print Name: _____________________________
Title: __________________________________
INDEMNITEE
_________________________________________
((NAME))
-6-
<PAGE>
EXHIBIT 10.5
FOURTH AMENDED AND RESTATED
---------------------------
STOCKHOLDERS' RIGHTS AGREEMENT
------------------------------
THIS FOURTH AMENDED AND RESTATED STOCKHOLDERS' RIGHTS AGREEMENT is made as
of the 7th day of March, 1997, by and between Cardima, Inc., a Delaware
corporation (the "Company"), Gabriel B. Vegh (the "Founder") and the investors
------- -------
listed on Exhibit A attached hereto (each an "Investor," and collectively, the
--------
"Investors").
- ----------
RECITALS
--------
WHEREAS, certain investors have purchased shares of Series A Preferred
Stock of the Company (the "Series A Preferred Stock") pursuant to that certain
------------------------
Series A Preferred Stock Purchase Agreement dated May 21, 1993 (the "Series A
--------
Agreement"), or pursuant to certain warrants issued to such investors by the
- ---------
Company, shares of Series B Preferred Stock of the Company (the "Series B
--------
Preferred Stock") pursuant to a recapitalization approved in that certain action
- ---------------
by Written Consent of the Stockholders of Cardima, Inc. dated June 30, 1993, or
shares of Series C Preferred Stock of the Company (the "Series C Preferred
------------------
Stock") pursuant to certain Series C Stock Purchase Agreements (the "Series C
--------
Agreements") or shares of Series D Preferred Stock of the Company (the "Series D
- ---------- --------
Preferred Stock") pursuant to that certain Series D Preferred Stock Purchase
- ---------------
Agreement dated December 19, 1995 (the "Series D Agreement");
------------------
WHEREAS, the Founder has purchased shares of Common Stock of the Company
pursuant to that certain Employee Stock Purchase Agreement dated May 4, 1993
(the "Founder's Agreement"); and
-------------------
WHEREAS, certain Investors are purchasing shares of Series E Preferred
Stock of the Company (the "Series E Preferred Stock") pursuant to that certain
------------------------
Series E Preferred Stock Purchase Agreement of even date herewith (the "Series E
--------
Agreement") and have asked the other Investors, the Founder and the Company to
- ---------
further amend and restate the Third Amended and Restated Stockholders' Rights
Agreement dated December 19, 1995, by and between certain of the Investors, the
Founder and the Company.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Investors, the Founder and the Company agree as
follows:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as amended.
---
(b) The term "Form S-3" means such form under the Act as in
--------
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
<PAGE>
(c) The term "Holder" means any person owning or having the
------
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
--------
1934, as amended.
(e) The term "register," "registered," and "registration" refer
-------- ---------- ------------
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
----------------------
issuable or issued upon conversion of the Series A Preferred Stock (including
shares of Series A Preferred Stock issuable upon exercise of warrants issued by
the Company), (ii) the Common Stock issuable or issued upon conversion of the
Series B Preferred Stock, (iii) the Common Stock issuable or issued upon
conversion of the Series C Preferred Stock (including shares of Series C
Preferred Stock issuable upon exercise of warrants issued by the Company), (iv)
the Common Stock issuable or issued upon conversion of the Series D Preferred
Stock (including shares of Series D Preferred Stock issuable upon exercise of
warrants issued by the Company) (v) the Common Stock issuable or issued upon
conversion of the Series E Preferred Stock (including shares of Series E
Preferred Stock issuable upon exercise of warrants issued by the Company), (vi)
the 66,666 shares of Common Stock (the "Founders Shares") issued to the Founder
---------------
pursuant to the Founder's Agreement provided, however, that the Founder Shares
shall not he deemed Registrable Securities and the Founder shall not be deemed a
Holder for the purposes of Sections 1.2, 1.6, 1.12, 1.14 and 2 and (vii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i), (ii), (iii), (iv), (v) and (vi) above, excluding
in all cases, however, any Registrable Securities sold by a person in a
transaction in which his rights under this Section 1 are not assigned.
(g) The "number of shares of Registrable Securities then
-----------------------------------------------
outstanding" shall be determined by the number of shares of Common Stock
- -----------
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(h) The term "SEC" shall mean the Securities and Exchange
---
Commission.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier
of (i) March 7, 2000, or (ii) six (6) months after the effective date of the
first registration statement for a bona fide, firm commitment underwritten
public offering of the Company's Common Stock at an offering price of at least
$10.00 per share (if prior to June 30, 1997 or $11.00 per share if on or after
July 1, 1997) and net proceeds to the Company of at least $20,000,000 (other
than a
-2-
<PAGE>
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction) (a "Qualified IPO"), a written request from the Holders of
-------------
at least twenty-five percent (25%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of at least fifteen percent (15%) of the Registrable
Securities then outstanding, then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event within
sixty (60) days of the receipt of such request, the registration under the Act
of all Registrable Securities which the Holders request to be registered,
subject to the limitations of subsection 1.2(b), within twenty (20) days of the
mailing of such notice by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
- --------------------
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting, the provisions of which will be consistent with
the provisions of this Agreement. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the
-3-
<PAGE>
filing of such registration statement, the Company shall have the right to defer
taking action with respect to such filing for a period of not more than one
hundred twenty (120) days after receipt of the request of the Initiating
Holders; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period.
(d) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has received three (3) requests
pursuant to this Section 1.2, each of which either has been declared or ordered
effective or withdrawn at the request of the Investors (other than as a result
of a material adverse change to the Company);
(ii) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing of, and ending
on a date one hundred eighty (180) days after the effective date of, a
registration subject to this Section 1.2 or Section 1.3 hereof; provided that
the Company is actively employing in good faith reasonable efforts to cause such
registration statements to become effective; or
(iii) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 1.12 below.
1.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than (a) a registration relating a
Qualified IPO prior to June 30, 1997, the completion of which results in the
- -------------
conversion into Common Stock of all outstanding shares of Preferred Stock, (b) a
registration relating solely to the sale of securities to participants in a
Company stock plan, (c) a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities or (d) a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with Section
3.5, the Company shall, subject to the provisions of Section 1.8, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
1.4 Obligations of the Company. Whenever required under this Section
--------------------------
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities
-4-
<PAGE>
registered thereunder, keep such registration statement effective for a period
of up to one hundred twenty (120) days or until the distribution contemplated in
the Registration Statement has been completed; provided, however, that (i) such
one hundred twenty (120) day period shall be extended for a period of time equal
to the period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such one hundred twenty (120) day period shall be
extended, if necessary, to keep the registration statement effective until all
such Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a post-effective
amendment which (I) includes any prospectus required by Section 10(a)(3) of the
Act or (II) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided, that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement (provided that the terms of such agreement
are consistent with the terms of this Agreement).
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
-5-
<PAGE>
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or national market system on
which similar securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective or the date of the closing of
the public offering of such securities if so requested by the underwriters, (i)
an opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
1.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required by the Act to effect the registration of such Holder's Registrable
Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b)(2), whichever is applicable.
1.6 Expenses of Demand Registration. All expenses, other than
-------------------------------
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company
(including fees and disbursements of counsel for the Company in its capacity as
counsel to the selling Holders hereunder; if Company counsel does not make
itself available for this purpose,
-6-
<PAGE>
the Company will pay the reasonable fees and disbursements of one counsel for
the selling Holders selected by Holders of a majority of the Registrable
Securities being included in the registration) shall be borne by the Company;
provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
Participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to the
demand registration pursuant to Section 1.2; provided further, however, that if
at the time of such withdrawal the Holders have learned of a material adverse
change in the condition, business, or prospects of the Company from that known
to the Holders at the time of their request and have withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company (including fees and disbursements of counsel for the
Company in its capacity as counsel to the selling Holders hereunder; if Company
counsel does not make itself available for this purpose, the Company will pay
the reasonable fees and disbursements of one counsel for the selling Holders
selected by Holders of a majority of the Registrable Securities being included
in the registration), but excluding underwriting discounts and commissions
relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters); provided, such terms are
consistent with the terms of this Agreement, and then only in such quantity as
the underwriters determine in their sole discretion will not, jeopardize the
success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by stockholders to be included in
such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling stockholders according to the total amount of securities
entitled to be included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by such selling stockholders),
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below fifteen percent (15%) of the total
amount of securities included in such offering, (ii) notwithstanding (i) above,
any shares being sold by a stockholder exercising a demand registration right
similar to that granted in Section 1.2
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<PAGE>
be excluded from such offering. For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, its partners, directors, officers and employees
(which persons shall be deemed to be included in the term Holder for purposes of
this subsection 1.10(a)) any underwriter (as defined in the Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act or
the 1934 Act, or other federal or state laws, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
---------
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, or the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the
-8-
<PAGE>
Act, any underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other Holder,
against any losses, claims, damages, or liabilities (joint or several) to which
any of the foregoing persons may become subject, under the Act, or the 1934 Act
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 1.10(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.10(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 1.10(b) exceed the net proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement
-9-
<PAGE>
of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from
---------------------
Holders of the Registrable Securities then outstanding a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
-10-
<PAGE>
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this section 1.12: (i) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than sixty (60) days after
receipt of the request of the Holder or Holders under this Section 1.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period; (4) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected two
registrations on Form S-3 for the Holders pursuant to this Section 1.12; or (5)
in any particular jurisdiction in which the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by the
Company. Registrations effected pursuant to this Section 1.12 shall not be
counted as demands for registration or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer holds at
least 250,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations) or to a transferee or assignee of such securities who is a
partner, shareholder or affiliate of such Holder without restriction as to
minimum shareholding, provided that with respect to any assignment under this
Section 1.13 (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned;
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<PAGE>
(b) such transferee or assignee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement, including without limitation the
provisions of Section 1.15 below; and (c) no transfer shall be made to a person
that the Board of Directors reasonably determines is a competitor of the
Company. For the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee, the holdings of transferees and
assignees of a partnership who are partners or retired partners of such
partnership (including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together and with the partnership;
provided, that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving notices or taking any action
under this Section 1.
1.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2, 1.3 or 1.12
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "Market Stand-Off" Agreement. The Founder and each Investor
---------------------------
hereby agree that, during the period of duration specified by the Company and an
underwriter of Common Stock or other equity securities of the Company, following
the effective date of a registration statement of the Company filed under the
Act, it shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that:
(a) all officers and directors of the Company, and each holder
of 1% or more of the capital stock of the Company agree to be similarly bound;
and
(b) such market stand-off time period shall not exceed one
hundred eighty (180) days for an initial public offering and ninety (90) days
for any other offering.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Founder and each Investor (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
-12-
<PAGE>
Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction
on Form S-4 or any similar forms which may be promulgated in the future.
1.16 Termination of Registration Rights.
----------------------------------
(a) No Holder shall be entitled to exercise any right provided
for in this Section 1 after the later to occur of (i) five (5) years following a
Qualified IPO; or (ii) such time as such Holder shall be entitled to sell such
Holder's shares without restriction pursuant to Rule 144(k) of the Act.
(b) In addition, the right of any Holder to request
registration or inclusion in any registration pursuant to Section 1.3 shall
terminate at any time on or after the closing of a Qualified IPO of the Company
if all shares of Registrable Securities held by such Holder represent less than
one percent (1%) of the then outstanding shares of Common Stock.
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. As each Investor hereby agrees
--------------------------------
that such Investor shall use diligent efforts to maintain the confidentiality of
the financial information of the Company, to be provided as described in this
Section 2, and to use such financial information of the Company solely for
purposes related to such Investor's relationship with the Company, the Company
shall deliver the financial information of the Company, as described in this
Section 2, to each Investor:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a statement of cash flow for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles, together with a report
of independent public accountants of nationally recognized standing selected by
the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited income statement and statement of cash flow
for such fiscal quarter and an unaudited balance sheet and a statement of
stockholder's equity as of the end of such fiscal quarter and a statement
showing the number of shares of each class and series of capital stock and
securities convertible into or exercisable for shares of capital stock
outstanding at the end of the period, the number of common shares issuable upon
conversion or exercise of any outstanding securities convertible or exercisable
for common shares and the exchange ratio or exercise price applicable thereto,
all in sufficient detail as to permit the Investor to calculate its percentage
equity ownership in the Company.
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<PAGE>
(c) within thirty (30) days of the end of each month, an
unaudited income statement and statement of cash flow and balance sheet for and
as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis and, as soon as prepared, any other
budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with generally accepted accounting
principles consistently applied with prior practice for earlier periods, all in
reasonable detail, subject to changes resulting from year-end audit adjustments,
and fairly present the financial condition of the Company and its results of
operation for the period specified;
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
the Company shall not be obligated under this subsection (f) or any other
subsection of Section 2.1 to provide information which it deems in good faith to
be a trade secret or similar confidential information unless the person
requesting such information has agreed to reasonable confidentiality
restrictions with respect to the use of such information.
2.2 Inspection. The Company shall permit each Investor, at such
----------
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.2 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information
unless the person requesting such information has agreed to reasonable
confidentiality restrictions with respect to the use of such information.
2.3 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this paragraph 2.3, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.3, a "Major Investor" shall mean (i) any Investor who holds
--------------
(whether in the form of Series A Preferred Stock or Series B Preferred Stock
Preferred Stock) at least ten percent (10%) of the original investment such
Investor makes in the Company pursuant to the Series A Agreement, (ii) any
person who acquires at least ten percent (10%) of the Preferred Stock (whether
in the form of Series A Preferred Stock or Series B Preferred Stock or the
Common Stock issued upon conversion thereof) issued pursuant to the Series A
Agreement, (iii) any person who holds at least 50,000 shares of Series C
Preferred Stock issued pursuant to the Series C Agreements, (iv) any Investor
who holds at least fifteen percent (15%) of its original investment pursuant to
the Series D or Series E Agreement (whether in the form of Series D or Series E
Preferred Stock or the Common Stock issued upon conversion thereof) or (v) any
person
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<PAGE>
who owns at least 250,000 shares of Series D or Series E Preferred Stock. For
purposes of this Section 2.3, Investor includes any general partners or
affiliates of an Investor. An Investor shall be entitled to apportion the right
of first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
------
each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice") to
------
the Major Investors stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
(b) Within twenty (20) calendar days after giving of the Notice, each
Major Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Registrable Securities then held by such
Major Investor bears to the total number of shares of Common Stock of the
Company then outstanding (assuming full conversion and exercise of all
outstanding convertible securities and options, warrants or rights to purchase
Common Stock). The Company shall promptly, in writing, inform each Major
Investor which purchases all the shares available to it ("Fully-Exercising
----------------
Investor") of any other Major Investor's failure to do likewise. During the
- --------
ten-day period commencing after such information is given, each Fully-Exercising
Investor shall be entitled to obtain that portion of the Shares for which Major
Investors were entitled to subscribe but which were not subscribed for by the
Major Investors which is equal to the proportion that the number of shares of
Registrable Securities then held by such Fully-Exercising Investor bears to the
total number of shares of Registrable Securities then held by all Fully-
Exercising Investors who wish to purchase some of the unsubscribed shares.
(c) If all Shares which Investors are entitled to obtain pursuant to
subsection 2.3(b) are not elected to be obtained as provided in subsection
2.3(b) hereof, the Company may, during the thirty (30) day period following the
expiration of the period provided in subsection 2.3(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than, those
specified in the Notice. If the Company does not enter into an agreement for
the sale of the Shares within such period, or if such agreement is not
consummated within thirty (30) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.3 shall not be
applicable (i) to the issuance or sale of not to exceed 894,846 shares of Common
Stock to employees, directors or consultants for the primary purpose of
soliciting or retaining their services, or (ii) to a Qualified IPO, (iii) the
issuance of securities pursuant to the conversion of convertible securities or
the exercise of options, warrants or rights to purchase securities currently
-15-
<PAGE>
outstanding or excluded under this Section 2.3(d), (iv) the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise or (v) the issuance of shares of capital stock upon exercise
or conversion of warrants to purchase shares of the capital stock of this
corporation issued in connection with equipment lease financing transactions or
bank financing transactions unanimously approved by the Board of Directors,
where the issuance of such warrants is not principally for the purpose of
raising additional equity capital for the Company.
(e) The right of first offer set forth in this Section 2.3 is for the
benefit of all Major Investors and may not be assigned or transferred by them,
except that (i) such right is assignable by each Holder to any wholly owned
subsidiary or parent of, or to any corporation or entity that is, within the
meaning of the Act, controlling, controlled by or under common control with, any
such Holder, and (ii) such right is assignable between and among any of the
Holders.
2.4 Termination of Covenants. The covenants set forth in this
------------------------
Section 2, shall terminate as to Investors and be of no further force or effect
on the earlier to occur of the following: (a) the completion of a Qualified
IPO, or (b) when there are outstanding shares of Preferred Stock representing
less than fifteen percent (15%) of the Registrable Securities outstanding on the
date of this Agreement.
3. Right of First Refusal on Stockholder Shares of Target.
------------------------------------------------------
3.1 General. Target may not sell, assign, transfer, or in any other
-------
manner dispose of or alienate, or transfer or assign any interest in, any or all
of the Stockholder Shares (as such term is defined below) which now or hereafter
may be held or owned by them to any person or entity unless such party (for
purposes of this Section 3 only, referred to as "Offeror") shall have first made
-------
the written offer to sell as hereinafter described, and the offered Stockholder
Shares shall not have been purchased, within the time hereinafter provided. For
purposes of this Section 3, "Stockholder Shares" shall include and be deemed to
------------------
mean: (i) the Series B Preferred Stock acquired by Target (the "Target Shares")
-------------
pursuant to the recapitalization approved in that certain Action by Written
Consent of the Stockholders of Cardima, Inc. dated June 30, 1993, (ii) the
Common Stock issued or issuable upon conversion of the Target Shares and (iii)
any Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Target Shares or Common Stock.
3.2 Offer by Stockholder. The Stockholder Shares which the Offeror
--------------------
desires to sell, assign, or transfer (the "Offered Stockholder Shares") shall
--------------------------
first be offered to the Company by a written offer (the "Offer") to sell at the
-----
price, and on the terms, set forth in subsection 3.4 below, to which shall be
attached a statement of intention to sell, assign, transfer, or otherwise
dispose of the Stockholder Shares being offered, as the case may be, the name
and address of each prospective purchaser or assignee, if any, the number of
Stockholder Shares involved in the proposed sale, assignment, or transfer, and
the price and terms of any such bona
-16-
<PAGE>
fide offer. The Offer shall be signed by the Offeror and shall be delivered
pursuant to the notice provisions of Section 4.5.
3.3 Option of Company To Purchase. For thirty (30) days after the
-----------------------------
receipt of the Offer (the "Offer Period"), the Company shall have the right, but
------------
not the obligation, to purchase all or some of the Offered Stockholder Shares.
If the Company elects to purchase any of the Offered Stockholder Shares, it
shall so notify the Offeror prior to the end of the Offer Period. The notice
shall specify a date for the closing of the purchase which shall not be more
than thirty (30) days after the date of the giving of such notice.
3.4 Purchase Price and Terms. The purchase price of the Stockholder
------------------------
Shares offered by the Offeror pursuant to this Section 3 to the Company shall be
equal to the price offered for the Stockholder Shares by a prospective purchaser
pursuant to a bona fide offer of purchase (if received), as set forth in the
Offer. The terms and conditions upon which the Company shall purchase the
Stockholder Shares, if elected by the Company, shall be no less favorable to the
Company than those received by the Offeror in a bona fide offer of purchase (if
received) by a prospective purchaser. If such bona fide offer is not received
by such a prospective purchaser, the Company shall have the right to purchase
the Stockholder Shares for an amount equal to the fair market value of such
shares as determined by the Board of Directors in its sole discretion. In the
event the purchase price specified in the Offer is payable in property other
than cash, the Company shall have the right to pay the purchase price in the
form of cash equal in amount to the fair market value of such property as
determined in good faith by the parties. If the Offeror and the Company cannot
agree on such fair market value within ten (10) days after the Company's receipt
of the notice by the Offeror pursuant to this Section 3, the valuation shall be
made by an appraiser of recognized standing selected by the Offeror and the
Company or, if they cannot agree on an appraiser within twenty (20) days after
receipt of such notice, each shall select an appraiser of recognized standing
and the two appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value, and which appraisal shall
be completed within forty-five (45) days after receipt of such notice. The
closing for such purchase shall then be held on the later of (i) the fifteenth
15th business day following the exercise of the rights hereunder or (ii) the
fifteenth (15th) day after such cash valuation shall have been made.
3.5 Release from Restriction. If all of the Offered Stockholder
------------------------
Shares are not purchased by the Company in accordance with the terms of this
Section 3, the Offeror's offer shall be deemed rejected with respect to the
remaining Offered Stockholder Shares, and subject to the provisions of this
Section 3 below, the Offeror may make a bona fide sale, assignment, transfer, or
other disposition of all, but not less than all, of the remaining Offered
Stockholder Shares to the prospective purchaser named in the statement attached
to the offer at a price not less than, and upon terms not more favorable than,
the bona fide offer, if any, described in the Offer. If the Offeror shall fail
to make such sale, assignment, transfer, or other disposition within one hundred
twenty (120) days following the expiration of all periods of time hereinabove
provided for purchase by the Company, the remaining Offered Stockholder Shares
shall again become subject to all of the restrictions of this Agreement, and
except as otherwise provided in this Agreement, the Offeror shall not sell,
assign, transfer or otherwise dispose of or alienate the
-17-
<PAGE>
Stockholder Shares without again offering said Stockholder Shares to the Company
as hereinabove provided.
3.6 Assignment. The Company may assign its right of first refusal
----------
under this Section 3 to any party or parties.
3.7 Exclusions: Lapse.
-----------------
(a) The right of first refusal under this Section 3 shall not be
applicable to any sale of Stockholder Shares pursuant to Section 1 of this
Agreement. The right of first refusal contained in this Section 3 shall not
apply to any transfer ("Permitted Transfer") of Stockholder Shares (i) pursuant
------------------
to an acquisition, merger or other transaction pursuant to which the Company's
stockholders of record as constituted immediately prior to such acquisition or
sale will, immediately after such acquisition or sale, hold less than 50% of the
voting power of the surviving or acquiring entity, or (ii) among Target's
Affiliates (collectively referred to herein as "Permitted Transferees");
---------------------
provided that the right of first refusal contained in this Section 3 shall
continue to be applicable to the Stockholder Shares after any such Permitted
Transfer and provided further that the transferees of such Stockholder Shares
shall have agreed in writing to be bound by the provisions of this Agreement
affecting the Stockholder Shares so transferred. An "Affiliate" of Target means
any other person, entity or investment fund controlling, controlled by or under
common control with Target.
(b) The right of first refusal set forth in this Section 3 shall
lapse upon the completion of a Qualified IPO.
4. Right of First Refusal on Shares of the Founder and Phillip C. Radlick.
----------------------------------------------------------------------
4.1 General. Each of the Founder and Phillip C. Radlick (the
-------
"Management Stockholders") has executed a Stock Restriction Agreement (the
- ------------------------
"Stock Restriction Agreement") with the Company, pursuant to which he has agreed
- ----------------------------
not to sell, assign, transfer, or in any other manner alienate, or transfer or
assign any interest in, any or all shares of capital stock in the Company held
or owned by him to any person or entity unless he shall have first made a
written offer to the Company.
4.2 Assignment. The Company agrees to assign any unexercised right
----------
of first refusal on shares of the Management Stockholders to the holders of
Series D Preferred and Series E Preferred who will be entitled to purchase such
shares pro rata based on the shares of Registrable Securities that each holder
of Series D Preferred and Series E Preferred then owns. Any such assigned right
of first refusal on shares of the Management Stockholders shall not be
reassigned by a holder of Series D Preferred or Series E Preferred, and the
Company shall have the right to reassign any such right of first refusal which
is not exercised by the holder of Series D Preferred and Series E Preferred to
whom it was assigned.
5. Affirmative Covenants. The Company covenants that until the closing of
---------------------
a Qualified IPO, it will use its reasonable commercial efforts to:
-18-
<PAGE>
5.1 Maintenance of Properties, etc. Keep its properties and assets
------------------------------
in such repair, working order and condition, and from time to time make such
repairs, renewals, replacements, additions and improvements thereto, as its
management deems reasonably necessary and appropriate, and do all things
necessary to preserve, renew and keep in full force and effect and in good
standing its corporate existence and authority necessary to continue its
business. Be qualified as a foreign corporation in each jurisdiction in which
it is required to qualify, except for such jurisdictions in which the failure to
be so qualified could not have a material adverse effect on the Company.
Preserve and maintain all patents, patent applications, copyrights, trademarks,
inventions, processes and other intellectual property, and all material licenses
to use any of the foregoing, that are necessary to the conduct of the business
of the Company and its Subsidiaries.
5.2 Compliance with Legal Requirements. Comply in all material
----------------------------------
respects with all requirements of law applicable to it, except where compliance
therewith shall at the time be contested in good faith by appropriate
proceedings.
5.3 Insurance. Keep its assets which are of an insurable character
---------
insured with responsible and reputable carriers against loss or damage by fire,
explosion or other hazards which may be insured against by extended coverage in
an amount sufficient to prevent it from becoming a co-insurer and in any event
not less than would be customary for a similarly situated company in a business
similarly situated, and maintain insurance against liability to persons and
property and other hazards and risks to the extent and in the manner customary
for companies in similar businesses similarly situated. Maintain term life
insurance on the lives of each of the Management Stockholders in the amount of
$500,000 each with the proceeds payable to the Company.
5.4 Payment of Taxes and Trade Debt. Pay and discharge when due and
-------------------------------
payable all taxes, assessments and governmental charges imposed upon its income,
profits, property or business, except for such the validity or which are in good
faith being contested by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto.
5.5 Independent Accountants. Retain independent public accountants
-----------------------
of recognized national standing, reasonably acceptable to the Investors, who
shall provide a report on the Company's annual financial statements and not
change such accountants without the approval of Investors holding at least a
majority of the Registrable Securities issued or issuable in connection with a
conversion of (i) the Series D Preferred Stock and (ii) the Series E Preferred
Stock, each voting separately as a single class.
5.6 Board of Directors. Cause the Board of Directors of the Company
------------------
to meet at least six (6) times each fiscal year. The Company will pay all
direct out-of-pocket expenses reasonably incurred by the Directors in connection
with travel to and attendance at such Board meetings. The Company will adopt
and maintain in its certificate of incorporation or bylaws provisions limiting
the monetary damages and indemnifying the directors of the Company to the
fullest extent permitted by applicable law. At all times hereafter up to the
time of effectiveness
-19-
<PAGE>
of a Qualified Public Offering, New Enterprise Associates ("NEA"), Chase Venture
---
Capital Associates, L.P., ("Chase"), and Premier Medical Partner, L.P.
-----
("Premier") shall have the right to designate a representative to attend all
-------
meetings of the Board of Directors in a nonvoting observer capacity, to receive
notice of such meetings and to receive the information provided by the Company
to the Board of Directors; provided, however, that the Company may require as a
condition precedent to NEA, Chase and Premier's rights under this Section 5.6
that each person proposing to attend any meeting of the Board of Directors and
each person to have access to any of the information provided by the Company to
the Board of Directors shall agree to hold in confidence and trust and to act in
a fiduciary manner with respect to all information so received during such
meetings or otherwise; and, provided further, that the Company reserves the
right not to provide information and to exclude such representative from any
meeting or portion thereof if delivery of such information or attendance at such
meeting by such representative would result in disclosure of trade secrets to
such representative or would adversely affect the attorney-client privilege
between the Company and its counsel or if such representative is a member of the
board of directors or otherwise attends meetings of the board of directors of
another company that is a direct competitor of the Company.
5.7 Financial Accounting System. Maintain a system of accounting in
---------------------------
which correct and complete entries will be made of all dealings and transactions
in relation to their business and affairs in accordance with generally accepted
accounting principles.
5.8 Proprietary Information Agreements. Cause each officer and key
----------------------------------
employee of the Company or any Subsidiary now or hereafter employed to execute
and deliver to the Company a Proprietary Information and Inventions Agreement
substantially in the form previously provided to the Investors.
5.9 Rule 144A Information. At all times during which the Company is
---------------------
neither subject to the reporting requirements under Sections 13 or 15(d) under
the Exchange Act, provide in written form as promptly as practicable upon
request, all information required by Rule 144A(d)(4)(i) promulgated under the
Securities Act; provided, however, that the Company may require the recipient of
-------- -------
such information to execute an agreement in which it agrees to take reasonable
precautions to ensure the confidentiality of such information.
6. Miscellaneous.
-------------
6.1 Small Business Investment Company Matters. Each Investor
-----------------------------------------
executing this Agreement agrees to cooperate with the Company in all reasonable
respects in complying with the terms and provisions of the letter agreement
between the Company and Chase Venture Capital Associates, L.P. ("CVCA"), a copy
----
of which is attached hereto as Exhibit B, regarding small business matters (the
---------
"Small Business Sideletter"); provided, however, that no Holder shall be
-------------------------
required under this Section 6.1 to take any action that would adversely affect
in any material respect such Holder's rights under this Agreement or as a
stockholder of the Company.
-20-
<PAGE>
6.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
6.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
6.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or by
overnight courier or sent by telegram or fax or upon deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties. If to the
Company, a copy of any notice shall be sent in the same manner to Cardima, Inc.,
47266 Benicia Street, Fremont, California, 94538, Attention: Mr. Phillip C.
Radlick.
6.7 Remedies and Expenses. The parties shall have all remedies for
---------------------
breach of this Agreement available to them provided by law or equity. Without
limiting the generality of the foregoing, in addition to all other rights and
remedies available at law or in equity, the parties shall be entitled to obtain
specific performance of the obligations of each party to this Agreement and
immediate injunctive relief. In the event any action or proceeding is brought
in equity to enforce the same, neither the Company nor any party will urge, as a
defense, that an adequate remedy at law exists. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
6.8 Amendments and Waivers. This Agreement constitutes the full and
----------------------
entire understanding and agreement between the parties with regard to the
subjects hereof, and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such
-21-
<PAGE>
amendment, waiver, discharge or termination is sought; provided, however, that
Holders of at least a majority of the Registrable Securities may, with the
written consent of the Company, waive, modify or amend on behalf of all Holders,
any provisions hereof benefiting such Holders, so long as the effect thereof
will be that all such Holders will be treated equally; and provided further,
that, in the event the Company shall issue additional shares of Series E
Preferred Stock, each new holder of such Series E Preferred Stock shall become a
party to this Agreement and shall be deemed to be a "Holder" for all purposes of
this Agreement by executing and delivering an additional counterpart signature
page to this Agreement.
6.9 Legends. Each stock certificate issued after the date hereof
-------
evidencing shares of the Company's capital stock subject to the provisions of
this Agreement (including any shares issued upon a transfer, stock split,
dividend, recapitalization, merger or other similar event) shall at all times
during the term of this Agreement bear the following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO, AND MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH, A STOCKHOLDERS' RIGHTS AGREEMENT, DATED AS
OF MARCH 7, 1997, AS AMENDED AND RESTATED FROM TIME TO TIME, AMONG THE HOLDERS
OF THESE SHARES AND CERTAIN OTHER HOLDERS OF THE COMPANY'S STOCK, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY.
6.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
6.11 Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
6.12 Entire Agreement. Except for the side letter from the Company to
----------------
Goldman Sachs & Co, Chase Venture Capital Associates, L.P., and Premier Medical
Partner Fund, L.P., the side letter from Chase Venture Capital Associates, L.P.
to the Company regarding Small Business Investment Company matters, and the side
letter from the Company to Integral Capital Partners II, L.P., all of even date
herewith, this Agreement and the documents referred to herein constitute the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.
-22-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
COMPANY
CARDIMA, INC.
By: /s/ Phillip C. Radlick
----------------------------------
Phillip C. Radlick, Ph.D.
Title: President and Chief Executive Officer
GS CAPITAL PARTNERS II, L.P.
BY: GS Advisors, L.P.
Its General Partner
BY: GS Advisors, Inc.
Its General Partner
By:
----------------------------------
Richard A. Friedman, President
GS CAPITAL PARTNERS II
OFFSHORE, L.P.
BY: GS Advisors II (Cayman), L.P.
Its General Partner
BY: GS Advisors II, Inc.
Its General Partner
By:
----------------------------------
Richard A. Friedman, President
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-23-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
COMPANY
CARDIMA, INC.
By:
----------------------------------
Phillip C. Radlick, Ph.D.
Title: President and Chief Executive Officer
GS CAPITAL PARTNERS II, L.P.
BY: GS Advisors, L.P.
Its General Partner
BY: GS Advisors, Inc.
Its General Partner
By: /s/ C.H. SKODINSKI
----------------------------------
Title: C.H. Skodinski, V.P.
-------------------------------
GS CAPITAL PARTNERS II
OFFSHORE, L.P.
BY: GS Advisors II (Cayman), L.P.
Its General Partner
BY: GS Advisors II, Inc.
Its General Partner
By: /s/ C.H. SKODINSKI
----------------------------------
Title: C.H. Skodinski, V.P.
-------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-24-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights
Agreement is hereby executed as of the date first above written.
GOLDMAN, SACHS & CO. VERWALTUNGS
GmbH
BY: /s/
----------------------------------
Managing Director
and
/s/ C.H. SKODINSKI
---------------------------------
C.H. Skodinski, V.P.
Registered Agent
THE GOLDMAN SACHS GROUP, L.P.
BY: The Goldman Sachs Corporation
----------------------------------
By: /s/
----------------------------------
Title:
-------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-25-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
BY: Chase Capital Partners,
Its General Partner
By: /s/ DAMION E. WICKER
-----------------------------------
Damion E. Wicker
Title: General Partner
---------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-26-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
PREMIER MEDICAL PARTNER FUND, L.P.
BY: Premier Capital Corporation
Its General Partner
By: /s/ ANTHONY E. MORENO
-----------------------------------
Title: Treasurer
-------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-27-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
KLEINER PERKINS CAUFIELD & BYERS VI
By: /s/JOSEPH S. LACOB
----------------------------------
Title: General Partner
-------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-28-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
NEW ENTERPRISE ASSOCIATES V,
LIMITED PARTNERSHIP
By: /s/NANCY DORMAN
----------------------------------
Its:
---------------------------------
CATALYST VENTURES,
LIMITED PARTNERSHIP
By: /s/NANCY DORMAN
----------------------------------
Its: General Partner
---------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-29-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights
Agreement is hereby executed as of the date first above written.
ONSET ENTERPRISE ASSOCIATES,
LIMITED PARTNERSHIP
By: /s/
------------------------------------------
Title: General Partner, OEA Management, L.P.
The General Partner of
ONSET Enterprise Associates, L.P.
------------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-30-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
TARGET THERAPEUTICS, INC.
By: /s/GARY BANG
----------------------------------
Title:
--------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-31-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
ATLAS VENTURE FUND II, L.P.
by Atlas Venture Associates II, L.P.
By: /s/
-------------------------------------
Its: General Partner
------------------------------------
ATLAS EUROPE FUND BV
By:
--------------------------------------
Its:
------------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-32-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
ATLAS VENTURE FUND II, L.P.
By:
-------------------------------------
Its: General Partner
------------------------------------
ATLAS EUROPE FUND BV
By: /s/
--------------------------------------
Its: Managing Director
------------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-33-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
INTEGRAL CAPITAL PARTNERS II, L.P.
By: Integral Capital Management II, L.P.
its General Partner
By: By /s/ Pamela K. Hagenah
---------------------------------------
its General Partner
Its:
---------------------------------------
INTEGRAL CAPITAL PARTNERS INTERNATIONAL C.V.
By: Integral Capital Management II, L.P.
its Investment General Partner
By: ---------------------------------------
By: /s/ Pamela K. Hagenah
---------------------------------------
its General Partner
Its:
--------------------------------------
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-34-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
/s/ GABRIEL B. VEGH
-------------------------
Gabriel B. Vegh
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-35-
<PAGE>
The foregoing Fourth Amended and Restated Stockholders' Rights Agreement is
hereby executed as of the date first above written.
OLYMPIC VENTURE PARTNERS III
OLYMPIC VENTURE PARTNERS III, L.P.
By OVMC III, L.P., Its G.P. By:
----------------------------
By /s/ Its:
-------------------------------- ---------------------------
Its General Partner
OVP III ENTREPRENEURS FUND
OVP III ENTREPRENEURS FUND
By OVMC III, L.P., Its G.P. By:
----------------------------
By /s/ Its:
-------------------------------- ---------------------------
Its General Partner
SIGNATURE PAGE TO CARDIMA, INC.
FOURTH AMENDED AND RESTATED
STOCKHOLDERS' RIGHTS AGREEMENT
-36-
<PAGE>
EXHIBIT 10.6
LICENSE AGREEMENT
-----------------
This Agreement ("Agreement") is entered into effective as of May 21,
1993 (the "Effective Date"), by and between Target Therapeutics, Inc., a
Delaware corporation with an office at 47201 Lakeview Boulevard, Fremont,
California 94537 ("Target"), and CaRDiMa, Inc., a Delaware corporation with an
office at 47201 Lakeview Boulevard, Fremont, California 94537 ("CaRDiMa").
WHEREAS, Target has developed catheter, coil and guidewire technology
that it utilizes principally in the areas of interventional radiology and
neuroradiology;
WHEREAS, Target's desire to have such technology developed primarily
for use in cardiac electrophysiology applications has led to the formation of a
subsidiary called CaRDiMa, Inc.;
WHEREAS, Target is willing to license such technology to CaRDiMa
primarily for use in cardiac electrophysiology applications, and CaRDiMa is
willing to obtain such license to such technology;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, Target and CaRDiMa agree as follows:
1. Definitions.
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1.1 "Target Technology" shall mean the Target Patent Rights and Target
Know-How existing as of the Effective Date, and during the period from the
Effective Date to the expiration of the Technology Inclusion Period.
1.2 "Target Patent Rights" shall mean (i) all patents owned by Target
(other than 4,832,047, [***])and (ii) all patent applications owned by Target,
and all U.S. and foreign patents issuing therefrom, including any additions,
continuations or continuations-in-part, divisions, reissues or extensions
thereof, and (iii) all patents licensed by Target from third party licensors;
but in each case only to the extent that Target is permitted to sublicense such
patents to CaRDiMa.
1.3 "Target Know-How" shall mean all Target trade secrets and other
confidential information, including, without limitation, design data and
information, formulations, specifications, developments, techniques, methods,
processes, apparatus, products and other information and data, whether or not
patentable, relating to the design, manufacture, assembly and use of Target's
catheters, guidewires and coils.
1.4 "CaRDiMa Technology" shall mean the CaRDiMa Patent Rights and
CaRDiMa Know-How owned by CaRDiMa during the period from the Effective Date to
the expiration of the Technology Inclusion Period.
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1.5 "CaRDiMa Patent Rights" shall mean (i) all patents owned by
CaRDiMa, and (ii) all patent applications owned by CaRDiMa, and all U.S. and
foreign patents issuing therefrom, including any additions, continuations or
continuations-in-part, divisions, reissues or extensions thereof, which patents
and patent applications relate to development and improvement by CaRDiMa of the
Target Technology or which relate to new technology developed by CaRDiMa for use
in the CaRDiMa Field or the Cardiology Field.
1.6 "CaRDiMa Know-How" shall mean all CaRDiMa trade secrets and other
confidential information, including, without limitation, design data and
information, formulations, specifications, developments, techniques, methods,
processes, apparatus, products and other information and data, whether or not
patentable, which relate to development and improvement by CaRDiMa of the Target
Technology or which relate to new technology developed by CaRDiMa for use in the
CaRDiMa Field or the Cardiology Field.
1.7 "Technology Inclusion Period" shall mean that period during the
term of this Agreement after the Effective Date and prior to the date [***]
after the Effective Date.
1.8 "Substantial Improvement" shall mean any modification, improvement
or enhancement by CaRDiMa of Target Technology incorporated in a particular
product that results in a material change in the function, purpose or
application of such product.
1.9 "CaRDiMa Field" shall mean the diagnosis and treatment of
irregularities or disease related to the production of electrical currents by
human tissues or organs, the proper function of such electrical currents and the
human tissues and organs affected by such electrical currents (a) in the heart
and (b) elsewhere in the body, other than in the central nervous system
(including the brain).
1.10 "Target Field" shall mean neurology (including, without
limitation, the diagnosis and treatment of epilepsy), interventional
neuroradiology, interventional radiology, diagnosis and treatment of male and
female reproductive disorders, and design, development, manufacture and sale of
vascular prostheses, including, without limitation, stents and grafts.
1.11 "Cardiology Field" shall mean the diagnosis and treatment of
diseases of the heart, other than the diagnosis or treatment of malfunctions or
diseases of the coronary vasculature by use of a catheter system employing a
balloon, which excepted applications shall include percutaneous coronary
angioplasty.
1.12 "Valid Claim" shall mean a claim of an issued and unexpired patent
that has not been held unenforceable, unpatentable or invalid by a court or
other governmental agency of competent jurisdiction, and which has not been
admitted to be invalid or unenforceable through reexamination, reissue,
disclaimer or otherwise.
1.13 "CaRDiMa Product" shall mean any CaRDiMa product or component (i)
whose sale would in the absence of this Agreement infringe a Valid Claim of a
patent within the Target Technology in the country for which such product or
component is sold, or whose manufacture would in the absence of this Agreement
infringe a Valid Claim of a patent within the Target
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Technology in the country in which such product is manufactured, or (ii) that
is made in accordance with or by use of Target Know-How.
1.14 "Target Product" shall mean any Target product or component (i)
whose sale would in the absence of this Agreement infringe a Valid Claim of a
patent within the CaRDiMa Technology in the country for which such product or
component is sold, or whose manufacture would in the absence of this Agreement
infringe a Valid Claim of a patent within the CaRDiMa Technology in the country
in which such product is manufactured, or (ii) that is made in accordance with
or by use of CaRDiMa Know-How.
2. License Grants.
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2.1 Grant to CaRDiMa.
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(a) Target hereby grants to CaRDiMa an exclusive, royalty-free,
worldwide license, with right to sublicense, to use the Target Technology in the
CaRDiMa Field, and to make, have made, use and sell or otherwise distribute
CaRDiMa Products for use within the CaRDiMa Field.
(b) Target hereby grants to CaRDiMa a non-exclusive, royalty-free
license, with right of sublicense, to use the Target Technology in the
Cardiology Field and to make, use and sell or otherwise distribute CaRDiMa
Products for use within the Cardiology Field; provided, however, that for all
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purposes of this Section 2.1(b), the Target Technology and CaRDiMa Products must
include a Substantial Improvement.
2.2 Grant to Target. CaRDiMa hereby grants to Target an exclusive,
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royalty-free, worldwide license, with right to sublicense, to use the CaRDiMa
Technology in the Target Field, and to make, have made, use and sell or
otherwise distribute Target Products for use within the Target Field.
3. Proprietary Rights.
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Except as expressly set forth in this Agreement, CaRDiMa shall have no
right, title and interest in and to the Target Technology. Except as expressly
set forth in this Agreement, Target shall have no right, title and interest in
and to the CaRDiMa Technology; provided, however, that Target or its licensors
shall retain their right, title and interest in and to the Target Technology
underlying the CaRDiMa Technology.
4. Patent Issues.
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4.1 Target Technology. Target shall prosecute, in its sole
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discretion and at its expense, patent applications within the Target Technology,
and shall implement such procedures and undertake such actions as it deems
necessary to protect the Target Technology against infringers, provided, that
Target shall use reasonable precautions to prevent the unauthorized use or
disclosure of Target Know-How. If CaRDiMa reasonably believes that Target is
failing to pursue diligently any of such patent applications and, within 30 days
after CaRDiMa's written request (or, if earlier, five days prior to the date
that statutory or regulatory time periods for making necessary filings will
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expire), fails to initiate such actions as may be set forth in such request
respecting the prosecution of any of such patent applications, or if Target
abandons any such patent applications, CaRDiMa, at its expense, shall have the
right to take such actions.
4.2 CaRDiMa Technology. CaRDiMa shall prosecute, in its sole
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discretion and at its expense, patent applications within the CaRDiMa
Technology, and shall implement such procedures and undertake such actions as it
deems necessary to protect the CaRDiMa Technology against infringers; provided,
that CaRDiMa shall use reasonable precautions to prevent the unauthorized use or
disclosure of CaRDiMa Know-How. If Target reasonably believes that CaRDiMa is
failing to pursue diligently any of such patent applications and, within 30 days
after Target's written request (or, if earlier, five days prior to the date that
statutory or regulatory time periods for making necessary filings will expire),
fails to initiate such actions as may be set forth in such request respecting
the prosecution of any of such patent applications, or if CaRDiMa abandons any
such patent applications, Target, at its expense, shall have the right to take
such actions.
4.3 Infringers of Patents and Know-How within the CaRDiMa Technology
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Operating in the Target Field or Cardiology Field. Target shall have the right
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to noncontrolling representation by counsel of its choice, at its expense, in
any action brought by CaRDiMa regarding the CaRDiMa Technology who are operating
within the Target Field or Cardiology Field. CaRDiMa shall be entitled to retain
all damages and other monies awarded in such action. In the event that CaRDiMa
shall not have brought such an action against such an infringer, or obtained the
discontinuance of such infringement, within ninety (90) days of receiving
written notice by Target of such infringement, Target shall have the right,
subject to CaRDiMa' approval, which shall not be unreasonably withheld, to
enforce patents or rights to know-how within the CaRDiMa Technology against
infringers of such patents or rights to know-how operating within the Target
Field or Cardiology Field. CaRDiMa shall have the right to noncontrolling
representation by counsel of its choice, at its expense, in any action brought
by Target against such infringers. Target shall be entitled to retain all
damages and other monies awarded in such action.
4.4 Infringers of Patents and Know-How within the Target Technology
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Operating in the CaRDiMa Field or Cardiology Field. CaRDiMa shall have the
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right to noncontrolling representation by counsel of its choice, at its expense,
in any action brought by Target regarding the Target Technology who are
operating within the CaRDiMa Field or Cardiology Field. Target shall be entitled
to retain all damages and other monies awarded in such action. In the event
that Target shall not have brought such an action against such an infringer, or
obtained the discontinuance of such infringement, within ninety (90) days of
receiving written notice by Target of such infringement, CaRDiMa shall have the
right, subject to Target's approval, which shall not be unreasonably withheld,
to enforce patents or rights to know-how within the Target Technology against
infringers of such patents or rights to know-how operating within the CaRDiMa
Field or Cardiology Field. Target shall have the right to noncontrolling
representation by counsel of its choice, at its expense, in any action brought
by CaRDiMa against such infringers. CaRDiMa shall be entitled to retain all
damages and other monies awarded in such action.
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4.5 Patent Counsel. CaRDiMa shall retain as its principal patent
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counsel for purposes of filing patents relating to Target Technology for the
three (3) year period following the Effective Date the same patent counsel
retained by Target during such period; provided, however, that CaRDiMa shall
have the ability to retain other patent counsel in the event that CaRDiMa
believes, in good faith, that there exists or may exist a conflict of interest
between CaRDiMa and Target with respect to the subject matter for which such
separate counsel has been retained; and provided further that CaRDiMa may retain
separate patent counsel at any time if approved in advance by Target, which
approval shall not be unreasonably withheld.
5. Technology Transfer.
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5.1 Training and Consultation Provided by Target. Upon request by
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CaRDiMa during a period of [***] after the Effective Date, Target shall provide
up to [***] person-hours per calendar quarter of training or consultation
without charge, at a site specified by CaRDiMa. Target shall use all reasonable
efforts to provide any additional training or consultation requested by CaRDiMa
at an hourly rate equal to [***] of the total hourly wage rate (excluding
benefits) of the Target employees providing such additional training or
consultation thereafter in such calendar quarter. After the conclusion of such
[***], Target shall, for [***] thereafter, provide a mutually agreed upon amount
of training or consultation to CaRDiMa at a site specified by CaRDiMa (which
shall not be less than [***] per year). Such training or consultation shall be
provided at an hourly rate equal to [***] of the total hourly wage rate
(excluding benefits) of the Target employees providing such additional training
or consultation. CaRDiMa shall bear the reasonable, preapproved travel, food and
lodging expenses of Target employees providing such training and consultation at
a site not owned, leased or rented by Target. Training and consultation may be
provided by Target after the expiration of the [***] period specified above,
upon terms mutually agreeable to both parties.
5.2 Training and Consultation Provided by CaRDiMa. Upon request by
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Target during a period of [***] after the Effective Date, CaRDiMa shall provide
a mutually agreed upon amount of training or consultation to Target (which shall
not be less than [***] hours per year) at a site specified by Target. Such
training or consultation shall be provided at an hourly rate equal to [***] of
the total hourly wage rate (excluding benefits) of the CaRDiMa employees
providing such training or consultation. Target shall bear the reasonable,
preapproved travel, food and lodging expenses of CaRDiMa employees providing
such training and consultation at a site not owned, leased or rented by CaRDiMa.
Training and consultation may be provided by CaRDiMa after the expiration of the
[***] period set forth above, upon terms mutually acceptable to both parties.
5.3 Technology Review Meetings. During the term of this Agreement,
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Target and CaRDiMa shall meet on a quarterly basis to inform each other of
additions and modifications to the Target Technology and CaRDiMa Technology,
respectively.
6. Warranty, Disclaimer.
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6.1 Target represents and warrants that (i) it has full right, power
and authority to enter into this Agreement and to grant the rights granted to
CaRDiMa hereunder, and (ii) it has not
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entered into, and during the term of this Agreement will not enter into, any
agreement with any third party that would conflict with the license granted to
CaRDiMa herein.
6.2 Target further represents and warrants that as of the Effective
Date (i) to the best of its knowledge Target is the sole and exclusive owner of
the Target Technology, or has the right to license such Target Technology to
CaRDiMa, and (ii) it is not aware of any claim or any basis therefor that might
render invalid the Target Patent Rights or limit use of the Target Know-How as
provided in the license grant to CaRDiMa herein.
6.3 CaRDiMa warrants that (i) it has full right, power and authority
to enter into this Agreement and to carry out its obligations hereunder, and
(ii) it has not entered into, and during the term of this Agreement will not
enter into, any agreement with any third party that would conflict with the
license granted to Target herein.
7. Intellectual Property Indemnity by Target.
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Target shall defend at its expense any action brought against CaRDiMa
to the extent such action is based on a claim that the Target Technology, or any
part thereof, infringes any United States copyright or trade secret owned by any
third party, and Target shall pay any settlements consented to by CaRDiMa (which
consent shall not be unreasonably withheld), and any costs, damages and
attorneys' fees finally awarded against CaRDiMa in such action which are
attributable to such claim; provided, the foregoing obligation shall be subject
to CaRDiMa notifying Target promptly in writing of the claim, giving Target the
exclusive control of the defense and settlement thereof, and providing all
reasonable assistance in connection therewith. Notwithstanding the foregoing,
Target shall not settle any such claim without the written consent of CaRDiMa,
which shall not be unreasonably withheld. If the Target Technology, or any part
thereof, are, or in the opinion of Target may become, the subject of any claim,
suit or proceeding for infringement of any United States copyright or trade
secret owned by a third party, or if it is adjudicatively determined that the
use by CaRDiMa of the Target Technology, or any part thereof, is enjoined, then
Target shall, at its expense, procure for CaRDiMa the right under such third
party's copyright or trade secret to use the Target Technology. Target shall not
be liable for any costs or expenses incurred without its prior written
authorization. THE FOREGOING STATES THE ENTIRE LIABILITY AND OBLIGATION OF
TARGET WITH RESPECT TO INFRINGEMENT OR CLAIMS OF INFRINGEMENT OF ANY
THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.
8. Limitation of Liability.
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IN NO EVENT WILL EITHER PARTY HAVE ANY LIABILITY FOR ANY SPECIAL, INDIRECT, OR
CONSEQUENTIAL DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT
IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS WILL
APPLY NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY.
9. Confidential Information.
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9.1 Confidential Information. "Confidential Information" shall mean
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any proprietary information which is specifically designated as such, which is
disclosed by either party to the other
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in any form in connection with this Agreement. Each party shall treat as
confidential all Confidential Information provided by the other party, shall
not use such Confidential Information except as expressly set forth herein or
otherwise authorized in writing, shall implement reasonable procedures to
prohibit the disclosure, unauthorized duplication, misuse or removal of the
Confidential Information and shall not disclose such Confidential Information
to any third party. Without limiting the foregoing, each of the parties shall
use at least the same procedures and degree of care to prevent the disclosure
of Confidential Information as it uses to prevent the disclosure of its own
confidential information of like importance, and shall in any event use no
less than reasonable procedures and a reasonable degree of care.
9.2 Exceptions. Notwithstanding the above, neither party shall have
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liability to the other with regard to any Confidential Information that:
(i) was generally known and available in the public domain at
the time it was disclosed, or becomes generally known and available in the
public domain through no fault of the receiver;
(ii) was known to the receiver at the time of disclosure as
shown by the files of the receiver in existence at the time of disclosure;
(iii) is disclosed with the prior written approval of the
discloser;
(iv) was independently developed by the receiver without any
use of the Confidential Information and by employees or other agents of the
receiver who have not been exposed to the Confidential Information, provided
that the receiver can demonstrate such independent development by documented
evidence prepared contemporaneously with such independent development;
(v) becomes known to the receiver from a source other than
the discloser without breach of this Agreement by the receiver and in a manner
which is otherwise not in violation of the discloser's rights; or
(vi) is disclosed pursuant to the order or requirement of a
court, administrative agency, or other governmental body; provided, that the
receiver shall provide reasonable advance notice thereof to enable the
discloser to seek a protective order or otherwise prevent such disclosure.
10. Regulatory Approvals.
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CaRDiMa shall be responsible for, and shall bear the expenses of,
obtaining all necessary regulatory approvals for CaRDiMa Products. Target shall
be responsible for, and shall bear the expenses of, obtaining all necessary
regulatory approvals for Target Products.
11. Accountants.
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CaRDiMa shall retain as its independent accountants for the three (3)
year period following the Effective Date the firm of Ernst & Young for
purposes of performing audits of the CaRDiMa financial statements.
12. Labeling.
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CaRDiMa and Target agree to label CaRDiMa Products and Target Products,
respectively, that are commercially distributed in any country in a manner that
is consistent with the provisions of this Agreement and the laws of the country
in which such products are distributed.
13. Trademarks.
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Neither party grants any license, right or interest relating to any
trademarks, service marks, names and logos that it may own or adopt from time to
time, to the other party, except as set forth in Section 3.3.2 of the
Intercompany Agreement between the parties of even date herewith.
14. Term, Termination.
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14.1 Term. This Agreement shall become effective as of the Effective
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Date and shall continue in force, unless earlier terminated in accordance with
this Section 14, until the expiration or invalidation of all claims of patents
within the Target Technology and/or the CaRDiMa Technology.
14.2 Termination for Cause. This Agreement may be terminated by either
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party upon written notice if the other party (i) breaches any material term or
condition of this Agreement and fails to remedy the breach within thirty (30)
days after being given written notice thereof, or (ii) is dissolved or
liquidated or the assets and/or business of such party shall be placed in the
hands of a trustee, receiver or assignee for the benefit of creditors, unless
such act is reversed within 90 days. In addition, this Agreement may be
terminated upon written notice (a) by CaRDiMa, if Target ceases to be actively
engaged in business for a period of twelve (12) months, or (b) by Target, if
CaRDiMa ceases to be actively engaged in business in the CaRDiMa Field and the
Cardiology Field for a period of twelve (12) months.
14.3 Return of Materials. Within ten (10) days after the expiration or
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termination of this Agreement, each party shall return any Confidential
Information received from the other party.
14.4 Effect of Termination. The provisions of Sections 1, 3, 6, 7, 8,
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9, 13, 14.3 and 15 shall survive the termination or expiration of this
Agreement.
15. Target Covenant.
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In the event that Target Patent Rights include any rights obtained by
Target from third-party licensors ("In-Licensed Rights") and, during the term of
this Agreement, Target determines to let any of such In-Licensed Rights
terminate or expire, Target shall promptly notify CaRDiMa of any such decision
and shall use its reasonable efforts to assist CaRDiMa, at CaRDiMa's request and
expense, in negotiations with the licensor of such In-Licensed Rights with the
objective of obtaining for CaRDiMa the ability to use such In-Licensed Rights on
terms substantially similar to those
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granted to Target. In the event that negotiations to provide for such direct
relationship between CaRDiMa and the licensor are not successful, Target
shall, to the extent permissible under the terms of the license, assign the In-
Licensed Rights to CaRDiMa so long as Target can be reasonably assured that it
shall have no ongoing obligations or liability after the date of such
assignment whether by operation of law, indemnity or otherwise. Nothing
contained in this Section 15 shall be construed to impose upon Target any
obligation to refrain from terminating any such third -party license agreement
or take any particular steps, other than as described above, to make such In-
Licensed Rights available to CaRDiMa.
16. Miscellaneous.
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16.1 Governing Law. This Agreement shall be governed by and
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interpreted under the laws of the State of California, without regard to
conflict of laws provisions.
16.2 Arbitration. Any dispute or claim arising out of or in connection
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with this Agreement will be finally settled by binding arbitration in San Jose,
California, under the Rules of Arbitration of the American Arbitration
Association, by one arbitrator appointed in accordance with said rules. Judgment
on the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. Notwithstanding the foregoing, the parties may apply to
any court of competent jurisdiction for preliminary or interim equitable relief
without breach of this arbitration provision.
16.3 Solicitation. After the Effective Date, CaRDiMa may conduct
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employment negotiations with Target employees on a list finalized and approved
by Target as of the Effective Date. Except as set forth in the preceding
sentence, during the term of this Agreement CaRDiMa shall not solicit employees
of Target to leave Target's employ and commence employment at CaRDiMa, and
Target shall not solicit employees of CaRDiMa to leave CaRDiMa' employ and
commence employment at Target.
16.4 Non-Competition.
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(a) Target hereby covenants and agrees that it will not, without
approval by CaRDiMa:
(i) Conduct material research or development efforts for
products in the CaRDiMa Field;
(ii) Make or sell products in the CaRDiMa Field; or
(iii) Acquire any other entity the majority of whose revenues or
research and development expenses are derived from or
devoted to products in the CaRDiMa Field;
(b) CaRDiMa hereby covenants and agrees that it will not, without
approval by Target:
(i) Conduct material research or development efforts for
products in the Target Field;
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(ii) Make or sell products in the Target Field;
(iii) Acquire any other entity the majority of whose revenues or
research and development expenses are derived from or
devoted to products in the Target Field;
(iv) Sell products, other than products utilizing Target
Technology, in the field described in subsection (b) of the
definition of CaRDiMa Field, without first notifying Target
of the decision to sell such products and negotiating in
good faith with Target for at least 90 days prior to
negotiating with any third party (or initiating direct sales
to consumers) with the objective of granting to Target
distribution rights with respect to such products; or
(v) Sell products utilizing Target Technology in the field
described in subsection (b) of the definition of CaRDiMa
Field, without
(A) if selling to a third party distributor, first
notifying Target of the decision to sell such
products and the terms and conditions under which
such products are to be sold (the "Terms") and
offering Target the opportunity to accept or
reject the Terms within 30 days from the date of
receipt of such notice, after which time if Target
shall reject or not accept the Terms, CaRDiMa
shall be free to offer the Terms to third parties;
provided, however, that CaRDiMa shall not offer
more favorable Terms to any such third party
without first following Target's notice and
refusal rights set forth herein; or
(B) if selling directly to the consumer, paying to
Target a fee equal to [***] of the difference
between the actual selling price for such product
and CaRDiMa's fully burdened cost of producing and
selling such product (calculated in CaRDiMa's
standard manner of calculating such fully burdened
costs) with such payment to be made within 30 days
after the end of each month in which such sales
occur.
16.5 Force Majeure. If the performance of this Agreement or any
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obligations hereunder is prevented, restricted or interfered with by reason of
fire or other casualty or accident, strikes or labor disputes, war or other
violence, any law, order, proclamation, ordinance, demand or requirement of any
government agency, or any other act or condition beyond the control of the
parties hereto, the party so affected, upon giving prompt notice to the other
party, shall be excused from such performance (other than the obligation to pay
money) during such prevention, restriction or interference.
16.6 Assignment. Each party hereto may assign its rights or
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obligations under this Agreement without the prior written consent of the other
party, provided that prior to the effective date of such assignment the assignee
enters into an agreement with the nonassigning party which contains terms and
conditions identical to the terms and conditions of this Agreement.
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16.7 Notices. All notices, requests, consents and other
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communications under this Agreement shall be in writing and (i) delivered by
hand, or (ii) mailed by first class registered mail, return receipt requested,
postage prepaid, or (iii) sent via facsimile transmission, or (iv) shipped
through a private courier system designated for overnight delivery, and shall
be addressed as follows:
To Target:
President and CEO
47201 Lakeview Boulevard
Fremont, CA 94538-5210
(510) 440-7700 - phone
(510) 440-7630 - fax
To CaRDiMa:
President and CEO
47201 Lakeview Boulevard
Fremont, CA 94538-5210
(510) 440-7700 - phone
(510) 440-7630 - fax
or to such other address or person as the parties may from time to time
designate by written notice delivered as specified above to the other. Notices
shall be effective upon tender, if delivered by hand, three (3) days after
mailing if mailed by first class mail, one (1) day after mailing if sent by
private overnight courier, or on the day of transmission if sent by facsimile.
16.8 Severability. In the event that any provision of this Agreement
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becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
16.9 Waiver. The failure of either party to enforce at any time the
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provisions of this Agreement shall in no way be constituted to be a present or
future waiver of such provisions, and shall not in any way affect the right of
either party to enforce each and every such provision thereafter.
16.10 Independent Contractors. The relationship of Target and CaRDiMa
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hereunder is that of independent contractors, and nothing herein shall be
construed to (i) give either party the right to direct or control the day-to-day
activities of the other, or (ii) constitute the parties as partners, joint
venturers, co-owners or otherwise as participants in a joint or common
undertaking.
16.11 Entire Agreement. The terms and conditions herein contained
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constitute the entire agreement between the parties and supersede all previous
agreements and understandings, whether oral or written, between the parties
hereto with respect to the subject matter hereof, and no agreement or
understanding varying or extending the same shall be binding upon either party
hereto unless in a written document signed by both parties.
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16.12 Section Headings. The section headings contained in this
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Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
16.13 Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
16.14 Public Announcements. Neither party shall make any initial
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public disclosure or publicity release pertaining to the existence of this
Agreement, the subject matter hereof, or any of the transactions related hereto
without the prior consent of the other party; provided, however, that upon
notice to the other party's legal counsel, each party shall be permitted to make
such disclosures to the public or to governmental agencies as its legal counsel
shall deem necessary to comply with any applicable laws. Without limiting the
foregoing, the parties currently anticipate that initial public disclosure by
the parties of this Agreement and the transactions related hereto shall take
place on May 12, 1993.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by duly authorized officers or representatives as of the date first above
written.
TARGET THERAPEUTICS, INC. CARDIMA, INC.
By: /s/ TARGET THERAPEUTICS, INC. By: /s/ CARDIMA, INC.
------------------------------- -------------------------------
Name: Name:
---------------------------- -----------------------------
Title: Title:
--------------------------- ----------------------------
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<PAGE>
EXHIBIT 10.7
STANDARD FORM LEASE
(INDUSTRIAL MULTI-TENANT; NET)
This Lease dated April 25, 1994 (this "Lease") is entered into by and between
State of California Public Employees' Retirement System ("Landlord") and
Cardima, Inc., a California corporation ("Tenant").
ARTICLE I.
BASIC LEASE PROVISIONS
Each reference in this Lease to the "Basic Lease Provisions" shall mean and
refer to the following terms, the application of which shall be governed by the
provisions in the remaining Articles of this Lease:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Address of Landlord: c/o O'Donnell Property Services, Inc. with a copy to:
1737 North First Street, Suite 580 2201 Dupont Drive, Suite 100
San Jose, CA 95112 Irvine, CA 92715
2. Promises Address: 47266 Benicia Street
Fremont, CA 94538
3. Address of Tenant:
(a) Notices: 47266 Benicia Street Fremont. CA 94538
(b) Billing: 47266 Benicia Street Fremont, CA 94538
4. Tenant's Trade Name: N/A
5. Tenant's Contact: Gabriel B. Vegh Telephone (510) 440-7709
6. Premises Square Footage: Approximately 44,810 Square Feet
Building Square Footage: Approximately 44,810 Square Feet
Project Square Footage: Approximately 430,104 Square Feet
7. Anticipated Commencement Date: August 1, 1994
8. Term: Five (5) years and Zero (0) months
9. Initial Monthly Rent: $17,027.80/month
(subject to adjustment per Exhibit E)
10. Security Deposit: $30,022.70
11. Permitted Uses: Develop, manufacture, store, and market and distribute
medical diagnostic and therapeutic devices and related
product and conduct stated research and office activities.
12. Brokers: J.R. Parrish (Landlord); CS Madison (Tenant)
13. Landlord's Architect: N/A
14. Guarantor: N/A
15. Vehicle Parking Spaces: One hundred seventy-nine (179) unassigned
16. Additional Insureds: THE STATE OF CALIFORNIA
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
ALEX. BROWN KLEINWORT BENSON REALTY ADVISORS
CORPORATION O'DONNELL PROPERTY SERVICES, INC.
17. Tenant's Liability Insurance Limits: $2,000,000
18. Tenant's Share: See Section 7.2 and Exhibit L
Exhibits:
A Description of Premises G Rules and Regulations
B Project Site Plan H Environmental Questionnaire
C Work Letter I Landlord's Disclosures
D Commencement Date Memorandum J [INTENTIONALLY OMITTED]
E Adjustments to Monthly Rent K [INTENTIONALLY OMITTED]
F [INTENTIONALLY OMITTED] L Calculation of Tenant's Share
Riders:
Rider Number One
Rider Number Two
</TABLE>
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ARTICLE II
DEFINITIONS
2.1. Certain Definitions. The capitalized terms set forth below, unless the
context clearly requires otherwise, shall have the following meanings in
this Lease:
"Additional Rent" means any and all sums (whether or not specifically
called "Additional Rent" in this Lease) other than Monthly Rent which
Tenant is or becomes obligated to pay to Landlord under this Lease. See
also Rent.
"Alterations" means any alterations, decorations, modifications,
additions or improvements made in, on, about, under or contiguous to the
Building or the Premises after the Commencement Date, including, but not
limited to, lighting, HVAC and electrical fixtures, pipes and conduits,
transfer, storage and disposal facilities, partitions, drapery, wall
coverings, shelves, cabinetwork, carpeting and other floor coverings,
ceiling tiles, fixtures and carpentry installations.
"Applicable Laws" means the laws, rules, regulations, ordinances,
restrictions, and practices described in Section 5.2.
"Applicable Rate" means the greater of ten percent (10%) per annum or
five percent (5%) in excess of the discount rate of the Federal Reserve
Bank of San Francisco in effect on the twenty-fifth (25/th/) day of the
calendar month immediately prior to the event giving rise to the
Applicable Rate Imposition; provided, however, the Applicable Rate shall
in no event exceed the maximum interest rate permitted to be charged by
applicable law.
"Broker" means the person or entity identified in Item 12 of the Basic
Lease Provisions.
"Building" means that certain building within which the Premises are
located.
"Casualty" is defined in Section 12.1.
"City" means the city in which the Premises are located.
"Commencement Date" means the commencement date of the term, described in
Section 3.2.
"Common Area" means all areas and facilities within the Project exclusive
of the Premises and other portions of the Project leased (or to be
leased) exclusively to other tenants. The Common Area includes, but is
not limited to, parking areas, access and perimeter roads, sidewalks,
landscaped areas and similar areas and facilities. Tenant's use of the
Common Area, and its rights and obligations with respect thereto, are
more particularly described in Article X.
"County" means the county in which the Premises are located.
"Event of Default" means the Tenant defaults described in Section 15.1.
"Guarantor" means the person(s) or entity identified in item 14 of the
Basic Lease Provisions, if any.
"HVAC" means the heating, ventilating and air conditioning system serving
the Building.
"Hazardous Materials" is defined in Section 6.1.
"Landlord's Agents" means Landlord's authorized agents, representatives,
property managers (whether as agents or independent contractors),
consultants, contractors, partners, subsidiaries, affiliates, directors,
officers and employees, including without limitation the Additional
Insureds named in Item 16 of the Basic Lease Provisions.
"Landlord's Architect" means the architect or architectural firm from
time to time designated by Landlord to perform the function of Landlord's
Architect set forth in this Lease. Landlord's Architect initially shall
be the architect or architectural firm designated in Item 13 of the Basic
Lease Provisions.
"Lease" means this instrument together with all exhibits,
amendments, addends and riders attached hereto and made a part hereof.
"Monthly Rent" means the monthly rental which Tenant is to pay to
Landlord pursuant to Section 41.1, as the same may be adjusted from time
to time as set forth in this Lease. See also Rent.
"Mortgage" means any mortgage, deed of trust, or similar lien on or
covering the Project or any part thereof.
2
<PAGE>
"Mortgagee" means any mortgagee of a mortgage, beneficiary of a deed of
trust or lender having a lien on or covering the Project or any part
thereof.
"Notice" means each and every notice, communication, request, demand,
reply or advice, or duplicate thereof, in this Lease provided or
permitted to be given, made or accepted by either party to any other
party, which shall be in writing and given in accordance with the
provisions of Section 21.6.
"Operating Expenses" means, collectively, Project Costs and Real Property
Taxes.
"Plans" means the final working drawings for the construction of the
Tenant Improvements to be prepared and approved as set forth in the Work
Letter.
"Premises" means the premises shown in Exhibit A, and all areas
---------
appurtenant thereto, if any, for the exclusive use of Tenant, as shown in
Exhibit A. The Premises are located within and constitute a portion of
---------
the Building at the address set forth in Item 2 of the Basic Lease
Provisions.
"Premises Square Footage" means the approximate floor area of the
Premises. The Premises Square footage as of the execution of this Lease
is set forth in Item 6 of the Basic Lease Provisions.
"Project" means that certain real property, and all improvements thereon,
including the Building and other buildings, if any, located within the
boundaries of such property, shown on the Project Site Plan.
"Project Costs" is defined in Section 7.3.
"Project Site Plan" means Exhibit B.
---------
"Real Property Taxes" is defined in Section 7.4.
"Rent" means Monthly Rent and Additional Rent, collectively.
"Rules and Regulations" means the rules and regulations attached hereto
as Exhibit G and any modifications thereto promulgated by Landlord or
---------
Landlord's Agents from time to time.
"Security Deposit" means the amount set forth in Item 10 of the Basic
Lease Provisions, which shall be paid to Landlord by Tenant pursuant to
Section 4.6.
"Substantial Completion" and "substantially completed" means the Tenant
Improvements, or repair of the Premises following a Casualty, have been
fully completed, except for minor details of construction, mechanical
adjustments or decoration the absence or completion of which do not
materially interfere with Tenant's use and enjoyment of the Premises and
which may reasonably be completed within thirty (30) days (items normally
referred to as "punch list" items).
"Tenant Delays" means (i) any and all delays in the construction of the
Tenant Improvements due to the fault of the Tenant, as defined and
specified in the Work Letter, and (ii) Tenant's failure to deliver to
Landlord prior to the Anticipated Commencement Date, executed copies of
policies of insurance or certificates thereof as required under Section
11.8.
"Tenant Improvements" means those certain improvements, if any, to
be constructed on the Premises as provided in Article XX and in the Work
Letter.
"Tenant's Agents" means Tenant's agents, representatives, consultants,
contractors, affiliates, subsidiaries, officers, directors, employees,
subtenants, guests and invitees.
"Tenant's Personal Property" means Tenant's trade fixtures, furniture,
equipment and other personal property located in or on the Premises.
"Term" means the term of this Lease, as provided in Section 3.2.
"Unavoidable Delay" means any delays which are beyond a party's
reasonable control, including, but not limited to, delays due to
inclement weather, strikes, acts of God, inability to obtain labor or
materials, inability to secure governmental approvals or permits,
governmental restrictions, civil commotion, fire, earthquake, explosion,
flood, hurricane, the elements, or the public enemy, action or
interference of governmental authorities or agents, war, invasion,
insurrection, rebellion, riots, lockouts or any other cause whether
similar or dissimilar to the foregoing which is beyond a party's
reasonable control; provided however, that in no event shall any of the
foregoing ever apply with respect to the payment of any monetary
obligation.
"Work Letter" means the work letter between Landlord and Tenant regarding
the construction of the Tenant Improvements, if any, in the form of
Exhibit C.
---------
3
<PAGE>
2.2. Other Definitions. Terms defined elsewhere in this Lease, unless the
context clearly requires otherwise, shall have the meaning as there
given.
4
<PAGE>
ARTICLE III
PREMISES AND TERM
3.1 Lease of Premises. Subject to and upon the terms and conditions set
forth herein, Landlord hereby leases the Premises to Tenant, and Tenant hereby
leases the Premises from Landlord.
3.2 Term and Commencement. Unless sooner terminated as provided herein,
the Term of this Lease shall be for that period of years and months set forth in
Item 8 of the Basic Lease Provisions, as the same may be extended in accordance
with any option or options to extend the Term granted herein, and shall commence
(the "Commencement Date") on the earlier of (i) the date upon which the City has
approved the Tenant improvements in accordance with its building code, as
evidenced by its written approval thereof in accordance with the building
permits issued for the Tenant Improvements, and Landlord's Architect has
certified in writing that the Tenant Improvements are substantially completed in
accordance with the Plans, provided that Landlord shall deliver to Tenant a
certificate of occupancy (temporary or otherwise) from the City for the Premises
within five (5) business days of such date, or (ii) the date Tenant commences
occupancy of the Premises. See Rider 3.2. When the actual Commencement Date
has occurred, Landlord and Tenant shall execute a Commencement Date Memorandum
in the form shown in Exhibit D. Landlord and Tenant anticipate that the Term
---------
will commence on the "Anticipated Commencement Date" set forth in Item 7 of the
Basic Lease Provisions, but the Anticipated Commencement Date shall in no event
affect the actual Commencement Date, which shall be determined as set forth in
this Section 3.2.
5
<PAGE>
RIDER 3.2: TERM AND COMMENCEMENT
(a) For the purposes of Clause (ii) [formerly clause (iii)] of Section
3.2, "occupancy of the Premises" shall mean occupancy of the Premises for the
conduct of Tenant's business, other than pursuant to Rider 3.2, subparagraph (b)
below.
(b) Notwithstanding any provision of the Lease to the contrary, from
and after the date on which this Lease is mutually executed by Landlord and
Tenant, Tenant shall have the right to use and occupy the ground floor lobby and
the second floor of the Premises for the conduct of Tenant's business, together
with the non-exclusive rights to the parking and other common areas of the
Project, without charge; provided, however, Tenant shall pay for all utilities
consumed by it and further provided that all provisions of this Lease other than
those dealing with Monthly Rent and Additional Rent shall apply during the
period of such use and occupancy. Such occupancy shall not cause the
Commencement Date of the Lease to occur. Tenant shall coordinate its activities
in such portion of the Premises so as to not interfere with Landlord's
construction of the Tenant Improvement pursuant to the Work Letter.
6
<PAGE>
3.3 Early Entry. Tenant and its authorized agents, contractors,
subcontractors and employees shall be granted a license by Landlord to enter
upon the Premises, at Tenant's sole risk and expense, during ordinary business
hours prior to the Commencement Date, for the sole purpose of installing
Tenant's trade fixtures and equipment in the Premises; provided, however, that
(i) the provisions of this Lease, other than with respect to the payment of
Monthly Rent or Additional Rent (except as provided below), shall apply during
such early entry, including, but not limited to, the provisions of Article XI
relating to Tenant's indemnification of Landlord, (ii) prior to any such entry,
Tenant shall pay for and provide evidence of the insurance to be provided by
Tenant pursuant to the provisions of Article XI, (iii) Tenant shall pay all
utility, service and maintenance charges for the Premises attributable to
Tenant's early entry and use of the Premises as reasonably determined by
Landlord, (iv) Tenant shall not unreasonably interfere, delay or hinder
Landlord, its agents, contractors or subcontractors in the construction of the
Tenant Improvements in accordance with the provisions of this Lease, and (v)
Tenant shall not use the Premises for the storage of inventory or otherwise
commence the operation of business during the period of such early entry except
as provided in Rider 3.2. Upon Tenant's breach of any of the foregoing
conditions, Landlord may, in addition to exercising any of its other rights and
remedies set forth herein, revoke such license upon notice to Tenant. Early
entry by Tenant in accordance with this Section 3.3 shall not constitute
occupancy of the Premises for purposes of establishing the Commencement Date.
3.4. Delay in Possession. If for any reason Landlord cannot deliver
possession of the Premises to Tenant with the Tenant Improvements substantially
completed on or before the Anticipated Commencement Date, Landlord shall not be
subject to any liability therefor, and such failure shall not affect the
validity of this Lease or the obligations of Tenant hereunder, but in such case,
Tenant shall not be obligated to pay Monthly Rent or Additional Rent other than
as provided in Section 3.3 and Section 3.5 until the Commencement Date has
occurred. If the Commencement Date has not occurred within ninety (90) days
following the Anticipated Commencement Date plus periods attributable to Tenant
Delays or Unavoidable Delay or one hundred fifty (150) days after the
anticipated Commencement Date plus periods attributable to Tenant Delays (but
without regard to Unavoidable Delays), Tenant may, at its option, by Notice to
Landlord within ten (10) days thereafter, terminate this Lease, in which event
the parties shall be discharged from all further obligations hereunder;
provided, however, if Tenant fails to give such notice to Landlord within such
ten-day period, Tenant shall no longer have the right to terminate this Lease
under this Section 3.4. Tenant understands that, notwithstanding anything to
the contrary contained herein, Landlord shall have no obligation to deliver
possession the Premises to Tenant for so long as Tenant fails to deliver to
Landlord executed copies of policies of insurance or certificates thereof as
required under Section 11.8.
3.5 Tenant Delays. The Commencement Date shall not be delayed or
postponed due to Tenant Delays, and the Term, Tenant's obligations to pay Rent
and all of Tenant's other obligations under this Lease shall commence upon the
date which would have been the Commencement Date but for Tenant Delays.
3.6 Condition of Premises. Landlord's sole construction obligations, if
any, regarding Tenant improvements for the Premises are set forth in Article XX
and the Work Letter and Rider 3.6. The taking of possession or use of the
Premises by Tenant for any purpose other than as provided in Section 3.3 or
Rider 3.2 shall conclusively establish that Tenant has inspected the Premises
and accepts them as being in good and sanitary order, condition and repair and
that the Tenant Improvements have been constructed in accordance with the Plans;
provided, however, Tenant shall have a period of thirty (30) days after taking
possession of the Premises (other than as provided in Section 3.3 or Rider 3.2)
in which to notify Landlord in writing of any construction deficiencies or
defects and any uncompleted punch list items (the punch list shall be limited to
items required to be accomplished by Landlord under the Work Letter) and, except
as hereafter provided, Landlord will repair, replace or complete at its expense
all items referenced in such notice within thirty (30) days after receipt of
such notice, subject to Unavoidable Delay, or as soon thereafter as Landlord,
acting in good faith and with diligence, can repair, replace or complete the
same. If Landlord reasonably contends that a particular item in such notice is
not justified, the parties will refer the issue to Landlord's Architect for
resolution. Landlord's Architect's determination shall be final and binding
upon the parties. Nothing in this Section 3.6 shall limit or expand Landlord's
maintenance and repair obligations set forth in Article IX. See Rider 3.6.
7
<PAGE>
RIDER 3.6 CONDITION OF PREMISES:
On the Commencement Date, Landlord shall deliver the Premises to
Tenant clean and free of debris, with all utility systems, HVAC, loading docks,
exterior doors and locks, and fixtures in good operating order, condition and
repair. Landlord warrants that the utility systems and fixtures shall remain in
good operating condition and repair for a period of 120 days following the
Commencement Date and that the roof shall be in good condition and repair and
watertight for a period of 270 days following the Commencement Date. If the
foregoing warranty is violated, then Landlord, upon written notice from Tenant,
shall promptly rectify the violation at Landlord's sole cost and expense.
8
<PAGE>
3.7 No Representations. Tenant acknowledges that neither Landlord nor any
of Landlord's Agents has made any representations or warranties as to the
suitability or fitness of the Premises for the conduct of Tenant's business,
including, but not limited to, any representations or warranties regarding
zoning or other land use matters, or for any other purpose, and that neither
Landlord nor any of Landlord's Agents has agreed to undertake any alterations or
additions or construct any Tenant Improvements to the Premises except as
expressly provided in this Lease.
9
<PAGE>
ARTICLE IV
RENT AND ADJUSTMENTS
4.1 Monthly Rent. From and after the Commencement Date, Tenant shall pay
to the Landlord, for each calendar month of the Term, the Monthly Rent set forth
in Item 9 of the Basic Lease Provisions, as the same may be adjusted from time
to time as provided in Section 4.2. Monthly Rent shall be due and payable to
Landlord in lawful money of the United States, in advance, on the first (1st)
day of each calendar month of the Term, without abatement, deduction, claim or
offset, and without prior notice, invoice or demand, at Landlord's address set
forth in Item 1 of the Basic Lease Provisions or at such place as Landlord may
from time to time designate. Tenant's payment of Monthly Rent for the first
(1st) month of the Term shall be delivered to Landlord concurrently with
Tenant's execution of this Lease.
4.2 Adjustments. Monthly Rent shall be adjusted from time to time as
provided in Exhibit E.
---------
4.3 Additional Rent. All Additional Rent shall be due and payable to
Landlord in lawful money of the United States, at Landlord's address set forth
in Item 1 of the Basic Lease Provisions or at such other place as Landlord may
from time to time designate, without abatement, deduction, claim or offset,
within ten (10) days of receipt of Landlord's invoice or statement for same, or
if this Lease provides another time for the payment of certain items of
Additional Rent, then at such other time.
4.4 Prorations. If the Commencement Date is not the first (1st) day of a
month, or if the expiration of the Term of this Lease is not the last day of a
month, a prorated installment of Monthly Rent based on a thirty (30) day month
shall be paid for the fractional month during which the Term commences or
terminates. All items of Additional Rent shall likewise be prorated for any
fractional period at the beginning or expiration of the Term.
4.5 Late Payment Charges. Tenant acknowledges that late payment by Tenant
to Landlord of Rent under this Lease will caused Landlord to incur costs not
contemplated by this Lease, the exact amount of which is extremely difficult or
impracticable to determine. Such costs include, but are not limited to,
processing and accounting charges, late charges that may be imposed on Landlord
by the terms of any Mortgage, and late charges and penalties that may be imposed
due to late payment of Real Property Taxes. Therefor, if any installment of
Monthly Rent or any payment of Additional Rent due from Tenant is not received
by landlord in good funds by the fifth (5th) calendar day from the applicable
due date, Tenant shall pay to Landlord an additional sum equal to five percent
(5%) of the amount overdue as a late charge for every month or portion thereof
that such amount remains unpaid. The parties acknowledge that this late charge
represents a fair and reasonable estimate of the costs that Landlord will incur
by reason of the late payment by Tenant. Acceptance of late Rent and late
charge therefor shall not prevent Landlord from exercising any of the other
rights and remedies available to Landlord for any other event of default under
this Lease.
4.6 Security Deposit. Tenant has deposited with Landlord the sum set
forth in Item 10 of the Basic Lease Provisions as a Security Deposit for the
full and faithful performance of every provision of this Lease to be performed
by Tenant. Upon an Event of Default, and whether or not Landlord is informed of
or has knowledge of the Event of Default, the Security Deposit (if not already
applied as hereinabove provided) shall be deemed to be automatically applied,
without waiver of any rights Landlord may have under this Lease or at law or in
equity as a result of an Event of Default, to the payment of any Rent not paid
when due, the repair of damage to the Premises caused by Tenant or for which
Tenant is responsible under the terms of this Lease or the payment of any other
amount which Landlord may spend or become obligated to spend by reason of an
Event of Default, or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of an Event of Default, to the full extent
permitted by law. If any portion of the Security Deposit is so applied, Tenant
shall, within ten (10) days after written demand therefor, deposit cash with
Landlord in an amount sufficient to restore the Security Deposit to its original
amount. Landlord shall not be required to keep the Security Deposit separate
from its general funds. The unused portion of the Security Deposit, if any,
shall be returned to Tenant within thirty (30) days of the expiration of this
Lease or any termination of this Lease not resulting from an Event of Default,
so long as Tenant has vacated the Premises in the manner required by this Lease
and paid all sums required to be paid under this
10
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Lease, provided however that Landlord may retain a portion of the Security
Deposit equal to the reasonably estimated amount of unpaid Additional Rent that
is Payable by Tenant for periods prior to the expiration of the Term until such
time as any amounts of Additional Rent due from Tenant have been determined and
paid in full but not longer than 90 days after expiration of the Term. Tenant
hereby waives the provisions of Section 1950.7(c) of the California Civil Code
and any present or future laws otherwise governing the return of the Security
Deposit to Tenant to the extent of reasonably anticipated Additional Rent
retained by Landlord pursuant to the previous sentence.
ARTICLE V
USE
5.1 Tenant's Use. Tenant shall use the Premises solely for the purposes
set forth in item 11 of the Basic Lease Provisions and shall use the Premises
for no other purpose. Tenant's use of the Premises shall be subject to all of
the terms and conditions of this Lease, including, but not limited to, all the
provisions of this Article V. Tenant, at Tenant's sole cost and expense, shall
procure, maintain and make available for Landlord's inspection throughout the
Term, all governmental approvals, licenses and permits required for the proper
and lawful conduct of Tenant's permitted use of the Premises. At Landlord's
request, Tenant shall deliver copies of all such approvals, licenses and permits
to Landlord.
5.2 Compliance With Applicable Laws. Throughout the Term, Tenant, at
Tenant's sole cost and expense, shall comply with, and shall not use the
Premises, Building or Common Area, or suffer or permit anything to be done in or
about the same which will in any way conflict with, (i) any and all present and
future laws, statutes, zoning restrictions, ordinances, orders, regulations,
directions, rules and requirements of all governmental authorities having
jurisdiction over all or any part of the Premises (including, but not limited
to, state, municipal, county and federal governments and their departments,
bureaus, boards and officials) pertaining to the use or occupancy of, or
applicable to, the Premises or privileges appurtenant to or in connection with
the enjoyment of the Premises, (ii) any and all applicable federal, state and
local laws, regulations or ordinances pertaining to air and water quality,
Hazardous Materials (as defined in Section 6.1), waste disposal, air emissions
and other environmental or health and safety matters, zoning, land use and
utility availability, which impose any duty upon Tenant directly or with respect
to the use or occupation of the Premises or any portion thereof, (iii) the
requirements of the Board of Fire Underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises or any portion thereof, (iv) any covenants, conditions,
easements or restrictions, including but not limited to the Restrictions, now
affecting or encumbering the project or any portion thereof, regardless of when
they become effective, (v) the Rules and Regulations, and (vi) good business
practices (collectively, (i) through (vi) above are hereinafter referred to as
"Applicable Laws"). Tenant shall not commit any waste of the Premises, Building
or Project, or any public or private nuisance or any other act or thing which
might or would disturb the quiet enjoyment of any other tenant of Landlord or
any occupant of nearby property. Tenant shall not place or permit to be placed
any loads upon the floors, walls or ceilings in excess of the maximum designed
load specified by Landlord or which might damage the Premises or the Building,
or place or permit to be placed any harmful liquids in the drainage systems, and
Tenant shall not dump or store, or permit to be dumped or stored, any inventory,
waste materials, refuse or other materials or allow any such materials to remain
outside the Building proper, except in designated enclosed trash areas. Tenant
shall not conduct or permit any auctions, sheriff's sales or other like
activities at the Project or any portion thereof. See Rider 5.2.
5.3 Restrictions. Tenant agrees that it will subordinate this Lease to
any other covenants, conditions and restrictions and any reciprocal easement
agreements or any similar agreements which Landlord may hereafter record against
the Premises and to any amendment or modification to any of the existing
Restrictions, provided that such subordination does not unreasonably interfere
with Tenant's use and enjoyment of the Premises. See Rider 5.3.
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RIDER 4.6 SECURITY DEPOSIT:
Pursuant to Section 21.20, certain obligations of Tenant under this
Lease are guaranteed by Guarantor. As provided in the Lease Guaranty Agreement
attached as Lease Rider Number Three and subject to the terms hereof, the
obligations of Guarantor shall terminate, for among other reasons, upon the
delivery to Landlord of a certificate certifying that Tenant has received
additional equity capital in the amount of not less than $6,750,000 and a
standby letter of credit, as further described in the Lease Guaranty Agreement.
Such standby letter of credit if and when delivered to Landlord, shall
constitute an additional security deposit under this Lease, subject to the
provisions of this Section 4.6.
RIDER 5.2 COMPLIANCE WITH LAW:
Landlord represents and warrants to Tenant that, to Landlord's
knowledge, the Premises complies with all Applicable Laws existing as of the
Commencement Date. Landlord further represents and warrants that Landlord has
received no notice from any governmental authority claiming that the Project (or
any portion thereof) fails to comply with any Applicable Law, commencing an
investigation to determine if the Project (or any portion thereof) may violate
any Applicable Law, or otherwise requiring any work to be done on or about the
Project. If any of the foregoing warranties is violated or if any structural
alteration or improvement is required by any governmental authority to be made
to the Premises in order to bring it into compliance with any Applicable Law now
in effect, then Landlord shall, at its sole cost, promptly upon notice from
Tenant, rectify such violation or effect such structural alteration or
improvement to the extent required by applicable governmental authorities.
Notwithstanding any provision of this Lease to the contrary, Tenant shall not
(a) be obligated to effect, or to reimburse Landlord for, any alteration
required by Applicable Law to be made to the Premises, unless and to the extent
such alteration is required solely because of the particular use of the Premises
being made by Tenant (as opposed to use of the Premises by tenants in general);
or (b) be liable, under any circumstance, for violations or alleged violations
of law which were otherwise not caused by Tenant or Tenant's Agents.
RIDER 5.3 RESTRICTIONS:
And provided, further, that such documents shall provide that no
violation of any restriction, and no foreclosure or other action thereunder
shall terminate Tenant's rights under the Lease. Notwithstanding the foregoing,
Tenant shall have no obligation to comply with or observe any modification to or
amendment of any Restrictions existing at the date of this Lease or any new
Restrictions that may be imposed after the date of this Lease to the extent such
modification, amendment or new Restrictions impose any financial obligation on
Tenant, unreasonably increase Tenant's duties or obligations thereunder or
unreasonably interfere with Tenant's use and enjoyment of the Premises and
Common Areas.
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5.4 Landlord's Right of Entry. Landlord and Landlord's Agents shall have
the right to enter the Premises at all reasonable times during Tenant's business
hours upon reasonable notice to Tenant (24 or more hours being deemed
reasonable), except for emergencies in which case no notice shall be required,
to inspect the Premises, to take samples and conduct environmental
investigations, to post notices of nonresponsibility and similar notices and
signs indicating the availability of the Premises for sale, to show the Premises
to interested parties such as prospective lenders and purchasers, to make
necessary Alternations or maintenance and repairs, to perform Tenant's
obligations as permitted herein when Tenant has failed to do so and, at any
reasonable time after one hundred eighty (180) days prior to the expiration of
the Term, to place upon the Premises reasonable signs indicating the
availability of the Premises for lease and to show the Premises to prospective
tenants, all without being deemed to have caused an eviction of Tenant and
without any liability to Tenant or abatement of Rent. The above rights are
subject to reasonable security regulations of Tenant (including, without
limitation, those pertaining to Tenant's trade secrets and clean-room
operations) and in exercising its rights set forth herein. Landlord shall
endeavor to cause the least possible interference with Tenant's business.
Landlord shall at all times have the right to retain a key which unlocks all of
the doors in the Premises, excluding Tenant's vaults and safes, and Landlord and
Landlord's Agents shall have the right to use any and all means which Landlord
may deem proper to open the doors Landlord's Agents shall not under any
circumstances be deemed to be a forcible or unlawful entry into, or a detainer
of, the Premises, or an eviction of Tenant from the Premises. Except during the
last six (6) months of the Term, Tenant may rightfully refuse access to the
Premises to any person known or suspected by Tenant to be a competitor of
Tenant.
ARTICLE VI
HAZARDOUS MATERIALS
6.1 Definition of Hazardous Materials. For purposes of this Lease, the
term "Hazardous Materials" includes (i) any "hazardous materials" as defined in
Section 25501(k) of the California Health and Safety Code unless Tenant
establishes, to the satisfaction of Landlord, that because of the quantity,
concentration, or physical or chemical characteristics, such substance or matter
does not pose a present or potential hazard to human health and safety or to the
environment, (ii) any other substance or matter which results in liability to
any person or entity from exposure to such substance or matter under any
statutory or common law theory, and (iii) any substance or matter which is in
excess of relevant and appropriate levels set forth in any applicable federal,
state or local law or regulation pertaining to any hazardous or toxic substance,
material or waste, or for which any applicable federal, state or local agency
orders or otherwise requires removal, treatment or remediation.
6.2 Use of Hazardous Materials. Tenant shall not cause or permit any
Hazardous Materials to be brought upon, stored, used, generated, released into
the environment or disposed of on, under, from or about the Premises (which for
purposes of this Article VI shall include, but is not limited to, subsurface
soil and ground water), by Tenant or Tenant's Agents without the prior written
consent of Landlord. Landlord may, in its reasonable discretion, place such
conditions as Landlord deems appropriate with respect to such Hazardous
Materials, and may further require that Tenant demonstrates to Landlord that
such Hazardous Materials are necessary or useful to Tenant's business and will
be generated, stored, used and disposed of in a manner that complies with all
Applicable Laws regulating such Hazardous Materials and with good business
practices. Tenant understands that Landlord may utilize an environmental
consultant to assist in determining conditions of approval and monitoring in
connection with the presence, storage, generation or use of Hazardous Materials
on or about the Premises by Tenant, and Tenant agrees that any costs reasonably
incurred by landlord in connection with any such environmental consultant's
services shall be reimbursed by Tenant to Landlord as Additional Rent upon
demand. See Rider 6.2.
6.3 Environmental Questionnaire; Disclosure. Prior to the execution of
this Lease, Tenant shall complete, execute and deliver to Landlord an
Environmental Questionnaire and Disclosure Statement (the "Environmental
Questionnaire") in the form of Exhibit H, and Tenant shall certify to Landlord
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all information contained in the Environmental Questionnaire as true and correct
to the best of Tenant's knowledge and belief. The
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completed Environmental Questionnaire shall be deemed incorporated into this
Lease for all purposes, and Landlord shall be entitled to rely fully on the
information contained therein. On each anniversary of the Commencement Date
(each such date is hereinafter referred to as a "Disclosure Date"), until and
including the first Disclosure Date occurring after the expiration or sooner
termination of this Lease, Tenant shall disclose to Landlord in writing the
names and amounts of all Hazardous Materials, or any combination thereof, which
were stored, generated, used or disposed of on, under or about the Premises for
the twelve-month period prior to each Disclosure Date, and which Tenant intends
to store, generate, use or dispose of on, under or about the Premises through
the next Disclosure Date. At Landlord's option, Tenant's disclosure obligations
under this Section 6.3 shall include a requirement that Tenant update, execute
and deliver to Landlord the Environmental Questionnaire, as the same may be
modified by Landlord from time to time. In addition to the foregoing, Tenant
shall promptly notify Landlord of, and shall promptly provide Landlord with
true, correct, complete and legible copies of, all of the following
environmental items relating to Hazardous Materials used by Tenant or the
Premises: reports filed pursuant to any self-reporting requirements; reports
filed pursuant to any Applicable Laws or this Lease; all permit applications,
permits, monitoring reports, workplace exposure and community exposure warnings
or notices, and all other reports, disclosures, plans or documents (even those
which may be characterized as confidential but excluding document for which a
legal evidentiary disclosure privilege applies provided that Tenant complies
with California Health and Safety Code Section 25359.7) relating to water
discharges, air pollution, waste generation or disposal, underground storage
tanks or Hazardous Materials; all orders, reports, notices, listings and
correspondence (even those which may be considered confidential but excluding
document for which a legal evidentiary disclosure privilege applies provided
that Tenant complies with California Health and Safety Code Section 25359.7) of
or concerning the release, investigation, compliance, clean up, remedial and
corrective actions, and abatement of Hazardous Materials whether or not required
by Applicable Laws; and all complaints, pleadings and other legal documents
filed against Tenant related to Tenant's use, handling, storage or disposal of
Hazardous Materials.
6.4 Inspection; Compliance. Landlord and Landlord's Agents shall have the
right, but not the obligation, to inspect, investigate, sample and/or monitor
the Premises, including any air, soil, water, groundwater or other sampling, and
any other testing, digging, drilling or analyses, at any time to determine
whether Tenant is complying with the terms of this Article VI, and in connection
therewith, Tenant shall provide Landlord with full access to all relevant
facilities, records and personnel, subject to Section 5.4 and excluding
documents to which a legal evidentiary privilege applies provided that Tenant
complies with California Health and Safety Code Section 25359.7. If Tenant is
not in compliance with any of the provisions of this Article VI, or in the event
of a release of any Hazardous Material on, under, from or about the Premises,
Landlord and Landlord's Agents shall have the right, but not the obligation,
without limitation on any of Landlord's other rights and remedies under this
Lease, to immediately enter upon the Premises and (if such release was caused by
Tenant or Tenant's Agents) to discharge Tenant's obligations under this Article
VI at Tenant's expense, including without limitation the taking of emergency or
long-term remedial action. Landlord and Landlord's Agents shall endeavor to
minimize interference with Tenant's business but shall not be liable for any
such interference. In addition, Landlord, at Tenant's sole costs and expense,
shall have the right, but not the obligation, to join and participate in any
legal proceedings or actions initiated in connection with any claims or causes
of action under, from or about the Premises. All sums reasonably disbursed,
deposited or incurred by Landlord in connection herewith, including, but not
limited to, all costs, expenses and actual attorneys fees, shall, to the extent
incurred as the result of the use, storage, disposal or release by Tenant, be
due and payable by Tenant to Landlord, as an item of Additional Rent, on demand
by Landlord, together with interest thereon at the Applicable Rate from the date
of such demand until paid by Tenant.
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RIDER 6.2 USE OF HAZARDOUS MATERIALS:
Notwithstanding the foregoing, Tenant may, without Landlord's prior
consent, but in compliance with all Applicable Laws, use any ordinary and
customary materials reasonably required to be used by Tenant in the normal
course of Tenant's business permitted on the Premises, so long as such use does
not expose the Premises or neighboring properties to any meaningful risk of
contamination or damage or expose Landlord to any liability therefor. Landlord
acknowledges and agrees that, unless Landlord has a reasonable belief that there
has been (i) a violation of Applicable Laws in connection with the presence,
storage, generation or use of Hazardous Materials on or about the Premises, or
(ii) a spill or release of Hazardous Materials on or about the Premises by
Tenant since Landlord's most recent environmental consultant's inspection of the
Premises, Tenant shall not be required to reimburse Landlord more than once
annually for Landlord's costs incurred in monitoring or inspecting the Premises.
Tenant shall not be required to expend more than $5,000 for each of Landlord's
annual inspections (which inspections shall be reasonable in scope taking into
consideration the use by Tenant of the Premises and the degree of risk that such
use has resulted in contamination thereof), except that Tenant may be required
to expend up to $10,000 for such annual inspection upon the expiration of the
Lease (the foregoing limitations shall not apply with respect to inspections
performed because of clause (i) or (ii) of the preceding sentence). Without
diminishing Tenant's obligations under Section 6.7 hereof, provided that Tenant
shall have obtained Landlord's prior written approval of any investigation to be
performed by Tenant pursuant to Section 6.7, Landlord shall not thereafter seek
reimbursement from Tenant for Landlord's annual inspection in the final year of
the Term as contemplated in the preceding sentence.
6.5 Tenant Obligation. If the presence of any Hazardous Materials on,
under or about the Premises or the Project caused by Tenant or Tenant's Agents
results in (i) injury to any person, (ii) injury to or contamination of the
Premises for the Project, or (iii) injury to or contamination of any real or
personal property wherever situated, Tenant, at its sole cost and expense, shall
promptly take all actions necessary to return the Premises and the Project to
the condition existing prior to the introduction of such Hazardous Materials to
the Premises and Project and to remedy or repair any such injury or
contamination. See Rider 6.5. Without limiting any other rights or remedies of
Landlord under this Lease. Tenant shall pay the cost of any cleanup work
performed on, under or about the Premises, the Building and the Project as
required by this Lease or any Applicable Laws in connection with the removal,
disposal, neutralization or other treatment of such Hazardous Materials caused
by Tenant or Tenant's Agents. If Landlord has reason to believe that Tenant or
Tenant's Agents may have caused the release of a Hazardous Material on, under,
from or about the Premises, then Landlord may require Tenant, at Tenant's sole
cost and expense, to conduct monitoring activities on or about the Premises
satisfactory to Landlord. In its sole and absolute judgment, concerning such
release of Hazardous Materials on, under, from or about the Premises.
Notwithstanding anything in the foregoing, Tenant shall not, without Landlord's
prior written consent, take any remedial action in response to the presence of
any Hazardous Materials on, under or about the Premises, or enter into any
settlement agreement, consent decree or other compromise with any governmental
agency with respect to any Hazardous Materials claims; provided, however,
Landlord's prior written consent shall not be necessary in the event that the
presence of Hazardous Materials on, under or about the Premises (i) poses an
immediate threat to the health, safety or welfare of any individual or (ii) is
of such nature that an immediate remedial response is necessary and it is not
possible to obtain Landlord's consent before taking such action.
6.6 Indemnification. To the fullest extent permitted by law, Tenant
hereby agrees to indemnify, hold harmless, protect and defend (with attorneys
acceptable to Landlord) Landlord and Landlord's Agents, and any successors to
all or any portion of Landlord's interest in the Premises, the Building and the
Project and their directors, officers, partners, employees, authorized agents,
affiliates, representatives and Mortgagees, from and against any and all
liabilities, losses, damages (including, but not limited to, damages for the
loss or restriction on use of rentable or usable space or any amenity of the
premises, the Building and the Project or damages arising from any adverse
impact on marketing of space in the Premises, the Building and the Project
during any required repair, restoration or clean-up of the Premises),
diminution in the value of the Premises, the Building and the Project,
judgments, fines, demands, claims, recoveries, deficiencies, costs and
expenses (including, but not limited to,
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reasonable attorneys' fees, disbursements and court costs and all other
professional or consultant's expenses), whether foreseeable or unforeseeable,
arising directly or indirectly out of the presence, use, generation, storage,
treatment, on or off-site disposal or transportation of Hazardous Materials
on, in or, from, under or about the Premises, the Building and the Project by
Tenant or Tenant's Agents, and specifically including the cost of any required
or necessary repair, restoration, clean-up (including, but not limited to, the
costs of investigation and removal of Hazardous Materials) or detoxification
of the Premises, the Building and the Project and the preparation of any
closure or other detoxification of the Premises, the Building and the Project
and the preparation of any closure or other required plans, whether or not
such action is required or necessary during the Term or after the expiration
of this Lease.
6.7 Tenant's Responsibility at Conclusion of Lease. Promptly upon the
expiration or sooner termination of this Lease, Tenant shall represent to
Landlord in writing that (i) Tenant has made a diligent effort to determine
whether any Hazardous Materials are on, under or about the Premises as a result
of any acts or omissions of Tenant or Tenant's Agents and (ii) to Tenant's
knowledge no such Hazardous Materials exist on, under or about the Premises
other than as specifically identified to Landlord by Tenant in writing. If
Tenant discloses the existence of Hazardous Materials on, under or about the
Premises caused by Tenant or Tenant's Agents, or if Landlord at any time
discovers that Tenant or Tenant's Agents caused the release of a Hazardous
Material on, under, from or about the Premises, Tenant shall, at Landlord's
request, immediately prepare and submit to Landlord within thirty (30) days
after such request a comprehensive plan, subject to Landlord's approval,
specifying the actions to be taken by Tenant to return the Premises to the
condition existing prior to the introduction of such Hazardous Materials. Upon
Landlord's approval of such clean up plan, Tenant shall, at Tenant's sole cost
and expense, without limitation on any rights and remedies of Landlord under
this Lease or at law or in equity, immediately implement such plan and proceed
to clean up such Hazardous Materials in accordance with all Applicable Laws and
as required by such plan and this Lease. See Rider 6.7.
6.8 Landlord's Disclosures. Landlord hereby discloses to Tenant, and
Tenant hereby acknowledges, certain facts relating to Hazardous Materials at the
Project known by Landlord to exist as of the date of this Lease, as more
particularly described in Exhibit I attached hereto. Tenant shall have no
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liability or responsibility with respect to the Hazardous Materials facts
described in Exhibit I. See Rider 6.8.
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RIDER 6.5 TENANT OBLIGATIONS:
If restoration of the Premises or Project to such pre-existing
condition is not possible or reasonably practicable, then Tenant shall
nevertheless take such actions to reduce the level and extent of contamination
to the extent that the governmental regulatory authorities having jurisdiction
thereover shall acknowledge in writing that tenant has complied with the
requirements of Applicable Law.
RIDER 6.7 TENANT'S RESPONSIBILITY AT CONCLUSION OF LEASE
If restoration of the Premises or Project to such pre-existing
condition is not possible or reasonably practicable, then Tenant shall
nevertheless take such actions to reduce the level and extent of contamination
to the extent that the governmental regulatory authorities having jurisdiction
thereover shall acknowledge in writing that Tenant has complied with the
requirements of Applicable Law.
RIDER 6.8 HAZARDOUS MATERIALS:
(a) Landlord represents and warrants to Tenant as follows:
(i) To the best of Landlord's knowledge, except as disclosed in
Exhibit I and without undertaking any investigation other than that which was
- ---------
performed in connection with Landlord's purchase of the Project, no Hazardous
Materials are located in, on, under or about the Premises or Project.
(ii) Landlord has received no notice of (A) any violation or
alleged violation of any Applicable Law pertaining to Hazardous Materials with
respect to the Project; or (B) any pending claims or investigations relating to
the presence of any Hazardous Materials in, on, under or about the Project.
(b) Except for matters that constitute Tenant's obligations under
Article VI of the Lease, Landlord shall, at its sole expense, take all actions
required by applicable governmental authorities to investigate and remediate any
Hazardous Materials which are found or suspect to exist in, on, under or about
the Project. Landlord hereby agrees to indemnify, hold harmless, protect and
defend Tenant (with attorneys acceptable to Tenant), from and against any
remediation costs or expenses imposed upon or incurred by Tenant in connection
with any investigation or remediation of Hazardous Materials present in, on or
under the Premises caused by Landlord or by a party or parties not party to this
Lease, which is required by a governmental agency with jurisdiction, provided
that such indemnification shall be limited to costs imposed upon or incurred by
Tenant to remediate the Premises, including, without limitation, actual
attorneys and consultants fees and costs, and it is not intended to and shall
not include losses, liabilities or expenses of any other type whatsoever,
including, without limitation, losses, liabilities or expenses due to business
interruption, economic or personal injury claims or otherwise.
(c) Except with respect to Hazardous Materials for which Tenant is
responsible pursuant to Article VI of the Lease, in no event shall Tenant be
required to pay (and Landlord shall not seek reimbursement from Tenant as an
item of Project Costs or otherwise) any costs or expenditure incurred in
connection with (i) any testing, investigation, monitoring, analysis or
remediation of any Hazardous Materials; (ii) any violation or alleged violation
of, or the defense of any claim arising under, any Applicable Law pertaining to
Hazardous Materials; (iii) any consequential damages suffered as a result of any
Hazardous Material contamination; or (iv) Landlord's compliance with its
obligations under subsection (b) above.
ARTICLE VII
OPERATING EXPENSES; TAXES; UTILITIES
7.1 Tenant to Bear Tenant's Share of Operating Expenses. Tenant shall pay
to Landlord Tenant's Share (as defined in Section 7.2) of Operating Expenses as
follows: Prior to the Commencement Date and thereafter prior to the
commencement of each of Landlord's fiscal years during the Term, Landlord shall
give Tenant a written estimate of Tenant's Share of Operating Expenses for the
ensuing fiscal year or partial fiscal year, as the case may be. Tenant shall
pay, as an item of Additional Rent, such estimated amount in equal monthly
installments, in advance, on or before the first (1st) day of each calendar
month concurrent with its payment of Monthly Rent. If Landlord has not
furnished its written estimate by the time set forth above, Tenant shall pay
monthly installments of Operating Expenses at the rate established for the prior
fiscal year, if any; provided that
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when the new estimate is delivered to Tenant, Tenant shall at the next monthly
payment date pay Landlord any accrued deficiency based on the new estimate, or
Landlord shall credit any accrued overpayment after the end of each fiscal year
(in no event less than one hundred (120) days after the end of each fiscal year
unless sooner completed by Landlord) Landlord shall furnish Tenant a statement
showing in reasonable detail Tenant's Share of the actual Operating Expenses
incurred for the period in question. If Tenant's estimated payments are less
than Tenant's Share of actual Operating Expenses incurred for the period in
question. If Tenant's estimated payments are less than Tenant's Share of actual
Operating Expenses as shown by the applicable statement, Tenant shall pay the
difference to Landlord within thirty (30) days thereafter. If Tenant shall have
overpaid Landlord, Landlord shall credit such overpayment toward Tenant's next
installment payment hereunder. When the final determination is made of Tenant's
Share of the actual Operating Expenses for the fiscal year in which this Lease
terminates, Tenant shall, even if this Lease has terminated, pay to Landlord
within fifteen (15) days after notice the excess of Tenant's Share of such
actual Operating Expenses over the estimate of Tenant's Share of Operating
Expenses paid. Conversely, any overpayment shall be rebated by landlord to
Tenant within fifteen (15) days. If Landlord shall determine at any time that
the estimate of Tenant's Share of Operating Expenses for the current fiscal year
is or will become inadequate to meet Tenant's Share of all such Operating
Expenses for any reason, Landlord shall immediately determine the approximate
amount of such inadequacy and issue a supplemental estimate as to Tenant's Share
of such Operating Expenses and Tenant shall pay any increase as reflected by
such supplemental estimate. Landlord shall keep or cause to be kept separate and
complete books of accounting covering all Operating Expenses and showing the
method of calculating Tenant's Share of Operating Expenses, and shall preserve
for at least twelve (12) months after the close of each fiscal year all material
documents evidencing said Operating Expenses for that fiscal year. Tenant, at
its sole cost and expense, through its officers or any public accountant
designated by it, shall have the right, during reasonable business hours and not
more frequently than once during any fiscal year, to examine and/or audit the
books and documents mentioned above evidencing such costs and expenses for the
previous fiscal year. Any delay or failure by Landlord in delivering any
estimate or statement pursuant to this Section 7.1 shall not constitute a waiver
of its right to require Tenant to pay Tenant's Share of Operating Expenses
pursuant hereto. See Rider 7.1.
7.2 Definition of Tenant's Share. The term "Tenant's Share" means that
portion of an Operating Expense determined by multiplying the cost of such item
by a fraction, the numerator of which is the Premises Square Footage and the
denominator of which is the total square footage of the floor area, as of the
date on which the computation is made, to be charged with such Operating
Expense. A determination of Tenant's Share for various Operating Expenses is
set forth in Exhibit I attached to and made a part of this Lease.
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7.3 Definition of Project Costs. The term "Project Costs" means all costs
and expenses incurred by Landlord or Landlord's Agents in connection with the
operation of the Project, including, but not limited to the following: repair
and maintenance of the roof, foundation and exterior walls of the buildings in
the Project, periodic painting of the buildings in the Project, periodic
cleaning of the exterior windows of the buildings in the Project, landscaping
services, outside pest control, normal maintenance and repair of the HVAC,
unless Landlord elects to maintain the same pursuant to Section 9.2), sweeping,
maintenance services, repairs to and replacement of asphalt paving, bumpers,
striping, light bulbs, light standards, monument and directional signs and
lighting systems, perimeter walls, retaining walls, sidewalks, planters,
landscaping and sprinkler system in planting area, any and all assessments
levied against the Project pursuant to the Restrictions, water, electrical and
other utility services not supplied directly to a tenant, removal of trash,
rubbish and other refuse from the Project, cleaning of and replacement of signs
of the Project, including relamping and repairs made as required; repair,
operation and maintenance of the Common Area, including, but not limited to,
removal of any obstructions not reasonably required for the Common Area uses,
prohibition and removal of the sale or display of merchandise or the storing of
materials and/or equipment in the Common Area, and payment of all electrical,
water and other utility charges or fees for services furnished to the Common
Area; obtaining and maintaining public liability, property damage and other
forms of insurance which Landlord may or is required to maintain in connection
with the Project (including the payment of any deductibles thereunder); costs
incurred in connection with compliance of any laws or changes in
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laws applicable to the Project, including without limitation any laws or changes
in laws regarding Hazardous Materials; employment of such personnel as Landlord
may deem reasonably necessary, if any, to direct parking and police the Common
Area and facilities; the cost of any capital improvements (other than tenant
improvements for specific tenants) made by or on behalf of Landlord to the
Project or Common Area to the extent of the amortized amount thereof over the
useful life of such capital improvements calculated at a market cost of funds,
all as reasonably determined by Landlord, for each such year of useful life
during the Term; depreciation of machinery and equipment used in connection with
the maintenance and operation of the Common Area for which a reasonable reserve
has not been established as herein provided; employment of personnel used in
connection with any of the foregoing, including, but not limited to, cost of
bookkeeping, accounting and auditing and legal services provided in connection
with any of the foregoing; the cost of any environmental consultant or other
services used in connection with Landlord's monitoring of the Project with
respect to Hazardous Materials; the cost of any tax, insurance or other
consultant utilized in connection with the Project; and any other items
reasonably necessary from time to time to properly repair, replace, maintain and
operate the Project. Project Costs shall also include management fee to cover
Landlord's management, overhead and administrative expenses; provided, however,
if Landlord elects to delegate its duties hereunder to a professional property
manager, then Project Costs shall not include any fee to Landlord, but under
such circumstances any reasonable amounts paid to the professional property
manager shall be added to and deemed a part of Project Costs. If Landlord elects
to perform any maintenance or repair herein described in conjunction with
properties other than the Project, and if a common maintenance contractor is
contracted with for such purpose, the contract amount allocable to the Project,
as reasonably determined by Landlord, shall be added to and deemed a part of
Project Costs hereunder. Increases in Project Costs by reason of a
disproportionate impact by Tenant thereon (for example, and not by way of
limitation, increases in costs of trash collection because of Tenant's excessive
generation of trash or increases in costs of Common Area maintenance because of
Tenant's unpermitted storage of inventory or materials in the Common Area), in
Landlord's reasonable judgment, may be billed by Landlord, as an item of
Additional Rent, directly to Tenant. See Rider 7.3.
7.4 Definition of Real Property Taxes. The term "Real Property Taxes"
means any form of tax, assessment, charge, license, fee, rent tax, levy, penalty
(if a result of Tenant's delinquency), real property or other tax (other than
Landlord's net income, estate, succession, inheritance, or franchise taxes), now
or hereafter imposed with respect to the Project or any part thereof (including
any Alterations), this Lease or any Rent payable under this Lease by any
authority having the direct or indirect power to tax, or by any city, county,
state or federal government or any improvement district or other district or
division thereof, whether such tax or any portion thereof (i) is determined by
the area of the Project or any part thereof or the Rent payable under this Lease
by Tenant including, but not limited to, any gross income or excise tax levied
by any of the foregoing authorities with respect to receipt of the Rent due
under this Lease, (ii) is levied or assessed in lieu of, in substitution for, or
in addition to, existing or additional taxes with respect to the Project or any
part thereof whether or not now customary or within the contemplation of
Landlord or Tenant, or (iii) is based upon any legal or equitable interest in
Landlord in the Project or any part thereof. See Rider 7.4.
7.5 Apportionment of Taxes. If the Project is assessed as part of a
larger parcel, then Landlord shall equitably apportion the Real Property Taxes
assessed against the real property which includes the Project and reasonably
determine the amount of Real Property Taxes attributable to the Project. If
other buildings exist on the assessed parcel, the Real Property Taxes
apportioned to the Project shall be based upon the ratio of the square footage
of all buildings within the Project to the square footage of all buildings on
the assessed parcel, and the amount of real Property Taxes so apportioned to the
Project shall be included as part of Operating Expenses. Landlord's reasonable
determination of such apportionment shall be conclusive.
7.6 Tax on Improvements; Permitted Contests. Tenant shall, at Landlord's
election, be directly responsible for and shall pay the full amount of any
increase in Real Property Taxes attributable to any and all Tenant Improvements
and any other improvements of any kind whatsoever placed in, on or about the
Premises for the benefit of, at the request of, or by Tenant. Tenant may
contest the amount or validity of any Real Property Taxes by appropriate
proceedings, provided that Tenant gives Landlord prior Notice of any such
contest and keeps
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Landlord advised as to all proceedings, and provided further that Tenant shall
continue to reimburse Landlord for Landlord's payment of such Real Property
Taxes unless such proceedings shall operate to prevent or stay such payment and
the collection of the tax so contested. Landlord shall join in any such
proceedings if any Applicable Laws shall so require, provided that Tenant shall
hold harmless, indemnify, protect and defend Landlord from and against any
liability, claim, demand, cost or expense in connection therewith, including,
but not limited to, actual attorneys' fees and costs reasonably incurred.
7.7 Utilities and Services. Tenant shall be responsible for and shall pay
promptly, directly to the appropriate supplier, all charges for water, gas,
electricity, heat, light, power, telephone, refuse pickup, janitorial service,
interior landscape maintenance and all other utilities, materials and services
furnished directly to Tenant or the remises or use by Tenant in, on or about the
Premises during the Term, together with any taxes thereon. If any utilities or
services are not separately metered or assessed to Tenant, Landlord shall make a
reasonable determination of Tenant's proportionate share of the cost of such
utilities and services and Tenant shall pay such amount to Landlord, as an item
of Additional Rent, within ten (10) days after receipt of Landlord's statement
or Invoice therefor. Landlord may also require Tenant to have any Specialized
HVAC system separately metered to Tenant, at Tenant's expense. Landlord shall
not be liable in damages or otherwise for any failure or interruption of any
utility or other service furnished to the Premises unless such failure or
interruption is due to Landlord's gross negligence or willful misconduct. No
such failure or interruption shall be deemed an eviction or entitle Tenant to
terminate this Lease or withhold or abate any Rent due hereunder.
RIDER 7.1 OPERATING EXPENSES:
If, as a result of Tenant's examination or audit, it is determined
that the amount charged to Tenant for Tenant's Share of Operating Expenses
exceeded by more than 5% the amount actually due, then Landlord shall promptly
reimburse Tenant's costs of the examination and/or audit.
RIDER 7.3 PROJECT COSTS:
Notwithstanding anything to the contrary in the Lease, Project Costs
(and any terms of similar meaning in the Lease) shall not include, and Tenant
shall have no liability for, the expense items listed below, and Project Costs
shall be subject to the limitations listed below:
(a) The following operating expense items shall not be charged to
Tenant:
1. The costs of original construction, the purchase price or
any depreciation of the Premises, Building or Project, any additions or
improvements thereto or any Premises, Building or Project service or utility
systems therein, including, without limitation, the cost of tools, equipment and
materials purchased in connection therewith.
2. Costs incurred for the repair, maintenance and replacement
of the structural components of the Premises, Building or Project, including,
without limitation, beams, columns, foundations, footings, load bearing and
exterior walls, structural slabs and the structural components of, the roof
(except that Tenant is solely responsible for the cost of all non-structural
repairs and maintenance to the roof commencing 270 days following the
Commencement Date).
3. Costs incurred for the repair, maintenance or replacement of
the Premises, Building or Project, or any portion thereof, to the extent: (a)
of the proceeds of insurance which Landlord is required to maintain under the
Lease or actually maintains (whichever is greater), (b) of any reimbursement
which Landlord receives therefor under any warranties or from any third party
(other than on account of a tenant's pro rata share of Project Costs), or (c)
caused by the gross negligence or willful misconduct of Landlord or Landlord's
Agents.
4. Rentals and other payments by Landlord under any ground
lease or other lease underlying this Lease, and interest, principal, points,
penalties and fees on any security instrument encumbering all or any portion of
the Premises, Building or Project.
5. Expenses and penalties (including, without limitation,
attorneys fees) incurred due to Landlord's violation of any lease, deed of
trust, mortgage, other security instrument, ground lease, Applicable Law or
private restriction.
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6. Leasing commissions, attorneys' fees, tenant improvement
costs and other costs and expenses incurred in connection with the leasing, or
the improvement for leasing, of any premises.
7. Any cost incurred in furnishing items or services other than
for the benefit of all tenants of the Building or Project generally.
8. Advertising, marketing, media and promotional expenditures
regarding the Premises, Building or Project, and costs of signs in or on the
Premises, Building or Project identifying the owner, lender or any contractor.
9. The rental value of any management office, engineer's
office, mechanical spaces and Common Areas.
10. Costs incurred in connection with the presence,
investigation, monitoring, release, removal or remediation of any Hazardous
Materials on, under, in or about the Premises, Building or Project, unless such
costs are incurred because of the activities of Tenant or Tenants Agents.
11. Any insurance premiums for insurance coverage or policy
limits which materially exceed the coverage or limits maintained by landlords of
comparable properties in the city in which the Premises is located.
(b) Project costs shall be subject to the following limitations:
1. Any management fee included in Project Costs shall not
exceed three and one-half percent (3 1/2%) of the Monthly Rent and shall
exclude: salaries, wages and benefits paid or provided to persons not employed
full-time in the management and operation of the Project; costs of automobiles
and travel expenses; professional, civic or recreational memberships; costs of
seminars, conventions, educational programs and the like; charitable
contributions; and any other administrative cost or expense not directly related
to the management and operation of the Project.
2. No fee shall be charged for the use of the Project parking
area or any other Common Area facility.
3. The aggregate sum of all Project Costs items allocated to
tenants of the Project for any year upon which an allocation is made shall not
exceed the aggregate sum of such cost items which are actually incurred by
Landlord for the year in question. No cost item shall be included more than
once or allocated under more than one expense category.
4. All expense items which are classified as capital
expenditures, improvements or replacements under generally accepted accounting
principles and which are permitted to be charged to Tenant hereunder shall be
amortized on a monthly basis over their maximum estimated useful lives at the
lesser of Landlord's cost of funds or the Bank of America prime rate plus two
percent (2%) per annum. Only the monthly amortized portion of such expense
which accrues or falls due during the Term shall be included as a Project Cost
item payable by Tenant hereunder.
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RIDER 7.4 REAL PROPERTY TAXES:
Notwithstanding anything to the contrary in the Lease, "Real Property
Taxes" shall not include, and Tenant shall have no liability for the following
items, and Real Property Taxes shall be subject to the following limitations:
(a) Real Property Taxes shall not include the following items:
1. Interest or penalties imposed as a result of Landlord's
failure to pay taxes or assessments when due;
2. Any taxes, fees, assessments, levies or similar impositions
that are charged or assessed other than with respect to the Premises, Building
or Project or Tenant's possessory interest therein;
3. Any increase in taxes resulting from the construction of
improvements for the benefit of a particular tenant or resulting from the use of
premises by a particular tenant;
4. Landlord's income, transfer, gift, estate, succession,
franchise or excess profits tax, or fees, taxes or assessments imposed on
Landlord for the privilege or right to conduct its business in general
(including, for example, fees paid for Landlord's business license) rather than
for a permit or license to operate the Project or any equipment or facility
therein in particular.
(b) Real Property Taxes shall be subject to the following limitations:
1. All taxes and assessments which can be paid by Landlord in
installments shall be included as a reimbursable expense item as if paid over
the maximum number of installments permitted, regardless of when Landlord
actually pays such assessments.
2. Taxes and assessments shall be prorated for the portion of
the year in which the Lease Term commences or ends.
ARTICLE VIII
ALTERATIONS
8.1 Permitted Alterations. After the Commencement Date, Tenant shall not
make or permit any Alterations in, on or about the Premises without the prior
written consent of Landlord (which consent shall not be unreasonably withheld or
delayed, except for Alterations not exceeding One Dollar ($1.00) per square foot
of the Premises in aggregate costs per year. Notwithstanding the foregoing,
without the prior written consent of Landlord. In no event shall any
Alterations (i) affect the exterior of the Building or the outside areas (or be
visible from adjoining sites), (ii) affect or penetrate any of the structural
portions of the Building, including, but not limited to, the roof, (iii) require
any change to the structural or mechanical components of the Premises, (iv)
interfere in any manner with the proper functioning of or Landlord's access to
any mechanical, electrical, plumbing or HVAC systems, facilities or equipment
located in or serving the Building, or (v) diminish the value of the premises.
All Alterations shall be constructed pursuant to plans and specifications
previously provided to and, when applicable, approved in writing by landlord,
shall be installed by a licensed contractor at Tenant's sole expense in
compliance with all Applicable Laws, and shall be accomplished in a good and
workmanlike manner conforming in quality and design with the Premises existing
as of the Commencement Date. No Hazardous Materials, including, but not limited
to, asbestos or asbestos containing materials, shall be used by Tenant or
Tenant's Agents in the construction of any Alterations permitted hereunder. All
Alterations made by Tenant shall be and become the property of Landlord upon the
installation thereof and shall not be deem Tenant's Personal Property; provided,
however, that Landlord may, at its option, require that Tenant, upon the
termination of this Lease, at Tenant's expense, remove any or all non-structural
Alterations installed by or on behalf of Tenant and return the Premises to its
condition as of the Commencement Date of this Lease, normal wear and tear
excepted. Notwithstanding any other provisions of this Lease, Tenant shall be
solely responsible for the maintenance, repair and replacement of any and all
Alterations made by or on behalf of Tenant (including without limitation by
Landlord on behalf of Tenant) to the Premises. See Rider 8.1.
8.2 Trade Fixtures. Tenant shall, at its own expense, provide, install
and maintain in good condition all of Tenant's Personal Property required in the
conduct of its business in the Premises.
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8.3 Mechanics' Liens. Tenant shall give Landlord Notice of Tenant's
intention to perform any work on the Premises which might result in any claim of
lien at least twenty (20) days prior to the commencement of such work to enable
Landlord to post and record a notice of nonresponsibility or other notice
Landlord deems proper prior to the commencement of any such work. Tenant shall
not permit any mechanic's, materialmen's or other liens to be filed against the
property of which the Premises are part or against Tenant's leasehold interest
in the premises. If Tenant fails to cause the release of record of any lien(s)
filed against the Premises or its leasehold estate therein by payment or posting
of a proper bond within ten (10) days from the date of the lien filing(s), then
Landlord may, at Tenant's expense, cause such lien(s) to be released by any
means Landlord deems proper, including, but not limited to, payment of or
defense against the claim giving rise to the lien(s). All sums reasonably
disbursed, deposited or incurred by Landlord in connection with the release of
the lien(s), including, but not limited to, all costs, expenses and actual
attorneys' fees, shall be due and payable by Tenant to Landlord, as an item of
Additional Rent, on demand by Landlord, together with interest thereon at the
Applicable Rate from the date of such demand until paid by Tenant.
RIDER 8.1 PERMITTED ALTERATIONS:
Within 15 days after Tenant's written request, Landlord shall inform Tenant
in writing whether or not Landlord will require any Alteration made or proposed
to be made by Tenant of the Lease Term. Failure of Landlord to respond timely
to Tenant's request shall constitute Landlord's consent to the surrender of such
Alteration with the Premises, excluding any trade fixtures and non-structural
Alterations which Tenant elects to remove, provided that Tenant shall repair all
damage to the Premises caused by such removal.
ARTICLE IX
MAINTENANCE AND REPAIR
9.1 Landlord's Maintenance and Repair Obligations. Landlord shall,
subject to Section 9.2, Article XII and Article XIII, maintain in good condition
and repair the roof (including any skylights, but including as needed any
replacement thereof), exterior walls, structural components and foundation of
the Building, utility systems within the structural components of the Building
and the Common Areas, provide normal maintenance services for the HVAC serving
the Building through maintenance contracts or otherwise, and paint the exterior
of the Building and clean the exterior windows of the Building as and when such
painting or window cleaning, as the case may be, becomes necessary in Landlord's
sole discretion. Landlord shall also provide maintenance and repair services to
the electrical, plumbing, and mechanical systems serving the Premises. Landlord
shall not be required to make any repairs to the roof, exterior walls,
foundation or any systems within the Premises unless and until Tenant has
notified Landlord in writing of the need for such repair and Landlord shall have
a reasonable period of time thereafter to commence and complete said repair, if
warranted. The cost of any maintenance and repairs on the part of Landlord
provided for in this Section 9.1 shall be considered part of Project Costs,
except that repairs which Landlord deems arise out of any gross negligence or
willful misconduct of Tenant or Tenant's Agents shall be made at the expense of
Tenant. Landlord's obligation to so repair and maintain the premises shall be
limited to the cost of effecting such repair and maintenance and in no event
shall Landlord be liable for any costs or expenses in excess of said amounts,
including, but not limited to, any consequential damages, opportunity costs or
lost profits incurred or suffered by Tenant.
9.2 Tenant's Maintenance and Repair Obligations. Subject to Section 9.1
and Articles XII and XIII. Tenant shall at all times during the Term of this
Lease, at Tenant's sole cost and expense, clean, keep, maintain, repair and make
necessary improvements to, the Premises and every portion thereof and all
improvements therein or thereto, in good and sanitary order and condition to the
reasonable satisfaction of Landlord and in compliance with all Applicable Laws,
usual wear and tear excepted. Any damage or deterioration of the Premises shall
not be deemed usual wear and tear if the same could have been prevented by good
maintenance practices by Tenant. Tenant's repair and maintenance obligations
herein shall include, but are not limited to, all necessary maintenance and
repairs to all portions of the Premises, and all exterior entrances, all glass,
windows, window easements, show window moldings, partitions, doors, door jams,
door closures, hardware, fixtures, electrical lighting and outlets, plumbing
fixtures, sewage facilities, interior walls, floors, ceilings, fans and exhaust
equipment, fire extinguisher
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equipment and systems, and all repairs to Specialized HVAC (as hereinafter
defined). As part of its maintenance obligations hereunder, Tenant shall, at
Landlord's request, provide Landlord with copies of all maintenance schedules,
reports and notices prepared by, for, or on behalf of Tenant. Landlord may
impose reasonable restrictions and requirements with respect to repairs by
Tenant, which repairs shall be at least equal in quality to the original work,
and the provisions of Section 8.3 shall apply to all such repairs. Tenant's
obligation to repair includes the obligation to replace, as necessary,
regardless of whether the benefit of such replacement extends beyond the Term.
Any special or above-standard heating, ventilating and air conditioning
installed by, on behalf of, or at the request of Tenant ("Specialized HVAC"),
shall be paid for and maintained by Tenant at Tenant's sole cost and expense.
Notwithstanding the foregoing, Landlord shall have the right, upon Notice to
Tenant, to undertake the responsibility for maintenance and repair of automatic
fire extinguisher equipment, such as sprinkler systems and alarms, Specialized
HVAC and other obligations of Tenant hereunder which Landlord deems appropriate
to undertake that affect the Building as a whole, in which event the cost
thereof shall be included as part of Project Costs and paid by Tenant in the
manner set forth in Section 7.1. Tenant shall not permit or authorize any person
to go onto the roof of the Building without the prior written consent of
Landlord.
9.3. Waiver. Tenant hereby waives all rights provided for by the
provisions of Sections 1941 and 1942 of the California Civil Code and any
present or future laws regarding Tenant's right to make repairs at the expense
of Landlord or to terminate this Lease because of the condition of the Premises.
9.4 Self-Help. If Tenant refuses or fails to initiate the repair and
maintenance of the Premises as required hereunder within ten (10) days from the
date on which Landlord makes a written demand on Tenant to effect such repair
and maintenance, Landlord may enter upon the Premises and make such repairs or
perform such maintenance without liability to Tenant for any loss or damage that
may accrue to Tenant or its merchandise, fixtures or other property or to
Tenant's business by reason thereof. All sums reasonably disbursed, deposited
or incurred by Landlord in connection with such repairs or maintenance, plus
five percent (5%) for overhead, shall be due and payable by Tenant to Landlord,
as an item of Additional Rent, on demand by Landlord, together with interest at
the Applicable Rate on such aggregate amount from the date of such demand until
paid by Tenant.
ARTICLE X
COMMON AREA AND PARKING
10.1 Grant of Nonexclusive Common Area License and Right. Landlord hereby
grants to Tenant and its permitted subtenants, in common with Landlord and all
persons, firms and corporations conducting business in the Project and their
respective customers, guests, licensees, invitees, subtenants, employees and
agents, to use the Common Area within the Project for vehicular parking, for
pedestrian and vehicular ingress, egress and travel, and for such other purposes
and for doing such other things as may be provided for, authorized and/or
permitted by the Restrictions, such nonexclusive license and right to be
appurtenant to Tenant's leasehold estate created by this Lease. The
nonexclusive license and rights granted pursuant to the provisions of this
Article X shall be subject to the provisions of the Restrictions, which pertain
in any way to the Common Area covered by such Restrictions, and the provisions
of this Lease.
10.2 Use of Common Area. Notwithstanding anything to the contrary herein,
Tenant and its successors, assigns, employees, agents and invitees shall use the
Common Area only for the purposes permitted hereby and by the Restrictions and
the Rules and Regulations. All uses permitted within the Common Area shall be
undertaken with reason and judgment so as not to interfere with the primary use
of the Common Area which is to provide parking and vehicular and pedestrian
access throughout the Common Area within the Project and to adjacent public
streets for the Landlord, Landlord's Agents, its tenants, subtenants and all
persons, firms and corporations conducting business within the Project and their
respective customers, guests and licensees. In no event shall Tenant erect,
install, or place, or cause to be erected, installed, or placed any structure,
building, trailer, fence, wall, signs or other obstructions on the Common Area
except as otherwise permitted herein and in the Restrictions, and Tenant shall
not store or sell any merchandise, equipment or materials on the Common Area.
10.3 Control of Common Area. Subject to provisions of the Restrictions,
all Common Area and all improvements located from time to time within the Common
Area shall at all times be subject to the exclusive
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control and management of the Landlord. Landlord shall have the right to
construct, maintain and operate lighting facilities within the Common Area; to
police the Common Area from time to time; to change the area, level, location
and arrangement of the parking areas and other improvements within the Common
Area; to close all or any portion of the Common Area or improvements therein to
such extent as may, in the opinion of counsel for Landlord, be legally
sufficient to prevent a dedication thereof or the accrual of any rights to any
person or to the public therein; to close temporarily all or any portion of the
Common Area and/or the improvements thereon; to discourage noncustomer parking;
and to do and perform such other acts in and to said Common Area and
improvements thereon as, in the use of good business judgment, Landlord shall
determine to be advisable; provided that, at all times and subject to the terms
hereof, Tenant shall have available for use the number of parking spaces set
forth in Section 15 of the Basic Lease Information.
10.4 Maintenance of Common Area. Subject to the provisions of the
Restrictions, Landlord shall operate and maintain (or cause to be operated and
maintained) the Common Area in a first-class condition, in such manner as
Landlord in its discretion shall determine from time to time. Without limiting
the scope of such discretion, Landlord shall have the full right and authority
to employ or cause to be employed all personnel and to make or cause to be made
all rules and regulations pertaining to or necessary for the proper operation
and maintenance of the Common Area and the improvements located thereon. The
cost of such maintenance of the Common Area shall be included as part of Project
Costs. No part of the Common Area may be used for the storage of any items,
including without limitation, vehicles, materials, inventory and equipment. All
trash and other refuse shall be placed in designated receptacles. No work of
any kind, including, but not limited to, painting, drying, cleaning, repairing,
manufacturing, assembling, cutting, merchandising or displaying shall be
permitted upon the Common Area.
10.5 Revocation of License. All Common Area and improvements located
thereon which Tenant is permitted to use and occupy pursuant to the provisions
of this Lease are to be used and occupied under a revocable license and right,
and if any such license be revoked, or if the amount of such areas be
diminished, Landlord shall not be subject to any liability nor shall Tenant be
entitled to compensation or diminution or abatement of Rent, and such revocation
or diminution of such areas shall not be deemed constructive or actual eviction.
It is understood and agreed that the condemnation or other taking or
appropriation by any public or quasi-public authority, or sale in lieu of
condemnation, of all or any portion of the Common Area shall not constitute a
violation of Landlord's agreements hereunder, and Tenant shall not be entitled
to participate in or make any violation of Landlord's agreements hereunder, and
Tenant shall not be entitled to participate in or make any claim for any award
or other condemnation proceeds arising from any such taking or appropriation of
the Common Area. Notwithstanding the foregoing, during the term of this Lease,
Landlord shall provide to Tenant the number of vehicle parking spaces set forth
in Item 15 of the basic Lease Provisions throughout the Term (subject to the
rights of Landlord under this Article X), and reasonable rights of ingress and
egress.
10.6 Landlord's Reserved Rights. Landlord reserves the right to install,
use, maintain, repair relocate and replace pipes, ducts, conduits, wires and
appurtenant meters and equipment included in the Premises or outside the
Premises, change the boundary lines of the Project and install, use, maintain,
repair, alter or relocate, expand and replace any Common Area; provided,
however, Landlord shall not unreasonably interfere with Tenant's use of the
Premises. Such rights of Landlord shall include, but are not limited to,
designating from time to time certain portions of the parking lot as exclusively
for the benefit of certain Tenants in the Project (so long as such exclusive
rights to the parking lot do not impair Tenant's parking rights under this
Lease).
10.7 Parking. Tenant shall be entitled to the number of vehicle parking
spaces set forth in Item 15 of the Basic Lease Provisions, which spaces shall be
unreserved and unassigned, on those portions of the Common Area designated by
Landlord for parking. Tenant shall not use more parking spaces than such
number. All parking spaces shall be used only for parking by vehicles no larger
than full size passenger automobiles or pick-up trucks. Tenant shall not permit
or allow any vehicles that belong to or are controlled by Tenant or Tenant's
employees, suppliers, shippers, customers, or invitees to be loaded, unloaded,
or parked in areas other than those designated by Landlord for such activities.
If Tenant permits or allows any of the prohibited activities described above,
then
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Landlord shall have the right, after reasonable notice, in addition to such
other rights and remedies that Landlord may have, to remove or tow away the
vehicle involved and charge the cost to Tenant, which cost shall be immediately
payable upon demand by Landlord. Parking within the Common Area shall be limited
to striped parking stalls, and no parking shall be permitted in any driveways,
accessways or in any area which would prohibit or impede the free flow of
traffic within the Common Area. Vehicles which have been abandoned or parking in
violation of the terms hereof may be towed away at the owner's expense.
Notwithstanding the foregoing, delivery vehicles may be parked, staged and
stored overnight, on a temporary basis.
ARTICLE XI
INDEMNITY AND INSURANCE
11.1 Indemnification. To the fullest extent permitted by Law, Tenant
hereby agrees to defend (with attorneys acceptable to Landlord), indemnify,
protect and hold harmless Landlord and Landlord's Agents and any successors to
all or any portion of Landlord's interest in the Premises and their directors,
officers, partners, employees, authorized agents, representatives, affiliates
and Mortgagees, from and against any and all damage, loss, claim, liability and
expense including, but not limited to, actual attorneys' fees and legal costs,
incurred directly or indirectly by reason of any claim, suit or judgment brought
by or on behalf of (i) any person or persons for damage, loss or expense due to,
but not limited to, bodily injury or property damage sustained by such person or
persons which arise out of, are occasioned by, or are in any way attributable to
the use or occupancy of the Premises by Tenant or the acts or omissions of the
Tenant or Tenant's Agents in or about the Premises or the Project (including but
not limited to any Event of Default hereunder), or (ii) Tenant or Tenant's
Agents for damage, loss or expense due to, but not limited to, bodily injury or
property damage which arise out of, are occasioned by, or are in any way
attributable to the use of any of the Common Area, except to the extent caused
by the gross negligence or willful misconduct of Landlord or Landlord's Agents.
11.2 Property Insurance. Landlord shall obtain and keep in force during
the Terms of this Lease a policy or policies of insurance, with deductibles at
the sole discretion of Landlord, covering loss of rents and loss or damage to
the Premises and the Building, the Tenant improvements and objects owned by
Landlord and normally covered under a "Boiler and Machinery" policy (as such
term is used in the insurance industry) at least in the amount of the full
replacement cost thereof, and in no event less than the total amount required by
Mortgagees, against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, special extended perils ("all
risk" or "special causes of action," as such terms are used in the insurance
industry, including, at Landlord's option, collapse, earthquake and flood) and
other perils as required by the Mortgagees or deemed necessary by Landlord. A
stipulated value or agreed amount endorsement deleting any co-insurance
provision of said policy or policies shall be procured with said insurance. The
cost of such insurance policies shall be included in the definition of Project
Costs, and shall be paid by Tenant in the manner set forth in Section 7.1. Such
insurance policies shall provide for payment of loss thereunder to Landlord or,
at Landlord's election, to the Mortgagees. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Landlord
which are adjacent to the Premises, then Tenant shall pay for any increase in
the property insurance of the Building or such other building or buildings
within the Project if such increase is caused by Tenant's acts, omissions, use
or occupancy of the Premises. Tenant shall obtain and keep in force during the
Term, at its sole cost and expense, (i) an "all risk" or "special causes of
action" property policy in the amount of the full replacement cost covering
tenant's Personal Property and any Alterations made by or at the request of
Tenant, with Landlord insured as its interest may appear.
11.3 Liability/Miscellaneous Insurance. Tenant shall maintain in full
force and effect at all times during the Term (plus such earlier and later
periods as Tenant may be in occupancy of the Premises), at its sole cost and
expense, for the protection of Tenant, Landlord and Landlord's Agents and
Mortgagees, policies of insurance issued by a carrier or carriers acceptable to
Landlord and the Mortgagees which afford the following coverages: (i) statutory
workers' compensation, (ii) employer's liability with minimum limits of Five
Hundred Thousand Dollars ($500,000), (iii) commercial general liability
insurance including, but not limited to, blanket contractual liability
(including the indemnity set forth in Section 11.1), fire and water legal
liability, broad form property damage,
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personal injury, independent contractors, and, if alcoholic beverages are
served, manufactured, distributed or sold in the Premises, comprehensive liquor
liability, and owned, non-owned and hired vehicles, of not less than the limits
set forth in Item 17 of the Basic Lease Provisions (or current limit carried,
whichever is greater), naming Landlord, the Mortgagees, and the Additional
insureds named in Item 16 of the Basic Lease Provisions as additional insureds,
and including a cross-liability or severability of interests endorsement, and
(iv) such other insurance in such terms and amounts as may be required by
Landlord or the Mortgagees from time to time. Landlord or Landlord's Agents on
behalf of Landlord may, at Landlord's election, obtain liability insurance in
such amounts and on such terms as Landlord shall determine, and the cost thereof
shall be included in Project Costs and paid by Tenant in the manner described in
Section 7.1.
11.4 Hazardous Materials. In the event Landlord consents to Tenant's use,
generation or storage of Hazardous Materials on, under or about the Premises
pursuant to Section 6.2, Landlord shall have the continuing right to require
Tenant, at Tenant's sole cost and expense, to purchase insurance specified and
approved by Landlord, with coverage of no less than Two Million Dollars
($2,000,000), insuring (i) any Hazardous Materials shall be removed from the
Premises, (ii) the Premises shall be restored to a clean, neat, attractive,
healthy, safe and sanitary condition, and (iii) any liability of Tenant,
Landlord and Landlord's Agents arising from such Hazardous Materials; provided,
however, that such insurance is available and can be obtained at commercially
reasonable rates.
11.5 Deductibles; Blanket Coverage. Any policy of insurance required
pursuant to this Lease containing a deductible exceeding Five Thousand Dollars
($5,000) per occurrence must be approved in writing by Landlord prior to the
issuance of such policy. Tenant shall be solely responsible for the payment of
any deductible. Any insurance required of Tenant pursuant to this Lease may be
provided by means of a so-called "blanket policy", so long as (i) the Premises
are specifically covered (by rider, endorsement or otherwise), (ii) the limits
of the policy are applicable on a "per location" basis to the Premises and
provide for restoration of the aggregate limits, and (iii) the policy otherwise
complies with the provisions of this Lease. Tenant may obtain the coverage
limits specified herein by an umbrella policy, if desired.
11.6 Increased Coverage. Upon demand, Tenant shall provide Landlord, at
Tenant's expense, with such increased amount of existing insurance, and such
other insurance as Landlord or the Mortgagees may reasonably require.
11.7 Sufficiency of Coverage. Neither Landlord nor any of Landlord's
Agents makes any representation that the types of insurance and limits specified
to be carried by Tenant under this Lease are adequate to protect Tenant. If
Tenant believes that any such insurance coverage is insufficient, Tenant shall
provide, at its own expense, such additional insurance as Tenant deems adequate.
Nothing contained herein shall limit Tenant's liability under this Lease, and
Tenant's liability under any provision of this Lease, including without
limitation under any indemnity provisions, shall not be limited to the amount of
any insurance obtained.
11.8 Insurance Requirements. Tenant's insurance shall be carried with
companies that have a general policyholder's rating of not less than "A" and
that are determined by Landlord, as financially sound on a current basis, (ii)
shall provide that such policies shall not be subject to material alteration or
cancellation except after at least thirty (30) days prior written notice to
Landlord, and (iii) shall be primary, and any insurance carried by Landlord or
Landlord's Agents shall be noncontributing. Tenant's policy or policies, or
duly executed certificates for them in the form and content of acceptable to the
Property Manager, shall be deposited with Landlord prior to the Commencement
Date, and prior to renewal of such policies. If Tenant fails to procure and
maintain the insurance required to be procured by tenant under this Lease,
Landlord may, but shall not be required to, order such insurance at Tenant's
expense. All sums reasonably disbursed, deposited or incurred by Landlord in
connection therewith, including, but not limited to, all costs, expenses and
actual attorneys' fees, shall be due and payable by Tenant to Landlord, as an
item of Additional Rent, on demand by Landlord, together with interest thereto
at the Applicable Rate from the date of such demand until paid by Tenant.
11.10 Landlord's Disclaimer. Notwithstanding any other provisions of this
Lease, and to the fullest extent permitted by law, Landlord and Landlord's
Agents shall not be liable for any loss or damage to persons or property
resulting from theft, vandalism, fire, explosion, failing materials, glass, tile
or sheetrock, steam, gas,
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electricity, water or rain which may leak from any part of the Premises, or from
the pipes, appliances or plumbing works therein or from the roof, street or
subsurface or whatsoever, unless caused by or due to the negligence or willful
misconduct of Landlord or Landlord's Agent, Landlord or Landlord's Agents shall
not be liable for interference with light or air, or for any latent defect in
the Premises except as otherwise expressly provided in this Lease. Tenant shall
give prompt Notice to Landlord in case of a casualty, accident or repair needed
to the Premises.
11.11 Waiver of Subrogation. Landlord and Tenant each hereby waives all
rights of recovery against the other and the other's agents on account of loss
and damage occasioned to such waiving party to the extent only that such loss or
damage is insured against under any insurance policies required by this Article
XI (and to the extent such insurance is inadequate to cover such loss, this
waiver shall not apply to amounts of loss above such coverage). Tenant and
Landlord shall, upon obtaining policies of insurance required hereunder, give
notice to the insurance carriers that the foregoing waiver of subrogation is
contained this Lease.
ARTICLE XII
DAMAGE OR DESTRUCTION
12.1 Landlord's Obligation to Rebuild. If the Premises ar damaged or
destroyed by fire or other casualty (a "Casualty"), Tenant shall promptly give
notice thereof to Landlord, and Landlord shall thereafter repair the Premises as
set forth in Sections 12.4 and 12.6 unless Landlord has the right to terminate
this Lease as provided in Section 12.2 and Landlord elects to so terminate or
Tenant has the right to terminate this Lease as provided in Section 12.3 and
Tenant elects to so terminate.
12.2 Landlord's Right to Terminate. Landlord shall have the right to
terminate this Lease following a Casualty if any of the following occurs: (i)
insurance proceeds (together with any additional amounts Tenant elects, at its
option, to contribute) are not available to Landlord to pay one hundred percent
(100%) of the cost to fully repair the Premises, excluding the deductible (for
which Tenant shall pay Tenant's Share of such deductible); (ii) Landlord's
Architect determines that the Premises cannot, with reasonable diligence, be
fully repaired by Landlord (or cannot be safely repaired because of the presence
of hazardous factors, including, but not limited to, Hazardous Materials,
earthquake faults, radiation, chemical waste and other similar dangers) within
one hundred eighty (180) days after the date of such Casualty; (iii) the
Premises are destroyed or damaged during the last twelve (12) months of the
Term; (but not later than six months prior to the expiration of the Term). If
Landlord elects to terminate this Lease following a Casualty pursuant to this
Section 12.2, Landlord shall give Tenant Notice of its election to terminate
within thirty (30) days after Landlord has knowledge of such Casualty, and this
Lease shall terminate fifteen (15) days after the date of such Notice. See
Rider 12.2.
12.3 Tenant's Right to Terminate. Subject to the later terms hereof,
Tenant shall have the right to terminate this Lease following the destruction of
the Premises (or damage to the Premises so extensive as to reasonably prevent
Tenant'' substantial use and enjoyment of the Premises) if any of the following
occurs: (i) the Premises cannot, with reasonable diligence, be or is not fully
repaired by Landlord within one hundred eighty (180) days after the date of the
damage or destruction, as determined by Landlord's Architect; (ii) the Premises
cannot safely be repaired because of the presence of hazardous factors,
including Hazardous Materials, earthquake faults, radiation, chemical waste and
other similar dangers; or (iii) the damage or destruction occurs during the last
twelve (12) months of the Term and cannot, with reasonable diligence, be fully
repaired by Landlord within ninety (90) days after the date of the destruction
or damage (but not later than six months prior to the expiration of the Term) as
determined by Landlord's Architect. Notwithstanding the foregoing, Tenant shall
not have the right to terminate under this Section 12.3 if (an Event of Default
has occurred and is continuing at the time of such damage or destruction or at
the time of exercising the right to terminate, or (b) the damage or destruction
was caused, in whole or in part, by the willful act or omission of Tenant or
Tenant's Agents. If Tenant elects to terminate this Lease pursuant to this
Section 2.3, Tenant shall give Landlord Notice of its election to terminate
within thirty (30) days after the date of such damage or destruction or ten (10)
days after receipt of the estimated construction period from Landlord's
Architect under clause (iii) if applicable, and this Lease shall terminate
thirty (30) days after the date of such Notice.
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12.4 Effect of Termination. If this Lease is terminated following a
Casualty pursuant to Section 12.2 or Section 12.3, Landlord shall, subject to
the rights of the Mortgagees, be entitled to receive and retain all the
insurance proceeds resulting from or attributable to such Casualty, except for
those proceeds payable under policies obtained by Tenant which specifically
insure Tenant's Personal Property. If neither party exercises any such right to
terminate this Lease, this Lease will continue in full force and effect, and
Landlord shall, promptly following the tenth (10th) day after the date of such
Casualty and receipt of the amounts set forth in clause (i) of Section 12.2,
commence the process of obtaining necessary permits and approvals for the repair
of the Premises, and shall commence such repair and prosecute the same
diligently to completion as soon thereafter as is practicable. Tenant shall
fully cooperate with Landlord in removing Tenant's Personal Property and any
debris from the Premises to facilitate the making of such repairs.
12.5 Limited Obligation to Repair. Landlord's obligation, should it elect
to or be obligated to repair the Premises following a Casualty, shall be limited
to the basic Building and Tenant Improvements and Tenant shall, at its expense,
replace or fully repair all Tenant's Personal Property and at Tenant's option,
any Alterations installed by Tenant existing at the time of such Casualty. If
the Premises are to be repaired in accordance with the foregoing, Tenant shall
make available to Landlord any portion of insurance proceeds it receives which
are allocable to the Tenant Improvements.
12.6 Abatement of Monthly Rent. During any period when Landlord or
Landlord's Architect reasonably determines that there is substantial
interference with Tenant's use of the Premises by reason of a Casualty, Monthly
Rent and Additional Rent shall be temporarily abated in proportion to the degree
of such substantial interference. Such abatement shall commence upon the date
of such Casualty and shall end upon the Substantial Completion of the repair of
the Premises which Landlord undertakes or is obligated to undertake hereunder.
Tenant shall not be entitled to any compensation or damages from Landlord for
loss of the use of the Premises, Tenant's Personal Property or other damage or
any inconvenience occasioned by a Casualty or by the repair or restoration of
the Premises thereafter, including, but not limited to, any consequential
damages, opportunity costs or lost profits incurred or suffered by Tenant.
Tenant hereby waives the provisions of Section 1932(2) and Section 1933(4) of
the California Civil Code, and the provisions of any similar or successor
statutes.
12.7 Landlord's Determination. The determination in good faith by
Landlord's Architect of or relating to the estimated cost of repair of any
damage, replacement cost, the time period required for repair or the
interference with or suitability of the Premises for Tenant's use or occupancy
shall be conclusive for purposes of this Article XII and Article XIII.
RIDER 12.2 LANDLORD'S RIGHT TO TERMINATE:
Notwithstanding the terms of Tenant's option to extend the Term,
pursuant to Lease Rider No. One, if a Casualty occurs during the initial Term of
this Lease during the period in which Tenant is entitled to exercise such
option, Tenant shall have the right (but not the obligation) to exercise such
option by giving Landlord written notice of exercise within thirty (30) days
after Tenant receives the estimate of Landlord's Architect of the period needed
to restore the Premises and, in that event, Landlord may not terminate the Lease
under clause (iii) above.
ARTICLE XIII
CONDEMNATION
13.1 Total Taking--Termination. If title to the Premises, the Common Areas
or so much thereof is taken for any public or quasi-public use under any statute
or by right of eminent domain so that reconstruction of the Premises or Common
Areas will not result in the Premises being reasonably suitable for Tenant's
continued occupancy for the uses and purposes permitted by this Lease, this
Lease shall terminate as of the date possession of the Premises or part thereof
is so taken.
13.2 Partial Taking. If any part of the Premises, or the parking and
access rights granted hereby not being sufficient for Tenant's use, or Common
Area, is taken for any public or quasi-public use under any statute or by right
of eminent domain and the remaining part is reasonably suitable for Tenant's
continued occupancy for the
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uses permitted by this Lease, this Lease shall, as to the part so taken,
terminate as of the date that possession of such part of the Premises or Common
Area is taken and the Monthly Rent and Additional Rent shall be reduce in the
same proportion that the floor area of the portion of the Premises so taken
(less any addition thereto by reason of any reconstruction) bears to the
original floor area of the Premises, as reasonably determined by Landlord or
Landlord's Architect. Landlord shall, at its own cost and expense, make all
necessary repairs or alternations to the Premises so as to make the portion of
the Premises not taken a complete architectural unit. Such work shall not,
however, exceed the scope of the work done by Landlord in originally
constructing the Premises including Tenant Improvements under this Lease. If
severance damages from the condemning authority are not available to Landlord in
sufficient amounts to permit such restoration, landlord may terminate this Lease
upon Notice to Tenant. Monthly Rent and Additional Rent due and payable
hereunder shall be temporarily abated during such restoration period in
proportion to the degree to which there is substantial interference with
Tenant's use of the Premises, as reasonably determined by Landlord or Landlord's
Architect. Each party hereby waives the provisions of Section 1265.130 of the
California Code of Civil Procedure and any present or future law allowing either
party to petition the Superior Court to terminate this Lease in the event of a
partial taking of the Building or Premises.
13.3 No Apportionment of Award. No award for any partial or total taking
shall be apportioned, it being agreed and understood that Landlord shall be
entitled to the entire award for any partial or entire taking. Tenant assigns
to Landlord its interest in any award which may be made in such taking or
condemnation, together with any and all rights of Tenant arising in or to the
same or any part thereof. Nothing contained herein shall be deemed to give
Landlord any interest in or require Tenant to assign to Landlord any separate
award made to Tenant for the taking of Tenant's Personal Property, for the
interruption of Tenant's business or its moving costs, or for the loss of its
goodwill.
13.4 Temporary Taking. No temporary taking of the Premises (which for
purposes hereof shall mean a taking of all or any part of the Premises for one
hundred eighty (180) days or less) shall terminate this Lease or give Tenant any
right to any abatement of Rent. Any award made to Tenant by reason of such
temporary taking shall belong entirely to Tenant and Landlord shall not be
entitled to share therein. Each party agrees to execute and deliver to the
other all instruments that may be required to effectuate the provisions of this
Section 13.4.
13.5 Sale Under Threat of Condemnation. A sale made in good faith to any
authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed at
taking under the power of eminent domain for all purposes of this Article XIII.
ARTICLE XIV
ASSIGNMENT AND SUBLETTING
14.1 Prohibition. Tenant shall not directly or indirectly, voluntarily or
by operation of law, assign (which term shall include any transfer, assignment,
pledge, mortgage or hypothecation) this Lease, or any right or interest
hereunder, or sublet the Premises or any part thereof, or allow any other person
or entity to occupy or use all or any part of the Premises without first
obtaining the written consent of Landlord in each instance, which consent shall
not be unreasonably withheld or delayed. No assignment, encumbrance,
subletting, or other transfer in violation of the terms of this Article XIV,
whether voluntary or involuntary, by operation of law, under legal process or
proceedings, by receivership, in bankruptcy, or otherwise shall be valid or
effective and, at the option of Landlord, shall constitute an Event of Default
under this Lease. To the extent not prohibited by provisions of the Bankruptcy
Code of 1978, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"). Tenant on
-- ----
behalf of itself, creditors, administrators and assigns waives the applicability
of Sections 541(c) and 365(e) of the Bankruptcy Code unless the proposed
assignee of the trustee for the estate of the bankrupt meets Landlord's
standards for consent as set forth below. Landlord has entered into this Lease
with Tenant in order to obtain for the benefit of the Project the unique
attraction of Tenant's name and business; the foregoing prohibition on
assignment or subletting is expressly agreed to by Tenant in consideration of
such fact. If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, any and all monies or other considerations
payable or otherwise to be delivered in connection with such assignment shall be
paid or delivered to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or the estate of Tenant
within the meaning of the
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Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to person
or entity to which this Lease is assigned pursuant to the provisions of the
Bankruptcy Code shall be deemed without further act or deed to have assumed all
of the obligations arising under this Lease on and after the date of such
assignment. Any such assignee shall upon demand execute and deliver to Landlord
an instrument confirming such assumption. See Rider 14.1.
14.2 Landlord's Consent. In the event Landlord consents to any assignment
or subletting, such consent shall not constitute a waiver of any of the
restrictions of this Article XIV and the same shall apply to each successive
assignment or subletting hereunder, if any. In no event shall Landlord's
consent to an assignment or subletting affect the continuing primary liability
of Tenant (which, following assignment, shall be joint and several with the
assignee), or relieve Tenant of any of its obligations hereunder without an
express written release being given by Landlord. In the event that Landlord
shall consent to an assignment under this Article XIV, such assignment shall not
be effective until the assignee shall assume all of the obligations of this
Lease on the part of Tenant to be performed or observed and whereby the assignee
shall agree that the provisions contained in this Lease shall, notwithstanding
such assignment, continue to be binding upon it with respect to all future
assignments. Such assignment or sublease agreement shall be duly executed and a
fully executed copy thereof shall be delivered to Landlord, and Landlord may
collect Monthly Rent and Additional Rent due hereunder directly from the
assignee or following the occurrence of an Event of Default hereunder, from the
sublessee. Collection of Monthly Rent and Additional Rent directly from an
assignee or the sublessee shall not constitute a consent or a waiver of the
necessity of consent to such assignment or subletting, nor shall such collection
constitute a recognition of such assignee or sublessee as the Tenant hereunder
or a release of Tenant from the performance of all of its obligations hereunder.
14.3 Information. Regardless of whether Landlord's consent is required
under this Article XIV, Tenant shall notify Landlord in writing of Tenant's
intent to assign this Lease or any right or interest hereunder, or to sublease
the Premises or any part thereof, and of the name of the proposed assignee or
sublessee, the nature of the proposed assignee's or sublessee's business to be
conducted on the Premise, the terms and provisions of the proposed assignment or
sublease, a copy of the proposed assignment or sublease form, and such other
information as Landlord may reasonably request concerning the proposed assignee
or sublessee, including but not limited to, net worth, income statements and
other financial statements for a two-year period preceding Tenant's request for
consent, evidence of insurance complying with the requirements of Article XI, a
completed Environmental Questionnaire from the proposed assignee or sublessee,
and the fee described in Section 14.7.
14.4 Standard for Consent. Landlord shall, within fifteen (15) days of
receipt of such Notice and all information requested by Landlord concerning the
proposed assignee or sublessee, elect to take one of the following actions:
(a) consent to such proposed assignment or sublease;
(b) refuse to consent to such proposed assignment or sublease, which
refusal shall be on reasonable grounds specified in written Notice of Landlord's
refusal; or
(c) if Tenant proposes to sublease all or part of the Premises for the
entire remaining Term, Landlord may, at its option exercised by fifteen (15)
days Notice to Tenant, elect to recapture such portion of the Premises as Tenant
proposes to sublease and unless Tenant provides Notice to Landlord in writing of
its election to withdraw its sublease proposal within fifteen (15) days of
Landlord's Notice to recapture as of the (30th) day after Landlord so notifies
Tenant of its election to recapture, this Lease shall terminate as to the
portion of the Premises recaptured and the Monthly Rent payable under this Lease
shall be reduced in the same proportion that the floor area of that portion of
the Premises so recaptured bears to the floor area of the Premises prior to such
recapture.
Tenant agrees, by way of example and without limitation, that it shall not
be unreasonable for Landlord to withhold its consent to a proposed assignment or
subletting if any of the following situations exist or may exist:
(i) Landlord determines that the proposed assignee's or
sublessee's use of the Premises conflicts with Article V or Article VI, presents
an unacceptable risk, as determined by Landlord, under Article VI (and Landlord
may require such assignee or sublessee to complete the Environmental
Questionnaire in
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the manner described in Section 6.5 prior to making such determination), or
conflicts with any other provision under this Lease;
(ii) Landlord determines that the proposed assignee or sublessee
is not as financially responsible as Tenant as of the date of Tenant's request
for consent or as of the effective date of such assignment or subletting;
(iv) Landlord determines that the proposed assignment or
subletting would breach a covenant, condition or restriction in some other
lease, financing agreement or other agreement relating to the Project, the
Building, the Premises or this Lease;
(v) Landlord determines that the proposed assignee or sublessee
(A) has been required by any prior landlord, lender or governmental authority to
take remedial action in connection with Hazardous Materials contaminating a
property if such contamination resulted from the proposed enforcement order
issued by any governmental authority in connection with the use, disposal or
storage of a Hazardous Material; or
(vi) An Event of Default has occurred and is continuing at the
time of Tenant's request for Landlord's consent, or as of the effective date of
such assignment or subletting.
14.5 Bonus Value. Tenant agrees that fifty percent (50%) of any amounts
paid by the assignee or sublessee, however described, in excess of (i) the
Monthly Rent payable by Tenant hereunder (or, in the case of sublease of a
portion of the Premises, in excess of the Monthly Rent reasonably allocable to
such portion), plus (ii) Tenant's direct out-of-pocket costs which Tenant
certifies to Landlord have been paid to provide occupancy or marketing related
improvements, repairs, or services to effect such assignment or sublease of a
nature commonly provided by landlords of similar space, shall be the property of
Landlord and such amounts shall be payable directly to Landlord by the assignee
or sublessee. At Landlord's request, a written agreement shall be entered into
by and among Tenant, Landlord and the proposed assignee or sublessee confirming
the requirements of this Section 14.5.
14.6 Certain Transfers. The sole of all or substantially all of Tenant's
assets (other than bulk sales in the ordinary course of business), or, if Tenant
is a corporation, an unincorporated association, or a partnership, the transfer,
assignment or hypothecation of any stock or interest in such corporation,
association or partnership in the aggregate in excess of fifty percent (50%)
(except for publicly traded shares of stock constituting a transfer of fifty
percent (50%) or more in the aggregate, so long as no change in the controlling
interest of Tenant occurs as a result thereof) shall be deemed an assignment
within the meaning and provisions of this Article XIV.
14.7 Landlord's Fee and Expenses. If Tenant requests Landlord's consent to
an assignment or subletting by Tenant under this Lease, Tenant shall pay and all
of Landlord's reasonable out-of-pocket expenses, including, but not limited to,
attorneys' fees (not to exceed $1,500 per Tenant's request) reasonably incurred
related to such assignment or subletting by Tenant, whether or not the
assignment or subletting is approved.
14.8 Transfer of the Premises by Landlord. Upon any conveyance of the
Premises and assignment by Landlord of this Lease, Landlord shall and is hereby
entirely released from all liability under any and all of its covenants and
obligations contained in or derived from this Lease occurring after the date of
such conveyance and assignment, and Tenant agrees to attorn to any entity
purchasing or otherwise acquiring the Premises; provided Landlord's transferee
assumes and agrees, in writing, to be bound by all of Landlord's obligations
under this Lease including, without limitation, those pertaining to refund of
the security deposit.
RIDER 14.1 PERMITTED LEASE TRANSFERS:
(a) Notwithstanding the provisions of Article XIV to the contrary,
Landlord's consent shall not be required for, and the provisions of Sections
14.4, 14.5, 14.6 and 14.7 shall not apply to, the following events:
(i) any assignment of this Lease or sublease of all or a portion
of the Premises to any entity which is controlled by, under common control with,
or controls Tenant ("control" being defined as the ownership of equity interests
constituting fifty percent (50%) or more of the total voting power of all
outstanding equity interests of the entity over which control is asserted) (an
assignment to Target Therapeutics shall not require Landlord's consent);
(ii) any assignment of this Lease pursuant to a merger,
consolidation or reorganization of Tenant in which Tenant is the surviving
entity; or
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(iii) any assignment of this Lease to a company that purchases
all or substantially all of the assets of Tenant as a going concern; provided
that, with respect to assignments under this clause (iii), the following
requirements are met:
(A) The assignee has a net worth equal to or greater than
that of Tenant at the date of execution of this Lease;
(B) Tenant shall have given Landlord not less than fifteen
(15) days prior written notice of the assignment, which includes documentation
evidencing satisfaction of the foregoing requirement;
(C) No Event of Default shall have occurred and be
continuing at the time of the assignment; and
(D) The assignee assumes, in writing, and agrees to be
bound by all of the conditions, obligations and agreements of Tenant contained
in this Lease. Tenant shall provide a copy of such agreement to Landlord within
thirty (30) days after such assignment;
(iv) any sale of Tenant's capital stock in any transaction which
is registered pursuant to the Securities Act of 1933, as amended, and the
regulations thereunder, or which is issued for fair value in any transaction
which is exempt from such registration requirements;
(v) if Tenant's capital stock is publicly traded, any sale or
transfer of Tenant's capital stock on any public securities exchange;
(vi) any transfer of Tenant's capital stock by Tenant's
shareholders to or among Tenant's shareholders or members of their immediate
families or any such shareholder's testamentary, or inter-vivos trust or upon
the death of any such shareholder; or
(vii) any transfer of Tenant's capital stock by corporate or
partnership shareholders thereof to the equity holders of such corporate or
partnership shareholders.
ARTICLE XV
DEFAULTS AND REMEDIES
15.1 Tenant's Default. At the option of Landlord, a default under this
Lease by Tenant shall exist if any of the following events shall occur (each is
called an "Event of Default"):
(a) Tenant fails to pay the Rent payable hereunder, as and when due,
for a period of three (3) days after Notice by Landlord; provided, however, the
Notice given hereunder shall be in lieu of, and not in addition to, any notice
required under Section 1161, et seq., of the California Code of Civil Procedures
-- ----
so long as such notice conforms to the requirement of such Section 1161, et seq.
-- ----
(b) Tenant suffers to be made any transfer, assignment or subletting,
except as provided in Article XIV hereof;
(c) Any of Tenant's rights under this Lease are sold or otherwise
transferred by or under court order or legal process or otherwise or if any of
the actions described in Section 15.2 are taken by or against Tenant or any
Guarantor;
(d) The Premises are used for any purpose other than as permitted
pursuant to Article V. See Rider 15.1(d);
(e) Tenant abandons the Premises
(f) Any representation or warranty given by Tenant under or in
connection with this Lease proves to be materially false or misleading;
(g) Tenant fails to timely comply with the provisions of Article VI
("Hazardous Materials") See Rider 15.1(g), Article XIV ("Assignment and
Subletting"), Article XVI ("Subordination; Estoppel Certificate; Financials"),
Section 21.5 ("Modifications for Mortgagees") or Section 21.19 ("Authority"); or
(h) Tenant fails to observe, keep, perform or cure within fifteen (15)
days after Notice by Landlord any of the other terms, covenants, agreements or
conditions contained in this Lease or those set forth in any other agreements or
rules or regulations which Tenant is obligated to observe or perform. In the
event such default reasonably could not b cured or corrected within such fifteen
day period, but is reasonably susceptible to
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cure or correction, then Tenant shall not be in default hereunder if Tenant
commences the cure or correction of such default within such fifteen-day period
and diligently prosecutes the same to completion after commencing such cure or
correction. The Notice required by this subparagraph 15.1(h) shall be in lieu
of, and not in addition to, any notice required under Section 1161, et seq., of
------
the California Code of Civil Procedure; provided such notice conforms to the
requirements of such Section 1161, et seq.
------
Notices given under this Section 15.1 shall specify the alleged default
and shall demand that Tenant perform the provisions of this Lease or pay the
Rent that is in arrears, as the case may be, within the applicable period of
time, or quit the Premises. No such Notice shall be deemed a forfeiture or a
termination of this Lease unless Landlord so elects in the Notice.
15.2 Bankruptcy or Insolvency. In no event shall this Lease be assigned or
assignable by operation of law and in no event shall this Lease be an asset of
Tenant in any receivership, bankruptcy, insolvency or reorganization proceeding.
In the event:
(a) A court makes or enters any decree or order adjudging Tenant to be
insolvent, or approving as properly filed by or against Tenant a petition
seeking reorganization or other arrangement of Tenant under any provisions of
the Bankruptcy Code or any applicable state law, or directing the winding up or
liquidation of Tenant and such decree or order shall have continued for a period
of thirty (30) days.
(b) Tenant makes or suffers any transfer which constitutes a
fraudulent or otherwise avoidable transfer under any provisions of the
Bankruptcy Code or any applicable state law;
(c) Tenant assigns its assets for the benefit of its creditors; or
(d) The material part of the property of Tenant or any property
essential to Tenant's business or of Tenant's interest in this Lease is
sequestered, attached or executed upon, and Tenant fails to secure a return or
release of such property within thirty (30) days thereafter, or prior to sale
pursuant to such sequestration, attachment or levy, whichever is earlier;
then this Lease shall, at Landlord's election, immediately terminate and be of
no further force or effect whatsoever, without the necessity for any further
action by Landlord, except that Tenant shall not be relieved of obligations
which have accrued prior to the date of such termination. Upon such
termination, the provisions herein relating to the expiration or earlier
termination of this Lease shall control and Tenant shall immediately surrender
the Premises in the condition required by the provisions of this Lease.
Additionally, Landlord shall be entitled to all relief, including recovery of
damages from Tenant, which may from time to time be permitted, or recoverable,
under the Bankruptcy Code or any other applicable state laws.
15.3 Landlord's Remedies. Upon the occurrence of an Event of Default,
then, in addition to and without waiving any other rights and remedies available
to Landlord at law or in equity or otherwise provided in this Lease, Landlord
may, at its option, cumulatively or in the alternative, exercise the following
remedies:
(a) Landlord may terminate Tenant's right to possession of the
Premises, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. No act by Landlord other than
giving Notice to Tenant of Landlord's election to terminate Tenant's right to
possession shall terminate this Lease. Acts of maintenance, efforts to relet
the Premises, or the appointment of a receiver on Landlord's initiative to
protect Landlord's interest under this Lease shall not constitute a termination
of Tenant's right to possession. Termination shall terminate Tenant's right to
possession of the Premises but shall not relieve Tenant of any obligation under
this Lease which has accrued prior to the date of such termination. Upon such
termination, Landlord shall have the right to re-enter the Premises, and remove
all persons and property, and Landlord shall also be entitled to recover from
Tenant:
(i) The worth at the time of award of the unpaid Monthly Rent
and Additional Rent which had been earned at the time of termination;
(ii) The worth at the time of award of the amount by which the
unpaid Monthly Rent and Additional Rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided;
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(iii) The worth at the time of award of the amount by which the
unpaid Monthly Rent and Additional Rent for the balance of the Term after the
time of award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided;
(iv) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result from Tenant's default, including, but not limited to, the cost of
recovering possession of the Premises, commissions and other expenses of
reletting, including necessary repair, demolition and renovation of the Premises
to the condition existing immediately prior to Tenant's occupancy, the
unamortized portion of any Tenant improvements and brokerage commissions funded
by Landlord in connection with this Lease, the cost of rectifying any damage to
the Premises occasioned by the act or omission of Tenant, reasonable attorneys'
fees, and any other reasonable costs; and
(v) At Landlord's election, all other amounts in addition to or
in lieu of the foregoing as may be permitted by law.
As used in subsections (i) and (ii) above, the "worth at the time of award"
shall be computed by allowing interest at the maximum legal rate permitted by
law. As used in subsection (iii) above, the "worth at the time of award" shall
be computed by discounting the amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).
(b) Landlord may elect not to terminate Tenant's right to possession
of the Premises, in which event this Lease will continue in full force and
effect as long as Landlord does not terminate Tenant's right to possession, and
Landlord may continue to enforce all of its rights and remedies under this
Lease, including remedy provided by this subparagraph 15.3(b), Landlord shall
not unreasonably withhold its consent to an assignment or subletting of the
Premises subject to the reasonable standards for Landlord's consent as are
contained in this Lease. In addition, in the event Tenant has entered into a
sublease which is valid under the terms of this Lease, Landlord may also, at its
option, cause Tenant to assign to Landlord the interest of Tenant under said
sublease, including, but not limited to, Tenant's right to payment of Rent as it
becomes due. To the extent permitted by law, Landlord may elect to enter the
Premises and relet them, or any part of them, to third parties for Tenant's
account. Tenant shall be liable immediately to Landlord for all costs Landlord
reasonably incurs in reletting the Premises, including, but not limited to,
broker's commissions, expenses of cleaning and remodeling the Premises required
by the reletting, attorneys' fees and like costs. Reletting can be for a period
shorter or longer than the remaining Term of this Lease and for the entire
Premises or any portion thereof. Tenant shall pay to Landlord the Monthly Rent
and Additional Rent due under this Lease on the dates the Monthly Rent and such
Additional Rent are due, less the Rent Landlord actually collects from any
reletting. Except as provided in the preceding sentence, if Landlord relets the
Premises or any portion thereof, such reletting shall not relieve Tenant of any
obligation hereunder. Notwithstanding the above, no act by Landlord allowed by
this subparagraph 15.3(b) shall terminate this Lease unless Landlord notifies
Tenant in writing that Landlord elects to terminate this Lease.
15.4 No Surrender. Tenant waives any right of redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or
under any other present or future law in the event Tenant is evicted or Landlord
takes possession of the Premises by reason of an Event of Default. No act or
thing done by Landlord or Landlord's Agents during the Term shall be deemed an
acceptance of a surrender of the Premises, and no agreement to accept a
surrender shall be valid unless in writing and signed by landlord. No employee
of Landlord or of Landlord's Agents shall have any power to accept the keys to
the Premises prior to the termination of this Lease, and the delivery of the
keys to any employee shall not operate as a termination of this Lease or a
surrender of the Premises.
15.5 Interest on Late Payments. Any Rent due under this Lease that is not
paid to Landlord within three (3) days of the date when due shall commence to
bear interest at the Applicable Rate until fully paid. Neither the accrual nor
the payment of interest shall cure any default by Tenant under this Lease.
15.6 Attorneys' and Other Fees. All sums reasonably incurred by Landlord
in connection with an Event of Default or holding over of possession by Tenant
after the expiration or termination of this Lease,
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including, but not limited to, all costs, expenses and actual accountants',
appraisers', attorneys' and other professional fees, and any collection agency
or other collections charges, shall be due and payable by Tenant to Landlord on
demand, and shall bear interest at the Applicable Rate from the date of such
demand until paid by Tenant. In addition, in the even that any action shall be
instituted by either of the parties hereto for the enforcement of any of its
rights in and under this Lease, the party in whose favor judgment shall be
rendered shall be entitled to recover from the other party all expenses
reasonably incurred by the prevailing party in such action, including actual
costs and reasonable attorneys' fees.
15.7 Landlord's Default. Landlord shall not be deemed to be in default in
the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within a reasonable
time, not to exceed thirty (30) days after receipt of Notice by Tenant to
Landlord (and the Mortgagees who have provided Tenant with notice) specifying
the nature of such default; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for its
performance, then Landlord shall not be deemed to be in default if it shall
commence such performance within such thirty (30) day period and thereafter
diligently prosecutes the same to completion. See Rider 15.7.
15.8 Limitation of Landlord's Liability. The obligations of the Landlord
do not constitute the personal obligations of the individual partners, trustees,
directors, officers or shareholders of Landlord or its constituent partners. If
Landlord shall fail to perform any covenant, term, or condition of this Lease
upon Landlord's part to be performed, Tenant shall be required to deliver to
Landlord Notice of the same. If, as a consequence of such default, Tenant shall
recover a money judgment against Landlord, such judgment shall be satisfied only
out of the proceeds of sale received upon execution of such judgment and levied
thereon against the right, title and interest of Landlord in the Project and out
of rent or other income from such property receivable by Landlord or out of
consideration received by Landlord from the sale or other disposition of all or
any part of Landlord's right, title or interest in the Project, and no action
for any deficiency may be sought or obtained by Tenant, provided, however, that
the total of all liens and encumbrances against the Project shall not exceed
70% of its appraised value.
15.9 Mortgagee Protection. Upon any default on the part of Landlord,
Tenant will give notice by registered or certified mail to any Mortgagee who has
provided Tenant with notice of its interest together with an address for
receiving notice, and shall offer such Mortgagee a reasonable opportunity to
cure the default. Tenant agrees that each of the Mortgagees to whom this Lease
has been assigned by Landlord is an express third party beneficiary hereof.
Tenant shall not make any prepayment of Monthly Rent more than one (1) month in
advance without the prior written consent of such Mortgagee. Tenant waives any
right under California Civil Code Section 1950.5 or any other present or future
law to the collection of any deposit from such Mortgagee or any purchaser at a
foreclosure sale of such Mortgagee's interest unless such Mortgagee or such
purchaser shall have actually received and not refunded the deposit. In such
case, Landlord shall remain fully liable for the refund of all deposits. Tenant
agrees to make all payments under this Lease to the Mortgagee upon receiving a
direction, in writing, to pay said amounts to such Mortgagee. Tenant shall
comply with such written direction to pay without determining whether an even of
default exists under such Mortgagee's load to Landlord.
15.10 Landlord's Right to Perform. If Tenant shall at any time fail to
make any payment or perform any other act on its part to be made or performed
under this Lease, Landlord may (but shall not be obligated to), at Tenant's
expense, and without waiving or releasing Tenant from any obligation of Tenant
under this Lease, make such payment or perform such other act to the extent
Landlord may deem desirable, and in connection therewith, pay expenses and
employ counsel. All sums paid by Landlord and all penalties, interest and
costs, including, but not limited to, collection costs and attorneys' fees
reasonably incurred in connection therewith, shall be due and payable by Tenant
to Landlord, as an item of Additional Rent, on demand by Landlord, together with
interest thereon at the Applicable Rate from the date of such demand until paid
by Tenant.
15.11 Limitation of Actions Against Landlord. Any claim, demand or right
of any kind by Tenant which is based upon or arises in connection with this
Lease shall be barred unless Tenant commences an action thereon within one (1)
year after the date Tenant discovers the act, omission, event or default upon
which the claim, demand or right arises.
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15.12 Waiver of Jury Trial. To the full extent permitted by law, Tenant
hereby waives the right to trial by jury in any action, proceeding or
counterclaim brought by Tenant on any matter whatsoever arising out of or in any
way connected with this Lease, the relationship of Landlord and Tenant, Tenant's
use or occupancy of the Premises and/or any claim of injury or damage.
RIDER 15.1 TENANT'S DEFAULT.
(d) ; provided, however, if a use other than the permitted use is
undertaken by Tenant in a good faith belief that such use is in fact a permitted
use, and if such unauthorized use is terminated within fifteen (15) days Notice
from Landlord, such use shall not constitute an Event of Default hereunder.
(g) (with respect to Tenant's failure to comply with the disclosure
and/or reporting requirements of Article VI, no Event of Default shall occur
until after Notice from Landlord with respect to such matters)
RIDER 15.7 LANDLORD'S DEFAULT.
In the event Landlord, after Notice, has failed to perform an
obligation required of it, and the nature of such failure is such that, if such
obligation is not immediately performed imminent personal injury or property
damage will ensue, Tenant shall have the right to perform such obligation on
Landlord's behalf and to invoice Landlord for the reasonable costs incurred by
Tenant in performing such obligation.
ARTICLE XVI
SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS
16.1 Subordination, Attornment and Non-Disturbance. Without the necessity
of any additional document being executed by Tenant for the purpose of effecting
a subordination, and at the election of Landlord or any Mortgagee or any ground
lessor with respect to the land of which the Premises are a part, this Lease
shall be subject and subordinate at all times to (i) all ground leases or
underlying leases which may now exist or hereafter be executed affecting the
Building, and (ii) the lien of any Mortgage which may now exist or hereafter be
executed in any amount for which the Project, the Building, ground leases or
underlying leases, or Landlord's interest or estate in any of said items is
specified as security. Landlord or any such Mortgagee or ground lessor shall
have the right, at its election, to subordinate or cause to be subordinated any
such ground leases or underlying leases or any such liens to this Lease. No
subordination shall permit material interference with Tenant's rights or
increase its obligations or liability hereunder, and any ground lessor or
Mortgagee shall recognize Tenant and its permitted successors and assigns as the
tenant of the Premises and shall not disturb Tenant's right to quiet possession
of the Premises during the Term so long as no Event of Default has occurred and
is continuing under this Lease. If Landlord's interest in the Premises is
acquired by any ground lessor or Mortgagee, or in the event proceedings are
brought for the foreclosure of, or in the event of exercise of the power of sale
under, any Mortgage made by Landlord covering the Premises or any part thereof,
or in the event a conveyance in lieu of foreclosure is made for any reason,
Tenant shall, notwithstanding any subordination and upon the request of such
successor in interest to Landlord, attorn to and become the Tenant of the
successor in interest to Landlord and recognize such successor in interest as
the Landlord under this Lease provided such successor in interest assumes and
agrees to be bound by, in writing, all of Landlord's obligations under this
Lease. Although this Section 16.1 is self-executing, Tenant covenants and
agrees to execute and deliver, upon demand by Landlord and in the form requested
by Landlord, or any Mortgagee or ground lessor, any additional documents
evidencing the priority or subordination of this Lease with respect to any such
ground leases or underlying leases or the lien of any such Mortgage, or
evidencing the attornment of Tenant to any successor in interest to Landlord as
herein provided. Tenant's failure to timely execute and deliver such additional
documents shall, at Landlord's option, constitute an Event of Default hereunder.
Landlord represents that no Mortgage currently encumbers the Premises.
16.2 Estoppel Certificate. Tenant shall within ten (10) days following
written request by Landlord, execute and deliver to landlord any documents,
including estoppel certificates, in a form required by Landlord (i) certifying
that this Lease is unmodified and in full force and effect or, if modified,
attaching a copy of such modification and certifying that this Lease, as so
modified, is in full force and effect and the date to which the Rent
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and other charges are paid in advance, if any, (ii) acknowledging that there are
not, to Tenant's knowledge, any uncured defaults on the part of the Landlord or
stating the nature of any uncured defaults, (iii) evidencing the status of this
Lease as may be required by a Mortgagee or a purchaser of the Premises, (iv)
certifying the current Monthly Rent amount and the amount and form of Security
deposit on deposit with Landlord, and (v) certifying to such other information
regarding the status of the Lease as Landlord, Landlord's Agents, Mortgagees and
prospective purchasers may reasonably request, including, but not limited to,
any requested information regarding Hazardous Materials. Tenant's failure to
deliver an estoppel certificate within ten (10) days after delivery of
Landlord's written request therefor shall constitute an Event of Default
hereunder. See Rider 16.2.
RIDER 16.2 ESTOPPEL CERTIFICATE.
Landlord shall, within twenty (20) days following written request by
Tenant, execute and deliver to Tenant Estoppel Certificates similar to the
Estoppel Certificates referenced above.
ARTICLE XVII
SIGNS AND GRAPHICS
Landlord shall designate the location on the Premises, for one (1) or more
exterior identification signs for Tenant. Tenant shall have no right to
maintain identification signs in any other location in, on or about the Premises
and shall not display or erect any other signs, displays or other advertising
materials that are visible from the exterior of the Building. The size, design,
color and other physical aspects of permitted signs shall be subject to
Landlord's written approval prior to installation, which approval may be
withheld in Landlord's discretion, any Restrictions and any applicable municipal
or other governmental permits and approvals. All such signs and graphics shall
conform to the Sign Criteria set forth by the Property Manager. The cost of all
signs and graphics, including the installation, maintenance and removal thereof,
shall be at Tenant's sole cost and expense. If Tenant fails to maintain its
signs, or if Tenant fails to remove same upon termination of this Lease and
repair any damage caused by such removal (including, but not limited to,
repainting the affected area, if required by Landlord), Landlord may do so at
Tenant's expense. All sums reasonably disbursed, deposited or incurred by
Landlord in connection with such removal, including, but not limited to, all
costs, expenses and actual attorneys' fees, shall be due and payable by Tenant
to Landlord on demand by landlord, together with interest thereon at the
Applicable Rate from the date of such demand until paid by Tenant.
ARTICLE XVIII
QUIET ENJOYMENT
Landlord covenants that Tenant, upon performing the terms, conditions and
covenants of this Lease, shall have quiet and peaceful possession of the
Premises as against any person claiming the same by, through or under Landlord.
ARTICLE XIX
SURRENDER; HOLDING OVER
19.1 Surrender of the Premises. Upon the expiration or earlier termination
of this Lease, Tenant shall surrender the Premises to Landlord in its condition
existing as of the Commencement Date, normal wear and tear, casualty damage and
acts of God excepted, with all interior walls in good repair, all carpets
shampooed and cleaned, the HVAC equipment, plumbing, electrical and other
mechanical installations in good operating order and all floors cleaned and
waxed, all to the reasonable satisfaction of Landlord. Tenant shall remove from
the Premises all of Tenant's Alterations which Landlord requires Tenant to
remove pursuant to Section 8.1 and all Tenant's Personal Property, and shall
repair any damage and perform any restoration work caused by such removal. If
Tenant fails to remove such Alterations and Tenant's Personal Property which
Tenant is authorized and obligated to remove pursuant to the above, and such
failure continues after the termination of this Lease, Landlord may retain such
property and all rights of Tenant with respect to it shall cease, or Landlord
may place all or any portion of such property in public storage for Tenant's
account. Tenant shall pay to Landlord, upon demand, the costs of removal
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of any such Alterations and Tenant's Personal Property and storage and
transportation costs of same, and the cost of repairing and restoring the
Premises, together with attorneys' fees and interest on said amounts at the
Applicable Rate from the date of expenditure by Landlord. If the Premises are
not so surrendered at the termination of this Lease, Tenant hereby agrees to
indemnify Landlord and Landlord's Agents against all loss or liability resulting
from any delay by Tenant in so surrendering the Premises, including, but not
limited to, any claims made by any succeeding tenant, losses to Landlord due to
lost opportunities to lease to succeeding tenants, and actual attorneys' fees
and costs.
19.2 Holding Over. If Tenant remains in possession of all or any part of
the Premises after the expiration of the Term with the prior written consent of
Landlord, such possession shall constitute a month-to-month tenancy only and
shall not constitute a renewal or extension for any further term. If Tenant
remains in possession of all or any part of the Premises after the expiration of
the Term without the prior written consent of Landlord, such possession shall
constitute a tenancy at sufferance. In either of such events, Monthly Rent
shall be increased to an amount equal to one hundred fifty percent (150%) of the
Monthly Rent payable during the last month of the Term, and any other sums due
hereunder shall be payable in the amounts and at the times specified in this
Lease. Any such tenancy shall be subject to every other term, condition, and
covenant contained in this Lease.
ARTICLE XX
CONSTRUCTION OF TENANT IMPROVEMENTS
The obligations of Landlord and Tenant, if any, with respect to the Tenant
Improvements, are set forth in the Work Letter attached as Exhibit C. It is
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acknowledged and agreed that all Tenant Improvements under this Lease are and
shall be the property of Landlord from and after their installation.
ARTICLE XXI
MISCELLANEOUS AND INTERPRETIVE PROVISIONS
21.1 Broker. Landlord and Tenant each warrant and represent to the other
that neither has had any dealings with any real estate broker, agent or finder
in connection with the negotiation of this Lease or the introduction of the
parties to this transaction, except for the Broker (whose commission shall be
paid by Landlord), and that it knows of no other real estate broker, agent or
finder who is or might be entitled to a commission or fee in connection with
this Lease. In the event of any additional claims for brokers' or finders' fees
with respect to this Lease, Tenant shall indemnify, hold harmless, protect and
defend Landlord from and against such claims if they shall be based upon any
statement or representation or agreement made by Tenant, and Landlord shall
indemnify, hold harmless, protect and defend Tenant from and against such claims
if they shall be based upon any statement, representation or agreement made by
Landlord.
21.2 Examination of Lease. Submission of this Lease for examination or
signature by Tenant does not create a reservation of or option to lease. This
Lease shall become effective and binding only upon full execution of this Lease
by both Landlord and Tenant.
21.3 No Recording. Tenant shall not record this Lease without Landlord's
prior written consent, but if either party requests, the other party agrees to
execute, have acknowledged and deliver a memorandum of this Lease in recordable
form which the requesting party thereafter may file for record.
21.4 Quitclaim. Upon any termination of this Lease, Tenant shall, at
Landlord's request, execute, have acknowledged and deliver to Landlord an
instrument in writing releasing and quitclaiming to Landlord all right, title
and interest of Tenant in and to the Premises by reason of this Lease or
otherwise.
21.5 Modifications for Mortgagees. If in connection with obtaining
financing for the Premises or any portion thereof, Landlord's Mortgagees shall
request reasonable modifications to this Lease as a condition to such financing,
Tenant shall not unreasonably withhold, delay or defer its consent thereto,
provided such modifications do not adversely affect Tenant's rights hereunder or
increase Tenant's obligations hereunder. Tenant's failure to so consent shall
constitute an Event of Default under this Lease.
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21.6 Notice. Any Notice required or desired to be given under this Lease
shall be in writing and shall be addressed to the address of the party to be
served. The addresses of Landlord and Tenant are as set forth in Items 1 and 3,
respectively, of the basic Lease Provisions, except that (a) prior to the
Commencement Date, the address for Notices to Tenant shall be as set forth
opposite Tenant's signature on this Lease and (b) from and after the
Commencement Date, notwithstanding the addresses for Tenant set forth in Item 3
of the Basic Lease Provisions, all Notices regarding the operation and
maintenance of the Project shall be delivered to Tenant at the Premises. Each
such Notice shall be deemed effective and given (i) upon receipt, if personally
delivered (which shall include delivery by courier or overnight delivery
services), (ii) upon being telephonically confirmed as transmitted, if sent by
telegram, telex or telecopy, (iii) two (2) business days after deposit in the
United States mail in Santa Clara County or in the county in which the Premises
are located, certified and postage prepaid, properly addressed to the party to
be served, or (iv) upon receipt if sent in any other way. Any party hereto may
from time to time, by Notice to the other in accordance with this Section 21.6,
designate a different address than that set forth above for the purposes of
Notice.
21.7 Captions. The captions and headings used in this Lease are for the
purpose of convenience only and shall not be construed to limit or extend the
meaning of any part of this Lease.
21.8 Executed Copy. Any fully executed copy of this Lease shall be deemed
an original for all purposes.
21.9 Time. Time is of the essence for the performance of each term,
condition and covenant of this Lease.
21.10 Severability. If any one or more of the provisions contained herein
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality, or unenforcability shall not affect any
other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had not been contained herein.
21.11 Survival. All covenants and indemnities set forth herein which
contemplate the payment of sums, or the performance by Tenant after the Term or
following an Event of Default, including specifically, but not limited to, the
covenants and indemnities set forth in Section 5.3, Article VI, Article VII,
Section 8.1, Section 9.2, Section 11.1, Section 11.10, Article XV, and Article
XIX, and all representations and warranties of Tenant, shall survive the
expiration or sooner termination of this Lease. The foregoing sentence shall
not be construed as imposing on Tenant any obligation or liability that did not
accrue, according to the terms of this Lease, during the Term of this Lease.
21.12 Choice of Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California. The language in all parts
of this Lease shall in all cases be construed as a whole according to its fair
meaning and not strictly for or against either Landlord or Tenant.
21.13 Gender; Singular, Plural. When the context of this Lease requires,
the neuter gender includes the masculine, the feminine, a partnership or
corporation or joint venture, the singular includes the plural and the plural
includes the singular.
21.14. Non-Agency. It is not the intention of Landlord or Tenant to
create hereby a relationship of master-servant or principal-agent, and under no
circumstance shall Tenant herein be considered the agent of Landlord. It being
the sole purpose and intent of the parties hereto to create a relationship of
landlord and tenant.
21.15 Successors. The terms, covenants, conditions and agreements
contained in this Lease shall, subject to the provisions as to assignment,
subletting, and bankruptcy contained herein and any other provisions restricting
successors or assigns, apply to and bind the heirs, successors, legal
representatives and assigns of the parties hereto.
21.16 Waiver; Remedies Cumulative. The waiver by either party of any
term, covenant, agreement or condition herein contained shall not be deemed to
be a waiver of any subsequent breach of the same or any other term, covenant,
agreement or condition herein contained, nor shall any custom or practice
which may grow up between the parties in the administration of this Lease be
construed to waive or to lessen the right of Landlord to insist upon the
performance by Tenant in strict accordance with all of the provisions of this
Lease. The subsequent
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acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of
any preceding breach by Tenant of any provisions, covenant, agreement or
condition of this Lease, other than the failure of Tenant to pay the
particular Rent payment so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such Rent payment.
Landlord's acceptance of any check, letter or payment shall in no event be
deemed an accord and satisfaction, and Landlord shall accept the check, letter
or payment without prejudice to Landlord's right to recover the balance of the
Rent or pursue any other remedy available to it. The rights and remedies of
either party under this Lease shall be cumulative and in addition to any and
all other rights and remedies which either party has or may have.
21.17 Unavoidable Delay. Except for the monetary obligations of Landlord
and Tenant under this Lease, neither party shall be chargeable with, liable for,
or responsible to the other for anything or in any amount for any Unavoidable
Delay and any Unavoidable Delay shall not be deemed a breach of or default in
the performance of this Lease, it being specifically agreed that any time limit
provision contained in this Lease (other than the scheduled expiration of the
Term) shall be extended for the same period of time lost by Unavoidable Delay.
21.18 Entire Agreement. This Lease is the entire agreement between the
parties, and supersedes any prior agreements, representations, negotiations or
correspondence between the parties except as expressed herein. Except as
otherwise provided herein, no subsequent change or addition to this Lease shall
be binding unless in writing and signed by the parties hereto.
21.19 Authority. If Tenant is a corporation or a partnership, each
individual executing this Lease on behalf of the corporation or partnership, as
the case may be, represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of said entity in accordance with its corporate
bylaws, statement of partnership or certificate of limited partnership, as the
case may be, and that this Lease is binding upon said entity in accordance with
its terms. If Tenant is a corporation, Tenant shall, if requested by Landlord,
within thirty (30) days after execution of this Lease and prior to entering into
possession of the Premises, deliver to Landlord a certified copy of a resolution
of the Board of Directors of the corporation or certificate of the Secretary of
the corporation, authorizing, ratifying or confirming the execution of this
Lease. If Tenant is a partnership, Tenant shall, if requested by Landlord,
within thirty (30) days after the execution of this Lease and prior to entering
into possession of the Premises, deliver to Landlord a certified copy of its
partnership agreement authorizing such execution.
21.20 Guaranty. As a condition to the execution of this Lease by
Landlord, the obligations, covenants and performance of the Tenant as herein
provided shall be guaranteed in writing by the Guarantor listed in Item 14 of
the Basic Lease Provisions.
21.21 Exhibits; References. All exhibits, amendments, riders and addenda
attached to this Lease are hereby incorporated into and made a part of this
Lease. In the event of variation or discrepancy, the duplicate original hereof
(including exhibits, amendments, riders and addenda, if any, specified above)
held by Landlord shall control. All references in this Lease to Articles,
Sections, Exhibits, Riders and clauses are made, respectively, to Articles,
Sections, Exhibits, Riders and clauses of this Lease, unless otherwise
specified.
21.22 Basic Lease Provisions. The Basic Lease Provisions at the beginning
of this Lease are intended to provide general information only. In the event of
any inconsistency between the Basic Lease Provisions and the specific provisions
of this Lease, the specific provisions of this Lease shall prevail.
21.23 No Merger. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, or a termination by Landlord, shall
not work a merger, and shall, at the option of Landlord, terminate all or any
existing subtenancies or may, at the option of Landlord, operate as an
assignment to Landlord of any or all such subtenancies.
21.24 Joint and Several Obligations. If more than one person or entity is
Tenant, the obligations imposed on each such person or entity shall be joint and
several.
21.25 No Light or Air Easement. Any diminution or shutting off of light
or air by any structure which may be erected on lands adjacent to the Building
shall in no way affect this Lease, abate Rent or otherwise impose any liability
on Landlord. This Lease does not confer any right with regard to the subsurface
below the ground level of the Building.
41
<PAGE>
21.26 Security Measures. Tenant hereby acknowledges that Landlord shall
have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises or the Project. Tenant assumes all
responsibility for the protection of Tenant, Tenant's Agents and the property of
Tenant and of Tenant's Agents from acts of third parties. Nothing herein
contained shall prevent Landlord, at Landlord's sole option, from providing
security protection for the Project or any part thereof, in which event the cost
thereof shall be included within the definition of Project Costs and paid by
Tenant in the manner set forth in Section 7.1.
THIS LEASE is effective as of the date the last signatory necessary to
execute this Lease shall have executed this Lease.
"LANDLORD"
STATE OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
By: Alex. Brown Kleinwort Benson Realty
Advisors Corporation
Its: Advisor and Duly Authorized Agent
By: /s/ Richard Cunningham
----------------------------
Richard Cunningham
Its: Senior Vice President
By: /s/ Joseph R. Shea
------------------------
Joseph R. Shea
Its: Senior Vice President
ADDRESS FOR NOTICES
PRIOR TO
COMMENCEMENT DATE:
"TENANT"
CARDIMA, INC.,
4720 Lakeview Blvd. A California corporation
Fremont, CA 94537
By: /s/ Gabriel B. Vegh
-------------------------
Name: Gabriel B. Vegh
Title: President
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
42
<PAGE>
RIDER 21.27
21.27(a) $600,000 Letter of Credit. Upon execution of this Lease,
-------------------------
Tenant shall deliver to Landlord a $600,000 letter of credit (the "$600,000
Letter of Credit"). The $600,000 Letter of Credit shall be issued by Silicon
Valley Bank, shall have an expiration date no earlier than October 31, 1994,
shall name Landlord as beneficiary thereunder and shall be a "clean" letter of
credit payable, in whole or in part, upon presentation of Landlord's sight
draft. Landlord shall be entitled to draw upon the $600,000 Letter of Credit
(i) upon the occurrence of an Event of Default under the Lease, and/or (ii) if
the $600,000 Letter of Credit, or any renewal or replacement thereof, shall not
be renewed or replaced (with a substitute satisfactory to Landlord) at least
fifteen (15) days prior to the expiration date thereof. Landlord shall be
entitled to draw upon the $600,000 Letter of Credit in an amount sufficient to
cure any then-current Event of Default and, if Landlord shall have terminated
this Lease because of an Event of Default hereunder, or if Landlord shall be
entitled to draw upon it because of pending expiration thereof pursuant to
clause (ii) of the preceding sentence, Landlord shall be entitled to draw upon
the entire amount of the $600,000 Letter of Credit. Landlord shall deliver the
original $600,000 Letter of Credit to Tenant upon delivery to Landlord of (A) a
certificate executed by the president of Tenant certifying that Tenant has,
after the date of execution of this Lease, received, in immediately available
funds, additional equity capital in the amount of at least $6,570,000 and (B) a
standby letter of credit conforming to the terms set forth in the following
subsection.
(b) Standby Letter of Credit. The standby letter of credit referred to in
------------------------
subsection (a) above (i) shall be issued by a financial institution that is
reasonably acceptable to Landlord, (ii) shall name Landlord as the beneficiary
thereunder, and (iii) shall be payable upon delivery of Landlord's sight draft.
Such letter of credit shall be renewed annually during the initial Term of the
Lease and shall provide for payment up to the amounts set forth below, plus the
unamortized balance of the "Additional Allowance", if any, funded by Landlord
pursuant to Exhibit C to this Lease:
<TABLE>
<CAPTION>
Period Amount
----------------------------------------- --------
<S> <C>
Commencement - 07/30/95 $200,000
08/01/95 - 07/31/96 160,000
08/01/96 - 07/31/97 120,000
08/01/97 - 07/31/98 80,000
08/01/98 - Expiration 40,000
</TABLE>
Landlord shall be entitled to draw upon the standby letter of credit (i)
upon the occurrence of an Event of Default under the Lease, and/or (ii) if the
standby letter of credit, or any renewal or replacement thereof, shall not be
renewed or replaced (with a substitute satisfactory to Landlord) at least
fifteen (15) days prior to the expiration date thereof. Landlord shall be
entitled to draw upon the standby letter of credit in an amount sufficient to
cure any then-current Event of Default and, if Landlord shall have terminated
this Lease because of an Event of Default hereunder, or if Landlord shall be
entitled to draw upon it because of pending expiration thereof pursuant to
clause (ii) of the preceding sentence, Landlord shall be entitled to draw upon
the entire amount of the standby letter of credit.
43
<PAGE>
LEASE RIDER NO. ONE
-------------------
OPTION TO EXTEND TERM
(FAIR MARKET VALUE ADJUSTMENT)
THIS LEASE RIDER is attached to and made a part of that certain Standard
Form Lease dated April 25, 1994, by and between State of California Public
Employees' Retirement System as "Landlord", and Cardima, Inc., a California
corporation as "Tenant", for the Premises known as 47266 Benicia Street,
Fremont, California.
The capitalized terms used and not otherwise defined herein shall have the
same definitions as set forth in the Lease. The provisions of this Lease Rider
shall supersede any inconsistent or conflicting provisions of the Lease.
A. Option to Extend Term.
----------------------
1. Grant of Option. Landlord hereby grants to Tenant the option (the
----------------
"Option") to extend the Term of the Lease for an additional consecutive term of
five (5) years and zero (0) months (the "Extension"), on the same terms and
conditions as set forth in the Lease, except the Monthly Rent shall be the
amount determined as set forth below. The Option shall be exercised only by
written notice delivered to Landlord at least one hundred twenty (120) days
before the expiration of the initial Term of the Lease. If Tenant fails to
deliver to Landlord written notice of the exercise of the Option within the time
period prescribed above, the Option shall lapse and there shall be not further
right to extend the Term of the Lease. The Option shall be exercisable by
Tenant on the express conditions that (i) at the time of the exercise of the
Option, and thereafter at all times prior to the commencement of the Extension,
an Event of Default shall not have occurred and be continuing under the Lease.
If Tenant properly exercises the Option, "Term", as used herein and in the
Lease, shall be deemed to include the Extension, unless specified otherwise
herein or in the Lease.
2. Personal Option. The Option is personal to Tenant. If Tenant
----------------
subleases or assigns or otherwise transfers any interest under the Lease prior
to the exercise of the Option, other than as permitted in Rider 14.1, the Option
shall lapse. If Tenant subleases or assigns or otherwise transfers any interest
of Tenant under the Lease after the exercise of the Option but prior to the
Commencement of the Extension, the Option shall lapse and the Term of the Lease
shall expire as if the option were not exercised.
B. Calculation of Monthly Rent.
----------------------------
1. Initial Monthly Rent. The Monthly Rent during the Extension shall be
---------------------
adjusted, as of the commencement of the Extension (the "Rental Adjustment Date")
to 95% of the "Fair Market Value" of the Premises, determined in the following
manner: Not later than one hundred (100) days prior to the Rental Adjustment
Date, Landlord and Tenant shall meet in an effort to negotiate, in good faith,
the Fair Market Value of the Premises as of the Rental Adjustment Date. If
Landlord and Tenant have not agreed upon the Fair Market Value of the Premises
at least ninety (90) days prior to the Rental Adjustment Date, the Fair Market
Value shall be determined by the following appraisal method:
(i) If Landlord and Tenant are not able to agree upon the Fair Market
Value of the Premises within the time period described above, then Landlord and
Tenant shall attempt to agree in good faith upon a single appraiser not later
than seventy-five (75) days prior to the Rental Adjustment Date. If Landlord
and Tenant are unable to agree upon a single appraiser within such time period,
then Landlord and Tenant shall each appoint one appraiser not later than sixty-
five (65) days prior to the Rental Adjustment Date, and Landlord and Tenant
shall each give written notice to the other of such appointment at the time of
such appointment. Within ten (10) days thereafter, the two appointed appraisers
shall appoint a third appraiser. If either Landlord or Tenant fails to appoint
its appraiser and to give written notice thereof to the other party within the
prescribed time period, the single appraiser appointed shall determine the Fair
Market Value of the Premises. If both parties fail to appoint appraisers within
the prescribed time periods, then the first appraiser thereafter selected by a
party (such selection to be by written notice thereof to such appraiser and the
other party) shall determine the Fair Market Value of the Premises. Each party
shall bear the cost of its own appraiser and the parties shall have at least
five (5) years' experience in the appraisal of commercial/industrial real
property in the area in which the Premises are located and shall be members of
professional organizations such as MAI or its equivalent.
44
<PAGE>
(ii) For the purposes of such appraisal, the term "Fair Market Value"
shall mean the price that a ready and willing tenant would pay, as of the Rental
Adjustment Date, as monthly rent, to a ready and willing Landlord of property
comparable to the Premises if such property were exposed for lease on the open
market for a reasonable period of time and taking into account all of the
purposes for which such property may be used. See Option Rider One (A). If a
single appraiser is chosen, then such appraiser shall determine the Fair Market
Value of the Premises. Otherwise, the Fair Market Value of the Premises shall
be the arithmetic average of the two (2) of the three (3) appraisals which are
closest in amount, and the third appraisal shall be disregarded. Landlord and
Tenant shall instruct the appraiser(s) to complete their determination of the
Fair Market Value not later than thirty (30) days prior to the Rental Adjustment
Date. If the Fair Market Value is not determined prior to the Rental Adjustment
Date, then Tenant shall continue to pay to Landlord the Monthly Rent applicable
to the Premises immediately prior to the Rental Adjustment Date until the Fair
Market Value is determined. When the Fair Market Value of the Premises is
determined, Landlord shall deliver notice thereof to Tenant, and Tenant shall
pay to Landlord, within ten (10) days after receipt of such notice, the
difference between the Monthly Rent actually paid by Tenant to Landlord for the
period after the Rental Adjustment Date and the new Monthly Rent determined
hereunder effective as of the Rental Adjustment Date.
RIDER ONE(A) EXTENSION OPTION, FAIR MARKET VALUE:
In determining the Fair Market Value of the Premises, the appraiser(s)
shall take into account a mix of economic and other relevant factors, including,
without limitation (i) the size, age and condition of the premises, excluding
the value of any leasehold improvements paid for by Tenant but including those
tenant improvements paid for by the "Allowance" (as defined in the Work Letter
Agreement), (ii) the services provided by Landlord under the terms of the Lease;
(iii) the duration of the extended term; (iv) the presence or absence of leasing
commissions and marketing costs; (v) the allocation of Operating Expenses, other
costs and expenses, and maintenance obligations between Landlord and Tenant as
provided in the Lease; and (vi) the rental and other monetary payments
(including any escalations and rental concessions) then being offered by
landlords of comparable properties for new leases.
45
<PAGE>
LEASE RIDER NO. TWO
-------------------
SPECIAL TAX PROVISIONS
(CALPERS)
THIS LEASE RIDER is attached to and made apart of that certain Standard
Form Lease dated May 2, 1994 , by and between State of California Public
--------------- -----------------------------
Employees' Retirement System , as "Landlord", and Cardima, Inc., a
- ---------------------------- ----------------
California corporation , as "Tenant", for the Premises known as 47266
- ---------------------- ----------
Benicia Street, Fremont , California.
- -----------------------
The capitalized terms used and not otherwise defined herein shall have the
same definitions as set forth in the Lease. The provisions of this Lease Rider
shall supersede any inconsistent or conflicting provisions of the Lease.
TO BE ADDED TO THE END OF THE DEFINITION OF "REAL PROPERTY TAXES":
Tenant acknowledges that Landlord is an agency of the State of California
and as such is exempt from the payment of ad valorem Real Property Taxes under
Section 3A of Article 13 of the California Constitution. Tenant acknowledges
that, despite such exemption, a Real Property Tax may be imposed upon the value
of the possessory interest in the Premises held by Tenant pursuant to California
Revenue and Taxation Code Section 107, et seq., as the same may be revised,
-- ---
amended or replaced from time to time (the "possessory interest tax"), and that
the value of the possessory interest may be determined as of the Commencement
Date of the Lease or as of such later date as may be determined by the
applicable taxing entity. The term "Real Property Taxes" as defined herein
shall include the possessory interest tax. Tenant shall pay the possessory
interest tax to Landlord as part of its payment of Real Property Taxes under the
terms and provisions of Article VII of the Lease. The full cash value, as
defined in Sections 110 and 110.1 of the Revenue and Taxation Code, of the
possessory interest, upon which property taxes will be based, shall equal the
greater of (A) the full cash value of the possessory interest, or (B) if Tenant
has leased less than all of the Project, the Tenant's allocable share of the
full cash value of the Project that would have been enrolled if the Project had
been subject to property tax upon acquisition by Landlord. Tenant's allocable
share shall be the Tenant's leaseable square feet divided by the total leasable
square feet of the Project.
46
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF PREMISES
This Exhibit is attached to and made a part of that certain Standard Form
Lease dated April 25, 1994, by and between State of California Public Employees'
Retirement System as "Landlord", and Cardima, Inc., a California corporation as
"Tenant", for the Premises known as 47266 Benicia Street, Fremont, California.
First level floor plan graphic.
47
<PAGE>
EXHIBIT B
---------
PROJECT SITE
------------
This Exhibit is attached to and made a part of that certain Standard Form
Lease dated April 25, 1994, by and between State of California Public Employees'
Retirement System as "Landlord", and Cardima, Inc., a California corporation as
"Tenant", for the Premises known as 47266 Benicia Street, Fremont, California.
Map of Project Site graphic.
48
<PAGE>
EXHIBIT C
---------
WORK LETTER
(TENANT IMPROVEMENT ALLOWANCE)
(PENDING PRELIMINARY PLANS)
This Exhibit is attached to and made a part of that certain Standard Form
Lease dated April 25, 1994, by and between State of California Public Employees'
Retirement System as "Landlord", and Cardima, Inc., a California corporation as
"Tenant", for the Premises known as 47266 Benicia Street, Fremont, California.
1. APPLICATION OF EXHIBIT
Capitalized terms used and not otherwise defined herein shall have the same
definitions as set forth in the Lease. The provisions of this Work Letter shall
apply to the planning and completion of leasehold improvements requested by
Tenant (the "Tenant Improvements") for the fitting out of the initial Premises,
as more fully set forth herein.
2. LANDLORD AND TENANT PRE-CONSTRUCTION OBLIGATIONS
(a) Preliminary Plans. Within five (5) business days following full
execution of this Lease by both Landlord and Tenant, Landlord's Architect shall
prepare preliminary space plans, and a preliminary general budget, for the
Tenant Improvements (the "Preliminary Plans") which shall include, without
limitation, sketches and/or drawings showing the locations of doors,
partitioning, electrical fixtures, outlets and switches, plumbing fixtures,
floor loads and other requirements, and a list of all specialized installations
and improvements and upgrade specifications determined by Tenant as required for
its use of the Premises. Tenant agrees to and shall promptly and fully
cooperate with Landlord's Architect and shall supply all information Landlord's
Architect deems necessary for the preparation of the Preliminary Plans. Tenant
acknowledges that the Preliminary Plans shall be prepared by Landlord's
Architect after consultation and cooperation between Tenant and Landlord's
Architect regarding the proposed Tenant Improvements and Tenant's requirements.
Landlord and Landlord's Architect shall be entitled, in all respects, to rely
upon all information supplied by Tenant regarding the Tenant Improvements. The
costs associated with preparation of the Preliminary Plans shall be borne by
Tenant and paid as set forth in Sections 5 and 6 of the Work Letter.
(b) Working Drawings. Within fourteen (14) business days following full
execution of this Lease by both Landlord and Tenant, Landlord's Architect shall
prepare working drawings together with a preliminary line item budget (the
"Working Drawings") for the Tenant Improvements based upon the approved
Preliminary Plans. The Working Drawings shall include architectural, mechanical
and electrical construction drawings for the Tenant Improvements based on the
Preliminary Plans. Notwithstanding the Preliminary Plans, in all cases the
Working Drawings (i) shall be subject to Landlord's final approval, which
approval shall not be unreasonably withheld, (ii) shall not be in conflict with
building codes for the City or County or with insurance requirements for a fire
resistive Class A building, and (iii) shall be in a form satisfactory to
appropriate governmental authorities responsible for issuing permits and
licenses required for construction. The costs associated with preparation of
the Working Drawings shall be borne by Tenant and paid as set forth in Sections
5 and 6 of this Work Letter.
(c) Approval of Working Drawings. Landlord or Landlord's Architect shall
submit the Working Drawings to Tenant for Tenant's review, and Tenant shall
notify Landlord and Landlord's Architect within five (5) business days after
delivery thereof of any requested revisions. Within five (5) days after receipt
of Tenant's notice, Landlord's Architect shall make all approved revisions to
the Working Drawings and submit two (2) copies thereof to Tenant for its final
review and approval, which approval shall be given within three (3) business
days thereafter. Concurrently with the above review and approval process,
Landlord may submit all plans and specifications to necessary permits and
licenses to construct the Tenant Improvements as shown on the Working Drawings.
Any changes which are required by City or other governmental agencies shall be
immediately submitted to Landlord for Landlord's review and reasonable approval,
and Landlord shall promptly notify Tenant of such changes. See Rider 2(c) to
Work Letter.
(d) Schedule of Critical Dates. Set forth below is a schedule of certain
critical dates relating to Landlord's and Tenant's respective obligations for
the design and construction of the Tenant Improvements. Such
49
<PAGE>
dates and the respective obligations of Landlord and Tenant are more fully
described elsewhere in this Work Letter. The purpose of the following schedule
is to provide a reference for Landlord and Tenant and to make certain the Final
Approval Date occurs as set forth herein. Following the Final Approval Date,
Tenant shall be deemed to have released Landlord to commence construction of the
Tenant Improvements as set forth in Section 4 below .
<TABLE>
<CAPTION>
Reference Date Due Responsible Party
- --------- -------- ----------------
<S> <C> <C>
A. "Preliminary Plan Completion" Five (5) business days after Tenant and Landlord
full execution of the Lease
B. "Working Drawings Completion" Fourteen (14) business days Landlord
after full execution of
the Lease
C. "Working Drawings Review" Five (5) business days after Tenant
Landlord submits the Working
Drawings to Tenant
D. "Working Drawings Revision" Five (5) days after Tenant Landlord
returns the Working Drawings
to Landlord
E. "Final Approval Date" Three (3) business days after Tenant
Landlord submits the revised
Working Drawings to Tenant
</TABLE>
50
<PAGE>
RIDER 2(c) TO WORK LETTER:
If Tenant timely disapproves the budget that is included within the
Working Drawings, Tenant shall be required to direct Landlord and Landlord's
Architect to amend the Working Drawings in a manner satisfactory to Tenant and
Landlord so as to reduce the estimated costs to an amount acceptable to Tenant,
and Tenant shall be liable for any delay in completing the Tenant Improvements
resulting from such amendment. If Tenant is unwilling or unable to amend the
Working Drawings in a manner acceptable to Landlord, then Tenant shall be deemed
to have approved the estimate for the Working Drawings as prepared.
51
<PAGE>
3. BUILDING PERMIT
After the Final Approval Date has occurred, Landlord shall, if Landlord has
not already done so, submit the Working Drawings to the appropriate governmental
body or bodies for final plan checking and a building permit. Landlord, with
Tenant's cooperation, shall cause to be made any change in the Working Drawings
necessary to obtain the building permit; provided, however, after the Final
Approval Date, no changes shall be made to the Working Drawings without the
prior written approval of both Landlord and Tenant, and then only after
agreement by Tenant to pay any excess costs resulting from such changes.
4. CONSTRUCTION OF TENANT IMPROVEMENTS
After the Final Approval Date has occurred and a building permit for the
work has been issued, Landlord shall, through a guaranteed maximum cost or fixed
price (at Landlord's sole option) construction contract ("Construction
Contract") with a reputable, licensed contractor selected by Landlord
("Contractor"), cause the construction of the Tenant Improvements to be carried
out in substantial conformance with the Working Drawings in a good and
workmanlike manner using first-class materials. The costs associated with the
construction of the Tenant Improvements shall be paid as set forth in Sections 5
and 6 of this Work Letter. Landlord shall see that the construction complies
with all applicable building, fire, health, and sanitary codes and regulations,
the satisfaction of which shall be evidenced by a certificate of occupancy for
the Premises.
5. TENANT IMPROVEMENT ALLOWANCE
Landlord shall provide Tenant with a Tenant Improvement Allowance in the
amount of Four Hundred Fifty Thousand and no/100 Dollars ($450,000.00) towards
the cost of the design, purchase and construction of the Tenant Improvements,
including without limitation design, engineering and consulting fees
(collectively, the "Tenant Improvement Costs"). Landlord shall also provide
Tenant with an additional Tenant Improvement Allowance in the amount of Two
Hundred Twenty-Four Thousand and no/100 Dollars ($224,000.00). Any portion of
the "Additional Allowance" that Tenant elects to use shall be fully amortized
over the initial term of the Lease at a rate of 10%. By example only: If the
Tenant used $44,810 ($1.00 p.s.f.), his monthly pay back in addition to rent and
CAMS would be $952.08($.0212 p.s.f. per month). The Tenant Improvement
Allowance shall be used for payment of the following Tenant Improvements Costs:
(i) Preparation by Landlord's Architect of the Preliminary Plans and the
Working Drawings as provided in Section 2 of this Work Letter, including without
limitation all fees charged by City (including without limitation fees for
building permits and plan checks) in connection with the Tenant Improvements
work in the Premises;
(ii) Construction work for completion of the Tenant Improvements as
reflected in the Construction Contract; and
(iii) All contractors' charges, general conditions, performance bond
premiums and construction fees.
6. COSTS IN EXCESS OF TENANT IMPROVEMENT ALLOWANCE AND ADDITIONAL TENANT
IMPROVEMENT ALLOWANCE AT TENANT'S EXPENSE
(a) Cost Approval. Tenant shall pay the excess of the Tenant Improvement
Costs over the amount of the Tenant Improvement Allowance and Additional
Allowance available to defray such costs. Concurrent with the plan checking
referred to in Section 3 of this Work Letter, Landlord shall prepare and submit
to Tenant a written line-item estimate of the amount of the remaining Tenant
Improvement Costs and the cost of the Tenant Improvement Allowance still
available to defray such costs (after preparation of the Preliminary Plans and
Working Drawings). Tenant shall approve or disapprove any such estimate by
written notice to Landlord within three (3) business days after receipt thereof.
If Tenant fails to notify Landlord of its disapproval within such three (3)
business day period, Tenant shall be deemed to have approved such estimate. If
such estimate exceeds the Tenant Improvement Allowance and Additional Allowance,
then still available and Tenant approves such estimate, Tenant's notice of
approval shall include payment to Landlord for the full amount of such excess.
If Tenant disapproves such estimate within the three (3) business day period,
Tenant shall be required to direct Landlord and Landlord's Architect to amend
the Working Drawings in a manner satisfactory to Landlord so as to reduce the
estimated costs to an amount acceptable to Tenant, and any excess estimated
costs remaining after such amendment
52
<PAGE>
shall be paid by Tenant in the manner described in the preceding sentence.
Tenant shall additionally pay any costs resulting from such amendment and Tenant
shall be liable for the delay in completing the Tenant Improvements and the
increased costs, if any, resulting from such delay. If Tenant is unwilling or
unable to amend the Working Drawings in a manner acceptable to Landlord, then
Tenant shall be deemed to have approved the estimate for the Working Drawings a
prepared, and shall pay in full the amount of any excess estimated costs
together with any costs arising from delay as a result of Tenant's actions
hereunder, in the manner hereinabove provided. See Rider One to work letter.
(b) Final Costs. Within sixty (60) days after completion by Landlord of
the Tenant Improvements, Landlord shall determine the actual final Tenant
Improvements Costs and shall submit a written statement of such amount to
Tenant. If any estimate previously paid by Tenant exceeds the amount due
hereunder from Tenant for such work, such excess shall be refunded to Tenant.
If any amount is still due from Tenant for such work, then Tenant shall pay such
amount in full within ten (10) days of receipt of Landlord's statement. See
Rider One to work letter.
7. CHANGE ORDERS
Tenant may from time to time request and obtain change orders during the
course of construction provided that: (i) each such request shall be
reasonable, shall be in writing and signed by or on behalf of Tenant, and shall
not result in any structural change in the Building, as reasonably determined by
Landlord, (ii) all additional charges and costs, including without limitation
architectural and engineering costs, construction and material costs, and
processing costs of any governmental entity shall be the sole and exclusive
obligation of Tenant, and (iii) any resulting delay in the completion of the
Tenant Improvements shall be deemed a Tenant Delay and in no event shall extend
the Commencement Date of the Lease. Upon Tenant's request for a change order,
Landlord shall as soon as reasonably possible submit to Tenant a written
estimate of the increased or decreased cost and anticipated delay, if any,
attributable to such requested change. Within three (3) days of the date such
estimated cost adjustment and delay are delivered to Tenant, Tenant shall advise
Landlord whether it wished to proceed with the change order, and if Tenant
elects to proceed with the change order, Tenant shall remit, concurrently with
Tenant's notice to proceed, the amount of the increased cost, if any,
attributable to such change order to the extent the Tenant Improvement Allowance
and Additional Allowance are fully applied. Unless Tenant includes in its
initial change order request that the work in process at the time such request
is made be halted pending approval and execution of a change order, Landlord
shall not be obligated to stop construction of the Tenant Improvements, whether
or not the change order relates to the work then in process or about to be
started. Tenant shall have no liability for any change order not specifically
approved by Tenant in writing.
8. TENANT DELAYS
In no event shall the Commencement Date of the Lease be extended or delayed
due or attributable to delays due to the fault of Tenant ("Tenant Delays").
Tenant Delays shall include delays caused by or resulting from any one or more
of the following:
(a) Tenant's failure to timely review and reasonably approve the Working
Drawings or to promptly cooperate with Landlord's Architect and furnish
information to Landlord for the preparation of the Preliminary Plans and Working
Drawings;
(b) Tenant's request for or use of special materials, finishes or
installations which are not readily available, provided that Landlord shall
notify Tenant in writing that the particular material, finish, or installation
is not readily available promptly upon Landlord's discovery of same;
(c) Change orders requested by Tenant to the extent of the delay period
specified in an approved changed order or the actual delay period, if shorter
provided that Landlord shall have notified Tenant in writing of such
interference within a reasonably period thereafter;
(d) Interference by Tenant or by Tenant's Agents with Landlord's
construction activities;
(e) Tenant's failure to approve any other item or perform any other
obligation in accordance with and by the dates specified herein or in the
Construction Contract;
53
<PAGE>
(f) Tenant's requested changes in the Preliminary Plans, Working Drawings
or any other plans and specifications after the approval thereof by Tenant or
submission thereof by Tenant to Landlord;
(g) Tenant's failure to approve written estimates of costs within the time
period specified in this Work Letter; and
(h) Tenant's obtaining or failure to obtain any necessary governmental
approvals or permits for Tenant's intended use of the Premises.
If the Commencement Date of the Lease is delayed by any Tenant Delays, then the
Commencement Date of the Lease and the payment of Rent shall be accelerated by
the number of days of such delay. Landlord shall give Tenant written notice
within a reasonable time of any circumstance that Landlord believes constitutes
a Tenant Delay. The Period of any Tenant Delay shall be determined after taking
into account the period of time that the construction work is accelerated by
Tenant's acts or performance.
9. TRADE FIXTURES AND EQUIPMENT
Tenant acknowledges and agrees that Tenant is solely responsible for
obtaining, delivering and installing in the Premises all necessary and desired
furniture, trade fixtures, equipment and other similar items, and that Landlord
shall have no responsibility whatsoever with regard thereto. Tenant further
acknowledges and agrees that neither the Commencement Date of the Lease nor the
payment of Rent shall be delayed for any period of time whatsoever due to any
delay in the furnishing of the Premises with such items.
10. FAILURE OF TENANT TO COMPLY
Any failure of Tenant to comply with any of the provisions contained in
this Work Letter within ten (10) days after written notice from Landlord given
after expiration of the times for compliance herein set forth shall be deemed a
default under the Lease. In addition to the remedies provided to Landlord in
this Work Letter upon the occurrence of such a default by Tenant, Landlord shall
have all remedies available at law or equity to a landlord against a defaulting
tenant pursuant to a written lease, including but not limited to those set forth
in the Lease.
54
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RIDER ONE TO WORK LETTER:
(a) Section 6(a) is amended by adding at the end thereof the following
language:
"Tenant shall not be obligated to reimburse Landlord for any amount in
excess of the approved budget based on the working drawings, except
with Tenant's prior written consent."
(b) Section 6(b) is amended by adding at the end thereof the following
language:
"The Tenant Improvement Costs shall not include any costs incurred to
correct errors or defects in the design or construction of the
Improvements not caused by Tenant. Tenant shall have the right,
during the course of construction, to review the Tenant Improvement
Costs."
(c) Landlord, at its sole expense (and not as part of Tenant Improvement
Allowance, Additional Allowance or Project Costs) shall (1) make all repairs,
maintenance and replacements required to put the Premises (without regard to the
Tenant Improvements), building and all building systems in good operating
condition and repair, and (2) make all repairs, replacements and alterations
necessary to bring the Premises and Building into compliance with all applicable
laws and restrictions.
55
<PAGE>
EXHIBIT D
---------
COMMENCEMENT DATE MEMORANDUM
DATE: April 25, 1994
RE: Standard Form Lease dated April 25, 1994, by and between State of
California Public Employees' Retirement System as "Landlord", and Cardima,
Inc. as "Tenant", for the Premises known as 47266 Benicia Street, Fremont,
California.
Agreement
---------
The undersigned hereby agree as follows:
1. The Tenant Improvements (as defined in the Lease) to the Premises have been
substantially completed in accordance with the terms and conditions of the
Lease, subject only to "punch list" items agreed to by Landlord and Tenant
pursuant to the terms of the Lease.
2. The Commencement Date, as defined in and determined in accordance with the
Lease, is hereby stipulated for all purposes to be______________________.
3. In accordance with the Lease, Monthly Rent (as defined in the Lease) in the
amount of_______ ($_______________), subject to adjustment in accordance with
the terms of the Lease, commences to accrue on_____ and is due and payable in
advance on the first day of each and every month during the Term (as defined in
the Lease). Unless and until notified by Landlord to the contrary, Tenant shall
make its Rent checks payable to O'Donnell Property Services, Inc. as agent for
CALPERS, P.O. Box 100053, Pasadena, CA 91189-0053.
"Landlord"
STATE OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM,
an agency of the State of California
By: O'Donnell Property Services, Inc.,
a California corporation,
Property Manager for the State of
California Public Employees' Retirement
System
By: _______________________________________
Donald S. Grant
Chief Executive Officer
"Tenant"
CARDIMA, INC.
a California corporation
By: ________________________________________
Its:____________________________________
By: ________________________________________
Its:____________________________________
56
<PAGE>
EXHIBIT E
---------
ADJUSTMENTS TO MONTHLY RENT
(FIXED ADJUSTMENT)
This Exhibit is attached to and made a part of that certain standard Form
Lease dated April 25, 1994, by and between State of California Public Employees'
Retirement System as "Landlord", and Cardima, Inc., a California corporation as
"Tenant", for the Premises known as 47266 Benicia Street, Fremont, California.
The capitalized terms used and not otherwise defined in this Exhibit shall
have the same definitions as set forth in the Lease. The provisions of this
Exhibit shall supersede any inconsistent or conflicting provisions of the Lease.
The Monthly Rent shall be adjusted, as of the commencement of the dates set
forth below, in accordance with the following schedule:
Months During Term Monthly Rent
------------------ ------------
1-18 $17,027.80
19-60 $30,022.70
57
<PAGE>
EXHIBIT G
---------
RULES AND REGULATIONS
(INDUSTRIAL)
This Exhibit is attached to and made a part of that certain Standard Form
Lease dated April 25, 1994, by and between State of California Public Employees'
Retirement System as "Landlord", and Cardima, Inc., a California corporation as
"Tenant", for the Premises known as 47266 Benicia Street, Fremont, California.
This Exhibit sets forth the rules and regulations governing Tenant's use of
the Common Area and the Premises leased to Tenant pursuant to the terms,
covenants and conditions of the Lease to which this Exhibit is attached and
therein made part thereof. Unless otherwise defined, capitalized terms used
herein shall have the same meanings as set forth in the Lease. In the event of
any conflict or inconsistency between this Exhibit and the Lease, the Lease
shall control.
1. Tenant shall not place anything or allow anything to be placed near
the glass of any window, door, partition or wall which may appear unsightly from
outside the Premises.
2. The walls, walkways, sidewalks, entrance passages, courts and
vestibules shall not be obstructed or used for any purpose other than ingress
and egress of pedestrian travel to and from the Premises, and shall not be used
for loitering or gathering, or to display, store or place any merchandise,
equipment or devices, or for any other purpose. The walkways, entrance
passageways, courts, vestibules and roof are not for the use of the general
public and Landlord shall in all cases retain the right to control and prevent
access thereto by all persons whose presence in the judgment of the Landlord
shall be prejudicial to the safety, character, reputation and interests of the
Building and its tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom Tenant normally deals in
the ordinary course of Tenant's business unless such persons are engaged in
illegal activities. No tenant or employee or invitee of any tenant shall be
permitted upon the roof of the Building.
3. No awnings or other projection shall be attached to the outside walls
of the Building. No security bars or gates, curtains, blinds, shades or screens
shall be attached to or hung in, or used in connection with, any window or door
of the Premises without the prior written consent of Landlord. Neither the
interior nor exterior of any windows shall be coated or otherwise sunscreened
without the express written consent of Landlord.
4. Tenant shall not in any way deface any part of the Premises or the
Building. Tenant shall not lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord in writing. The expense of repairing any
damage resulting from a violation of this rule or removal of any floor covering
shall be borne by Tenant.
5. The toilet room, urinals, wash bowls and other plumbing apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the Tenant.
6. Landlord shall direct electricians as to the manner and location of
any future telephone wiring. No boring or cutting for wires will be allowed
without the prior consent of Landlord. The locations of the telephones, call
boxes and other office equipment affixed to the Premises shall be subject to the
prior written approval of Landlord.
7. No exterior storage shall be allowed at any time without the prior
written approval of Landlord. The Premises shall not be used for cooking or
washing clothes without the prior written consent of Landlord, or for lodging or
sleeping or for any immoral or illegal purposes.
8. Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or neighboring
buildings or premises or those having business with them, whether by the use of
any musical instrument, radio, phonograph, machinery, or otherwise. Tenant
shall not use, keep or permit to be used, or kept, any foul or obnoxious gas or
substance in the Premises or permit or suffer the Premises to
58
<PAGE>
be used or occupied in any manner offensive or objectionable to Landlord or
other occupants of this or neighboring buildings or premises by reason of any
odors, fumes or gases.
9. Neither Tenant nor any of Tenant's Agents shall at any time bring or
keep upon the Premises any toxic, hazardous, inflammable, combustible or
explosive fluid, chemical or substance without the prior written consent of
Landlord.
10. No animals shall be permitted at any time within the Premises.
11. Tenant shall not use the name of the Building or the Project in
connection with or in promoting or advertising the business of Tenant, except as
Tenant's address, without the prior written consent of Landlord. Landlord shall
have the right to prohibit any advertising by Tenant which, in Landlord's
reasonable opinion, tends to impair the reputation of the Project or its
desirability for its intended uses, and upon written notice from Landlord Tenant
shall refrain from or discontinue such advertising.
12. Canvassing, soliciting, peddling, parading, picketing, demonstrating
or otherwise engaging in any conduct that unreasonably impairs the value or use
of the Premises or the Project are prohibited and Tenant shall cooperate to
prevent the same.
13. No equipment of any type shall be placed on the Premises which in
Landlord's opinion exceeds the load limits of the floor or otherwise threatens
the soundness of the structure or improvements of the Building.
14. Landlord will not be responsible for loss or damage to any furniture,
equipment, or other personal property of Tenant from any cause.
15. No air conditioning unit or other similar apparatus shall be installed
or used by Tenant without the prior written consent of Landlord.
16. No aerial antenna shall be erected on the roof or exterior walls of
the Premises, or on the grounds, without in each instance the prior written
consent of Landlord. Any aerial or antenna so installed by or on behalf of
Tenant without such written consent shall be subject to removal by Landlord at
any time without prior notice at the expense of Tenant, and Tenant shall upon
Landlord's demand pay a removal fee to Landlord of not less than $200.00.
17. The entire Premises, including vestibules, entrances, doors, fixtures,
windows and plate glass, shall at all times be maintained in a safe, neat and
clean condition by Tenant. All trash, refuse and waste materials shall be
regularly removed from the Premises by Tenant and placed in the containers at
the locations designated by Landlord for refuse collection. All cardboard boxes
must be "broken down" prior to being placed in the trash containers. All
styrofoam chips must be bagged or otherwise contained prior to placement in the
trash containers, so as not to constitute a nuisance. Pallets may not be
disposed of in the trash containers or enclosures. The burning of trash, refuse
or waste materials is prohibited.
18. Tenant shall use at Tenant's cost such pest extermination contractor
as Landlord may direct and at such intervals as Landlord may require.
19. All keys for the Premises shall be provided to Tenant by Landlord and
Tenant shall return to Landlord any of such keys so provided upon the
termination of the Lease. Tenant shall not change locks or install other locks
on doors of the Premises, without the prior written consent of Landlord. In the
event of loss of any keys furnished by Landlord for Tenant, Tenant shall pay to
Landlord the costs thereof.
20. No person shall enter or remain within the Project white intoxicated
or under the influence of liquor or drugs. Landlord shall have the right to
exclude or expel from the Project any person who, in the absolute discretion of
Landlord, is under the influence of liquor or drugs.
Tenant agrees to comply with all such Rules and Regulations. Should Tenant
not abide by these Rules and Regulations, Landlord or any "Operator,"
"Association" or "Declarant" under any Restrictions may serve a three (3) day
notice to correct the deficiencies. If Tenant has not corrected the
deficiencies by the end of the notice period, Tenant will be in default of the
Lease, and Landlord and/or its designee shall have the right, without further
notice, to cure the violation at Tenant's expense.
Landlord reserves the right to amend or supplement the foregoing Rules and
Regulations and to adopt and promulgate additional rules and regulations
applicable to the Project. Notice of such rules and regulations and
59
<PAGE>
amendments and supplements thereto, if any, shall be given to the Tenant. The
terms of the Lease shall govern and control over any conflict between the terms
of the Lease and the Rules and Regulations wherever adopted.
Neither Landlord nor Landlord's Agents or any other person or entity shall
be responsible to Tenant or to any other person for the ignorance or violation
of these Rules and Regulations by any other tenant or other person. Tenant
shall be deemed to have read these Rules and Regulations and to have agreed to
abide by them as a condition precedent, waivable only by Landlord, to Tenant's
occupancy of the Premises.
60
<PAGE>
EXHIBIT H
---------
DRAFT 4/10/91
ENVIRONMENTAL QUESTIONNAIRE AND DISCLOSURE STATEMENT
The purpose of this questionnaire is to obtain information regarding the
environmental impact your company or business may have on 47266 Benicia Street,
Fremont, California property, neighboring properties or the atmosphere based
upon your use, storage, treatment, generation, handling, transportation or
disposal of hazardous materials or hazardous waste including, but not limited
to, regulated substances, chemicals, diesel fuel, gasoline, and other petroleum
products. Prospective tenant should answer the questions in light of their
proposed operations on the premises. Existing tenants should answer the
questions as they relate to on-going operations on the premises and should
update any information previously submitted. If additional space is needed to
answer the questions, you may attach separate sheets of paper to this
questionnaire.
If any answers to this questionnaire require further investigation, please
complete the investigation before answering the question. Your answers should
be complete and include any information which you believe pertinent to the
questions asked.
Your cooperation in this matter is appreciated. Any questions should be
directed to, and when completed, the forms should be mailed to:
O'Donnell Property Services, Inc.
1737 North First Street, Suite 580
San Jose, CA 95112
Attn: Mark Schmidt
Phone: (408) 453-9444
1. GENERAL INFORMATION
1.1 Name of responding company or business (this entity will be referred
to as "you" or "your"):
Check the Applicable Status:
Prospective Tenant [X] Existing Tenant [_]
1.2 Mailing Address 47201 Lakeview Blvd.
_____________________________________________________
Fremont, CA
_____________________________________________________________________
Contact Person and Title: Bob Balderrama, Facilities Mgr.
__________________________________________
Telephone Number: (510) 440-7666
__________________________________________________
Address of Leased Premises (the "premises")
_________________________
1
<PAGE>
_____________________________________________________________________
Length of Lease Term: _______________________________________________
1.3 Describe the proposed operations to take place on the property,
including principal products manufactured or services to be
conducted. Existing tenant should describe any proposed changes to
on-going operations.
Warehouse storage for finished products, catheters, guidewires
_____________________________________________________________________
_____________________________________________________________________
1.4 Will a company or business other than you occupy the premises?
Yes [_] No [_]
If your answer is yes, complete a separate questionnaire for each
additional occupant.
1.5 Provide the name, title and address of the person who is responsible
for ensuring you are in compliance with environmental laws and
regulations pertaining to the use, storage, treatment, generation,
handling, transportation or disposal of hazardous materials or
hazardous wastes.
Bob Balderrama, Facilities Mgr.
_____________________________________________________________________
1.6 Provide the name, title and address of the person completing this
questionnaire.
Bob Balderrama
_____________________________________________________________________
If, the person who completes this questionnaire is not the same person
identified in Section 1.5, did the person identified in Section 1.5
assist in completing this questionnaire?
Yes [_] No [_]
If your answer is no, explain why. N/A
___________________________________
_____________________________________________________________________
1.7 How many employees will be employed at the premises.
5
_____________________________________________________________________
2. STORAGE OF HAZARDOUS MATERIALS
2.1 Will any hazardous materials be treated, used, stored or present on-
site?
Yes [_] No [X]
2.2 If you answered yes to Section 2.1, provide the following information
for each hazardous material. Also, provide a copy of the MSDSs for
each hazardous material.
Name or Description: N/A
____________________________________________________
Nature of Material: ______________________________________________________
Maximum Volume stored at one time: _______________________________________
Total amount used per year: ______________________________________________
Location of Storage: _____________________________________________________
Maximum time stored: _____________________________________________________
2
<PAGE>
Describe the manner in which each hazardous material is used on the
premises:
__________________________________________________________________________
__________________________________________________________________________
2.3 If you answered yes to Section 2.1, describe the containers and
storage areas. Your description should provide the following
information:
Number of Storage Areas: N/A
_________________________________________________
Type of Containers: ______________________________________________________
Capacity of Containers: __________________________________________________
Number of Containers: ____________________________________________________
Secondary Containment: Yes [_] No [_]
Type/Composition: ___________________________________________________
Maximum Volume: _____________________________________________________
Location of Storage Areas: _______________________________________________
2.4 If you answered yes to Section 2.1, provide a map showing where each
hazardous material, container and storage area is located on the
premises. N/A
3. STORAGE TANKS & SUMPS
3.1 Is any above or below ground storage of hazardous materials in tanks
proposed or currently conducted on the premises?
Yes [_] No [X]
If yes, describe the hazardous materials to be stored, the type, size
and construction of each tank, and describe the secondary containment.
Identify the location of each tank.
3.2 Do you have all federal, state or local (including local fire
department) permits required to operate each above or below ground
tank? N/A
Yes [_] No [_]
If yes, please attach copies of the permits. If no, please explain
why not.
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
3.3 Do you have or intend to have any sumps on the premises?
Yes [_] No [X]
If yes, how many sumps are there, or do you intend to have, on the
premises?
Provide the following information for each sump: (i) its intended
use, (ii) the hazardous material it contains, (iii) whether or not it
is used for storage, (iv) its type, size and construction, and (v) its
location.
3.4 Have any of the tanks or sumps been monitored, inspected or tested
for leakage? N/A
Yes [_] No [_]
3
<PAGE>
If so, attach the results.
3.5 Have any spills or leaks occurred from such tanks or sumps? N/A
Yes [_] No [_]
If so, describe (e.g., date, location, hazardous material and
quantity released).
_____________________________________________________________________
_____________________________________________________________________
3.6 Were any regulatory agencies notified of the spill or leak? N/A
Yes [_] No [_]
If so, attach copies of any spill reports filed, any clearance letters
or other correspondence from regulatory agencies relating to the spill
or leak.
3.7 Have any underground or above ground storage tanks or sumps been taken
out of service or removed? N/A
Yes [_] No [_]
If yes, attach copies of any closure permits and clearance obtained
from regulatory agencies relating to closure and removal of such
tanks.
4. SPILLS AND RELEASES
4.1 During the past five years, have any spills or releases occurred on
the premises? N/A
Yes [_] No [_]
If so, please describe each spill or release (e.g., date, location,
hazardous material and quantity) and attach the results of any testing
conducted to determine the extent of such spills or release.
4.2 Were any agencies notified in connection with such spills or releases?
N/A
Yes [_] No [_]
If so, attach copies of any spill or release reports or other
correspondence with regulatory agencies.
4.3 Were any clean-up actions undertaken in connection with the spills or
releases? N/A
Yes [_] No [_]
If so, briefly describe the actions taken. Attach copies of any
clearance letters obtained from any regulatory agencies involved and
the results of any final air, soil or groundwater sampling done upon
completion of the clean-up work.
5. HAZARDOUS WASTE MANAGEMENT
5.1 Have you been issued an EPA Hazardous Waste Generator I.D. Number?
N/A
Yes [_] No [_]
If yes, provide the number: _________________________________________
4
<PAGE>
5.2 Have you filed a biennial report as a hazardous waste generator? N/A
Yes [_] No [_]
If so, attach a copy of the most recent report filed.
5.3 For each hazardous waste generated or to be generated provide (i) its
hazard class and waste code, (ii) describe the process generating the
waste, and (iii) state the quantity generated on a monthly basis.
5.4 Describe the method(s) of disposal for each hazardous waste. Indicate
where and how often disposal will take place and provide the name and
telephone number of your hazardous waste recycling and/or disposal
company and the name and telephone number of your hazardous waste
transporter.
N/A
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
5.5 Indicate the name of the person(s) responsible for maintaining copies
of hazardous waste manifests completed for off-site shipments of
hazardous waste.
N/A
_____________________________________________________________________
5.6 Is any treatment or processing of hazardous wastes currently conducted
or proposed to be conducted at the premises: N/A
Yes [_] No [_]
If yes, please describe any existing or proposed treatment methods.
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Provide the name, telephone number and agency (local, state or
federal) which supervises your waste management operation in this
state or region:
_____________________________________________________________________
_____________________________________________________________________
5.7 Attach copies of any hazardous waste permits or licenses issued to you
with respect to the operations on the premises. N/A
If no permit is required to conduct the activities on the premises,
so indicate.
_____________________________________________________________________
_____________________________________________________________________
5.8 Are you in the process of obtaining a hazardous waste permit? N/A
Yes [_] No [_]
If yes, provide the information requested in Section 5.3
6. WASTEWATER TREATMENT/DISCHARGE
6.1 Do you discharge wastewater to: N/A
5
<PAGE>
___ storm drain? ___ other? Describe. __________________________
____________________________________
___ surface water? ___ no industrial discharge
___ sewer?
6.2 Is your wastewater treated before discharge? N/A
Yes [_] No [_]
If yes, describe the type of treatment conducted. If no, explain why
treatment is not required.
_____________________________________________________________________
6.3 Attach copies of any wastewater discharge permits issued to you with
respect to the operations on the premises.
6.4 Provide the name, telephone number and agency (local, state or
federal) which supervises your wastewater discharge practices:
_____________________________________________________________________
_____________________________________________________________________
7. AIR EMISSIONS
7.1 Do you have any air pollution control systems or stacks?
Yes [_] No [_]
Please describe (e.g., type of system, purpose, height of stacks,
venting, quantity of emissions):
N/A
_____________________________________________________________________
_____________________________________________________________________
7.2 Do you operate any of the following types of equipment or type of
process, or any other equipment or process requiring an air emissions
permit from an air pollution control district or agency? N/A
___ Spray booth ___ Generator
___ Dip tank ___ Storage Tank
___ Drying oven ___ Degreaser
___ Incinerator ___ No Equipment or Process Requires
an Air Permit
___ Other (Please Describe):
______________________________________________
Are you required to prepare any air emission inventory reports and/or
risk assessments for any equipment or process? N/A
Yes [_] No [_]
If yes, attach a copy of the report or assessment:
6
<PAGE>
_____________________________________________________________________
_____________________________________________________________________
7.3 Are air emissions from your operations monitored? N/A
Yes [_] No [_]
If so, indicate the frequency of monitoring and a description of the
monitoring results.
_____________________________________________________________________
7.4 Attach copies of any air emissions permits pertaining to your
operations on the premises. N/A
7.5 Provide the name, telephone number, and agency (local, state or
federal) which issues your air pollution permits. N/A
8. CALIFORNIA HAZARDOUS MATERIALS DISCLOSURES [Note: For California property
only.]
8.1 Do you handle any hazardous materials in a quantity equal to or
exceeding an aggregate of 500 pounds, 55 gallons, or 200 cubic feet?
N/A
Yes [_] No [_]
8.2 If you answered yes to Section 8.1, have you prepared a hazardous
materials management plan ("business plan") and submitted it to the
appropriate agency as required by the California Health and Safety
Code? N/A
Yes [_] No [_]
If so, attach a copy of the business plan.
8.3 Are any of the chemicals used in your operations regulated under
Proposition 65? N/A
Yes [_] No [_]
If so, describe the actions taken, or proposed actions to be taken, to
comply with Proposition 65 requirements.
_____________________________________________________________________
8.4 Will you be posting proposition 65 warning signs? N/A
Yes [_] No [_]
If you will not be posting Proposition 65 warning signs, please
explain why not.
_____________________________________________________________________
_____________________________________________________________________
If you answered yes, please describe any additional actions you will
take to comply with Proposition 65 requirements.
_____________________________________________________________________
_____________________________________________________________________
9. WORKER SAFETY
9.1 Describe the procedures followed to comply with OSHA Hazard
Communication Standard requirements.
N/A
_____________________________________________________________________
7
<PAGE>
9.2 Describe any protective or special equipment or clothing (e.g.,
respirators) which your employees wear, or are required to wear, in
order to reduce exposures to hazardous substances on the premises.
Also indicate the purpose of such equipment or clothing.
_____________________________________________________________________
_____________________________________________________________________
10. ENVIRONMENTAL ENFORCEMENT ACTIONS, COMPLAINTS
10.1 Have you ever been subject to (i) any local, state or federal agency
environmental enforcement actions, administrative orders, or consent
decrees (civil, criminal or administrative) or permit revocation
within the last five years, or (ii) any local, state or federal agency
or private party notifications identifying you as a potentially
responsible party for an environmental cleanup or environmental
related claim? N/A
Yes [_] No [_]
If so, describe the actions and any continuing compliance obligations
imposed as a result of these actions.
_____________________________________________________________________
10.2 Other than governmental action addressed in Section 10.1, have there
ever been, or are there now pending or threatened, any lawsuits or
claims against you regarding compliance with any environmental or
health and safety laws or regulations concerns? N/A
Yes [_] No [_]
If so, provide the following: (i) the nature of the claim, (ii) the
data when the claim was first asserted, (iii) the name(s) of the
party(ies) asserting the claim, and (iv) the history and current
status of such claim, including what actions you have taken to address
and/or remediate the claim.
_____________________________________________________________________
10.3 Has an environmental audit ever been conducted at your current
facility? N/A
Yes [_] No [_]
If so, specify the number of audits, identify the person who conducted
the audit, the data of each audit, and discuss the results of such
audits or attach a copy of each audit.
_____________________________________________________________________
10.4 Have there been any problems or complaints from employees or
neighbors regarding environmental issues (e.g., odor, emissions,
nuisance, etc.) resulting from the operation of your current facility?
Yes [_] No [X]
If so, describe the source and nature of the complaint.
_____________________________________________________________________
_____________________________________________________________________
8
<PAGE>
11. ADDITIONAL INFORMATION
11.1 Please provide any additional information which you believe is
relevant to assess the environmental impact which your use, storage,
treatment, generation, handling, transportation or disposal of
hazardous materials or hazardous waste may have on the premises.
12. TENANT DISCLOSURES AND REPRESENTATIONS.
12.1 The undersigned understands that it has an ongoing obligation
according to the terms of the lease, to report in writing any changes
to the information it provides in this questionnaire and to update
this questionnaire, as necessary, with any new information which may
impact the health and safety of people on or in the vicinity of the
premises or which may impact the environment.
12.2 The undersigned warrants and represents that it is, as of the date set
forth below, in compliance with all environmental laws and regulations
governing its activities on the premises, except as expressly set
forth in this questionnaire.
12.3 The information contained in this questionnaire is true and correct.
NOTICE FOR CALIFORNIA PROPERTY ONLY:
------------------------------------
PURSUANT TO CALIFORNIA HEALTH AND SAFETY CODE SECTION 25359.7(b) IF
YOU KNOW OR HAVE REASONABLE CAUSE TO BELIEVE THAT A RELEASE OF
HAZARDOUS MATERIALS HAS COME TO BE LOCATED ON OR BENEATH THE PROPERTY,
YOU ARE REQUIRED, WITHIN A REASONABLE PERIOD OF TIME, EITHER PRIOR TO
THE RELEASE OF THE HAZARDOUS MATERIAL OR FOLLOWING THE DISCOVERY OF
THE PRESENCE, OR BELIEVED PRESENCE, OF THE HAZARDOUS MATERIAL RELEASE,
TO PROVIDE WRITTEN NOTICE OF SUCH RELEASE TO THE OWNER OF THE PROPERTY
OR TO THE LESSOR UNDER YOUR LEASE. YOUR FAILURE TO PROVIDE SUCH
NOTICE MAY CONSTITUTE A DEFAULT UNDER YOUR LEASE AND YOU MAY BE LIABLE
FOR DAMAGES AND ANY REMEDIES AVAILABLE AT LAW, INCLUDING CIVIL
PENALTIES.
TARGET THERAPEUTICS
____________________________________________
[Name of company or business]
By: /s/ Bob Balderrama
________________________________________
Title: Facilities Mgr.
________________________________
Date: 6/27/94
______________________
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EXHIBIT I
---------
GROUNDWATER SAMPLING AND ANALYSIS
MISSION BUSINESS PARK,
FREMONT, CALIFORNIA 95815
PREPARED FOR:
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
F.I.A. ASSOCIATES
1601 RESPONSE ROAD, SUITE 300
SACRAMENTO, CALIFORNIA
PREPARED BY:
MED-TOX ASSOCIATES, INC.
1431 WARNER AVENUE
TUSTIN, CALIFORNIA 95815
FILE 8.28
MAY 1989
10
<PAGE>
MED-TOX ASSOCIATES, INC.
ENVIRONMENTAL & OCCUPATIONAL HEALTH SERVICES
1431 WARNER AVENUE * P.O. BOX 2054 * TUSTIN, CA 92681 * (714)259-0620 * FAX
(714)259-0351
May 24, 1989
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
c/o Mr. Christopher Hays
F.I.A. ASSOCIATES
1601 Response Road, Suite 300
Sacramento, California 95815
RE: Groundwater Sampling and Analysis - Mission Business Park,
Fremont, California. Reference Job #: 1E-3809
Dear Mr. Hays:
In this letter Med-Tox Associates, Inc. (MED-TOX) presents the results of the
groundwater sampling and analysis conducted at the above referenced site.
In the MED-TOX report, Final Site Assessment Report, Cerritos, Irvine, Tustin,
-------------------------------------------------------
Fremont, and San Jose Properties (Reference #1E-3809), issued to your attention
- --------------------------------
on May 9, 1989, it was recommended that additional sampling be conducted at the
Mission Business Park.
Background
- ----------
On April 11-12, 1989, a subsurface investigation was conducted on the Mission
Business Park Property. Results of the groundwater sampling and analysis
indicated that two volatile organic compounds (1,1,1-Trichloroethane and 1,1-
Dicholoroethene) occur in one of the wells, MW-MT-2 (Figure 1.0). The
concentrations detected were below present regulatory criteria and applied
action levels.
Because these two compounds were detected, MED-TOX recommended additional
testing be performed on the Mission Business Park Property.
The scope of work consisted of the following:
. Installing two additional groundwater monitoring wells, designated as MW-MT3
and MW-MT4;
. Develop the existing 10 groundwater monitoring wells;
. Sample and analyze groundwater from all the wells at the site.
All water samples were analyzed for purgeable halocarbons (per EPA Method 601).
Water samples collected from MW-MT2, MW-MT4 and MW-E3, were analyzed for Total
Petroleum Hydrocarbons (per EPA Method 8015) and purgeable aromatics (per EPA
Method 602). General minerals analysis and CAC-17 Metals Analysis (California
Assessment Method) were conducted on water samples collected from MW-MT1, MW-
MT2, MW-MT3, and MW-MT4.
11
<PAGE>
Monitoring Well Construction
- ----------------------------
The field activities were conducted on May 4 and 5, 1989. The soil borings were
drilled about thirty and twenty five feet below groundsurface in borings MW-MT3
and MW-MT4, respectively. Borings were converted to monitoring wells and
designated as MW-MT3 and MW-MT4. The borings penetrated into mostly clayey
materials, as shown in Appendix B, Log of Boring of MW-MT3 and MW-MT4.
Two-inch, schedule 40, flush threaded PVC well casing was lowered into the
hollow stem auger. The bottom 20 feet of the 2-inch casing consisted of machine
slotted well screen with 0.010-inch slots. The hollow stem auger was retracted,
exposing the screen section of the PVC casing. The annulus surrounding the
screen section was filled with 2/16 LoneStar Monterey type sand. The well
casing was packed with sand to two feet above the top of the well screen. A
one-foot thick bentonite seal was then constructed above the sand pack using
bentonite pellets. The remaining annular space was grouted with neat cement. A
representative of the Alameda County Water District was present to inspect the
well seal.
A steel well cover was cemented into place to protect the top of the well
casing.
Well Development and Groundwater Sampling
- -----------------------------------------
Monitoring wells were developed using a centrifugal pump. The pump was washed
and steamed cleaned between wells. The wells were pumped until the discharge
was relatively clear of sediment. Water samples were then obtained using a
three-foot long teflon bailer. A water sample was also obtained with the teflon
bailer for field collection of pH and electrical conductivity (analogous to
total dissolved solids) measurements (see Table 2.0). The teflon bailer was
washed and steam cleaned before each water sample was obtained. All water
samples were placed in laboratory prepared containers and refrigerated in an ice
chest. The samples were then delivered to Med-Tox Laboratories located in
Pleasant Hill, California. The samples were accompanied by a chain-of-custody
form.
In addition to the monitoring wells constructed by MED-TOX on May 4 and 5, 1989,
(i.e., MT3 and MW-MT4) ten existing wells were also developed and sampled.
These wells are MW-E1, MW-E2, MW-E3, MW-E4, MW-1, MW-2, MW-3, MW-4, MW-MT1 and
MW-MT2. Their locations are shown on Figure 1, Site Plan.
Hydrology
- ---------
The site is underlain by clay and clayey sand to sandy clay materials to a depth
of about 30 feet below ground surface. The first water-bearing zone beneath the
site appears to be 13 feet below grade. These units are typical low energy
fluvial type deposits.
The surficial sediments within the study area consist of an upper layer of clay
to an approximate depth of 13 feet below ground surface. Underlying this layer
is a layer of clayey sand to sandy clay and clay with an approximate thickness
of 10 feet. Underlying this unit is a medium stiff clay to a depth of 31.5 feet
which may be the lower boundary of the shallow aquifer.
During on-site investigation on May 4-5, 1989, MED-TOX surveyed groundwater
elevations at wells MW-E3, MW-E4 and MW-E2. The groundwater flow direction was
then computed and data indicates groundwater is flowing to the west at very
gentle gradient of 0.57 feet per 100 feet (0.0057). The hydraulic conductivity
is estimated from well be development activities to be low in these clayey
sediments (1,300 gallon per day per foot). Therefore, the groundwater movement
is estimated to be low (0.21 ft/day). However, it should be mentioned that the
water movement would be higher in sand lense that might occur within the water
bearing sediments. Such sand lense are often associated with alluvial fan
deposits. However, MED-TOX wells did not encounter such high permeable zones.
12
<PAGE>
In general, because of the low groundwater velocity, any potential degraded
waters at the site or in the general area will be migrating slowly to the west.
In other words, potential plumes created by accidental chemical releases are
generally limited in areal extent and will not proliferate rapidly throughout
the site.
Analytical Results
- ------------------
The laboratory analysis indicated the presence of 1,1,1-Trichloroethane and 1,1-
Dichloroethene (TCA and DCE, respectively) in water samples collected from MW-
MT4 and MW-MT2 (Table 1.0). U.S. EPA Method 601, purgeable halocarbon
constituents were not detected in the remaining water samples (Appendix A).
U.S. EPA Method 602, purgeable aromatic constituents were not detected in the
water samples submitted for analysis. Similarly, total petroleum hydrocarbons
were not detected in the water samples submitted for analysis. The general
minerals analysis as well as the CAC-17 Metals Analysis did not detect any
chemical constituents of regulatory concern.
CONCLUSION AND RECOMMENDATION
The detection of TCA and DEC in two groundwater samples indicates chemical
contamination exist. However, the levels detected are below current regulatory
criteria and applied action levels. It is difficult to assess whether the
concentration detected and the location indicate one source or two sources.
Data from the field indicate that groundwater flows in a westerly direction.
Upgradient well (MW-E2 and MW-E3) water samples did not detect TCA or DCE. MW-
MT3 was installed upgradient and the Okidata facility to assess the groundwater
quality coming onto the subject property. Based on data from MW-MT3, MW-E2, and
MW-E3, it does not appear degraded water is originating off-site. Figure 1
shows that MW-MT4 and MW-MT2, which are linear and downgradient to each other,
are located approximately 500 feet apart. MW-MT4 is located directly adjacent
and west of Building 1. MW-MT2 is located directly adjacent and southwest of
Building 2 (see Figure 1.0).
Based on the identified conditions of the underlying soil and low groundwater
velocity, any potential degraded waters at the site will be migrating very
slowly. It should be noted that organic compounds such as DCE and TCA move 2 to
5 times slower than water moving thru an aquifer. In other words, potential
plumes created by accidental chemical releases are generally limited in area
extent, however, they may be indicative of a peripheral contaminant plume.
It is strongly recommended that a quarterly groundwater sampling and analysis
program be instituted to monitor the progress of the contaminant plume.
If the client wishes to discover the possible release location of the organics
to the subsurface, it is advisable to initiate a soil gas survey of the
underlying soils beneath buildings 1 and 2.
The soil gas method involves the collection of a known volume of soil gas from
soil pores within a few feet of the ground surface. The soil gas method depends
on the existence of a chemical concentration gradient in the vadose zone in
which the contaminated soil acts as a "source" and it will defuse toward the
above ground atmosphere. The greater the concentration gradient, the greater
the rate of diffusion of chemical constituents from the soil to soil gas.
The site specific disadvantages to a soil gas survey area:
. Samples to be collected beneath the building;
. The underlying soil is comprised of clayey material;
. The results are not definitive, but only allude to the potential presence of
chemicals.
Based on the results of the soil gas survey, soil borings and groundwater
monitoring wells would be located at areas of detected contaminant soil gas
readings.
13
<PAGE>
If you have any questions or concerns regarding this matter, please do not
hesitate to contact me at (714) 259-0620.
Respectfully submitted,
Med-Tox Associates, Inc.
Amir K. Matin, M.S., R.G., C.E.G. Lincoln A. Castro, M.P.H., R.E.A.
Director of Environmental and Senior Environmental Scientist
Geotechnical Services
LC/lh:E5024/06
1E-3809
14
<PAGE>
TABLE 1.0
MISSION BUSINESS PARK
WATER SAMPLE ANALYSIS
PURGEABLE HALOCARBONS/(1)/
(ug/l)
<TABLE>
<CAPTION>
___________________________________
WELL # TCA/(2)/ DCE/(3)/
___________________________________
<S> <C> <C>
MW-MT2 24 5
MW-MT4 19 6
</TABLE>
___________________________________
Note:
(1): U.S. EPA Method 601
(2): 1,1,1-Trichloroethane
(3): 1,1-Dichloroethene
15
<PAGE>
TABLE 2
Field Measurements of pH and Electrical Conductance
<TABLE>
<CAPTION>
_____________________________________________________
WELL #1 pH EC (micro mnos/cm)
_____________________________________________________
<S> <C> <C>
MW-2 7.33 1359
MW-MT1 7.39 1974
MW-3 7.57 1802
MW-4 7.66 1527
MW-MT3 (Okidata) 7.54 1431
MW-E3 7.41 1788
MW-E2 7.36 1629
MW-E4 7.18 1681
MW-MT4 7.26 1782
MW-E1 7.28 1522
MW-1 7.60 2160
MW-MT2 7.38 1810
</TABLE>
_____________________________________________________
16
<PAGE>
Site Plan
[graphic]
17
<PAGE>
APPENDIX A
LABORATORY ANALYTICAL
RESULTS
18
<PAGE>
MED-TOX ASSOCIATES, INC.
ENVIRONMENTAL & OCCUPATIONAL HEALTH SERVICES
1431 WARNER AVENUE * P.O. BOX 2054 * TUSTIN, CA 92681 * (714)259-0620 * FAX
(714)259-0351
LABORATORY ANALYSIS REPORT
MED-TOX ASSOCIATES, INC. REPORT DATE: 05/19/89
1431 WARNER AVENUE
TUSTIN, CA 92631 DATE SAMPLED: 05/06/89
ATTN: AMIR MATIN DATE RECEIVED: 05/06/89
DATE EXTRACTED: 05/06/89
DATE ANALYZED: 05/06/89
CLIENT ID: 1E-3809 MED-TOX JOB NO: 8905037
ANALYSIS OF: WATER SAMPLES FOR PURGEABLE HALOCARBONS, PURGEABLE
AROMATICS, GENERAL MINERALS, CAM-17 METALS, AND
TOTAL PETROLEUM HYDROCARBONS
<TABLE>
<CAPTION>
METHOD: EPA 8015 (Extraction)
_____________________________________________________
Total Petroleum
Hydrocarbons
Sample Identification as Diesel
Client Id. Lab No. (mg/L)
_____________________________________________________
<S> <C> <C>
MWMT-2 01D ND
MWMT-4 02D ND
MW-E3 06B ND
Detection limit 0.3
</TABLE>
/s/ Linnea M. Nowak for M.L.
_________________________________________________
Michael Lynch, Manager
Organic Laboratory
Results FAXed to Amir Matin 05/10-11/89
19
<PAGE>
PAGE 2 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-2 MED-TOX LAB NO: 8905037-01C
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 5 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 24 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
20
<PAGE>
PAGE 3 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-4 MED-TOX LAB NO: 8905037-02C
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 6 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 19 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
21
<PAGE>
PAGE 4 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-3 MED-TOX LAB NO: 8905037-03C
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
22
<PAGE>
PAGE 5 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-1 MED-TOX LAB NO: 8905037-04C
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
23
<PAGE>
PAGE 6 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MW-E2 MED-TOX LAB NO: 8905037-05B
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
24
<PAGE>
PAGE 7 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MW-E3 MED-TOX LAB NO: 8905037-06A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
25
<PAGE>
PAGE 8 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MW-3 MED-TOX LAB NO: 8905037-07A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
26
<PAGE>
PAGE 9 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MW-4 MED-TOX LAB NO: 8905037-08A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
27
<PAGE>
PAGE 10 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MW-E4 MED-TOX LAB NO: 8905037-09A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
28
<PAGE>
PAGE 11 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MW-1 MED-TOX LAB NO: 8905037-10A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
29
<PAGE>
PAGE 12 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MW-E1 MED-TOX LAB NO: 8905037-11A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
30
<PAGE>
PAGE 13 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MW-2 MED-TOX LAB NO: 8905037-12A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
31
<PAGE>
PAGE 14 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: Trip Blank MED-TOX LAB NO: 8905037-13A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 601
PURGEABLE HALOCARBONS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Bromodichloromethane 75-27-4 ND 0.5
Bromoform 75-25-2 ND 0.5
Bromomethane 74-83-9 ND 0.5
Carbon Tetrachloride 56-23-5 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
Chloroethane 75-00-3 ND 0.5
2-Chloroethyl Vinyl Ether 110-75-8 ND 0.5
Chloroform 67-66-3 ND 0.5
Chloromethane 74-87-3 ND 0.5
Dibromochloromethane 124-48-1 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Dichlorodifluoromethane 75-71-8 ND 0.5
1,1-Dichloroethane 75-34-3 ND 0.5
1,2-Dichloroethane 107-06-2 ND 0.5
1,1-Dichloroethene 75-35-4 ND 0.5
1,2-Dichloroethene, total 540-59-0 ND 0.5
1,2-Dichloropropane 78-87-5 ND 0.5
cis-1,3-Dichloropropene 10061-01-5 ND 0.5
trans-1,3-Dichloropropene 10061-02-6 ND 0.5
Methylene Chloride 75-09-2 ND 0.5
1,1,2,2-Tetrachloroethane 79-34-5 ND 0.5
Tetrachloroethene 127-18-4 ND 0.5
1,1,1-Trichloroethane 71-55-6 ND 0.5
1,1,2-Trichloroethane 79-00-5 ND 0.5
Trichloroethene 79-01-6 ND 0.5
Trichlorofluoromethane 75-69-4 ND 0.5
1,1,2-Trichloro- 76-13-1 ND 0.5
1,2,2-trifluouroethane
Vinyl Chloride 75-01-4 ND 0.5
</TABLE>
ND - Not detected at or above indicated method detection limit
32
<PAGE>
PAGE 15 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-2 MED-TOX LAB NO: 8905037-01C
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 602
PURGEABLE AROMATICS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Benzene 71-43-2 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Ethylbenzene 100-41-4 ND 0.5
Toluene 108-88-3 ND 0.5
Xylenes, Total ------ ND 2
</TABLE>
ND - Not detected at or above indicated method detection limit
33
<PAGE>
PAGE 16 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-4 MED-TOX LAB NO: 8905037-02C
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 602
PURGEABLE AROMATICS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Benzene 71-43-2 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Ethylbenzene 100-41-4 ND 0.5
Toluene 108-88-3 ND 0.5
Xylenes, Total ------ ND 2
</TABLE>
ND - Not detected at or above indicated method detection limit
34
<PAGE>
PAGE 17 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MW-E3 MED-TOX LAB NO: 8905037-06A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE SAMPLED: 05/06/89 DATE ANALYZED: 05/08/89
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
EPA METHOD 602
PURGEABLE AROMATICS
<TABLE>
<CAPTION>
_______________________________________________________________________________
DETECTION
CONCENTRATION LIMIT
COMPOUND CAS # (ug/L) (ug/L)
_______________________________________________________________________________
<S> <C> <C> <C>
Benzene 71-43-2 ND 0.5
Chlorobenzene 108-90-7 ND 0.5
1,2-Dichlorobenzene 95-50-1 ND 0.5
1,3-Dichlorobenzene 541-73-1 ND 0.5
1,4-Dichlorobenzene 106-46-7 ND 0.5
Ethylbenzene 100-41-4 ND 0.5
Toluene 108-88-3 ND 0.5
Xylenes, Total ------ ND 2
</TABLE>
ND - Not detected at or above indicated method detection limit
35
<PAGE>
PAGE 18 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-2 MED-TOX LAB NO: 8905037-01A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
GENERAL MINERALS
<TABLE>
<CAPTION>
_______________________________________________________________________________
CODE PARAMETER CONCENTRATION DETECTION METHOD
(mg/L) LIMIT REFERENCE
(mg/L)
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Bicarbonate Alkalinity 390 * 2 403
Carbonate Alkalinity ND * 2 403
Hydroxide Alkalinity ND * 2 403
Ca Calcium 130 0.1 7140
Cl Chloride 240 0.1 300
Cu Copper 0.012 0.005 7210
Fe Iron ND 0.1 7380
Mg Magnesium 57 0.01 7450
Mn Manganese 0.013 0.005 7460
pH 8.0 ** NA 9040
Na Sodium 140 0.01 7770
Sulfate 110 0.5 300
Conductivity 1,700 *** 20 120.1
Total Dissolved Solids 1,000 10 160.1
Hardness 560 * 0.3 314-A
Zn Zinc 0.044 0.003 7950
</TABLE>
* mg CaC03/L
** standard units
*** umhos/cm
ND = Not detected at or above indicated method detection limit
36
<PAGE>
PAGE 19 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-4 MED-TOX LAB NO: 8905037-02A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
GENERAL MINERALS
<TABLE>
<CAPTION>
_______________________________________________________________________________
CODE PARAMETER CONCENTRATION DETECTION METHOD
(mg/L) LIMIT REFERENCE
(mg/L)
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Bicarbonate Alkalinity 400 * 2 403
Carbonate Alkalinity ND * 2 403
Hydroxide Alkalinity ND * 2 403
Ca Calcium 130 0.1 7140
Cl Chloride 250 0.1 300
Cu Copper 0.018 0.005 7210
Fe Iron ND 0.1 7380
Mg Magnesium 56 0.01 7450
Mn Manganese 0.022 0.005 7460
pH 7.9 ** NA 9040
Na Sodium 160 0.01 7770
Sulfate 64 0.5 300
Conductivity 1,800 *** 20 120.1
Total Dissolved Solids 1,000 10 160.1
Hardness 560 * 0.3 314-A
Zn Zinc 0.059 0.003 7950
</TABLE>
* mg CaC03/L
** standard units
*** umhos/cm
ND = Not detected at or above indicated method detection limit
37
<PAGE>
PAGE 20 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-3 MED-TOX LAB NO: 8905037-03A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
GENERAL MINERALS
<TABLE>
<CAPTION>
_______________________________________________________________________________
CODE PARAMETER CONCENTRATION DETECTION METHOD
(mg/L) LIMIT REFERENCE
(mg/L)
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Bicarbonate Alkalinity 390 * 2 403
Carbonate Alkalinity ND * 2 403
Hydroxide Alkalinity ND * 2 403
Ca Calcium 72 0.1 7140
Cl Chloride 160 0.1 300
Cu Copper 0.012 0.005 7210
Fe Iron ND 0.1 7380
Mg Magnesium 38 0.01 7450
Mn Manganese 0.018 0.005 7460
pH 7.8 ** NA 9040
Na Sodium 160 0.01 7770
Sulfate 57 0.5 300
Conductivity 1,300 *** 20 120.1
Total Dissolved Solids 740 10 160.1
Hardness 340 * 0.3 314-A
Zn Zinc 0.028 0.003 7950
</TABLE>
* mg CaC03/L
** standard units
*** umhos/cm
ND = Not detected at or above indicated method detection limit
38
<PAGE>
PAGE 21 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-1 MED-TOX LAB NO: 8905037-04A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
GENERAL MINERALS
<TABLE>
<CAPTION>
_______________________________________________________________________________
CODE PARAMETER CONCENTRATION DETECTION METHOD
(mg/L) LIMIT REFERENCE
(mg/L)
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Bicarbonate Alkalinity 390 * 2 403
Carbonate Alkalinity ND * 2 403
Hydroxide Alkalinity ND * 2 403
Ca Calcium 140 0.1 7140
Cl Chloride 350 0.1 300
Cu Copper 0.008 0.005 7210
Fe Iron ND 0.1 7380
Mg Magnesium 73 0.01 7450
Mn Manganese 0.017 0.005 7460
pH 7.8 ** NA 9040
Na Sodium 140 0.01 7770
Sulfate 88 0.5 300
Conductivity 1,900 *** 20 120.1
Total Dissolved Solids 1,100 10 160.1
Hardness 650 * 0.3 314-A
Zn Zinc 0.37 0.003 7950
</TABLE>
* mg CaC03/L
** standard units
*** umhos/cm
ND = Not detected at or above indicated method detection limit
39
<PAGE>
PAGE 22 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MW-E2 MED-TOX LAB NO: 8905037-05A
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
GENERAL MINERALS
<TABLE>
<CAPTION>
_______________________________________________________________________________
CODE PARAMETER CONCENTRATION DETECTION METHOD
(mg/L) LIMIT REFERENCE
(mg/L)
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Bicarbonate Alkalinity 370 * 2 403
Carbonate Alkalinity ND * 2 403
Hydroxide Alkalinity ND * 2 403
Ca Calcium # 0.1 7140
Cl Chloride 220 0.1 300
Cu Copper # 0.005 7210
Fe Iron # 0.1 7380
Mg Magnesium # 0.01 7450
Mn Manganese # 0.005 7460
pH 7.8 ** NA 9040
Na Sodium # 0.01 7770
Sulfate 94 0.5 300
Conductivity 1,600 *** 20 120.1
Total Dissolved Solids 950 10 160.1
Hardness # * 0.3 314-A
Zn Zinc # 0.003 7950
</TABLE>
* mg CaC03/L
** standard units
*** umhos/cm
ND = Not detected at or above indicated method detection limit
# No sample available for analysis
40
<PAGE>
PAGE 23 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-2 MED-TOX LAB NO: 8905037-01B
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
CAM-17 METALS IN WATER
<TABLE>
<CAPTION>
_______________________________________________________________________________
CODE METAL CONCENTRATION DETECTION METHOD
(mg/L) LIMIT REFERENCE
(mg/L)
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Sb Antimony ND 0.1 7040
As Arsenic 0.002 0.002 7060
Ba Barium 0.23 0.02 7080
Be Beryllium ND 0.003 7090
Cd Cadmium ND 0.003 7130
Cr Chromium ND 0.01 7190
Co Cobalt ND 0.02 7200
Cu Copper 0.012 0.005 7210
Pb Lead ND 0.01 7420
Hg Mercury ND 0.0003 7470
Mo Molybdenum ND 0.05 7480
Ni Nickel ND 0.01 7520
Se Selenium 0.007 0.006 7740
Ag Silver ND 0.005 7760
Ti Thallium ND 0.05 7840
V Vanadium ND 0.1 7910
Zn Zinc 0.044 0.003 7950
</TABLE>
ND = Not detected at or above indicated method detection limit
41
<PAGE>
PAGE 24 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-4 MED-TOX LAB NO: 8905037-02B
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
CAM-17 METALS IN WATER
<TABLE>
<CAPTION>
_______________________________________________________________________________
CODE METAL CONCENTRATION DETECTION METHOD
(mg/L) LIMIT REFERENCE
(mg/L)
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Sb Antimony ND 0.1 7040
As Arsenic ND 0.002 7060
Ba Barium 0.26 0.02 7080
Be Beryllium ND 0.003 7090
Cd Cadmium ND 0.003 7130
Cr Chromium ND 0.01 7190
Co Cobalt ND 0.02 7200
Cu Copper 0.018 0.005 7210
Pb Lead ND 0.01 7420
Hg Mercury ND 0.0003 7470
Mo Molybdenum ND 0.05 7480
Ni Nickel ND 0.01 7520
Se Selenium 0.017 0.006 7740
Ag Silver ND 0.005 7760
Ti Thallium ND 0.05 7840
V Vanadium ND 0.1 7910
Zn Zinc 0.059 0.003 7950
</TABLE>
ND = Not detected at or above indicated method detection limit
42
<PAGE>
PAGE 25 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-3 MED-TOX LAB NO: 8905037-03B
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
CAM-17 METALS IN WATER
<TABLE>
<CAPTION>
_______________________________________________________________________________
CODE METAL CONCENTRATION DETECTION METHOD
(mg/L) LIMIT REFERENCE
(mg/L)
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Sb Antimony ND 0.1 7040
As Arsenic 0.003 0.002 7060
Ba Barium 0.22 0.02 7080
Be Beryllium ND 0.003 7090
Cd Cadmium ND 0.003 7130
Cr Chromium ND 0.01 7190
Co Cobalt ND 0.02 7200
Cu Copper 0.012 0.005 7210
Pb Lead ND 0.01 7420
Hg Mercury ND 0.0003 7470
Mo Molybdenum ND 0.05 7480
Ni Nickel ND 0.01 7520
Se Selenium ND 0.006 7740
Ag Silver ND 0.005 7760
Ti Thallium ND 0.05 7840
V Vanadium ND 0.1 7910
Zn Zinc 0.028 0.003 7950
</TABLE>
ND = Not detected at or above indicated method detection limit
43
<PAGE>
PAGE 26 OF 26
MED-TOX ASSOCIATES, INC.
CLIENT ID: MWMT-1 MED-TOX LAB NO: 8905037-04B
CLIENT JOB NO: 1E-3809 MED-TOX JOB NO: 8905037
DATE RECEIVED: 05/06/89 REPORT DATE: 05/19/89
CAM-17 METALS IN WATER
<TABLE>
<CAPTION>
_______________________________________________________________________________
CODE METAL CONCENTRATION DETECTION METHOD
(mg/L) LIMIT REFERENCE
(mg/L)
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Sb Antimony ND 0.1 7040
As Arsenic ND 0.002 7060
Ba Barium 0.39 0.02 7080
Be Beryllium ND 0.003 7090
Cd Cadmium ND 0.003 7130
Cr Chromium ND 0.01 7190
Co Cobalt ND 0.02 7200
Cu Copper 0.008 0.005 7210
Pb Lead ND 0.01 7420
Hg Mercury ND 0.0003 7470
Mo Molybdenum ND 0.05 7480
Ni Nickel ND 0.01 7520
Se Selenium ND 0.006 7740
Ag Silver ND 0.005 7760
Ti Thallium ND 0.05 7840
V Vanadium 0.2 0.1 7910
Zn Zinc 0.37 0.003 7950
</TABLE>
ND = Not detected at or above indicated method detection limit
44
<PAGE>
ANALYTICAL REQUEST/CHAIN OF CUSTODY FORM
Handwritten form.
Signed by Amir Matin on 5/6/89
45
<PAGE>
APPENDIX B
LOG OF BORINGS
46
<PAGE>
Log of Boring
MW-MT-3
Page 1 of 2
[graphic]
47
<PAGE>
Log of Boring
MW-MT-3
Page 2 of 2
[graphic]
48
<PAGE>
Log of Boring
MW-MT-4
Page 1 of 2
[graphic]
49
<PAGE>
Log of Boring
MW-MT-4
Page 2 of 2
[graphic]
50
<PAGE>
EXHIBIT L
---------
CALCULATION OF TENANT'S SHARE
This Exhibit is attached to and made a part of that certain Standard Form
Lease dated April 25, 1994, by and between State of California Public Employees'
Retirement System as "Landlord", and Cardima, Inc., a California corporation as
"Tenant", for the Premises known as 47266 Benicia Street, Fremont, California.
The capitalized terms used and not otherwise defined herein shall have
the same definitions as set forth in the Lease. The provisions of this Exhibit
shall supersede any inconsistent or conflicting provisions of the Lease.
Building and Project:
- ---------------------
Tenant understands that the Premises are a part of a multi-tenant
Building having the approximate square footage as set forth in Item 6 of the
Basic Lease Provisions contained in the Lease, and that the Building is part of
a multi-building Project containing as of the date of the Lease approximately
430,104 square feet of space.
Calculation of Tenant's Share:
- ------------------------------
Tenant's Share of various Operating Expenses under the Lease shall be
determined as a function of Building square footage, Project square footage or
Product square footage, depending upon the nature of the Operating Expense to be
charged. Tenant acknowledges that the total square footage of the Building, the
Project or other uses of the Project by tenants in the same Product type as
Tenant, may change from time to time, and that Tenant's Share under any or all
of the foregoing categories may vary accordingly, effective on the first day of
the month after each such change occurs.
Set forth below is the initial Tenant's Share (i.e. calculated as of
----
the date of the Lease) with respect to Operating Expenses to be charged as a
function of the Building, of the Project, and of the Product, as of the date of
the Lease. Tenant understands that (i) Landlord shall determine, in its sole
discretion, what Operating Expenses are included within each category to be
charged as a function of the Building, the Project or the Product, and (ii)
Landlord may change the category of any Operating Expense at any time, at
Landlord's sole discretion.
Tenant's Share of the Building: One hundred percent (100%)
Tenant's Share of the Project: Ten point four percent (10.4%)
51
<PAGE>
EXHIBIT 10.8
SUBLEASE BETWEEN CARDIMA, INC. AND TARGET THERAPEUTICS, INC.
1. PARTIES.
This Sublease, dated November 14, 1996 is made between Cardima, Inc., a
Delaware corporation ("Sublessor"), and Target Therapeutics, Inc., a
Delaware corporation ("Sublessee").
2. MASTER LEASE.
Sublessor is the Tenant under a written lease dated April 25, 1992, wherein
the State of California Public Employee's Retirement System ("Landlord")
leases to Sublessor the real property commonly known as 47266 Benicia
Street, Fremont, CA 94538, and consisting of approximately 44,810 square
feet of office, R&D and warehouse space (the "Premises"). Said lease, as
amended by that certain Lease Amendment No. 1, dated September 28, 1994
(collectively, the "Master Lease"), is attached hereto as Exhibit "A".
----------
3. PREMISES.
Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from
Sublessor, on the terms and conditions set forth in this Sublease, that
portion of the Premises depicted on Exhibit "B" attached hereto (the
----------
"Subleased Premises"). The parties stipulate that the Subleased Premises
contains approximately 6,695 rentable square feet of warehouse space.
4. WARRANTY BY SUBLESSOR.
Sublessor warrants and represents to Sublessee that the Master Lease has not
been amended or modified except as expressly set forth herein, that
Sublessor is not now, and as of the commencement of the Term hereof will
not be, to Sublessor's knowledge, the default or breach of any of the
provisions of the Master Lease,and that Sublessor has no knowledge of any
claim by Landlord that Sublessor is in default or breach of any of the
provisions of the Master Lease.
5. TERM.
5.1 Commencement.
------------
5.1.1 The term of the Sublease (the "Term") shall commence on
November 15, 1996 (the "Commencement Date"), and end on November 14,
1997 (the "Termination Date"), unless otherwise sooner terminated in
accordance with provisions of this Sublease.
1
<PAGE>
5.2 Renewal. At the Termination Date, the Term may be extended for
-------
successive periods of one (1) year each provided that: (a) Sublessee shall
-------------
give Sublessor written notice of its intent to extend the Term not less than
ninety (90) days prior to the expiration of the then existing Term, (b)
Sublessor and Sublessee shall mutually consent to the extension of the Term,
and the amount of the rent to be paid by Sublessee during such extension,
(c) the unexpired term of the Master Lease, as of the commencement of each
extended Term, shall not be less than one (1) year, and (d) there shall be
no Event of Default by Sublessee hereunder either as of the date of exercise
of any such extension option or as of the date on which the ensuing Term
extension would otherwise commence. If the Term of this Sublease is so
extended, Sublessor and Sublessee shall enter into a written amendment of
this Sublease setting forth the commencement and expiration dates of the
Term as so extended and any other modifications of this Sublease to which
the parties may agree. Notwithstanding anything in this Sublease to the
contrary, the Term of this Sublease shall not be extended beyond the
expiration or sooner termination of the Master Lease, and Sublessor shall
have no obligation to extend the term of the Master Lease.
5.3 Cancellation. At any time during the Term, either party may cancel
------------
this Sublease by giving the other party not less than six (6) months prior
written notice of cancellation; provided, however, that no notice of
cancellation from Sublessee shall be effective if there is an uncured Event
of Default by Sublessee existing as of the date on which such cancellation
would otherwise be effective, and such cancellation shall be effective only
as of the date that such Event of Default is cured. No cancellation of this
Sublease pursuant to this provision shall relieve either party of any of its
obligations or liabilities which have accrued under this Sublease prior to,
and remain unsatisfied as of, the effective date of such cancellation.
6. RENT.
6.1 Minimum Rent. Beginning on November 15, 1996, (the "Rent Start
-----------
Date"), Sublessee shall pay to Sublessor, without deduction, setoff, notice,
or demand, at the address of Sublessor provided in Section 12 hereof, the
sum of Four-Thousand Five-Hundred Fifty-Two Dollars and Sixty Cents
($4,552.60) minimum monthly rent ("Monthly Rent").
Monthly Rent shall be due and payable to Sublessor in lawful money of the
United States, in advance, on the first (1st) day of each calendar month of
the Term.
6.2 Prorations. If the Commencement Date is not the first (1st) day of a
----------
month, or if the expiration of the Term of this Sublease is not the last day
of a month, a prorated installment of Monthly Rent based on a thirty (30)
day month shall be paid for the fractional month during which the Term
commences or terminates.
2
<PAGE>
6.3 Operating Expenses. Sublessee shall pay to Sublessor, as Additional
------------------
Rent, Fifteen percent (15%) of the Operating Expenses, as described in
Paragraph 7.1 of the Master Lease, as and when such Operating Expenses are
payable by Sublessor to Landlord. Sublessor shall provide notice to
Sublessee of the required payments promptly following receipt of notice
thereof from Landlord.
6.4 Sublessor's Maintenance Costs. In addition to the payment required
-----------------------------
under Section 6.4 hereof, Sublessee shall pay to Sublessor, as Additional
Rent, Eighteen percent (18%) of all costs incurred by Sublessor in the
operation and maintenance of the Premises ("Sublessor's Maintenance Costs")
which are not included among the Operating Expenses.
Sublessor shall provide to the Subleased Premises water, gas electricity,
heat, light, power, refuse pickup, janitorial service and all other
utilities, materials, and services provided to or utilized by Sublessor in
the operation and maintenance of the Premises, and reasonably applicable to
the Subleased Premises, and Sublessor's Maintenance Costs shall include the
reasonable cost of providing such services. Sublessor will provide Sublessee
a detailed monthly invoice of such charges. Sublessee agrees to pay
Sublessor the amount due under such invoice within thirty (30) days of
invoice date.
6.5 Late Payment Charges. If any installment of Monthly Rent or any
--------------------
payment of Additional Rent or any other sums due from Sublessee hereunder is
not received by Sublessor in good funds by the fifth (5th) calendar day from
the applicable due date, Sublessee shall pay to Sublessor an additional sum
equal to five percent (5%) of the amount overdue as a late charge for every
month or portion thereof that such amount remains unpaid.
6.6 General Rent Payment Terms. All Monthly Rent and Additional Rent
--------------------------
shall be paid to Sublessor in lawful money of the United States, at
Sublessor's address provided in Section 12 hereof, without abatement,
deduction, claim or offset, and without prior notice, invoice or demand,
except as specifically provided herein.
7. SECURITY DEPOSIT.
Sublessee shall deposit with Sublessor upon execution of this Sublease the
sum of Seven Thousand Five Hundred and no/100 Dollars ($7,500.00) as
security for Sublessee's faithful performance of Sublessee's obligations
hereunder ("Security Deposit"). If Sublessee fails to pay rent or other
charges when due under this Sublease, or fails to perform any of its other
obligations hereunder, Sublessor may use or apply all or any portion of the
Security Deposit for the payment of any rent or other amount then due
hereunder and unpaid, for the payment of any other sum for which Sublessor
may become obligated by reason of Sublessee's default or breach, or for any
loss or damage sustained by Sublessor as a result of Sublessee's default or
breach. If Sublessor so uses any portion of the Security Deposit, Sublessee
shall, within fifteen (15) days after written demand Sublessor, restore the
Security Deposit to the full amount originally deposited, and Sublessee's
3
<PAGE>
failure to do so shall constitute a default under this Sublease. Sublessor
shall not be required to keep the Security Deposit separate from its
general accounts, and shall have no obligation or liability for payment of
interest on the Security Deposit. In the event Sublessor assigns its
interests in this Sublease, Sublessor shall deliver to its assignee so much
of the Security Deposit as is then held by Sublessor. Within ten (10) days
after the Term has expired, or Sublessee has vacated the Subleased
Premises, or any final adjustment pursuant to Subsection 6.2, 6.3, 6.4 and
6.5 hereof has been made, whichever shall last occur, and provided there is
no Event of Default on the part of Sublessee hereunder, the Security
Deposit, or so much thereof as had not theretofore properly been applied by
Sublessor, shall be returned to Sublessee or to the last assignee, if any,
of Sublessee's interest hereunder.
8. USE OF SUBLEASED PREMISES.
The Subleased Premises shall be used and occupied only for storage of
Sublessee's goods, manufacturing and office equipment and office files, and
related uses, and for no other use or purpose. Sublessee may perform
alterations, additions or improvements only with the prior written consent
of the Sublessor, which shall not be unreasonably withheld and, if consent
is required under the Master Lease, with the prior written consent of the
Landlord. Any such alterations, additions or improvements will be made at
the expense of Sublessee, and will remain the property of Sublessee,
subject to any provisions of the Master Lease requiring the surrender of
such alterations, additions or improvements to the Landlord.
9. ASSIGNMENT AND SUBLETTING.
Sublessee shall not assign this Sublease or further sublet all or any part
of the Subleased Premises without the prior written consent of Sublessor,
which shall not be unreasonably withheld or delayed (and the consent of
Landlord, if such is required under the terms of the Master Lease).
10. OTHER PROVISIONS OF SUBLEASE.
10.1 Terms of Sublease. This Sublease is subject and subordinate to the
-----------------
terms and conditions of the Master Lease. All applicable terms and
conditions of the Master Lease are incorporated into and made a part of
this Sublease, with each reference therein to Landlord deemed to mean
Sublessor, each reference to Tenant therein deemed to mean Sublessee, each
reference to the Premises deemed to mean the Subleased Premises, and each
reference therein to the Lease deemed to mean this Sublease. Sublessee
assumes and agrees to perform the Tenant's obligations under the Master
Lease during the Term to the extent that such obligations are incorporated
herein. Sublessee shall not commit or suffer any act or omission that will
violate any provision of the Master Lease. Sublessor shall exercise
reasonable diligence in attempting to cause Landlord to perform its
obligations under the Master Lease for the benefit of Sublessee, but shall
have no liability to Sublessee for any default of Landlord under the Master
Lease or any
4
<PAGE>
breach by Landlord under the Master Lease, except to the extent resulting
from the acts or omissions of Sublessor.
10.2 Incorporation of Master Lease Terms.
-----------------------------------
10.2.1 Notwithstanding the foregoing, the following provisions of
the Master Lease are not incorporated herein: the Basic Lease Provisions
summary page, Paragraphs 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 4.1, 4.2, 4.6, Rider
14.1, 15.7, 15.8, 21.27, Lease Rider No. One, Exhibit A, Exhibit C, Exhibit
C, Exhibit D, Exhibit E, and Exhibit L. With respect to the representations
and warranties made pursuant to Paragraph 6.8 of the Master Lease and
incorporated herein, the parties acknowledge that Sublessor has undertaken
no independent investigation of the accuracy of those representations and
warranties.
10.2.2 For purposes of incorporation into this Sublease, the terms
of the Master Lease are subject to the following additional modifications:
(i) in all provisions of the Master Lease requiring the approval or consent
of Landlord, Sublessee shall be required to obtain the approval or consent
of Landlord and Sublessor, which shall be subject to the same standard of
approval as would apply to the approval of Landlord under the Master Lease,
(ii) in all provisions of the Master Lease requiring the Tenant to submit,
exhibit, supply or provide to Landlord evidence, certificates or any other
matter or thing, Sublessee shall be required to submit, exhibit, supply or
provide, as the case may be, the same to both Landlord and Sublessor. In
any such instance, Sublessor shall determine, according to the same
standard applicable to Landlord under the Master Lease, if such evidence,
certificate or other matter or thing shall be satisfactory, (iii) in all
provisions of the Master Lease obligating Landlord to provide to Tenant
statements, certificates, or other documents or information, Sublessor
shall provide to Sublessee copies of such statements, certificates or other
documents or information immediately following receipt from Landlord,
insofar as they are applicable to this Sublease, (iv) any rent abatement,
refund, credit, or other amount that may be allowed or become due from
Landlord to the Tenant under the Master Lease shall be allowed, refunded or
credited by Sublessor to Sublessee only to the extent applicable to
Sublessee's occupancy of the Premises pursuant to this Sublease and only if
and to the extent allowed to or received by Sublessor under the Master
Lease. Without limiting the foregoing, in no event shall Sublessee have any
right or claim to any abatement, refund, credit, or other amount that may
be allowed or become due from Landlord to Sublessor with respect to any
portion of the Premises not included within the Subleased Premises, and (v)
Sublessor shall have no obligation, pursuant to Article XII of the Master
Lease, to restore or rebuild any portion of the Premises after any damage
or destruction or, pursuant to Article XIII, after any taking by eminent
domain, except as expressly set forth therein.
5
<PAGE>
10.3 Termination of Master Lease. If the Master Lease terminates, this
---------------------------
Sublease shall terminate and the parties shall be relieved of any further
liability or obligation under this Sublease, except for such liability as
may have accrued and remained unsatisfied as of the date of termination. If
the Master Lease terminates as a result of a default or breach by Sublessor
or Sublessee under this Sublease and/or the Master Lease, then the
defaulting party shall be liable to the nondefaulting party for the damage
suffered as a result of such termination. Sublessor shall provide to
Sublessee a copy of any notice of default of the obligations of Sublessor
under the Master Lease in the event of the partial or total damage,
destruction, or condemnation of the Premises or the building or project of
which the Premises, are a part, subject to Section 10.5(ii) below, the
exercise of such right by Sublessor shall not constitute a default or
breach hereunder.
10.4 Representations Regarding Master Lease. Sublessor represents and
--------------------------------------
warrants (i) that the document attached as Exhibit A to this Sublease is a
---------
true, correct and complete copy of the Master Lease, and that the Master
Lease represents the entire agreement between Sublessor and Landlord with
respect to the lease of the Subleased Premises, and (ii) Sublessor has not
assigned, encumbered or otherwise transferred any interest of Tenant under
the Master Lease.
10.5 Master Lease Obligations. During the term of this Sublease,
------------------------
Sublessor: (i) shall perform all obligations of the Tenant under the Master
Lease, insofar as such obligations are applicable to this Sublease, (ii)
shall not terminate the Master Lease without the express written consent of
Sublessee, except following an event of damage or destruction which would
permit Sublessor to terminate the Master Lease pursuant to Paragraph 12.3
thereof, and which event of damage or destruction affects the Premises and
not the Subleased Premises, and (iii) shall not amend, modify or alter any
terms or conditions of the Master Lease which may affect the use or
operation by Sublessee of the Subleased Premises, without the consent of
Sublessee. Sublessee's consent hereunder shall not be unreasonably withheld
or delayed.
10.6 Default by Sublessor under Master Lease. Effective as of the date
---------------------------------------
that Sublessee receives written notice that a default by Sublessor has
occurred under the Master Lease, or under this Sublease, Sublessee shall be
entitled (i) to withhold from any payments of Monthly Rent due to Sublessor
hereunder an amount reasonably estimated by Sublessee as necessary to cure
such default, until such time as Sublessee shall have received reasonably
satisfactory written evidence from Landlord that the default under the
Master Lease has been cured, or until such time as the default of Sublessor
hereunder is cured, and (ii) to apply such sums as are reasonably necessary
to cure such default (but without any obligation on the part of Sublessee
to cure any such default). Sublessee shall have no duty to investigate the
veracity of any alleged notice of default of Sublessor received by
Sublessee. Immediately following receipt of evidence that Sublessor's
default
6
<PAGE>
under the Master Lease and/or the Sublease has been cured, Sublessee shall
pay to Sublessor all amounts withheld hereunder, less any sums expended by
Sublessee in curing such defaults, together with invoices or other evidence
confirming all sums so paid by Sublessee.
Sublessor shall indemnify, defend and hold harmless Sublessee from and
against any loss, cost, demand, or liability, including attorney's fees and
expenses resulting directly or indirectly from the (i) negligence or
willful misconduct of Sublessor, its agents or contractors, or (ii) a
breach of the obligations of Sublessor hereunder or as Tenant under the
Master Lease.
11. ATTORNEYS' FEES.
If Sublessor or Sublessee shall commence an action against the other
arising out of or in connection with this Sublease, the prevailing party
shall be entitled to recover its costs of suit and reasonable attorney's
fees.
12. NOTICES.
All notices and demands which are required or permitted to be given by
either party hereunder shall be in writing. All notices and demands shall
be (i) personally delivered (including delivery by courier or overnight
delivery service), (ii) sent by facsimile or telecopy transmittal and
confirmed by United States mail, as provided in the next clause, or (iii)
sent by United States mail, postage prepaid, to the address noted below for
the respective parties, or to such other place as either party may from
time to time designate in a notice to the other. Notices and demands sent
by personal delivery shall be deemed effective upon delivery to the
addressee, and notices sent by facsimile or telecopy transmission shall be
deemed effective upon transmission to the addressee, and electronic or
telephonic confirmation of receipt. Notices and demands sent by the United
States mail shall be deemed effective on the third (3rd) business day
following deposit in the United States mail in the manner required herein.
To Sublessor: 47266 Benicia Street, Fremont, CA 94538
Attention: Controller
Telephone: 510/354-0300
Facsimile: 510/657-4476
To Sublessee: 47201 Lakeview Blvd., Fremont, CA 94538-5120
Attention: Chief Financial Officer
Telephone: 510/440-7784
Facsimile: 510/440-7630
7
<PAGE>
13. PARKING.
Sublessee shall have the non-exclusive right to use, in common with
Sublessor and other occupants of the property of which the Premises are a
part, a number of parking spaces among the total number of parking spaces
allocated to Sublessor under the Master Lease which is reasonably adequate
for the use by Sublessee of the Subleased Premises.
14. CONSENT BY LANDLORD.
Sublessor represents and warrants to Sublessee that the consent of
Landlord to the transaction contemplated by this Sublease is not required.
IN WITNESS WHEREOF the parties have executed this Sublease intending to be
bound as of the date first set forth above.
SUBLESSOR: SUBLESSEE:
CARDIMA, INC., TARGET THERAPEUTICS, INC.,
A Delaware corporation A Delaware corporation
/s/CARDIMA, INC. /s/TARGET THERAPEUTICS, INC.
By:_______________________________ By:______________________________
Title:____________________________ Title:___________________________
EXHIBIT A: Master Lease
EXHIBIT B: Subleased Premises Floor Plan
8
<PAGE>
LEASE AMENDMENT NO. 1
This Lease Amendment No. 1 (the "Amendment"), dated September 28, 1994
for reference only, is made by and between STATE OF CALIFORNIA PUBLIC
EMPLOYEES' RETIREMENT SYSTEM ("Landlord"), and CARDIMA, INC., a California
Corporation ("Tenant"), on the basis of the facts, intentions and
understandings of the parties set forth in the following Recitals.
Recitals
--------
A. Landlord and Tenant have heretofore entered into that certain
Standard Form Lease (Industrial; Multi-Tenant; Net), dated as of April 25,
1994 (the "Lease"), providing for the lease by Tenant of the premises located
at 47266 Benicia Street, Fremont, California 94538 (the "Premises").
B. The parties desire to amend the Lease in certain respects to
provide, among other things, for the sublease of a portion of the Premises to
Target Therapeutics, Inc. and to modify the provisions of the Lease relating
to the determination of the date on which the term of the Lease shall
commence.
Agreement
---------
NOW, THEREFORE, for and in consideration of the mutual covenants set
forth in this Amendment, and for other valuable consideration the receipt and
sufficiency of which are acknowledged, Landlord and Tenant hereby amend the
Lease as follows:
1. Definitions. Capitalized terms used in this Amendment without
-----------
definition have the same meanings as are ascribed to such terms in the Lease.
2. Commencement of Lease. Section 3.2 of the Lease is amended to
---------------------
provide that the Commencement Date shall occur on the first to occur of the
dates set forth in subclauses (i) or (ii) thereof or November 15, 1994.
3. Permitted Lease Transfers. Rider 14.1, subsection (a) (i), of the
-------------------------
Lease is amended to read in its entirety as follows:
(i) any assignment of this Lease or sublease of all or a portion of
the Premises to either (A) Target Therapeutics, Inc., or (B) any entity which
is controlled by, under common control with, or controls Tenant ("control"
being defined as the ownership of equity interests constituting fifty percent
(50%) or more of the total voting power of all outstanding equity interests of
the entity over which control is asserted);
4. Subtentant Improvements. In connection with the proposed sublease
-----------------------
of a portion of the Premises to Target Therapeutics, Inc. ("Subtenant"),
Subtenant may (a) install a chain link demising wall separating its subleased
portion of the Premises from the remainder of the Premises, (b) install its
trade fixtures and equipment within its subleased
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<PAGE>
portion of the Premises, and (c) store within its subleased portion of the
Premises equipment, materials and supplies, without such installation and
storage constituting occupancy of the Premises for purposes of determining the
Commencement Date.
5. Continuation of Lease. As amended by this Amendment, all terms and
---------------------
conditions of the Lease shall remain unchanged and in full force and effect.
6. General Provisions.
------------------
6.1 Captions. Captions and headings used in this Amendment are for
--------
convenience of reference only and shall not affect the meaning or
interpretation of any provision of this Amendment.
6.2 Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original as against the party
whose signature appears thereon, and together which shall constitute but one
and the same agreement.
6.3 Recitals. The Recitals set forth in this Amendment are
--------
incorporated into and made a part of this Amendment.
Landlord and Tenant have caused this Amendment to be executed by their
respective duly authorized officers on the date set forth opposite their
respective signatures below.
Landlord:
Date:______________________, 1996 STATE OF CALIFORNIA PUBLIC
EMPLOYEES' RETIREMENT SYSTEM
By: Alex. Brown Kleinwort Benson
Realty Advisors Corporation,
its duly authorized agent
By:_______________________________ By:_______________________________
Name:_____________________________ Name:_____________________________
Its:______________________________ Its:______________________________
Tenant:
Date:______________________, 1996 CARDIMA, INC.
a California corporation
By:_______________________________
Name:_____________________________
Its:______________________________
<PAGE>
EXHIBIT B
[FLOOR PLAN OF SUBLEASED PREMISES.]
<PAGE>
EXHIBIT 10.9
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated January 23, 1996 by and
between COMDISCO, INC. ("Lessor") and CARDIMA, INC. ("Lessee").
CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Summary
Equipment Schedule. In the event of a conflict, the terms of the applicable
Schedule prevail over this Master Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment,
will be bound to its rental obligations for each item of Equipment and the
term of a Summary Equipment Schedule will begin and continue through the
Initial Term and thereafter until terminated by either party upon prior
written notice received during the Notice Period. No termination may be
effective prior to the expiration of the Initial Term.
3. Rent and Payment.
Rent is due and payable in advance on the first day of each Rent Interval at
the address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment
and disclaims any reliance upon statements made by the Lessor,
other than as set forth in the Schedule.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee
that, so long as Lessee is not in default, Lessor will not disturb
Lessee's quiet and peaceful possession, and unrestricted use of the
Equipment. To the extent permitted by the manufacturer, Lessor
assigns to Lessee during the term of the Summary Equipment Schedule
any manufacturer's warranties for the Equipment. LESSOR MAKES NO
OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT
OR ITS FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible
for any /????/, claim, loss, damage or expense of any kind
(including strict liability in tort) caused by the Equipment except
for any loss or damage caused by the willful misconduct or
negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. Title; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the
rights of the Owner, Lessor, any Assignee and any Secured Party.
Lessee authorizes Lessor, as Lessee's agent, and at Lessor's
expense, to prepare, execute and file in Lessee's name
precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured
Party in the Equipment and to insert serial numbers in Summary
Equipment Schedules as appropriate, Lessee will, at its expense,
keep the Equipment free and clear from any liens or encumbrances of
any kind (except any caused by Lessor) and will indemnify and hold
the Owner, Lessor, any Assignee and Secured Party harmless from and
against any loss caused by Lessee's failure to do so, except where
such is caused by Lessor.
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5.2 Relocation or Sublease. Upon prior written notice, Lessee may
relocate Equipment to any location within the continental United
States provided (i) the Equipment will not be used by an entity
exempt from federal income tax, and (ii) all additional costs
(including any administrative fees, additional taxes and insurance
coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee
meets the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule
have been fixed by Lessor in order to permit Lessor to sell and/or
assign or transfer its interest or grant a security interest in
each Schedule and/or the Equipment to a Secured Party or Assignee.
In that event, the term Lessor will mean the Assignee and any
Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and
will not materially change Lessee's duties or materially increase
the burdens or risks imposed on Lessee. The Lessee consents to and
will acknowledge such assignments in a written notice given to
Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The
Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and
the Secured Party continues to receive all Rent payable under the Schedule;
and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee
reserves its right to have recourse directly against Lessor for any defense
or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent
of the Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease.
Lessee's obligation to pay Rent and all other amounts due hereunder
is absolute and unconditional and is not subject to any abatement,
reduction, set-off, defense, counterclaim, interruption, deferment
or recoupment for any reason whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for
all taxes, fees or any other charges (together with any related
interest or penalties not arising from the negligence of Lessor)
accrued for or arising during the term of each Summary Equipment
Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and
franchise taxes on the capital or the net income of Lessor). Lessor
will file all personal property tax returns for the Equipment and
pay all such property taxes due. Lessee will reimburse Lessor for
property taxes within thirty (30) days of receipt of an invoice.
7. Care, Use and Maintenance; Inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in
good operating order and appearance, protect the Equipment from
deterioration, other than normal wear and tear, and will not use
the Equipment for any purpose other than that for which it was
designed. If commercially available
2
<PAGE>
and considered common business practice for each item of Equipment,
Lessee will maintain in force a standard maintenance contract with
the manufacturer of the Equipment, or another party acceptable to
Lessor, and will provide Lessor with a complete copy of that
contract. If Lessee has the Equipment maintained by a party other
than the manufacturer or self maintains, Lessee agrees to pay any
costs necessary for the manufacturer to bring the Equipment to then
current release, revision and engineering change levels, and to re-
certify the Equipment as eligible for manufacturer's maintenance at
the expiration of the lease term, provided re-certification is
available and is required by Lessor. The lease term will continue
upon the same terms and conditions until recertification has been
obtained.
7.2 Inspection by Lessor. Upon reasonable advance notice, Lessee,
during reasonable business hours and subject to Lessee's security
requirements, will make the Equipment and its related log and
maintenance records available to Lessor for inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents,
warrants and convenants that with respect to the Master Lease and each
Schedule executed hereunder:
(a) The Lessee is a corporation duly organized and validly existing in
good standing under the laws of the jurisdiction of its incorporation,
is duly qualified to do business in each jurisdiction (including the
jurisdiction where the Equipment is, or is to be, located) where its
ownership or lease or property or the conduct of its business requires
such qualification, except for where such lack of qualification would
not have a material adverse effect on the Company's business; and has
full corporate power and authority to hold property under the Master
Lease and each Schedule and to enter into and perform its obligations
under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by
all necessary corporate action on the part of the Lessee, and the
Master Lease and each Schedule are not inconsistent with the Lessee's
Articles of Incorporation or Bylaws, do not contravene any law or
governmental rule, regulation or order applicable to it, do not and
will not contravene any provision of, or constitute a default under,
any indenture, mortgage, contract or other instrument to which it is a
party or by which it is bound, and the Master Lease and each Schedule
constitute legal, valid and binding agreements of the Lessee,
enforceable in accordance with their terms, subject to the effect of
applicable bankruptcy and other similar laws affecting the rights of
creditors generally and rules of law concerning equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending
or, to the knowledge of the Lessee, threatened against or affecting
the Lessee in any court or before any governmental commission, board
or authority which, if adversely determined, shall have a materiel
adverse effect on the ability of the Lessee to perform its
obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities
and obligations of the Lessee as set forth in the Financial Statements
and liabilities and obligations which have occurred in the ordinary
course of business, and which have not been, in any case or in the
aggregate, materially adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all
patents, patent applications, trademarks, trade names, inventions,
franchises, licenses, permits, computer software and copyrights
necessary for the operations of its business as now conducted, with no
known infringement of, or conflict with, the rights of others.
(g) All material contracts, agreements and instruments to which the
Lessee is a party are in full force and effect in all material
respects, and are valid, binding and enforceable by the Lessee in
accordance with
3
<PAGE>
their respective terms, subject to the effect of applicable
bankruptcy and other similar laws affecting the rights of creditors
generally, and rules of law concerning equitable remedies.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. Indemnity.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each
item of Equipment in an amount not less than the Casualty Value. All policies
for such insurance will name the Lessor and any Secured Party as additional
insured and as loss payee, and will provide for at least thirty (30) days prior
written notice to the Lessor of cancellation or expiration, and will insure
Lessor's interest regardless of any breach or violation by Lessee of any
representation, warranty or condition contained in such policies and will be
primary without right of contribution from any insurance effected by Lessor.
Upon the execution of any Schedule, the Lessee will furnish appropriate evidence
of such insurance acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. Default, Remedies and Mitigation.
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13.1 Default. The occurrence of any one or more of the following
Events of Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee
when due if that failure continues for five (5) business days after written
notice; or
(b) Lessee's failure to perform any other term or condition of the
Schedule or the material inaccuracy of any representation or warranty made by
the Lessee in the Schedule or in any document or certificate furnished to the
Lessor hereunder if that failure or inaccuracy continues for ten (10) business
days after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the
failure by Lessee to pay its debts when due, the insolvency of Lessee, the
filing by Lessee or the filing against Lessee of any petition under any
bankruptcy or insolvency law or for the appointment of a trustee or other
officer with similar powers, the adjudication of Lessee as insolvent, the
liquidation of Lessee, or the taking of any action for the purpose of the
foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary
Equipment Schedule or other agreement between Lessee and Lessor or its Assignee
or Secured Party.
13.2 Remedies. Upon the occurrence of any of the above Events of Default,
Lessor at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable
Schedule by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default
Costs;
(c) with notice and demand, recover all sums due and accelerate and
recover the present value of the remaining payment stream of all Rent due under
the defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's
security requirements, Lessor may enter on Lessee's premises to remove and
repossess the Equipment without being liable to Lessee for damages due to the
repossession, except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms of
Section 13.2, Lessor will use its best efforts in accordance with its normal
business procedures (and without obligation to give any priority to such
Equipment) to mitigate Lessor's damages as described below. EXCEPT AS SET FORTH
IN THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY
STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY
ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or
otherwise dispose of all or any part of the Equipment at a public or private
sale for cash or credit with the privilege of purchasing the Equipment. The
proceeds from any sale, lease or other disposition of the Equipment are defined
as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair
Market Value of the Equipment at the expiration of the Initial Term less the
Default Costs; or
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<PAGE>
(b) if leased, the present value (discounted at 3 percent (3%) over the
U.S. Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. Additional Provisions.
14.1 Board Attendance. One representative of Lessor will have the
right to attend Lessee's corporate Board of Directors meetings and Lessee will
give Lessor reasonable notice in advance of any special Board of Directors
meeting, which notice will provide an agenda of the subject matter to be
discussed at such board meeting. Lessee will provide Lessor with a certified
copy of the minutes of each Board of Directors meeting within thirty (30) days
following the date of such meeting held during the term of this Master Lease.
14.2 Financial Statements. As soon as practicable at the end of each
month (and in any event within thirty (30) days), Lessee will provide to Lessor
the same information which Lessee provides to its Board of Directors, but which
will include not less than a monthly income statement, balance sheet and
statement of cash flows prepared in accordance with generally accepted
accounting principles, consistently applied (the "Financial Statements"). As
soon as practicable at the end of each fiscal year, Lessee will provide to
Lessor audited Financial Statements setting forth in comparative form the
corresponding figures for the fiscal year (and in any event within ninety (90)
days), and accompanied by an audit report and opinion of the independent
certified public accountants selected by Lessee. Lessee will promptly furnish
to Lessor any additional information (including, but not limited to, tax
returns, income statements, balance sheets and names of principal creditors) as
Lessor reasonably believes necessary to evaluate Lessee's continuing ability to
meet financial obligations. After the effective date of the initial
registration statement covering a public offering of Lessee's securities, the
term "Financial Statements" will be deemed to refer to only those statements
required by the Securities and Exchange Commission.
14.3 Obligation to Lease Additional Equipment. Upon notice to Lessee,
Lessor will not be obligated to lease any Equipment which would have a
Commencement Date after said notice if: (i) Lessee is in default under this
Master Lease or any Schedule; (ii) Lessee is in default under any loan
agreement, the result of which would allow the lender or any secured party to
demand immediate payment of any material indebtedness; (iii) there is a material
adverse change in Lessee's credit standing; or (iv) Lessor determines (in
reasonable good faith) that Lessee will be unable to perform its obligations
under this Master Lease or any Schedule.
14.4 Merger and Sale Provisions. Lessee will notify Lessor of any
proposed Merger at least sixty (60) days prior to the closing date. Lessor may,
in its discretion, either (i) consent to the assignment of the Master Lease and
all relevant Schedules to the successor entity, or (ii) terminate the Lease and
all relevant schedules. If Lessor elects to consent to the assignment, Lessee
and its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 Entire Agreement. This Master Lease and associated Schedules and
Summary Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 No Waiver. No action taken by Lessor or Lessee will be deemed to
constitute a waiver of compliance with any representation, warranty or covenant
contained in this Master Lease or a Schedule. The waiver
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<PAGE>
by Lessor or Lessee of a breach of any provision of this Master Lease or a
schedule will not operate or be construed as a waiver of any subsequent
breach.
14.7 Binding Nature. Each Schedule is binding upon, and inures to the
benefit of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR
OBLIGATIONS.
14.8 Survival of Obligations. All agreements, obligations including,
but not limited to those arising under Section 6.2, representations and
warranties contained in this Master Lease, any Schedule, Summary Equipment
Schedule or in any document delivered in connection with those agreements are
for the benefit of Lessor and any Assignee or Secured Party and survive the
execution, delivery, expiration or termination of this Master Lease.
14.9 Notices. Any notice, request or other communication to either
party by the other will be given in writing and deemed received upon the earlier
of (1) actual receipt or (2) three days after mailing if mailed postage prepaid
by regular or airmail to Lessor (to the attention of "the Comdisco Venture
Group") or Lessee, at the address set out in the Schedule, (3) one day after it
is sent by courier or (4) on the same day as sent via facsimile transmission,
provided that the original is sent by personal delivery or mail by the sending
party.
14.10 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE
WILL HAVE BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE
GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 Severability. If any one or more of the provisions of this
Master Lease or any Schedule is for any reason held invalid, illegal or
unenforceable, the remaining provisions of this Master Lease and any such
schedule will be unimpaired, and the invalid, illegal or unenforceable provision
replaced by a mutually acceptable valid, legal and enforceable provision that is
closest to the original intention of the parties.
14.12 Counterparts. This Master Lease and any Schedule may be executed
in any number of counterparts, each of which will be deemed an original, but all
such counterparts together constitutes one and the same instrument. If Lessor
grants a security interest in all or any part of a schedule, the Equipment or
sums payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 Licensed Products. Lessee will obtain no title to Licensed
Products which will at all times remain the property of the owner of the
Licensed Products. A license from the owner may be required and it is Lessee's
responsibility to obtain any required license before the use of the Licensed
Products. Lessee agrees to treat the Licensed Products as confidential
information of the owner, to observe all copyright restrictions, and not to
reproduce or sell the Licensed Products.
14.14 Secretary's Certificate. Lessee will, upon execution of this
Master Lease, provide Lessor with a secretary's certificate of incumbency and
authority. Upon the execution of each Schedule with a purchase price in excess
of $1,000,000, Lessee will provide Lessor with an opinion from Lessee's counsel
in a form acceptable to Lessor regarding the representations and warranties in
Section 8.
14.15 Electronic Communications. Each of the parties may communicate
with the other by electronic means under mutually agreeable terms.
14.16 Landlord/Mortgagee Waiver. Lessee agrees to provide Lessor with
a Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be
in a form satisfactory to Lessor.
14.17 Equipment Procurement Charge/Progress Payments. Lessee hereby
agrees that Lessor shall not, by virtue of its entering into this Master Lease,
be required to remit any payments to any manufacturer or other third party until
Lessee accepts the equipment subject to this Master Lease.
7
<PAGE>
14.18 Definitions.
Advance - means the amount due to Lessor by Lessee upon Lessee's execution of
- -------
each Schedule.
Assignee - means an entity to whom Lessor has sold or assigned its rights as
- --------
owner and Lessor of Equipment.
Casualty Loss - means the irreparable loss or destruction of Equipment.
- -------------
Casualty Value - means the greater of the aggregate Rent remaining to be paid
- --------------
for the balance of the lease term or the fair Market Value of the equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
Commencement Date - is defined in each Schedule.
- -----------------
Default Costs - means reasonable attorney's fees and remarketing costs resulting
- -------------
from a Lessee default or Lessor's enforcement of its remedies.
Delivery Date -means date of delivery of Inventory Equipment to Lessee's
- -------------
address.
Equipment - means the property described on a Summary Equipment Schedule and any
- ---------
replacement for that property required or permitted by this Master Lease or a
Schedule.
Event of Default - means the events described in Subsection 13.1.
- ----------------
Fair Market Value - means the aggregate amount which would be obtainable in an
- -----------------
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
Initial Term - means the period of time beginning on the first day of the first
- ------------
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
Interim Rent - means the pro-rata portion of Rent due for the period from the
- ------------
Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.
Late Charge - means the lesser of five percent (5%) of the payment due or the
- -----------
maximum amount permitted by the law of the state where the Equipment is located.
Licensed Products - means any software or other licensed products attached to
- -----------------
the Equipment.
Like Equipment - means replacement Equipment which is lien free and of the same
- --------------
model, type, configuration and manufacture as Equipment.
Merger - means any consolidation or merger of the Lessee with or into any other
- ------
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
Notice Period - means not less than ninety (90) days nor more than twelve (12)
- -------------
months prior to the expiration of the lease term.
Owner - means the owner of Equipment.
- -----
Rent - means the rent Lessee will pay for each item of Equipment expressed in a
- ----
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
8
<PAGE>
Rent Interval - means a full calendar month or quarter as indicated on a
- -------------
Schedule.
Schedule - means either an Equipment Schedule or a Licensed Products Schedule
- --------
which incorporates all of the terms and conditions of this Master Lease.
Secured Party - means an entity to whom Lessor has granted a security interest
- -------------
for the purpose of securing a loan.
Summary Equipment Schedule - means a certificate provided by Lessor summarizing
- --------------------------
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
CARDIMA, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Phil Radlick By:
------------------------ -------------------------------
Title: Title:
----------------------- ----------------------------
9
<PAGE>
EQUIPMENT SCHEDULE VL-1
DATED AS OF JANUARY 23, 1996
TO MASTER LEASE AGREEMENT
DATED AS OF JANUARY 23, 1996 (THE "MASTER LEASE")
LESSEE: CARDIMA, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------- ------------------------
Dr. Phillip Radlick
Ph. (510)354-0153 6111 North River Road
Fax (510)657-4476 Rosemont, Illinois 60018
Attn.: Venture Group
Address for Notices:
- --------------------
47266 Benicia Street
P.O. Box 14172
Fremont, CA 94539-1372
Attn.:
Central Billing Location: Rent Interval: Monthly
- ------------------------- --------------
Same as above.
Attn.:
Lessee Reference No.:
----------------------
(24 digits maximum)
Location of Equipment: Initial Term: 42
- ---------------------- -------------
Same as above. (Number of Rent Intervals)
Lease Rate Factor: 2.815%
------------------
Attn.:
EQUIPMENT (as defined below): Advance: $42,225.00
--------
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period January 23, 1996 through January 23, 1997
("Equipment Delivery Period"), for which Lessor receives vendor invoices
approved for payment, up to an aggregate purchase price of $1,500,000
("Commitment Amount"); excluding custom use equipment, leasehold improvements,
installation costs and delivery costs, rolling stock, special tooling, "stand-
alone" software, application software bundled into computer hardware, hand held
items, molds and fungible items.
10
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in a value up to the Commitment
Amount referred to on the face of this Schedule. If the Equipment acquired is
of category (i), (ii) or (iii) below, the effectiveness of this Schedule as it
relates to those items of Equipment is contingent upon Lessee's acknowledgment
at the time Lessor acquires the Equipment that Lessee has either received or
approved the relevant purchase documentation between vendor and Lessor for that
Equipment.
Lessor will finance only the acquisition of individual items of Equipment
with a cost to Lessor of more than $500.00.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
specifically approved by Lessor.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may be
considered by Lessor for inclusion under this Lease (the "Sale-Leaseback
Transaction"). Any request for Sale-Leaseback Transaction must be submitted to
Lessor in writing (along with accompanying evidence of Lessee's Equipment
ownership satisfactory to Lessor for all Equipment submitted) no later than the
fifteenth day of the last month in each quarter and for equipment installed
after the date hereof (except for the Equipment submitted on the second Sale-
Leaseback Transaction) Lessor will not approve a Sale-Leaseback Transaction for
Equipment which arrives ninety (90) days after the original purchase of the
Equipment as evidenced by the invoice date. Further, the first Sale-Leaseback
of Equipment will be placed on lease subject to: (1) Lessor prior approval of
the Equipment; and (2) if approved, at Lessee's actual book value. The second
Sale-Leaseback Transaction will be placed on lease subject to values established
by Lessor based on the age of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to Lessor's prior
approval of the Equipment and at Lessor's appraised value for such used
Equipment.
(iv) INVENTORY EQUIPMENT. Upon Lessee's request, Lessor may supply new
or used Equipment from its inventory at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the date Lessee approves the vendor invoice. The Commencement
Date for sale-leaseback Equipment shall be the date Lessor tenders the purchase
price, and the Commencement Date for inventory Equipment shall be the Delivery
Date. Lessor will summarize all approved invoices, purchase documentation and
evidence of delivery, as applicable, received in the same calendar quarter into
a Summary Equipment Schedule in the form attached to this Schedule as Exhibit 1,
and the Initial Term will begin the first day of the calendar quarter
thereafter. Each Summary Equipment Schedule will contain the Equipment
location, description, serial number(s) and cost and will incorporate the terms
and conditions of the Master Lease and this Schedule and will constitute a
separate lease.
3. Option to Extend
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event,
the rent to be paid during said extended period shall be mutually agreed upon
and if the parties cannot mutually agree, then the Summary Equipment Schedule
shall continue in full force and effect pursuant to the existing terms and
conditions until terminated in accordance with its terms. The Summary Equipment
Schedule will continue in effect following said extended period until terminated
by either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the date of receipt.
11
<PAGE>
4. Purchase Option
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term of the Summary Equipment Schedule to
purchase all, but not less than all, of the Equipment listed therein for the
purchase price not to exceed twenty percent (20%) of the original cost of
Equipment and upon terms and conditions to be mutually agreed upon by the
parties following Lessee's written notice, plus any taxes applicable at time of
purchase. Said purchase price shall be paid to Lessor at least thirty (30) days
before the expiration date of the Initial Term or extended purchase price but,
in no event, earlier than the expiration of the fixed Initial Term of extended
term, if applicable. If the parties are unable to agree on the purchase price
or the terms and conditions with respect to said purchase, then the Summary
Equipment Schedule with respect to this Equipment shall remain in full force and
effect. Notwithstanding the exercise by Lessee of this option and payment of
the purchase price, until all obligations under the applicable Summary Equipment
Schedule have been fulfilled, it is agreed and understood that Lessor shall
retain a purchase money security interest in the Equipment listed therein and
the Summary Equipment Schedule shall constitute a Security Agreement under the
Uniform Commercial Code of the state in which the Equipment is located.
5. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
(a) Section 14.14. Secretary's Certificate
-----------------------
In line 3, delete the sentence beginning with the words "Upon the
execution".
(b) Section 14.16. Landlord/Mortgagee Waiver
-------------------------
To the beginning of this Section add the words "Upon request of Lessor and
within a reasonable timeframe,"
Master Lease: This schedule is issued pursuant to the Lease identified on page
1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations and
warranties set forth in Section 8) except as modified herein by this Schedule.
This Schedule may not be amended or rescinded except by a writing signed by both
parties.
CARDIMA, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Phil Radlick By:
------------------ -------------------------------
Title: Title:
--------------- -----------------------------
Date: Date:
---------------- -----------------------------
12
<PAGE>
18 SLXXXXX-XX
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- ------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
13
<PAGE>
ADDENDUM TO THAT EQUIPMENT SCHEDULE VL-1
DATED AS OF JANUARY 23, 1996 TO THE
MASTER LEASE AGREEMENT DATED AS OF JANUARY 23, 1996
BETWEEN CARDIMA, INC. AS LESSEE
AND COMDISCO, INC. AS LESSOR
The undersigned hereby agree that the terms and conditions of the above-
referenced Equipment Schedule are hereby modified and amended as follows:
1) Section 5.2. Relocation or Sublease.
----------------------
In the second paragraph, line 2, after the words "the Secured Party" insert
"such consent not to be reasonably withheld."
2) Section 9. Delivery and Return of Equipment.
--------------------------------
At the beginning of the first sentence add "As between Lessor and Lessee,"
and in line 7 after the words "and wear and tear" insert "subject to the
other terms of this agreement".
3) Section 11. Indemnity
---------
In line 9, after the words "negligent acts" insert the words "or willful
misconduct".
4) Section 13. Default
-------
In subparagraph (b), in line 4 after the words "after written notice"
insert "from Lessor".
In subparagraph (c), in line 1 after the words "of its creditors, the" add
"material".
5) Section 13.2. Remedies
--------
To the end of the last paragraph in this Section, add the following:
"Any such successive or cumulative exercise is not intended to provide
Lessor with a greater return than it would have received had Lessee fully
performed under the terms of the applicable Summary Equipment Schedule."
6) Section 14.1. Board Attendance
----------------
Delete the first sentence of this section.
14
<PAGE>
7) Section 14.2. Financial Statements
--------------------
In line 10, after the words "furnish to Lessor" add the words ",upon
request".
Delete the last 2 lines of this section and add "obligations of Lessee
under this Section shall cease".
8) Section 14.4. Merger and Sale Provisions.
In line 2, delete "sixty (60)" and replace with "twenty (20)".
CARDIMA, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Phil Radlick By:
-------------------- -------------------------
Title: Title:
------------------ ----------------------
Date: Date:
------------------- -----------------------
15
<PAGE>
COMDISCO, INC,COMDISCO, INC.
6111 North River Road PURCHASE AGREEMENT - Leaseback
Rosemont, Illinois 60018 (Installed Equipment)
This Agreement dated as of March 18, 1996 by and between COMDISCO, INC., a
Delaware corporation, having its principal place of business at 6111 North River
Road, Rosemont, Illinois 60018, hereinafter called BUYER and Cardima, Inc. a
corporation, having its principal place of business at 47266 Benicia Street, PO
Box 14172, Fremont, California 945390-1372 hereinafter called SELLER.
Witnesseth, that in consideration of the mutual undertaking herein
contained, the parties agree as follows:
1. SALE
----
SELLER agrees to sell and BUYER agrees to purchase from SELLER the
equipment listed below together with all additions, attachments, parts or
accessories incorporated or attached therein or associated therewith
(referred to as the "Equipment") in accordance with the terms and
conditions specified herein.
Item Machine Model/ Serial
Number Quantity Type Feature Description Number
- --------- -------- ------- ------- ----------- ------
SEE ATTACHED INVOICES
2. PURCHASE PRICE
--------------
BUYER shall purchase the installed Equipment for an amount equivalent to
$85,088.66. BUYER shall have the benefit of any prior or retroactive price
decrease which applies to the Equipment. SELLER shall provide BUYER with
all of the purchase documentation associated with SELLER's purchase of the
Equipment from the vendor (the "Equipment Vendor") including but not
limited to the purchase documentation, invoices and Bill of Sale to SELLER.
If SELLER has not yet paid the Equipment Vendor from whom SELLER is
purchasing the Equipment, BUYER shall pay said Purchase Price directly to
the Equipment Vendor, unless otherwise agreed.
3. DELIVERY
--------
SELLER shall deliver and BUYER shall accept delivery of the Equipment at
SELLER's premises on the Closing Date. Irrespective of any other provision
hereof, SELLER shall bear all risk of damage from fire, the elements or
otherwise until the full payment of the purchase price is paid.
4. CLOSING DATE
------------
The Closing shall take place on 4-22-96.
-------
5. LEASEBACK
---------
This Agreement is contingent upon SELLER leasing the Equipment from BUYER
pursuant to the Equipment Schedule No. VL-1 to the Master Lease Agreement
dated as of January 23, 1996 between SELLER, as Lessee, and BUYER, as
Lessor (collectively the "Lease").
SELLER represents and warrants to BUYER that the Equipment has been
installed, tested, inspected and accepted by SELLER from the Equipment
Vendor and that the Equipment is in good working order.
1
<PAGE>
6. MAINTENANCE/WARRANTIES
----------------------
(a) SELLER warrants that either (i) the Equipment under "new" equipment
warranty from the manufacturer or (ii) the Equipment has been
continuously under a maintenance contract and will be eligible for the
manufacturer's maintenance agreement as of the Closing Date and all
Equipment is at current manufacturer release, revision and/or
engineering change levels.
(b) SELLER shall and hereby does assign to BUYER the benefit of all rights
applicable to the Equipment in connection with warranties, servicing,
training, patent and copyright indemnities and the like including the
right to use and possess licensed products associated with the
Equipment provided by the manufacturer or Equipment Vendor.
7. TITLE
-----
Title shall pass from SELLER to BUYER on the date BUYER tenders payment of
the purchase price. SELLER shall provide BUYER with a Bill of Sale as
specified by BUYER upon payment of the full Purchase Price to evidence
passage of title to the Equipment from SELLER to BUYER free and clear of
all claims, liens and encumbrance
8. TAXES
-----
SELLER hereby indemnifies and holds BUYER harmless for any sales or other
tax arising from the transaction between the Manufacturer and SELLER.
BUYER warrants that it is in the business of buying and selling capital
equipment and that the purchase of the Equipment is for the purpose of
resale only. BUYER shall provide SELLER with a resale exemption
certificate upon request.
9. NOTICES
-------
Any notice provided for herein shall be in writing and sent by registered
or certified mail, postage prepaid, addressed to the party for which it is
intended at the address set forth in the first paragraph of this Agreement
or to such other address as either party shall from time to time indicate
in writing, and said notice shall be effective upon receipt or three days
from the date of mailing, whichever occurs first.
10. TAX BENEFITS
------------
SELLER hereby agrees that with respect to the Equipment, BUYER shall be
entitled to all the tax benefits that are afforded to an owner of equipment
under the Internal Revenue Code of 1986 (the "Code"), and its related
sections of the Code.
11. MISCELLANEOUS
-------------
(a) This constitutes the entire Agreement between SELLER and BUYER with
respect to the purchase and sale of the Equipment and no
representation or statement not contained herein shall be binding upon
SELLER or BUYER as a warranty or otherwise, unless in writing and
executed by the party to be bound thereby.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois including all matters of
construction, validity, performance and enforcement.
2
<PAGE>
(d) This Agreement is subject to acceptance by BUYER at its offices in
Rosemont, Illinois, and shall only become effective on the date
thereof.
(e) This Agreement may be executed in multiple counterparts, each of which
shall be deemed to be an original and of equal force and effect.
(f) SELLER agrees to and shall indemnify and hold BUYER harmless from and
against all claims, liens, costs, loss, expenses or damages arising
out of the breach by SELLER of its obligations or out of any
misrepresentation by SELLER, hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and do hereby warrant and represent that its respective signatory whose
signature appears below has been and is on the date of this Agreement duly
authorized by all necessary and appropriate corporate action to execute this
Agreement.
CARDIMA, INC. COMDISCO, INC.
as Seller as Buyer
By: /s/ Gabriel B. Vegh By: /s/ Jill C. Hanses
--------------------- ---------------------------
Title: COO Title: Assistant Vice President
------------------- --------------------------
Date: 3/22/96 Date:
-------------------- ---------------------------
3
<PAGE>
COMDISCO, INC,COMDISCO, INC.
6111 North River Road PURCHASE AGREEMENT - Leaseback
Rosemont, Illinois 60018 (Installed Equipment)
This Agreement dated as of January 23, 1996 by and between COMDISCO, INC.,
a Delaware corporation, having its principal place of business at 6111 North
River Road, Rosemont, Illinois 60018, hereinafter called BUYER and CARDIMA,
INC., a Delaware corporation, having its principal place of business at 47266
Benicia Street, Fremont, California 94539, hereinafter called SELLER.
Witnesseth, that in consideration of the mutual undertaking herein
contained, the parties agree as follows:
1. SALE
----
SELLER agrees to sell and BUYER agrees to purchase from SELLER the
equipment listed below together with all additions, attachments, parts or
accessories incorporated or attached therein or associated therewith
(referred to as the "Equipment") in accordance with the terms and
conditions specified herein.
Item Machine Model/ Serial
Number Quantity Type Feature Description Number
- --------- -------- ------- ------- ----------- ------
SEE ATTACHED LIST
2. PURCHASE PRICE
--------------
BUYER shall purchase the installed Equipment for an amount equivalent to
$504,947.92. BUYER shall have the benefit of any prior or retroactive
price decrease which applies to the Equipment. SELLER shall provide BUYER
with all of the purchase documentation associated with SELLER's purchase of
the Equipment from the vendor (the "Equipment Vendor") including but not
limited to the purchase documentation, invoices and Bill of Sale to SELLER.
If SELLER has not yet paid the Equipment Vendor from whom SELLER is
purchasing the Equipment, BUYER shall pay said Purchase Price directly to
the Equipment Vendor, unless otherwise agreed.
3. DELIVERY
--------
SELLER shall deliver and BUYER shall accept delivery of the Equipment at
SELLER's premises on the Closing Date. Irrespective of any other provision
hereof, SELLER shall bear all risk of damage from fire, the elements or
otherwise until the full payment of the purchase price is paid.
4. CLOSING DATE
------------
The Closing shall take place on______________________.
5. LEASEBACK
---------
This Agreement is contingent upon SELLER leasing the Equipment from BUYER
pursuant to the Equipment Schedule No. VL-1 to the Master Lease Agreement
dated as of January 23, 1996 between SELLER, as Lessee, and BUYER, as
Lessor (collectively the "Lease").
SELLER represents and warrants to BUYER that the Equipment has been
installed, tested, inspected and accepted by SELLER from the Equipment
Vendor.
1
<PAGE>
6. MAINTENANCE/WARRANTIES
----------------------
(a) SELLER warrants that the Equipment has either been self maintained or
has been under a maintenance contract with the manufacturer or other
third party maintenance organization, and as such the Equipment is in
good operating order and appearance, other than normal wear and tear.
(b) SELLER shall and hereby does assign to BUYER the benefit of all rights
applicable to the Equipment in connection with warranties, servicing,
training, patent and copyright indemnities and the like including the
right to use and possess licensed products associated with the
Equipment provided by the manufacturer or Equipment Vendor.
7. TITLE
-----
Title shall pass from SELLER to BUYER on the date BUYER tenders payment of
the purchase price. SELLER shall provide BUYER with a Bill of Sale as
specified by BUYER upon payment of the full Purchase Price to evidence
passage of title to the Equipment from SELLER to BUYER free and clear of
all claims, liens and encumbrance
8. TAXES
-----
SELLER hereby indemnifies and holds BUYER harmless for any sales or other
tax arising from the transaction between the Manufacturer and SELLER.
BUYER warrants that it is in the business of buying and selling capital
equipment and that the purchase of the Equipment is for the purpose of
resale only. BUYER shall provide SELLER with a resale exemption
certificate upon request.
9. NOTICES
-------
Any notice provided for herein shall be in writing and sent by registered
or certified mail, postage prepaid, addressed to the party for which it is
intended at the address set forth in the first paragraph of this Agreement
or to such other address as either party shall from time to time indicate
in writing, and said notice shall be effective upon receipt or three days
from the date of mailing, whichever occurs first.
10. TAX BENEFITS
------------
SELLER hereby agrees that with respect to the Equipment, BUYER shall be
entitled to all the tax benefits that are afforded to an owner of equipment
under the Internal Revenue Code of 1986 (the "Code"), and its related
sections of the Code.
11. MISCELLANEOUS
-------------
(a) This constitutes the entire Agreement between SELLER and BUYER with
respect to the purchase and sale of the Equipment and no
representation or statement not contained herein shall be binding upon
SELLER or BUYER as a warranty or otherwise, unless in writing and
executed by the party to be bound thereby.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois including all matters of
construction, validity, performance and enforcement.
(d) This Agreement is subject to acceptance by BUYER at its offices in
Rosemont, Illinois, and shall only become effective on the date
thereof.
2
<PAGE>
(e) This Agreement may be executed in multiple counterparts, each of which
shall be deemed to be an original and of equal force and effect.
(f) SELLER agrees to and shall indemnify and hold BUYER harmless from and
against all claims, liens, costs, loss, expenses or damages arising
out of the breach by such party of its obligations under this
agreement or out of any misrepresentation by such party, hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and do hereby warrant and represent that its respective signatory whose
signature appears below has been and is on the date of this Agreement duly
authorized by all necessary and appropriate corporate action to execute this
Agreement.
CARDIMA, INC. COMDISCO, INC.
as Seller as Buyer
By: /s/ Phil Radlick By:
------------------------ --------------------------
Title: Title:
--------------------- -----------------------
Date: Date:
---------------------- ------------------------
3
<PAGE>
EXHIBIT 10.10
WARRANT PURCHASE AGREEMENT
This Warrant Purchase Agreement (the "AGREEMENT") is made and entered
into as of December 9, 1993, by and between CaRDiMa, Inc., a Delaware
corporation (the "COMPANY"), and Target Therapeutics, Inc., a Delaware
corporation (the "PURCHASER").
The Company desires to sell and the Purchaser desires to purchase a
warrant (the "WARRANT") to purchase 76,600 shares of the Company's Series A
Preferred Stock (the "WARRANT SHARES") at a purchase price of $1.00 per share
substantially in the form attached hereto as Exhibit A on the terms and
conditions set forth herein.
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
1. STOCK PURCHASE.
--------------
(a) Subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase a Warrant from the Company and the Company agrees
to sell and issue a Warrant to the Purchaser for an aggregate purchase price of
$766.00.
(b) The purchase and sale of the Warrant shall take place at the
offices of Venture Law Group, 2800 Sand Hill Road, Menlo Park, California, or at
such other time and place as to which the Company and Purchaser shall agree. At
the Closing, the Company shall deliver the Warrant to the Purchaser, against
payment of the purchase price therefor by either (i) check, (ii) wire transfer,
or (iii) cancellation of indebtedness then owing by the Company to Purchaser for
services rendered by the Purchaser in arranging debt financing for the Company.
2. ACCESS TO INFORMATION. The Purchaser acknowledges that it has
---------------------
had access to all material information concerning the Company that it has
requested. The Purchaser also acknowledges that it has had the opportunity to,
and has to its satisfaction, questioned the officers of the Company with respect
to such Purchaser's investment hereunder, and has required sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Warrant.
3. REPRESENTATION OF PURCHASER. The Purchaser represents that it
---------------------------
understands that the Warrant and the Warrant Shares are speculative investments,
that it is aware of the Company's business affairs and financial condition, and
that it has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Warrant. The Purchaser
represents and warrants that it is purchasing the Warrant and any Warrant Shares
issued upon exercise thereof for investment for its own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), or applicable state securities laws. The Purchaser further represents
that it understands that neither the Warrant nor the Warrant Shares have been
registered under the Securities Act or applicable state securities laws by
reason of specific
<PAGE>
exemptions therefrom, which exemptions depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. The
Purchaser represents that it understands that the Warrant and any Warrant
Shares issued upon exercise thereof must be held indefinitely unless such
securities are subsequently registered under the Securities Act and all
applicable state securities laws and regulations or an exemption from such
registration or qualification is available, and that the Company is under no
obligation to register or qualify such securities except as set forth in the
Company's Stockholders' Rights Agreement originally dated May 21, 1993, as
amended and restated as of June 30, 1993, among the Company, the Purchaser and
certain other holders of the Company's securities, which Agreement shall again
be amended and restated pursuant to Section 9 of the Warrant.
4. CONDITIONS OF THE COMPANY'S ISSUANCE. The Company's obligation
------------------------------------
to issue the Warrant is subject to the satisfaction of each of the following
conditions, or the Company's written waiver thereof:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Purchaser contained in Section 2 and 3 shall be true and correct.
(b) Approvals and Qualifications. All authorizations,
----------------------------
approvals or permits, if any, of any governmental authority or regulatory body
that are required at this time in connection with the lawful issuance and sale
of the Warrant pursuant to this Agreement, and the issuance of Shares shall
have been duly obtained and be in effect.
5. QUALIFICATION OF SECURITIES. The sale of the securities which
---------------------------
are the subject of this Agreement has not been qualified with the Commissioner
of Corporations of the State of California and the issuance of such securities
or the payment or receipt of any part of the consideration thereof prior to such
qualification is unlawful, unless the sale of securities is exempt from the
qualification by Section 25100, 25102 or 25105 of the California Corporations
Code. The rights of all parties to this Agreement are expressly conditioned upon
such qualification being obtained, unless the sale is so exempt.
6. LEGENDS. The Purchaser acknowledges and understands that the
-------
instruments evidencing the Warrant and any certificates evidencing the Warrant
Shares (and Common Stock issuable upon conversion thereof) shall bear the
legends as specified in the Warrant in the form attached hereto as Exhibit A
(and any other legends required under state or federal securities laws in the
opinion of legal counsel for the Company).
7. GENERAL PROVISIONS.
------------------
(a) This Agreement represents the entire agreement between the
Company and Purchaser regarding the subject matter hereof, supersedes all
prior agreements and understanding, and may only be amended in a writing
signed by the Company and the Purchaser.
(b) This Agreement shall bind and benefit the successors,
assigns, heirs, executors and administrators of the parties. The rights of the
Purchaser under this Agreement may not be assigned without the written consent
of the Company.
-2-
<PAGE>
(c) This Agreement shall be governed in all respects by the laws
of the State of California.
(d) The Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Purchase Agreement as of the day and year first set forth above.
CARDIMA, INC. TARGET THERAPEUTICS, INC.
a Delaware corporation a Delaware corporation
By: /s/ CARDIMA, INC. By: /s/ TARGET THERAPEUTICS, INC.
----------------------------- -----------------------------
Title: Title:
--------------------------- ---------------------------
-3-
<PAGE>
EXHIBIT A
---------
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE.
SERIES A PREFERRED STOCK PURCHASE WARRANT
Shares Originally
Issuable Upon Exercise: 2,000,000 Issued: December 9, 1993
THIS CERTIFIES THAT, for value received, Target Therapeutics, Inc., is
entitled to subscribe for and purchase up to 76,600 shares (as adjusted pursuant
------
to provisions hereof, the "SHARES") of the fully paid and nonassessable Series A
Preferred Stock of Cardima, Inc., a Delaware corporation (the "COMPANY"), at a
price per share of $1.00 (such price and such other price as shall result, from
-----
time to time, from adjustments specified herein is herein referred to as the
"WARRANT PRICE"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, the term "PREFERRED STOCK" shall mean
the Company's presently authorized Series A Preferred Stock, and any stock into
or for which such Series A Preferred Stock may hereafter be converted or
exchanged pursuant to the Certificate of Incorporation of the Company as from
time to time amended as provided by law and in such Articles, and the term
"GRANT DATE" shall mean the date set forth above.
1. TERM. Subject to the terms hereof, the purchase right represented
----
by this Warrant is exercisable, in whole or in part, at any time and from time
to time from and after the Grant Date and prior to the earlier of (a) the date
five (5) years after the Grant Date, or (b) the closing of the Company's sale of
all or substantially all of its assets or the acquisition of the Company by
another entity by means of merger or other transaction as a result of which
stockholders of the Company immediately prior to such acquisition possess a
minority of the voting power of the acquiring entity immediately following such
acquisition (an "Acquisition") to the extent that the acquiring entity in good
faith requires, as a condition of the Acquisition, the exercise or termination
of this Warrant on or before the closing of such Acquisition, which requirement
shall be set forth in writing and delivered to the holder hereof not less than
thirty (30) days prior to the closing of such Acquisition.
2. METHOD OF EXERCISE; NET ISSUE EXERCISE.
--------------------------------------
(a) Method of Exercise; Payment; Issuance of New Warrant. The
----------------------------------------------------
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by surrender of this Warrant
(with the notice of exercise form attached hereto
<PAGE>
as Exhibit A duly executed) at the principal office of the Company, accompanied
by payment to the Company, by check, of an amount equal to the then applicable
Warrant Price per share multiplied by the number of Shares then being purchased,
or (ii) if in connection with a registered public offering of the Company's
securities, the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A-1 duly executed) at the principal office of the
Company together with notice of arrangements reasonably satisfactory to the
Company for payment to the Company either by check or from the proceeds of the
sale of shares to be sold by the holder in such public offering of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased.. The person or persons in whose name(s) any
certificate(s) representing Shares shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares represented
thereby (and such shares shall be deemed to have been issued) immediately prior
to the close of business on the date or dates upon which this Warrant is
exercised. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be delivered to
the holder hereof as soon as possible and in any event within thirty days of
receipt of such notice and, unless this Warrant has been fully exercised or
expired, a new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof as soon as possible and in any event within such
thirty (30) day period.
(b) Net Issue Exercise.
------------------
(i) In lieu of exercising this Warrant, holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
Holder a number of shares of the Company's Common Stock computed using the
following formula:
X = Y(A - B)
--------
A
Where X = The number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock purchasable under this
Warrant.
A = the fair market value of one share of the Company's Common Stock.
B = Warrant Price (as adjusted to the date of such calculations).
(ii) For purposes of this Section, fair market value of the
Company's Common Stock shall mean (A) the average of the closing bid and asked
prices of the Company's Common Stock quoted in the Over-The-Counter Market
Summary, if applicable, or (B) the average closing price quoted on any exchange,
including the NASDAQ-National Market System, on which the Common Stock is
listed, if applicable, as published in the Western Edition of The Wall Street
Journal for the ten (10) trading days prior to the date of determination of fair
market value, or (C) the price determined by the Company's Board of Directors,
acting in good faith upon a review of all relevant factors.
-2-
<PAGE>
(c) Company Option Upon Registered Offering. In the event of the
---------------------------------------
initial registered public offering by the Company of its Common Stock effected
pursuant to a Registration Statement on Form S-1 (or its successor) filed under
the Securities Act of 1933, the Company will have the option, but not the
obligation, to purchase for cash immediately prior to the issuance of such
shares in such offering all, but not less than all, of the following: (i) this
Warrant for a price per Share equal to the difference between (x) the Net Per
Share Price (as defined below) of the stock being issued in such offering and
(y) the Warrant Price, and (ii) all Shares that have been issued pursuant to the
exercise of this Warrant for a price per share equal to the Net Per Share Price
of the stock being issued in such offering. For the purpose of this Paragraph
the term "NET PER SHARE PRICE" shall mean the proceeds to be received by the
Company (or selling shareholders, in the event of a secondary offering) for each
share in the registered public offering, net of underwriting discounts and
commissions.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be
---------------------------------------
issued upon the exercise of the rights represented by this Warrant and Common
Stock issuable upon conversion of the Common Stock will, upon issuance, be fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to the issue thereof. Subject to the terms of Section 9 below and, during the
period, within which the rights represented by the Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of
issuance upon exercise of the purchase rights evidenced by this Warrant, a
sufficient number of shares of its Preferred Stock (and Common Stock issuable
upon conversion thereof) and the Warrant Price to provide for the exercise of
the right represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
------------------------------------------------
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
--------------------------
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall execute a
new Warrant (in form and substance satisfactory to the holder of this Warrant)
providing that the holder of this Warrant shall have the right to exercise such
new Warrant and upon such exercise to receive, in lieu of each share of
Preferred Stock theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change or merger by a holder of one share of Preferred
Stock. Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as many be practicable to the adjustments provided for in this
Paragraph 4. The provisions of this subparagraph (a) shall similarly apply to
successive reclassification, changes, mergers and transfers.
-3-
<PAGE>
(b) Subdivisions or Combination of Shares. If the Company at any time
-------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Warrant Price and the number of Shares issuable upon
exercise hereof shall be proportionately adjusted.
(c) Stock Dividends. If the Company at any time while this Warrant is
---------------
outstanding and unexpired shall pay a dividend payable in shares of Common Stock
(except any distribution specifically provided for in the foregoing
subparagraphs (a) and (b)), then the Warrant Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of shares of Preferred
Stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of shares of Preferred Stock
outstanding immediately after such dividend or distribution and the number of
Shares subject to this Warrant shall be proportionately adjusted.
(d) No Impairment. The Company will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
(e) Notices of Record Date. In the event of any taking by the Company
----------------------
of a record of its shareholders for the purpose of determining shareholders who
are entitled to receive payment of any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property, or to receive any
other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed merger or consolidation of the Company with
or into any other corporation, or any proposed sale, lease or conveyance of all
or substantially all of the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, the Company shall mail to the holder
of the Warrant, at least twenty (20) days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price shall be
---------------------
adjusted pursuant to the provisions hereof, the Company shall within thirty (30)
days of such adjustment deliver a certificate signed by its chief financial
officer to the registered holder(s) hereof setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price after giving effect
to such adjustment.
-4-
<PAGE>
6. FRACTIONAL SHARES. No fractional shares of Preferred Stock will
-----------------
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Warrant Price then in effect.
7. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR SHARES
----------------------------------------------------------------
OF COMMON STOCK.
---------------
(a) Compliance with Securities Act. The holder of this Warrant
------------------------------
and each subsequent holder, by acceptance hereof, agrees that this Warrant, the
shares of Preferred Stock to be issued upon exercise hereof and the Common Stock
to be issued upon conversion of such Preferred Stock are being acquired for
investment and that such holder will not offer, sell or otherwise dispose of
this Warrant or any shares of Preferred Stock to be issued upon exercise hereof
(or Common Stock issued upon conversion of such Preferred Stock) except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "SECURITIES ACT"). This Warrant and the Preferred Stock
issued upon exercise of this Warrant (unless registered under the Securities
Act) shall be stamped or imprinted with a legend in substantially the following
form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMP TION THEREFROM UNDER SAID ACT. COPIES OF
THE AGREEMENT COVER ING THE PURCHASE OF THESE SECURITIES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS
OF A VOTING AGREEMENT DATED AS OF MAY 21, 1993. BY ACCEPTING ANY
INTEREST IN SUCH SHARES THE PERSON ACCEPTING THE INTEREST SHALL BE
DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF
SAID VOTING AGREEMENT. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY.
(b) Disposition of Warrant and Shares. With respect to any
---------------------------------
offer, sale or other disposition of this Warrant or any shares of Preferred
Stock acquired pursuant to the exercise of this Warrant (or Common Stock issued
upon conversion of such Preferred Stock) prior to registration of such shares,
the holder hereof and each subsequent holder of the Warrant agrees to give
written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the
Securities Act as then in effect or any federal or state law then in effect) of
this Warrant or such shares of Preferred Stock or Common Stock and indicating
whether or not under the Securities Act certificates for this Warrant or such
shares of Preferred Stock or Common Stock to be sold or otherwise disposed of
require any restrictive legend as to applicable restrictions on transferability
in order to insure compliance with the Securities Act. Each
-5-
<PAGE>
certificate representing this Warrant or the shares of Preferred Stock or
Common Stock thus transferred (except a transfer pursuant to Rule 144) shall
bear a legend as to the applicable restrictions on transferability in order to
insure compliance with the Securities Act, unless in the aforesaid opinion of
counsel for the holder, such legend is not required in order to insure
compliance with the Securities Act. Nothing herein shall restrict the transfer
of this Warrant or any portion hereof by the initial holder hereof to any
partnership affiliated with the initial holder, or to any partner of any such
partnership provided such transfer may be made in compliance with applicable
federal and state securities laws. The Company may issue stop transfer
instructions to its transfer agent in connection with the foregoing
restrictions.
8. RIGHTS AS SHAREHOLDERS; INFORMATION.
------------------------------------
(a) Shareholder Rights. No holder of the Warrant, as such, shall
------------------
be entitled to vote or receive dividends or be deemed the holder of Preferred
Stock or any other securities of the Company which may at any time be issuable
on the exercise thereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or other wise until this Warrant Shall have been exercised and the Shares
purchasable upon the he exercise hereof shall have become deliverable, as
provided herein.
(b) Financial Statements and Information. If and for so long as
------------------------------------
the holder of this Warrant is not receiving the financial statements described
below from the Company pursuant to another contract or agreement between such
parties, the Company shall deliver to the registered holder hereof (i) within
120 days after the end of the fiscal year of the Company, a consolidated balance
sheet of the Company as of the end of such year and a consolidated statement of
income, retained earnings and cash flows for such year, which year-end financial
reports shall be in reasonable detail and certified by independent public
accountants of nationally recognized standing selected by the Company, and (ii)
within 45 days after the end of each fiscal quarter other than the last fiscal
quarter, unaudited consolidated statements of income, retained earnings and cash
flows for such quarter and a consolidated balance sheet as of the end of such
quarter. In addition, the Company shall deliver to the registered holder hereof
any other information or data provided to the shareholders of the Company.
9. AUTHORIZATION, RESERVATION AND GRANT OF RIGHTS. The Company
-----------------------------------------------
hereby covenants and agrees that within sixty (60) days of the Grant Date it
will (i) amend its Certificate of Incorporation to increase the authorized
number of shares of Preferred Stock and Common Stock necessary to issue the
Shares pursuant to the exercise of this Warrant and the issuance of the Common
Stock issuable upon conversion of the Shares, (ii) reserve from its authorized
and unissued Preferred Stock and Common Stock a sufficient number of shares to
provide for the issuance of the Shares upon the exercise of this Warrant and the
issuance of Common Stock upon conversion of the Shares, and (iii) further amend
and restate the Amended and Restated Registration Rights Agreement attached
hereto as Exhibit B (the "RIGHTS AGREEMENT"), to include the holder hereof in
registration rights granted therein and provide that at the holder of this
Warrant shall be deemed a "Holder" and that the Common Stock of the Company
issuable upon conversion of the Shares shall be deemed to be "Registrable
Securities", as both terms are
-6-
<PAGE>
defined in the Rights Agreement. Failure to accomplish any or all of the
foregoing within the allotted time period shall constitute a breach of the terms
of this Warrant and an immediate default under Section 24(k) of the Master Lease
Agreement entered into by and between the Company and the original holder of
this Warrant of even date herewith (disregarding for purposes of this Section 9
the ten-day cure period set forth in Section 24(k) of such Agreement with
respect to other obligations of the Company).
10. ADDITIONAL RIGHTS.
--------------------
10.1 Secondary Sales. The Company agrees to notify the holder of
---------------
this Warrant if opportunities to make secondary sales of the Company's
securities become available. To this end, the Company will promptly provide the
holder of this Warrant with notice of any offer to acquire from the Company's
security holders more than five percent (5%) of the total voting power of the
Company.
10.2 Mergers. Unless the Company provides the holder of this
-------
Warrant with reasonable advance notice of the terms and conditions of the
proposed transaction, the Company will not (i) sell, lease, exchange, convey or
otherwise dispose of all of substantially all of its property or business, or
(ii) merge into or consolidate with any other corporation (other than a wholly-
owned subsidiary of the Company), or effect any transaction (including a merger
or other reorganization) or series of related transactions, in which more than
50% of the voting power of the Company is disposed of.
11. REPRESENTATIONS AND WARRANTIES. This Warrant is issued and
-------------------------------
delivered on the basis of the following:
(a) This Warrant has been duly authorized and executed by the
Company and when delivered will be the valid and binding obligation of the
Company enforceable in accordance with its terms;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions
granted to or imposed upon the Shares and the holders thereof are as set forth
in the Company's Certificate of Incorporation, as amended, a true and complete
copy of which has been delivered to the original Warrant holder;
(d) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Company's Certificate of Incorporation, as amended, will
be validly issued, fully paid and nonassessable; and
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Certificate of
Incorporation or by-laws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not
-7-
<PAGE>
and will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of or
by, any federal, state or local government authority or agency or other person.
12. MODIFICATION AND WAIVER. This Warrant and any provision hereof
-----------------------
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
13. NOTICES. Any notice, request or other document required or
-------
permitted to be given or delivered to the holder hereof or the Company shall be
delivered, or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated on the he signature page of this Warrant.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
----------------------------
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant and all of
the covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The company will, at the time of
the exercise of this Warrant, in whole or in part, upon request of the holder
hereof but at the Company's expense, acknowledge in writing its continuing
obligation to the holder hereof in respect of any rights (including, without
limitation, any right to registration of the shares of Registrable Securities)
to which the holder hereof shall continue to be entitled after such exercise in
accordance with this Warrant; provided, that the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to
-----------------------------------
the holder hereof that upon receipt of evidence reasonable satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. GOVERNING LAW. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
-8-
<PAGE>
IN WITNESS WHEREOF, this Preferred Stock Purchase Warrant is executed
effective as of the date first above written.
CARDIMA, INC.
By: /s/ Gabriel B.Vegh
------------------
Title: Chief Operating Officer
-----------------------
-9-
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: _______________________________
_______________________________
_______________________________
Attn: _________________________
1. The undersigned hereby elects to purchase __________ shares of ______
Stock of ___________ pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
Name: ________________________________
Address: ________________________________
________________________________
________________________________
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
_____________________________________
(Signature)
___________________________
(Date)
<PAGE>
EXHIBIT A-1
NOTICE OF EXERCISE
To: ________________________________________
________________________________________
________________________________________
Attn: __________________________________
1. Contingent upon and effective immediately prior to the closing
(the "CLOSING") of the Company's public offering contemplated by the
Registration Statement of Form S-_____, filed ________________, _________, the
undersigned hereby elects to purchase __________ shares of ____________________
Stock of the Company (or such lesser number of shares as may be sold on behalf
of the undersigned at the Closing) pursuant to the terms of the attached
Warrant.
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such __________________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $___________________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such
shares, the undersigned agrees to deliver the difference to the Company prior to
the Closing.
_______________________________________
(Signature)
__________________________
(Date)
-11-
<PAGE>
EXHIBIT 10.11
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE CORPORATION AND ITS COUNSEL. THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
CORPORATION: CARDIMA, INC., A DELAWARE CORPORATION
NUMBER OF SHARES: 12,000
CLASS OF STOCK: SERIES A PREFERRED
INITIAL EXERCISE PRICE: $1.00 PER SHARE
ISSUE DATE: JUNE 10, 1994
EXPIRATION DATE: JUNE 10, 1999
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 INTENTIONALLY OMITTED.
---------------------
1.4 Fair Market Value. If the Shares are traded in a public market, the
-----------------
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall
be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On 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, on delivery of an
1
<PAGE>
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.7.1. "Acquisition". For the purpose of this Warrant, "Acquisition"
-------------
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2. Assumption of Warrant. If upon the closing of any Acquisition
---------------------
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3. Nonassumption. If upon the closing of any Acquisition the
-------------
successor entity does not assume the obligations of his Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7.4. Purchase Right. Notwithstanding the foregoing, upon the
--------------
closing of any Acquisition in which the Holder would receive as consideration
shares of stock of the entity, the stock of which is not generally traded in the
public market, the entity shall purchase, or shall cause the acquiring entity to
purchase, the unexercised portion of this Warrant for cash in an amount equal to
(a) the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
-----------------------------
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
------------------------------------------
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2
<PAGE>
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
----------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number
----------------------------------
of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment, from time to time in the manner set
forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
-----------------
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder amount computed
by multiplying the factional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representation and Warranties. The Company hereby represents and
-----------------------------
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than (i) the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior
3
<PAGE>
written notice of the date when the same will take place (and specifying the
date on which the holders of common stock will be entitled to exchange their
common stock for securities or other property deliverable upon the occurrence
of such event); and (3) in the case of the matter referred to in (e) above,
the same notice as is given to the holders of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statement required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirement [or if the subject loan(s) no longer are outstanding]), then within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS
-------------
4.1 Term; Notice of Expiration. This Warrant is exercisable, in whole or
--------------------------
in part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder s notice of
proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.2, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail,
4
<PAGE>
postage prepaid, at such address as may have been furnished to the Company or
the Holder, as the case may be, in writing by the Company or such holder from
time to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
CARDIMA, INC.
By /s/ Gabriel B. Vegh
-------------------------------------
Name Gabriel B. Vegh
------------------------------------
(Print)
Title: Chairman of the Board, President,
or Vice President
By /s/ Josh L. Green
--------------------------------------
Name Josh L. Green
------------------------------------
(Print)
Title: Chief Financial Officer, Secretary
Assistant Treasurer, or Assistant
Secretary
5
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase_________shares of the
Common/Series_________Preferred [strike one] Stock of____________________
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to__________of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
----------------------------
(Name)
----------------------------
----------------------------
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
--------------------------------------------
(Signature)
----------------------
(Date)
6
<PAGE>
APPENDIX 2
Notice that Warrant Is About to Expire
--------------------------------------
,
------------ --
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear:
---------------------
This is to advise you that the Warrant issued to you described below will
expire on_________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
--------------------------------------------
(Name of Issuer)
By
-----------------------------------------
Its
----------------------------------------
7
<PAGE>
EXHIBIT A
---------
Anti-Dilution Provisions
(For Preferred Stock Warrants With Existing Anti-Dilution Protection)
-------------------------------------------------------------------
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Articles (Certificate) of Incorporation
which apply to Diluting Issuances.
The Company agrees that the Provisions, as in effect on the Issue Date,
shall be deemed to remain in full force and effect during the term of the
Warrant notwithstanding any subsequent amendment, waiver or termination there of
by the Company's shareholders.
Under no circumstances shall the aggregate Warrant price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
8
<PAGE>
EXHIBIT B
Registration Rights
-------------------
The Shares (if common stock), or the common stock issuable upon
conversion of the Shares, shall be deemed "registrable securities" or for
purposes of being entitled to "piggy back" registration rights in accordance
with the terms of the following agreement (the "Agreement") between the Company
and its investor(s):
AMENDED AND RESTATED STOCK HOLDER'S RIGHTS AGREEMENT, AS AMENDED FROM TIME
TO TIME
Notwithstanding the above, the Company agrees that no amendments will be
made to the Agreement which would have an adverse impact on Holder's
registration rights thereunder without the consent of Holder. By acceptance of
the Warrant to which this Exhibit B is attached, Holder shall be deemed to be a
party to the Agreement.
If no Agreement exists, then the Company and the Holder shall enter into
Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
9
<PAGE>
EXHIBIT 10.12
WARRANT PURCHASE AGREEMENT
This Warrant Purchase Agreement (the "Agreement") is made and entered
into as of July 1, 1994, by and between CaRDiMa, Inc., a Delaware corporation
(the "Company"), and State of California Public Employees' Retirement System
(the "Purchaser").
The Company desires to sell and the Purchaser desires to purchase a
warrant (the "Warrant") to purchase 10,000 shares of the Company's Common Stock
(the "Warrant Shares") at a purchase price of $.01 per share substantially in
the form attached hereto as Exhibit A on the terms and conditions set forth
---------
herein.
In consideration of the mutual promises contained herein, the
parties hereto agree as follows:
1. Stock Purchase.
--------------
a. Subject to the terms and conditions of this Agreement,
the Purchaser agrees to purchase a Warrant from the Company and the Company
agrees to sell and issue a Warrant to the Purchaser for an aggregate purchase
price of $100.00.
b. The purchase and sale of the Warrant shall take place
at the offices of Brobeck, Phleger & Harrison, Two Embarcadero Place, 2200 Geng
Road, Palo Alto, California on the date this Agreement is signed by the parties,
or at such other time and place as to which the Company and Purchaser shall
agree (which time and place are designated as the "Closing"). At the Closing,
the Company shall deliver the Warrant to the Purchaser, against payment of the
Purchase price therefor by either check or wire transfer.
2. Representations and Warranties of Purchaser. The Purchaser
-------------------------------------------
hereby represents and warrants to the Company that:
a. Purchase Entirely for Own Account. This Warrant is
---------------------------------
issued to the Purchaser in reliance upon Purchaser's representation to the
Company that the Warrant and the Common Stock issuable upon exercise of the
Warrant (collectively, the "Securities") will be acquired for investment for the
Purchaser's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same (other than to partners of the Purchaser). Purchaser
further represents and warrants that it does not have any contract, undertaking,
agreement, or arrangement with any person to sell, transfer, or grant
participations to such person or to any third person, with respect to any of the
Securities (other than to partners of the Purchaser).
b. Access to Information. The Purchaser acknowledges that
---------------------
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the Warrant.
<PAGE>
c. Investment Experience. The Purchaser acknowledges that
---------------------
it is able to fend for itself, can bear the economic risk of its investment, and
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
It has not been organized solely for the purpose of acquiring the Securities.
d. Accredited Investor. The Purchaser is an "accredited
-------------------
investor" within the meaning of SEC Rule 501 of Regulation D, as presently in
effect.
e. Restricted Securities. It understands that the
---------------------
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, the
Purchaser represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
f. Legends. It is understood that the certificates
-------
evidencing the Securities may bear one or all of the following legends:
(1) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO AN EXEMPTION TO SUCH ACT. "
(2) Any legend required by the laws of the State of
California.
3. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Purchaser as follows:
a. This Agreement and the Warrant have been duly authorized
and executed by the Company and are valid and binding obligations of the
Company, enforceable in accordance with their terms except as to (i) the
effect of applicable bankruptcy and similar laws affecting the rights of
creditors, and (ii) the effect of rules of law governing specific performance,
injunctive relief and other equitable remedies.
b. The Common Stock issuable upon exercise of the Warrant has
been duly authorized and reserved for issuance by the Company and, when issued
in accordance with the terms hereof, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issue of such shares.
-2-
<PAGE>
c. The rights, preferences, privileges, and restrictions
granted to or imposed upon the Common Stock and the holders thereof are as set
forth in the Articles of Incorporation, a true and complete copy of which has
been delivered to the Purchaser.
d. The execution and delivery of this Agreement and the
Warrant are not, and the issuance of the Common Stock upon exercise of the
Warrant in accordance with the terms thereof, are not inconsistent with the
Company's Articles of Incorporation or Bylaws, do not contravene any law,
governmental rule or regulation, judgment, or order applicable to the Company,
and do not conflict with or contravene any provision of, or constitute a
default under, any indenture, mortgage, contract, or other instrument of which
the Company is a party or by which it is bound or require the consent or
approval of, the giving of notice to, the registration or filing with, or the
taking of any action in respect of or by, any federal, state, or local
government authority or agency or other person, other than state or federal
securities law filings.
e. During the period within which the Warrant may be
exercised, the Company will at all times have authorized and reserved for the
purpose of the issue upon exercise of the Warrant a sufficient number of
shares of its Common Stock to provide for the exercise of the Warrant.
4. Qualification of Securities. The sale of the Securities has
---------------------------
not been qualified with the Commissioner of Corporations of the State of
California and the issuance of such securities or the payment or receipt of any
part of the consideration thereof prior to such qualification is unlawful,
unless the sale of securities is exempt from the qualification by Section 25100,
25102 or 25105 of the California Corporations Code. The Company represents and
warrants that the sale of the Securities is exempt from qualification under the
securities laws of the State of California.
5. General Provisions.
------------------
a. This Agreement represents the entire agreement between the
Company and Purchaser regarding the subject matter hereof, supersedes all
prior agreements and understanding, and may only be amended in a writing
signed by the Company and the Purchaser.
b. This Agreement shall bind and benefit the successors,
assigns, heirs, executors and administrators of the parties. The rights of the
Purchaser under this Agreement may not be assigned (except to an Affiliate of
Purchaser, as such term is defined in Rule 405 of the rules and regulations
promulgated under the Securities Act of 1933, as amended) without the written
consent of the Company.
c. This Agreement shall be governed in all respects by the
laws of the State of California.
d. The Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Purchase Agreement as of the day and year first set forth above.
CARDIMA, INC.
a Delaware corporation
/s/ Gabriel B. Vegh
-------------------------------------------
By: Gabriel B. Vegh
Title: President
STATE OF CALIFORNIA PUBLIC
EMPLOYEES' RETIREMENT SYSTEM,
an agency of the State of California
------------------------------------------
By: Alex, Brown Kleinwort Benson Realty
Advisors Corporation
Its: Advisor and Duly Authorized Agent
By: /s/ Richard Cunningham
------------------------------------------
Richard Cunningham
Its: Senior Vice President
By: /s/ Joseph R. Shea
------------------------------------------
Joseph R. Shea
Its: Senior Vice President
-4-
<PAGE>
EXHIBIT A
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THEY MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE
TRANSFERRED, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO AN EXEMPTION TO SUCH ACT.
COMMON STOCK WARRANT
OF
CARDIMA, INC.
THIS CERTIFIES THAT State of California Public Employees' Retirement
System (the "Warrantholder" is entitled to subscribe for and purchase from
CaRDiMa, Inc., a Delaware corporation (the "Company") 10,000 fully paid and non-
assessable shares of the Company's Common Stock ("Common Stock"), at a price of
$1.00 per share (the "Exercise Price"); provided, however, that the Exercise
Price and the number of shares purchasable hereunder are subject to adjustment
upon the occurrence of the contingencies set forth in this Warrant. This
Warrant is granted in connection with the execution of that certain Lease
Agreement by and between the Company and State of California Public Employees'
Retirement System, dated April 25, 1994.
Upon delivery of this Warrant, subject to Section 1 hereof, together
with payment of the Exercise Price of the shares of Common Stock thereby
purchased, at the principal office of the Company or at such other office or
agency as the Company may designate by notice in writing to the holder hereof,
the holder of this Warrant shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The date at which the
Company receives (i) the Warrant and, subject to Section 1 hereof, (ii) the
payment for the shares of Common Stock, either by payment in cash or by check or
by notice of Warrantholder's intent to use shares of Common Stock as payment as
described in Section 1 below, or such later date as such notice shall specify,
shall be referred to herein as the "Exercise Date." However, other than an
exercise pursuant to a Conversion (as defined below), in no case shall the
issuance of the shares of Common Stock purchasable upon exercise of this Warrant
occur prior to the Company's receipt from the Warrantholder of the payment for
such shares. All shares of Common Stock which may be issued upon the exercise of
this Warrant will, upon issuance, be fully paid, non-assessable and free from
all taxes, liens and charges with respect thereto.
<PAGE>
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant.
-------------------
a. This Warrant may be exercised in part or in whole at any
time (1) commencing on the earlier of (i) 36 months after the date of issuance
of the Warrant, or (ii) 20 days prior to the day upon which the Company's Common
Stock commences trading on the National Association of Securities Dealers
Automated Quotations System or on a national securities exchange in connection
with the Company's initial underwritten public offering (the "Initial Public
Offering") of its equity securities pursuant to a registration statement under
the Securities Act of 1933, as amended (the "Act"), or (iii) 20 days prior to
the closing of (x) the sale of all or substantially all of the assets of the
Company or (y) a consolidation, merger or reorganization by the Company pursuant
to which the shareholders of the Company immediately prior to such
consolidation, merger or reorganization do not possess a majority of the voting
power of the acquiring entity immediately following such consolidation, merger
or reorganization (a "Merger/Acquisition"), or (iv) 20 days prior to the record
date for any dividend of cash or other property (other than Common Stock or
convertible securities) declared on any Common Stock or convertible securities
(a "Cash Dividend"), and (2) ending on the earlier of (i) six years from the
date of this Warrant, (ii) seven (7) days following the closing of the Initial
Public Offering, or (iii) the date upon which the Company consummates a
Merger/Acquisition, respectively; provided that the Company shall notify the
Warrantholder as soon as possible, but in no event later than twenty (20) days,
prior to the occurrence of an Expiration Date. This Warrant may be exercised by
surrendering it at the principal office of the Company and by payment to the
Company, in cash or by check or in the manner provided for in the following
paragraph, of the Exercise Price for all of the Common Stock purchased. The
Company shall, within 10 days after such delivery, prepare a certificate for the
shares of Common Stock purchased in the name of the holder of this Warrant, or
as such holder may direct (subject to the restrictions upon transfer contained
herein. Such certificate or certificates shall be deemed to have been issued and
the person so named therein shall be deemed to have become a holder of record of
such shares as of the Exercise Date, irrespective of the date of delivery of
such certificate or certificates for shares of Common Stock.
b. In lieu of exercising this Warrant by the payment of the
Exercise Price in cash or by check, but otherwise in accordance with the
preceding paragraph, the Warrantholder may elect to receive shares (a
"Conversion") equal to the value (as determined below) of this Warrant by
surrender of this Warrant at the principal office of the Company together with
notice of such election (which notice shall include the number of shares being
exercised hereunder), in which event the Company shall issue to the
Warrantholder that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the value of the shares of Common Stock being exercised
(the "Exercised Shares") on the Exercise Date, which value shall be determined
by subtracting (A) the aggregate Exercise Price of the Exercised Shares
immediately prior to the exercise of the Warrant from (B) the aggregate fair
market value of the Exercised Shares on the Exercise Date by (y) the fair market
value of one share of Common
-2-
<PAGE>
Stock as of the Exercise Date. No fractional shares shall be issuable upon
exercise of this Warrant, and if the number of shares to be issued determined in
accordance with the foregoing formula is other than a whole number, the Company
shall pay to the Warrantholder an amount in cash equal to the fair market value
of the resulting fractional share on the Exercise Date.
c. For purposes of this Section 1, the fair market value of the
Common Stock issuable upon exercise of this Warrant shall be determined as
follows:
(i) If this Warrant is exercised in connection with and
contingent upon the Initial Public Offering whether pursuant to a Conversion or
by payment of cash, and if the Company's registration statement relating to such
Initial Public Offering has been declared effective by the Securities and
Exchange Commission, then the fair market value shall be the initial "Price to
Public" specified in the final prospectus with respect to such offering.
(ii) If this Warrant is not exercised in connection with
and contingent upon the Initial Public Offering then the fair market value shall
be determined in good faith by mutual agreement between the Warrantholder and
the Company. If the Warrantholder and the Company are unable to so agree on the
fair market value, then the fair market value shall be determined in good faith
by the Board of Directors of the Company, and, as soon thereafter as
practicable, the Company shall give written notice thereof to the Warrantholder
at the address of such holder as shown in the books of the Company, and the
Expiration Date shall be extended until the later of the date determined
pursuant to Section 1(a)(2) above or 20 days after the receipt of such notice of
the Board's determination of fair market value.
d. The Company will pay all documentary stamp taxes and other
governmental charges (excluding all foreign, federal or state income, franchise,
property, estate, inheritance, gift or similar taxes) in connection with the
issuance or delivery of the Warrant hereunder, as well as such taxes
attributable to the initial issuance or delivery of shares of Common Stock upon
the exercise of the Warrant or payment of the Exercise Price.
2. Transfer of Warrant. This Warrant and all rights hereunder are
-------------------
not transferable, except to an Affiliate, as such term is used in the Act and in
accordance with Section 3 hereof.
3. Condition of Transfer of Warrant. It shall be a condition to any
--------------------------------
transfer of this Warrant that the Company shall have received, at the time of
such transfer, a statement in writing of the pertinent facts covering any
proposed distribution thereof. It shall be a further condition to any transfer
of this Warrant or of any or all of the shares of Common Stock issued upon
exercise of this Warrant, other than a transfer registered under the Act, that
the Company shall have received (i) if required by counsel to the Company, a
legal opinion, in form and substance reasonably satisfactory to the Company and
its counsel, reciting the pertinent circumstances surrounding the proposed
transfer and stating that such transfer is exempt from the prospectus and the
registration requirements of the Act and (ii) a statement in writing from, and
signed by, any proposed transferees containing the same representations and
warranties as set
-3-
<PAGE>
forth in Section 6 hereof. The requirement of a legal opinion shall not apply to
the transfer of this Warrant or any part thereof to a partnership of which the
Warrantholder is a partner or to the beneficial owners or affiliates of such
partnership without further consideration or otherwise to an Affiliate (as such
term is defined in Rule 405 of the rules and regulations promulgated under the
Securities Act of 1933, as amended) of the Warrantholder, so long as such
transfer is in compliance with applicable securities laws. Each certificate
evidencing the shares of Common Stock issued upon exercise of this Warrant, or
upon any transfer of such shares (other than a transfer registered under the Act
or any subsequent transfer of shares so registered) shall, at the option of the
Company, contain a legend, in form and substance satisfactory to the Company and
its counsel, restricting the transfer of such shares to sales or other
dispositions exempt from the requirements of the Act.
It shall be a further condition to each such transfer that the
transferee shall receive and accept a Warrant, of like tenor and date, executed
by the Company.
4. Adjustment of Exercise Price and Number of Shares Purchasable
-------------------------------------------------------------
Hereunder. The Exercise Price and the number of shares purchasable hereunder
- ---------
shall be subject to adjustment from time to time in accordance with the
following provisions:
a. Subdivisions and Combinations. In case the Company shall at
-----------------------------
any time subdivide the outstanding shares of its Common Stock, the Exercise
Price in effect immediately prior to such subdivision shall be proportionately
decreased, and in case the Company shall at any time combine the outstanding
shares of its Common Stock, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased, effective at the close of
business on the date of such subdivision or combination, as the case may be.
b. Stock Dividends. In case the Company shall at any time
---------------
declare a dividend or make a distribution with respect to its Common Stock
payable in Common Stock, then the Exercise Price in effect immediately prior to
the record date for distribution of such dividend or distribution shall be
adjusted to that price determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction (i) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of shares of Common Stock outstanding immediately after such
dividend or distribution.
c. Common Stock. In case the Company shall at any time issue
------------
shares of Common Stock for a consideration per share less than the Specified
Value per share on the issue date, then the Exercise Price in effect immediately
prior to the issue date for such shares shall be adjusted to that price
determined by multiplying the Exercise Price in effect immediately prior to such
issue date by a fraction (i) the numerator of which shall be (A) the total
number of Fully Diluted Shares outstanding immediately prior to such issue date,
plus (B) the aggregate consideration, if any, received by the Company upon such
issuance divided by the Specified Value as of such issue date and (ii) the
denominator of which shall be the total number of Fully Diluted Shares
outstanding immediately after such issue date. This subsection (c) does not
apply to:
-4-
<PAGE>
(i) the issuance of shares of the Company's Common Stock
upon conversion of shares of Series A or B Preferred Stock;
(ii) the issuance of up to 1,385,000 shares of the
Company's Common Stock to officers, directors or employees of, or consultants
to, the Corporation pursuant to incentive stock option or incentive stock
purchase plans or agreements on terms unanimously approved by the Board of
Directors, subject to adjustment for all subdivisions and combinations; or
(iii) the issuance of shares of the Company's Common Stock
as a dividend or distribution on the Company's capital stock.
d. Convertible Securities. In case the Company shall at any
----------------------
time issue any options, warrants, rights or other securities convertible into or
exchangeable or exercisable for Common Stock for a consideration per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
securities less than the Specified Value per share on the issue date, then the
Exercise Price in effect immediately prior to the issue date of such securities
shall be adjusted to that price determined by multiplying the Exercise Price in
effect immediately prior to such issue date by a fraction (i) the numerator of
which shall be (A) the total number of Fully Diluted Shares outstanding
immediately prior to such issue date, plus (B) the aggregate consideration, if
any, received or to be received by the Company upon such issuance and such later
conversion, exchange or exercise divided by the Specified Value as of such issue
date and (ii) the denominator of which shall be the total number of Fully
Diluted Shares outstanding immediately after such issue date.
This subsection (d) does not apply to the issuance of up to 1,385,000
shares of the Company's Common Stock to officers, directors or employees of, or
consultants to, the Corporation pursuant to incentive stock option or incentive
stock purchase plans or agreements on terms unanimously approved by the Board of
Directors, subject to adjustment for all subdivisions and combinations.
e. Specified Value. "Specified Value" per share of Common
---------------
Stock shall be the greater of (i) $2.00, provided, however, that such amount
shall be proportionately adjusted for future stock splits, dividends,
combinations or other similar corporate events and (ii) the per share fair
market value of the Common Stock on the date of determination.
f. Consideration Received. For purposes of any computation
----------------------
respecting consideration received pursuant to subsections (c) and (d) of this
Section 4, the following shall apply:
(i) in the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash, provided that in
no case shall
-5-
<PAGE>
any deduction be made for any commissions, discounts or other expenses incurred
by the Company for any underwriting of the issue or otherwise in connection
therewith;
(ii) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof (irrespective of
the accounting treatment thereof) as determined in good faith by the Board of
Directors; and
(iii) in the case of the issuance of options, warrants
or other securities convertible into or exchangeable or exercisable for shares
of Common Stock, the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be received by
the Company upon the conversion, exchange or exercise thereof (the consideration
in each case to be determined in the same manner as provided in clauses (1) and
(2) of this subsection).
g. Number of Shares. Upon each adjustment pursuant to
----------------
subdivisions (a), (b), (c) or (d) of this Section 4, the registered holder of
this Warrant shall thereafter (until another such adjustment) be entitled to
purchase in accordance with Section 1 hereof, at the adjusted Exercise Price,
the number of shares of Common Stock, calculated to the nearest full share,
obtained by multiplying the number of shares of Common Stock purchasable
hereunder immediately prior to such adjustment by the Exercise Price in effect
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
h. Reclassification or Merger. In case of any
--------------------------
reclassification, change, or conversion of securities of the class or series
issuable upon exercise of this Warrant (other than as a result of a subdivision
or combination described above), or in case of a Merger/Acquisition where this
Warrant has not been exercised in accordance with Section 1 hereof, the Company,
or such successor or purchasing corporation, as the case may be, shall duly
execute and deliver to the Warrantholder a new warrant so that the Warrantholder
shall have the right to receive, at a total purchase price not to exceed that
payable upon the exercise of the unexercised portion of this Warrant, and in
lieu of the shares of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, change, or Merger/Acquisition by
a holder of the number of shares of Common Stock then purchasable under this
Warrant. Such new warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this subparagraph (h) shall similarly apply to successive
reclassification, changes, and Mergers/Acquisitions.
i. Adjustments in Other Securities. If as a result of any
-------------------------------
event or for any other reason, any adjustment is made which increases the number
of shares of Common Stock issuable upon conversion, exercise or exchange of, or
in the conversion or exercise price or exchange ratio applicable to, securities
of the Company issued on or prior to the last issuance date of the Series C
Preferred Stock of the Company that are convertible into, or exercisable or
-6-
<PAGE>
exchangeable for, Common Stock of the Company, then a corresponding adjustment
shall be made hereunder to increase the number of shares of Common Stock
issuable upon exercise of the Warrant, but only to the extent that no such
adjustment has been made pursuant to Sections 4(a), (b), (c) or (d) hereof with
respect to such event or for such other reason.
j. Miscellaneous. For purposes of this Section 4 the term
-------------
"shares of Common Stock" shall mean (i) shares of the class of stock designated
as the Common Stock of the Company at the date of this Agreement, and (ii)
shares of any other class of stock resulting from successive changes or
reclassification of such shares consisting solely of changes in par value, or
from par value to no par value, or from no par value to par value. For purposes
of this Section 4, the term "Fully Diluted Shares" shall mean (i) shares of
Common Stock outstanding as of a specified date and (ii) shares of Common Stock
into or for which rights, options, warrants or other securities outstanding as
of such date are exercisable or convertible.
5. Notices.
-------
a. Upon any adjustment of the Exercise Price and any increase
or decrease in the number of shares of Common Stock purchasable upon the
exercise of this Warrant, then, and in each such case, the Company, as soon as
practicable, but in no event later than thirty (30) days thereafter, shall give
written notice thereof to the registered holder of this Warrant at the address
of such holder as shown on the books of the Company which notice shall state the
Exercise Price as adjusted and the increased or decreased number of shares
purchasable upon the exercise of this Warrant, setting forth in reasonable
detail the method of calculation of each.
b. In the event that the Company shall propose at any time to
effect the Initial Public Offering, a Merger/Acquisition or a Cash Dividend and
in addition to the notice referred to in Section 1(a)(2) above, the Company
shall send to the Warrantholder at least twenty (20) days prior written notice
of the date when the same is anticipated to take place; provided, however, that
the failure to give such notice shall not give the Warrantholder the right to
delay or otherwise restrain or affect the Initial Public Offering, the
Merger/Acquisition or a Cash Dividend, but failure to give such notice will
extend the Expiration Date to the later of the date determined pursuant to
Section 1(a)(2) above or 20 days after the receipt of such notice, in addition
to all other rights and remedies the Warrantholder has under applicable law.
Such written notice shall be given by first class mail, postage prepaid,
addressed to the Warrantholder at the address as shown on the books of the
Company for the Warrantholder.
6. Representations and Warranties of Warrantholder. Without
-----------------------------------------------
limiting or modifying the representations and warranties of the Company in
Section 7 of this Warrant or the right of the Warrantholder to rely thereon, the
Warrantholder hereby represents and warrants that:
a. Purchase Entirely for Own Account. This Warrant is issued
---------------------------------
to the Warrantholder in reliance upon Warrantholder's representation to the
Company, which by its acknowledgement of this Warrant Warrantholder hereby
confirms, that the Warrant and the
-7-
<PAGE>
Common Stock issuable upon exercise of the Warrant (collectively, the
"Securities") will be acquired for investment for the Warrantholder's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Warrantholder has no present
intention of selling, granting any participation in, or otherwise distributing
the same (other than to partners of the Warrantholder). By acknowledging this
Warrant, it does not have any contract, undertaking, agreement, or arrangement
with any person to sell, transfer, or grant participations to such person or to
any third person, with respect to any of the Securities (other than to partners
of the Warrantholder). It has full power and authority to acknowledge this
Warrant.
b. Disclosure of Information. It has had an opportunity to ask
-------------------------
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Warrant.
c. Investment Experience. The Warrantholder acknowledges that
---------------------
it is able to fend for itself, can bear the economic risk of its investment, and
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Warrant. It
has not been organized solely for the purpose of acquiring the Warrant.
d. Accredited Investor. The Warrantholder is an "accredited
-------------------
investor" within the meaning of SEC Rule 501 of Regulation D, as presently in
effect.
e. Restricted Securities. It understands that the Securities
---------------------
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, the
Warrantholder represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
f. Legends. It is understood that the certificates evidencing
-------
the Securities may bear one or all of the following legends:
(i) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO AN EXEMPTION TO SUCH ACT."
(ii) Any legend required by the laws of the State of
California.
-8-
<PAGE>
7. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Warrantholder as follows:
a. This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company, enforceable in
accordance with its terms except as to (i) the effect of applicable bankruptcy
and similar laws affecting the rights of creditors, and (ii) the effect of rules
of law governing specific performance, injunctive relief and other equitable
remedies.
b. The Common Stock issuable upon exercise of this Warrant has
been duly authorized and reserved for issuance by the Company and, when issued
in accordance with the terms hereof, will be validly issued, fully paid and non-
assessable, and free from all taxes, liens and charges with respect to the
issuance of such shares. Before taking any action which would cause an
adjustment pursuant to Section 4 hereof to reduce the Exercise Price below the
then par value (if any) of the Common stock, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock at the Exercise Price so adjusted.
c. The rights, preferences, privileges, and restrictions
granted to or imposed upon the Common Stock and the holders thereof are as set
forth in the Articles of Incorporation, a true and complete copy of which has
been delivered to the Warrantholder.
d. The execution and delivery of this Warrant is not, and the
issuance of the Common Stock upon exercise of this Warrant in accordance with
the terms hereof, is not inconsistent with the Company's Articles of
Incorporation or Bylaws, does not contravene any law, governmental rule or
regulation, judgment, or order applicable to the Company, and does not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract, or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with, or the taking of any action in
respect of or by, any federal, state, or local government authority or agency or
other person, other than state or federal securities law filings.
e. During the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved for the
purpose of the issue upon exercise of this Warrant a sufficient number of shares
of its Common Stock to provide for the exercise of this Warrant. The Company
shall from time to time take all action which may be necessary or appropriate so
that the shares of Common stock issuable upon exercise of the Warrant,
immediately upon their issuance following the exercise of the Warrant, will be
listed on the principal securities exchanges and markets within the United
States of America, if any, on which the other shares of Common Stock are then
listed; provided, however, that this section shall not be construed to provide
the Holder with the right to have such shares registered in any manner other
than as set forth in Section 8.f. hereof
-9-
<PAGE>
f. The authorized capital of the Company consists, or will
consist immediately prior to the Closing, of:
(i) Preferred Stock. Eight Million Seven Hundred Sixty-Six
---------------
Thousand Six Hundred Sixty-Six (8,766,666) shares of Preferred Stock (the
"Preferred Stock"), Three Million One Hundred Thousand (3,100,000) of which have
been designated Series A Preferred Stock (the "Series A Preferred Stock"), Three
Million (3,000,000) shares of which are outstanding, Two Million Three Hundred
Thirty-Three Thousand Three Hundred Thirty-Three (2,333,333) of which have been
designated Series B Preferred Stock (the "Series B Preferred Stock"), all of
which are outstanding and Three Million Three Hundred Thirty-Three Thousand
Three Hundred Thirty-Three (3,333,333) of which have been designated Series C
Preferred Stock (the "Series C. Preferred Stock"), none of which are
outstanding.
(ii) Common Stock. Ten Million Six Hundred Eighteen
------------
Thousand Three Hundred Thirty Three (10,618,333) shares of common stock ("Common
Stock"), of which Four Hundred Sixty-Six Thousand Six Hundred Sixty-Seven
(466,667) shares are issued and outstanding, Three Million One Hundred Thousand
(3,100,000) have been reserved for issuance upon the conversion of the Series A
Preferred Stock, Two Million Three Hundred Thirty-Three Thousand Three Hundred
Thirty-Three (2,333,333) have been reserved for issuance upon conversion of the
Series B Preferred Stock and Three Million Three Hundred Thirty-Three Thousand
Three Hundred Thirty-Three (3,333,333) have been reserved for issuance upon
conversion of the Series C Preferred Stock.
(a) All Four Hundred Sixty-Six Thousand Six Hundred
Sixty-Seven (466,667) shares of outstanding Common Stock are owned by Gabriel
Vegh, a founder of the Company, pursuant to an Employee Stock Purchase Agreement
with the Company.
(b) The outstanding shares of Common Stock are all
duly and validly authorized and issued, fully paid and nonassessable, and were
issued in accordance with the registration or qualification provisions of the
Securities Act of 1933, as amended (the "Act") and any relevant state securities
laws or pursuant to valid exemptions therefrom.
(iii) Except for (A) the conversion privileges of the Series
A Preferred Stock, the Series B Preferred Stock and the Series C Preferred
Stock, (B) the rights provided in Section 2.4 of the Amended and Restated
Stockholders' Rights Agreement effective June 30, 1993, as amended (the
"Stockholder Rights Agreement"), (C) 866,666 shares reserved for issuance
pursuant to the Company's 1993 Stock Option Plan, of which no shares have been
issued, 281,500 shares are subject to outstanding options, and 585,166 shares
remain available for issuance, and (D) a warrant to purchase 76,600 shares of
the Company's Series A Preferred Stock issued to Target Therapeutics, Inc. in
connection with an equipment lease financing transaction, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
-10-
<PAGE>
shares of its capital stock. The Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which affects or
relates to the voting or giving of written consents with respect to any security
or by a director of the Company.
8. Miscellaneous.
-------------
a. The terms of this Warrant shall be binding upon and shall
inure to the benefit of any successors and assigns of the Company and of the
holder or holders hereof and of the Common Stock issued or issuable upon the
exercise hereof and all of the obligations of the Company relating to the Common
Stock issuable upon exercise of this Warrant shall survive the exercise of this
Warrant.
b. No holder of this Warrant, as such, shall be entitled to
vote or receive dividends or be deemed to be a shareholder of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
c. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
d. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company, or in the
case of any such mutilation, upon surrender and cancellation of such Warrant,
the Company at its expense will execute and deliver, in lieu thereof, a new
Warrant of like date and tenor.
e. This Warrant shall be governed by the internal laws of the
State of California.
f. The holder of this Warrant shall be entitled to the piggy-
back registration rights in substantially the form set forth in a Stockholders'
Rights Agreement, a copy of which is annexed hereto and incorporated herein by
reference.
-11-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
Date: July 1, 1994
CaRDiMa, Inc.
/s/ Gabriel B. Vegh
--------------------------
By: Gabriel B. Vegh
Title: President
Acknowledged and Accepted By:
STATE OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM,
an agency of the State of California
By:
-----------------------------------
Alex, Brown Kleinwort Benson Realty
Advisors Corporation
Its: Advisor and Duly Authorized Agent
By: /s/ Richard Cunningham
-----------------------------------
Richard Cunningham
Its: Senior Vice President
By: /s/ Joseph R. Shea
-----------------------------------
Joseph R. Shea
Its: Senior Vice President
-12-
<PAGE>
SUBSCRIPTION
------------
CaRDiMa, Inc.
47201 Lakeview Boulevard
Fremont, CA 94539
Ladies and Gentlemen:
The undersigned, ________________________________, hereby elects to
purchase, pursuant to the provisions of the Warrant Purchase Agreement and the
Warrant dated ____________________, 1994 held by the undersigned, ____________
shares of the Common Stock of CaRDiMa, Inc., a Delaware corporation, and tenders
herewith payment of the exercise price of such shares in full.
The undersigned hereby represents and warrants that the undersigned is
acquiring such stock for its own account and not for resale or with a view to,
or for resale in connection with, the distribution of any part thereof or of any
of the Common Stock issuable upon conversion thereof, and accepts such shares
subject to the restrictions of the Warrant Purchase Agreement (the "Agreement"),
all dated as of ____________________, 1994. The undersigned hereby remakes all
representations set forth in Section 2 of the Agreement.
Dated:__________________, 199_ By: ____________________________________
Address: _______________________________
_______________________________
STATE OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
an agency of the State of California
By: Alex. Broan Kleinwort Benson Realty Advisors Corporation
Its: Advisor and Duly Authorized Agent
By: /s/ Richard C. Cunningham By: /s/ Joseph R. Shea
------------------------- ------------------
Richard C. Cunningham Joseph R. Shea
Its: Senior Vice President Its: Senior Vice President
-13-
<PAGE>
EXHIBIT 10.13
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE CORPORATION AND ITS COUNSEL. THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
CORPORATION: CARDIMA, INC., A DELAWARE CORPORATION
NUMBER OF SHARES: 2,000
CLASS OF STOCK: SERIES A PREFERRED
INITIAL EXERCISE PRICE: $1.00 PER SHARE
ISSUE DATE: OCTOBER 26, 1994
EXPIRATION DATE: OCTOBER 26, 1999
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 INTENTIONALLY OMITTED.
---------------------
1.4 Fair Market Value. If the Shares are traded in a public market, the
-----------------
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall
be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On 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, on delivery of an
1
<PAGE>
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.7.1. "Acquisition". For the purpose of this Warrant, "Acquisition"
-------------
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2. Assumption of Warrant. If upon the closing of any Acquisition
---------------------
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3. Nonassumption. If upon the closing of any Acquisition the
-------------
successor entity does not assume the obligations of his Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7.4. Purchase Right. Notwithstanding the foregoing, upon the
--------------
closing of any Acquisition in which the Holder would receive as consideration
shares of stock of the Company, the stock of which is not generally traded in
the public market, the entity shall purchase, or shall cause the acquiring
entity to purchase, the unexercised portion of this Warrant for cash in an
amount equal to (a) the fair market value of any consideration that would have
been received by Holder in consideration of the Shares had Holder exercised the
unexercised portion of this Warrant immediately before the record date for
determining the shareholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price of the Shares, but in no event
less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
-----------------------------
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
------------------------------------------
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2
<PAGE>
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
----------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number
----------------------------------
of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment, from time to time in the manner set
forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
-----------------
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder amount computed
by multiplying the factional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representation and Warranties. The Company hereby represents and
-----------------------------
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than (i) the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior
3
<PAGE>
written notice of the date when the same will take place (and specifying the
date on which the holders of common stock will be entitled to exchange their
common stock for securities or other property deliverable upon the occurrence
of such event); and (3) in the case of the matter referred to in (e) above,
the same notice as is given to the holders of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statement required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirement [or if the subject loan(s) no longer are outstanding]), then within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS
-------------
4.1 Term; Notice of Expiration. This Warrant is exercisable, in whole or
--------------------------
in part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder s notice of
proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.2, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail,
4
<PAGE>
postage prepaid, at such address as may have been furnished to the Company or
the Holder, as the case may be, in writing by the Company or such holder from
time to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
CARDIMA, INC.
By /s/ Gabriel B. Vegh
-------------------------------------
Name Gabriel B. Vegh
-----------------------------------
(Print)
Title: Chairman of the Board,
President, or Vice President
By /s/ Joshua L. Green
--------------------------------------
Name Joshua L. Green
------------------------------------
(Print)
Title: Chief Financial Officer, Secretary
Assistant Treasurer, or Assistant
Secretary
5
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase__________shares of the
Common/Series_________Preferred [strike one] Stock of____________________
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to_______of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
-------------------------
(Name)
-------------------------
-------------------------
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
----------------------------------------
(Signature)
--------------
(Date)
6
<PAGE>
APPENDIX 2
Notice that Warrant Is About to Expire
--------------------------------------
,
------------------- ----
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear: _________________________
This is to advise you that the Warrant issued to you described below will
expire on________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
------------------------------------------
(Name of Issuer)
By
---------------------------------------
Its
--------------------------------------
7
<PAGE>
EXHIBIT A
---------
Anti-Dilution Provisions
In the event of the issuance (a "Diluting Issuance") by the Company,
after the Issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, or, if the Shares are common stock, less than the then
conversion price of the Company's Series_________Preferred Stock, then the
number of shares of common stock issuable upon conversion of the Shares, or if
the Shares are common stock, the number of Shares issuable upon exercise of
the Warrant, shall be adjusted as a result of Diluting Issuances in accordance
with the Holder's standard form of Anti-Dilution Agreement in effect on the
Issue Date.
Under no circumstances shall the aggregate Warrant price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
8
<PAGE>
EXHIBIT B
Registration Rights
-------------------
The Shares (if common stock), or the common stock issuable upon
conversion of the Shares, shall be deemed "registrable securities" or for
purposes of being entitled to "piggy back" registration rights in accordance
with the terms of the following agreement (the "Agreement") between the Company
and its investor(s):
AMENDED AND RESTATED STOCK HOLDER'S RIGHTS AGREEMENT, AS AMENDED FROM TIME
TO TIME
Notwithstanding the above, the Company agrees that no amendments will be
made to the Agreement which would have an adverse impact on Holder's
registration rights thereunder without the consent of Holder. By acceptance of
the Warrant to which this Exhibit B is attached, Holder shall be deemed to be a
party to the Agreement.
If no Agreement exists, then the Company and the Holder shall enter into
Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
9
<PAGE>
EXHIBIT 10.14
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE
HEREUNDER HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO SUCH WARRANT OR SECURITIES, OR DELIVERY OF AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
THE COMPANY THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE WITH THE ACT OR UNLESS SOLD
IN FULL COMPLIANCE WITH RULE 144 UNDER THE ACT.
SERIES A PREFERRED STOCK PURCHASE WARRANT
of
CARDIMA, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
----------------------------------------------------
Issued: December 30, 1994
THIS CERTIFIES THAT, for value received, [1] (the "Investor") is
entitled to subscribe for and purchase [2] shares (the "Shares") of the fully
paid and nonassessable Series A Preferred Stock of Cardima, Inc., a Delaware
corporation (the "COMPANY"), at a price per share of $1.00 (such price and such
-----
other price as shall result, from time to time, from adjustments specified
herein is herein referred to as the "WARRANT PRICE"), subject to the provisions
and upon the terms and conditions hereinafter set forth. As used herein, the
term "Preferred Stock" shall mean the Company's duly authorized Series A
Preferred Stock, and any stock into or for which such Series A Preferred Stock
may hereafter be converted or exchanged pursuant to the Certificate of
Incorporation of the Company as from time to time amended as provided by law and
in such Articles, and the term "GRANT DATE" shall mean the date set forth above.
This Warrant is issued in connection with the cancellation of certain
promissory notes and the cancellation and reissuance of certain warrants
previously issued by the Company.
1. TERM. Subject to the terms hereof, the purchase right
----
represented by this Warrant is exercisable, in whole or in part, at any time and
from time to time from and after the Grant Date and prior to the earlier of (a)
the date ten (10) years after the Grant Date, or (b) the closing of the
Company's sale of all or substantially all of its assets or the acquisition of
the Company by another entity by means of merger or other transaction as a
result of which stockholders of the Company
<PAGE>
immediately prior to such acquisition possess a minority of the voting power of
the acquiring entity immediately following such acquisition (an "ACQUISITION")
to the extent that the acquiring entity in good faith requires, as a condition
of the Acquisition, the exercise or termination of this Warrant on or before the
closing of such Acquisition; provided that the Company shall provide written
notice of an Acquisition to the holder hereof not less than 30 days before the
proposed closing date of such Acquisition.
2. METHOD OF EXERCISE; NET ISSUE EXERCISE.
--------------------------------------
(a) Method of Exercise; Payment; Issuance of New Warrant. The
----------------------------------------------------
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by either, at the election of
the holder hereof, (i) the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit B duly executed) at the principal
---------
office of the Company and by the payment to the Company, by check, of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased or (ii) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit B-1 duly executed) at the
-----------
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing Shares shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within
thirty days of receipt of such notice and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the holder hereof as soon as possible and in any event within
such thirty-day period.
(b) Net Issue Exercise.
------------------
(i) In lieu of exercising this Warrant, the holder hereof
may elect to receive shares equal to the value of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with notice of such election in which event the Company
shall issue to Holder a number of shares of the Company's Preferred Stock
computed using the following formula:
X = Y(A - B)
--------
A
Where X = The number of shares of Preferred Stock to be issued to Holder.
-2-
<PAGE>
Y = the number of shares of Preferred Stock purchasable under this
Warrant.
A = the fair market value of one share of the Company's Preferred
Stock.
B = Warrant Price (as adjusted to the date of such calculations).
(ii) For purposes of this Section, fair market value of the
Company's Preferred Stock shall mean (A) the average of the closing bid and
asked prices of the Company's Preferred Stock quoted in the Over-The-Counter
Market Summary, if applicable, or (B) the average closing price quoted on any
exchange, including the Nasdaq National Market System, on which the Preferred
Stock is listed, if applicable, as published in the Western Edition of The Wall
--------
Street Journal for the ten trading days prior to the date of determination of
- --------------
fair market value, or (C) the price determined by the Company's Board of
Directors, acting in good faith upon a review of all relevant factors.
(c) Company's Option Upon Registered Offering. In the event of the
-----------------------------------------
initial registered public offering by the Company of its Common Stock effected
pursuant to a Registered Statement on Form S-1 (or its successor) filed under
the Securities Act of 1933, the Company will have the option, but not the
obligation, to purchase for cash immediately prior to the issuance of such
shares in such offering this Warrant for a price per Share equal to the
difference between (x) the Net Per Share Price (as defined below) of the stock
being issued in such offering and (y) the Warrant Price. For the purpose of
this Paragraph the term ("NET PER SHARE PRICE") shall mean the proceeds to be
received by the Company (or selling shareholders, in the event of a secondary
offering) for each share in the registered public offering, net of underwriting
discounts and commissions.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be
---------------------------------------
issued upon the exercise of the rights represented by this Warrant and Common
Stock issuable upon conversion of the Preferred Stock will, upon issuance, be
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. During the period within which the rights
represented by the Warrant may be exercised, the Company will at all times have
authorized and reserved for the purpose of issuance upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Preferred Stock (and Common Stock issuable upon conversion thereof) to provide
for the exercise of the right represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and
------------------------------------------------
kind of securities purchasable upon the exercise of the Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any
--------------------------
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is a continuing corporation and
-3-
<PAGE>
which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant), or in case of any sale of
all or substantially all of the assets of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall execute a new
Warrant (in form and substance satisfactory to the holder of this Warrant)
providing that the holder of this Warrant shall have the right to exercise such
new Warrant and upon such exercise to receive, in lieu of each share of
Preferred Stock theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change or merger by a holder of one share of Preferred
Stock. Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Paragraph 4. The provisions of this subparagraph (a) shall similarly apply to
successive reclassification, changes, mergers and transfers.
(b) Subdivisions or Combination of Shares. If the Company at any
-------------------------------------
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, the Warrant Price and the number of Shares issuable
upon exercise hereof shall be proportionately adjusted such that the aggregate
exercise price of this Warrant shall at all time remains equal.
(c) Stock Dividends. If the Company at any time while this
---------------
Warrant is outstanding and unexpired shall pay a dividend payable in shares of
Common Stock (except any distribution specifically provided for in the foregoing
subparagraphs (a) and (b)), then the Warrant Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of shares of Preferred
Stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of shares of Preferred Stock
outstanding immediately after such dividend or distribution and the number of
Shares subject to this Warrant shall be proportionately adjusted.
(d) No Impairment. The Company will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
(e) Notices of Record Date. In the event of any taking by the
----------------------
Company of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend (other than a
cash dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed merger or consolidation of
the Company with or into any other corporation, or any proposed sale, lease or
conveyance of all or substantially all of the assets of the Company, or any
proposed liquidation, dissolution or winding up of the Company, the Company
shall mail to the holder
-4-
<PAGE>
of the Warrant, at least twenty (20) days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price shall be
---------------------
adjusted pursuant to the provisions hereof, the Company shall within thirty (30)
days of such adjustment deliver a certificate signed by its chief financial
officer to the registered holder(s) hereof setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price after giving effect
to such adjustment.
6. FRACTIONAL SHARES. No fractional shares of Preferred Stock will
-----------------
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Warrant Price then in effect.
7. REGISTRATION RIGHTS. The Company agrees to use its best efforts
-------------------
and to do and take all actions necessary to amend that certain Amended and
Restated Stockholders' Rights Agreement dated June 30, 1993 (the "Stockholder
Rights Agreement") to include the Series A Preferred Stock to be issued upon
exercise of this Warrant in the definition of Registrable Securities by no later
than the earlier of December 31, 1994 or the closing of the next round of equity
financing of the Company. The Investor agrees that it will become subject to
the market-stand-off provisions of the Stockholder Rights Agreement upon such
amendment.
8. TRANSFERS AND EXCHANGES.
-----------------------
(a) This Warrant shall not be transferrable except in accordance
with the terms of Section 3.7 of that certain Convertible Promissory Note and
Series A Preferred Stock Warrant Purchase Agreement dated as of September 9,
1994 by and among the Company, Investor and certain other investors.
(b) All new warrants issued in connection with transfers or
exchanges shall be identical in form and provision to this Warrant. It shall be
a further condition to each such transfer that the transferee shall receive and
accept a Warrant, of like tenor and date, executed by the Company.
9. RIGHTS AS SHAREHOLDERS.
----------------------
No holder of the Warrant, as such, shall be entitled to vote or
receive dividends or be deemed the holder of Preferred Stock, or any other
securities of the Company which may at any time be issuable on the exercise
thereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise
until this Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
-5-
<PAGE>
10. REPRESENTATIONS AND WARRANTIES. This Warrant is issued and
------------------------------
delivered on the basis of the following:
(a) This Warrant has been duly authorized and executed by the
Company and when delivered will be the valid and binding obligation of the
Company enforceable in accordance with its terms;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions granted
to or imposed upon the Shares and the holders thereof are as set forth in the
Company's Certificate of Incorporation, as amended, a true and complete copy of
which has been delivered to the original Warrant holder;
(d) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Company's Certificate of Incorporation, as amended, will
be validly issued, fully paid and nonassessable; and
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Certificate of
Incorporation or by-laws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of or
by, any federal state or local government authority or agency or other person.
11. MODIFICATION AND WAIVER. This Warrant and any provision hereof
-----------------------
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
12. NOTICES. Any notice, request or other document required or
-------
permitted to be given or delivered to the holder hereof or the Company shall be
delivered, or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated on the signature page of this Warrant.
13. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
----------------------------
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Common Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant and all of
the covenants and agreements of the Company shall inure to the benefit of the
successors and
-6-
<PAGE>
assigns of the holder hereof. The Company will, at the time of the exercise of
this Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation, any right
to registration of the shares of Registrable Securities) to which the holder
hereof shall continue to be entitled after such exercise in accordance with this
Warrant; provided, that the failure of the holder hereof to make any such
request shall not affect the continuing obligation of the Company to the holder
hereof in respect of such rights.
14. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to
-----------------------------------
the holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
15. DESCRIPTIVE HEADINGS. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
16. GOVERNING LAW. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
IN WITNESS WHEREOF, this Preferred Stock Purchase Warrant is executed
effective as of the date first above written.
CARDIMA, INC.
By:
---------------------------------------
Title:
------------------------------------
-7-
<PAGE>
EXHIBIT B
---------
NOTICE OF EXERCISE
To:
---------------------------------
---------------------------------
---------------------------------
Attn:
--------------------------
1. The undersigned hereby elects to purchase ______ shares of
__________ Stock of________________ pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below
Name:
---------------------------------
Address:
------------------------------
------------------------------
------------------------------
3. The undersigned represents that the aforesaid shares being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
---------------------------------
(Signature)
----------------------
(Date)
-8-
<PAGE>
EXHIBIT B-1
-----------
NOTICE OF EXERCISE
To:
---------------------------------
---------------------------------
---------------------------------
Attn:
--------------------------
1. Contingent upon and effective immediately prior to the closing
(THE "CLOSING") of the Company's public offering contemplated by the
Registration Statement of Form S-______, filed _______________, _______________,
the undersigned hereby elects to purchase shares of
______________________________ Stock of the Company (or such lesser number of
shares as may be sold on behalf of the undersigned at the Closing) pursuant to
the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such _______________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $_______________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company prior to the
Closing.
---------------------------------
(Signature)
- ---------------------------
(Date)
-9-
<PAGE>
Schedule of Holders of
Form of Series A Preferred Stock Warrant
Issued in December 1994
No. of Series A
Preferred Stock
Name Warrant Shares
---- ----------------
Catalyst Ventures Limited Partnership 857
Kleiner Perkins Caufield & Byers VI 8,016
KPCB VI Founders Fund 1,229
New Enterprise Associates V, LP 4,362
Onset Enterprise Associates, LP 857
Target Therapeutics, Inc. 3,089
<PAGE>
EXHIBIT 10.15
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE CORPORATION AND ITS COUNSEL. THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
CORPORATION: CARDIMA, INC., A DELAWARE CORPORATION
NUMBER OF SHARES: 15,000
CLASS OF STOCK: SERIES D PREFERRED
INITIAL EXERCISE PRICE: $0.73 PER SHARE
ISSUE DATE: OCTOBER 31, 1995
EXPIRATION DATE: OCTOBER 31, 1999
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
--------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 INTENTIONALLY OMITTED.
---------------------
1.4 Fair Market Value. If the Shares are traded in a public market, the
-----------------
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that
1
<PAGE>
determined by the Board of Directors, then all fees and expenses of such
investment banking firm shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On 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, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.7.1. "Acquisition". For the purpose of this Warrant, "Acquisition"
-------------
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2. Assumption of Warrant. If upon the closing of any Acquisition
---------------------
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3. Nonassumption. If upon the closing of any Acquisition the
-------------
successor entity does not assume the obligations of his Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7.4. Purchase Right. Notwithstanding the foregoing, upon the
--------------
closing of any Acquisition in which the Holder would receive as consideration
shares of stock of the Company, the stock of which is not generally traded in
the public market, the entity shall purchase, or shall cause the acquiring
entity to purchase, the unexercised portion of this Warrant for cash in an
amount equal to (a) the fair market value of any consideration that would have
been received by Holder in consideration of the Shares had Holder exercised the
unexercised portion of this Warrant immediately before the record date for
determining the shareholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price of the Shares, but in no event
less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
-----------------------------
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2
<PAGE>
2.2 Reclassification, Exchange or Substitution. Upon any
------------------------------------------
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
----------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number
----------------------------------
of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment, from time to time in the manner set
forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
-----------------
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder amount computed
by multiplying the factional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------
3.1 Representation and Warranties. The Company hereby represents and
-----------------------------
warrants to the Holder as follows:
3
<PAGE>
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than (i) the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statement required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirement [or if the subject loan(s) no longer are outstanding]), then within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS
-------------
4.1 Term; Notice of Expiration. This Warrant is exercisable, in whole or
--------------------------
in part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
4
<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND
ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder s notice of
proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.2, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
5
<PAGE>
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
CARDIMA, INC.
By: /s/ Phil Radlick
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
6
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase_______shares of the Common/Series
_____________________Preferred [strike one] Stock of___________________
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to________of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name as is specified below:
- -------------------------------
(Name)
- -------------------------------
(Address)
3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
- ------------------------------
(Signature)
- ------------------------------
(Date)
7
<PAGE>
APPENDIX 2
Notice that Warrant Is About to Expire
--------------------------------------
,
-------------- --
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear: _________________
This is to advise you that the Warrant issued to you described below will
expire on____________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
- -------------------------------------
(Name of Issuer)
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
8
<PAGE>
EXHIBIT 10.16
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE
HEREUNDER HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO SUCH WARRANT OR SECURITIES, OR DELIVERY OF AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
THE COMPANY THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT OR UNLESS
SOLD IN FULL COMPLIANCE WITH RULE 144 UNDER THE ACT.
COMMON STOCK WARRANT
OF
CARDIMA, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
----------------------------------------------------
Issued: [NoteDate]
THIS CERTIFIES THAT, for value received, [Name] (the "Investor") is
entitled to subscribe for and purchase shares (the "Shares") of the fully paid
and nonassessable Common Stock of Cardima, Inc., a Delaware corporation (the
"Company"), at a price per share of $0.15 (such price and such other price as
----
shall result, from time to time, from adjustments specified herein is herein
referred to as the "WARRANT PRICE"), subject to the provisions and upon the
terms and conditions hereinafter set forth. As used herein, the term "Common
Stock" shall mean the Company's duly authorized Common Stock, and any stock into
or for which such Common Stock may hereafter be exchanged pursuant to the
Certificate of Incorporation of the Company as from time to time amended as
provided by law and in such Articles, and the term "GRANT DATE" shall mean the
date set forth above.
This Warrant is issued in connection with the extension of a loan to the
Company by the Investor as evidenced by that certain convertible promissory note
of even date herewith executed by the Company and delivered to the Investor in
the principal amount of $[NoteAmount] (the "Note").
1. TERM. Subject to the terms hereof, the purchase right represented by
----
this Warrant is exercisable, in whole or in part, at any time and from time to
time from and after the Grant Date and prior to the earlier of (a) the date ten
(10) years after the Grant Date, or (b) the closing of the Company's sale of all
or substantially all of its assets or the
<PAGE>
acquisition of the Company by another entity by means of merger or other
transaction as a result of which stockholders of the Company immediately prior
to such acquisition possess a minority of the voting power of the acquiring
entity immediately following such acquisition (an "ACQUISITION") to the extent
that the acquiring entity in good faith requires, as a condition of the
Acquisition, the exercise or termination of this Warrant on or before the
closing of such Acquisition; provided that the Company shall provide written
notice of an Acquisition to the holder hereof not less than 30 days before the
proposed closing date of such Acquisition.
2. NUMBER OF SHARES. Subject to the terms and conditions hereinafter set
----------------
forth, the Investor is entitled, upon surrender of this Warrant, to purchase
from the Company that number of shares of Common Stock, at a purchase price of
$0.15 per share, equal to the product of (i) the product of .05 multiplied by
the total original principal dollar amount represented by the Note (the
"Principal Note Amount"), multiplied by (ii) the number of thirty (30) day
periods all or any part of such Principal Note Amount remains outstanding.
3. METHOD OF EXERCISE, NET ISSUE EXERCISE.
--------------------------------------
(a) Method of Exercise: Payment, Issuance of New Warrant. The
----------------------------------------------------
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by either, at the election of
the holder hereof, (i) the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit B duly executed) at the principal
---------
office of the Company and by the payment to the Company, by check, of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased or (ii) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit B-1 duly executed) at the
-----------
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing Shares shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within
thirty days of receipt of such notice and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have
-2-
<PAGE>
been exercised shall also be issued to the holder hereof as soon as possible and
in any event within such thirty-day period.
(b) Net Issue Exercise.
------------------
(i) In lieu of exercising this Warrant, the holder hereof may
elect to receive shares equal to the value of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with notice of such election in which event the Company
shall issue to Holder a number of shares of the Company's Common Stock computed
using the following formula:
X = Y(A - B)
--------
A
Where X = The number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock purchasable under this Warrant.
A = the fair market value of one share of the Company's Common Stock.
B = Warrant Price (as adjusted to the date of such calculations).
(ii) For purposes of this Section, fair market value of the
Company's Common Stock shall mean (A) the average of the closing bid and asked
prices of the Company's Common Stock quoted in the Over-The-Counter Market
Summary, if applicable, or (B) the average closing price quoted on any exchange,
including the Nasdaq National Market System, on which the Common Stock is
listed, if applicable, as published in the Western Edition of The Wall Street
---------------
Journal for the ten trading days prior to the date of determination of fair
- -------
market value, or (C) if neither (A) or (B) is applicable, the price determined
by the Company's Board of Directors, acting in good faith upon a review of all
relevant factors.
(c) Company's Option Upon Registered Offering. In the event of the
-----------------------------------------
initial registered public offering by the Company of its Common Stock effected
pursuant to a Registered Statement on Form S-1 (or its successor) filed under
the Securities Act of 1933, the Company will have the option, but not the
obligation, to purchase for cash immediately prior to the issuance of such
shares in such offering this Warrant for a price per Share equal to the
difference between (x) the Net Per Share Price (as defined below) of the stock
being issued in such offering and (y) the Warrant Price. For the purpose of
this Paragraph the term "NET PER SHARE PRICE" shall mean the proceeds to be
received by the Company (or selling shareholders, in the event of a secondary
offering) for each share in the registered public offering, net of underwriting
discounts and commissions.
-3-
<PAGE>
4. STOCK FULLY PAID: RESERVATION OF SHARES. All Shares that may be issued
---------------------------------------
upon the exercise of the rights represented by this Warrant will, upon issuance,
be fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. During the period within which the rights
represented by the Warrant may be exercised, the Company will at all times have
authorized and reserved for the purpose of issuance upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Common Stock to provide for the exercise of the right represented by this
Warrant.
5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of the Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
--------------------------
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall execute a
new Warrant (in form and substance satisfactory to the holder of this Warrant)
providing that the holder of this Warrant shall have the right to exercise such
new Warrant and upon such exercise to receive, in lieu of each share of Common
Stock theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change or merger by a holder of one share of Common Stock.
Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Paragraph 4. The provisions of this subparagraph (a) shall similarly apply to
successive reclassification, changes, mergers and transfers.
(b) Subdivisions or Combination of Shares. If the Company at any time
-------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Warrant Price and the number of Shares issuable upon
exercise hereof shall be proportionately adjusted such that the aggregate
exercise price of this Warrant shall at all time remains equal.
(c) Stock Dividends. If the Company at any time while this Warrant is
---------------
outstanding and unexpired shall pay a dividend payable in shares of Common Stock
(except any distribution specifically provided for in the foregoing
subparagraphs (a) and (b)), then the Warrant Price shall be adjusted, from and
after the date of determination of
-4-
<PAGE>
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend or
distribution and the number of Shares subject to this Warrant shall be
proportionately adjusted.
(d) No Impairment. The Company will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 5 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
(e) Notices of Record Date. In the event of any taking by the Company
----------------------
of a record of its shareholders for the purpose of determining stockholders who
are entitled to receive payment of any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property, or to receive any
other right, or for the purpose of determining stockholders who are entitled to
vote in connection with any proposed merger or consolidation of the Company with
or into any other corporation, or any proposed sale, lease or conveyance of all
or substantially all of the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, the Company shall mail to the holder
of the Warrant, at least twenty (20) days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
6. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price shall be adjusted
---------------------
pursuant to the provisions hereof, the Company shall within thirty (30) days of
such adjustment deliver a certificate signed by its chief financial officer to
the registered holder(s) hereof setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Warrant Price after giving effect to such
adjustment.
7. FRACTIONAL SHARES. No fractional shares of Common Stock will be issued
-----------------
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Warrant
Price then in effect.
-5-
<PAGE>
8. REGISTRATION RIGHTS. The Company agrees to use its best efforts and to
-------------------
do and take all actions necessary to amend that certain Second Amended and
Restated Stockholders' Rights Agreement dated December 31, 1994 (the
"Stockholder Rights Agreement") to include the Common Stock to be issued upon
exercise of this Warrant in the definition of Registrable Securities by no later
than the closing of the next round of equity financing of the Company. The
Investor agrees that it will become subject to the market-stand-off provisions
of the Stockholder Rights Agreement upon such amendment.
9. TRANSFERS AND EXCHANGES.
-----------------------
(a) This Warrant shall not be transferrable except to an affiliate of
the Investor.
(b) All new warrants issued in connection with transfers or exchanges
shall be identical in form and provision to this Warrant. It shall be a further
condition to each such transfer that the transferee shall receive and accept a
Warrant, of like tenor and date, executed by the Company.
10. RIGHTS AS STOCKHOLDERS.
----------------------
No holder of the Warrant, as such, shall be entitled to vote or
receive dividends or be deemed the holder of Common Stock, or any other
securities of the Company which may at any time be issuable on the exercise
thereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise
until this Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
11. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. This Warrant is issued
---------------------------------------------
and delivered on the basis of the following:
(a) This Warrant has been duly authorized and executed by the Company
and when delivered will be the valid and binding obligation of the Company
enforceable in accordance with its terms;
(b) The Shares have been duly authorized by the Company and when
issued in accordance with the terms hereof, will be validly issued, fully paid
and nonassessable;
(c) The rights, preferences, privileges and restrictions granted to or
imposed upon the Shares and the holders thereof are as set forth in the
Company's
-6-
<PAGE>
Certificate of Incorporation, as amended, a true and complete copy of which has
been delivered to the original Warrant holder;
(d) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Certificate of
Incorporation or by-laws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of or
by, any federal state or local government authority or agency or other person.
12. REPRESENTATIONS AND WARRANTIES OF INVESTOR. Without limiting or
------------------------------------------
modifying the representations and warranties of the Company in Section 11 of
this Warrant or the right of the Investor to rely thereon, the Investor hereby
represents and warrants that:
(a) Purchase Entirely for Own Account. This Warrant is issued to the
---------------------------------
Investor in reliance upon Investor's representation to the Company, which by its
acknowledgment of this Warrant Investor hereby confirms, that the Warrant and
the Common Stock issuable upon exercise of the Warrant (collectively, the
"Securities") will be acquired for investment for the Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same (other than to
partners of the Investor). By acknowledging this Warrant, it does not have any
contract, undertaking, agreement, or arrangement with any person to sell,
transfer, or grant participations to such person or to any third person, with
respect to any of the Securities (other than to partners of the Investor). It
has full power and authority to acknowledge this Warrant.
(b) Disclosure of Information. It has had an opportunity to ask
-------------------------
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Warrant.
(c) Investment Experience. The Investor acknowledges that it is able
---------------------
to fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Warrant. It has not
been organized solely for the purpose of acquiring the Warrant.
(d) Accredited Investor. The Investor is an "accredited investor"
-------------------
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
-7-
<PAGE>
(e) Restricted Securities. It understands that the Securities it is
---------------------
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, the Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
(f) Legends. It is understood that the certificates evidencing the
-------
Securities may bear one or all of the following legends:
(i) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO AN EXEMPTION TO SUCH ACT."
(ii) Any legend required by the laws of the State of California.
13. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
14. NOTICES. Any notice, request or other document required or permitted
-------
to be given or delivered to the holder hereof or the Company shall be delivered,
or shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated on the signature page of this Warrant.
15. BINDING EFFECT ON SUCCESSORS. The terms and provisions of this
----------------------------
Warrant shall be binding upon the Company and the Investor and their respective
successors and assigns. All of the obligations of the parties relating to the
Common Stock issuable upon the exercise of this Warrant shall survive the
exercise and termination of this Warrant and all of the covenants and agreements
of each party relating thereto shall inure to the benefit of the successors and
assigns of the other. The Company will, at the time of the exercise of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation, any right
to registration of the shares of Registrable Securities) to which the holder
hereof shall continue to be entitled after such exercise in accordance with this
Warrant; provided, that the failure of the
-8-
<PAGE>
holder hereof to make any such request shall not affect the continuing
obligation of the Company to the holder hereof in respect of such rights.
16. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to the
-----------------------------------
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
17. DESCRIPTIVE HEADINGS. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
18. GOVERNING LAW. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
IN WITNESS WHEREOF, this Common Stock Warrant is executed effective as of
the date first above written.
CARDIMA, INC.
By:
-----------------------------
Title:
--------------------------
AGREED TO AND ACCEPTED:
By:
--------------------------
Title:
-----------------------
-9-
<PAGE>
EXHIBIT B
---------
NOTICE OF EXERCISE
To: Cardima, Inc.
47266 Benicia Street
Fremont, CA 94538
Attn: President
1. The undersigned hereby elects to purchase _________ shares of Common
Stock of Cardima, Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below
Name:
-----------------------------------
Address:
--------------------------------
--------------------------------
--------------------------------
3. The undersigned represents that the aforesaid shares being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
--------------------------------
(Signature)
- --------------------
(Date)
-10-
<PAGE>
EXHIBIT B-1
-----------
NOTICE OF EXERCISE
To: Cardima, Inc.
47266 Benicia Street
Fremont, CA 94538
Attn: President
1. Contingent upon and effective immediately prior to the closing (the
"CLOSING") of the Company's public offering contemplated by the Registration
Statement of Form S-_____, filed ________________, ________________, the
undersigned hereby elects to purchase shares of Common Stock of the Company (or
such lesser number of shares as may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such __________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $_____________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such
shares, the undersigned agrees to deliver the difference to the Company prior to
the Closing.
--------------------------------
(Signature)
- -------------------
(Date)
-11-
<PAGE>
Schedule of Holders of
Form of Common Stock Warrant
Issued from April 1995 to December 1995
No. of
Common Stock
Name Warrant Shares
---- ---------------
Catalyst Ventures Limited Partnership 8,666
3,412
3,607
Kleiner Perkins Caufield & Byers VI 35,368
92,342
55,873
42,854
29,540
11,505
KPCB VI Founders Fund 5,425
14,165
8,571
6,574
4,531
1,764
New Enterprise Associates V, LP 43,333
17,746
18,261
Onset Enterprise Associates, LP 8,666
3,412
3,607
Gabriel B. Vegh 37,301
<PAGE>
EXHIBIT 10.17
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series D Preferred Stock of
CARDIMA, INC.
Dated as of January 23, 1996 (the "Effective Date")
---------------------------------------------------
WHEREAS, Cardima, Inc., a Delaware corporation (the "Company") has entered
into a Master Lease Agreement dated as of January 23, 1996. Equipment Schedule
No. VL-1 dated as of January 23, 1996, and related Summary Equipment Schedules
(collectively, the "Leases") with Comdisco, Inc., a Delaware corporation (the
"Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series D Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 166,438 fully paid and non-
assessable shares of the Company's Series D Preferred Stock ("Preferred Stock")
at a purchase price of $.73 per share (the "Exercise Price"). The number and
purchase price of such shares are subject to adjustment as provided in
Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement and
the right to purchase Preferred Stock as granted herein shall commence on the
Effective Date and shall be exercisable for a period of (i) ten (10) years or
(ii) five (5) years from the effective date of the Company's initial public
offering, whichever is longer.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by the
Warrantholder, in whole or in part, at any time, or from time to time, prior to
the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
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<PAGE>
The Exercise Price may be paid at the Warrantholder's election either (i) by
cash or check, or (ii) by surrender of Warrants ("Net Issuance") as determined
below. If the Warrantholder elects the Net Issuance method, the Company will
issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be exercised
under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of Preferred
Stock shall mean with respect to each share of Preferred Stock;
(a) if the exercise is in connection with an initial public offering of
the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC, then
the fair market value per share shall be the product of (x) the initial "Price
to Public" specified in the final prospectus with respect to the offering and
(y) the number of shares of Common Stock into which each share of Preferred
Stock is convertible at the time of such exercise;
(b) if this Warrant is exercised after, and not in connection with, the
Company's initial public offering and:
(i) if traded on a securities exchange, the fair market value
shall be deemed to be the product or (x) the average of the closing prices
over a twenty-one (21) day period ending three days before the day the current
fair market value of the securities is being determined and (y) the number of
shares of Common Stock into which each share of Preferred Stock is convertible
at the time of such exercise; or
(ii) if actively traded over-the-counter, the fair market value shall
be deemed to be the product of (x) the average of the closing bid and asked
prices quoted on the NASDAQ system (or similar system) over the twenty-one (21)
day period ending three days before the day the current fair market value of the
securities is being determined and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such exercise;
(c) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x) the
highest price per share which the Company could obtain from a willing buyer (not
a current employee or director) for shares of Common Stock sold by the Company,
from authorized but unissued shares, as determined in good faith by its Board of
Directors and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise, unless the Company
shall become subject to a merger, acquisition or other consolidation pursuant to
which the Company is not the surviving party, in which case the fair market
value of Common Stock shall be deemed to be the value received by the holders of
the Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall promptly
issue an amended Warrant Agreement representing the remaining number of shares
purchasable hereunder. All other terms and conditions of such amended Warrant
Agreement shall be identical to those contained herein, including, but not
limited to the Effective Date hereof.
2
<PAGE>
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before such shares
may be issued upon conversion, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered, listed or approved for listing on such domestic securities exchange,
as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be issued
upon the exercise of the Warrant, but in lieu of such fractional shares the
Company shall make a cash payment therefor upon the basis of the Exercise Price
then in effect.
6. NO RIGHTS AS SHAREHOLDER.
-------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting rights
or other rights as a shareholder of the Company prior to the exercise of the
Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under
3
<PAGE>
this Warrant Agreement immediately prior to such combination,
reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the distribution, to
that price determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction (i) the numerator of which shall be the
total number of all shares of the Company's stock outstanding immediately prior
to such dividend or distribution, and (ii) the denominator of which shall be the
total number of all shares of the Company's stock outstanding immediately after
such dividend or distribution. The Warrantholder shall thereafter be entitled
to purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Preferred Stock (calculated to the nearest whole share) obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Preferred Stock issuable upon the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(e) Right to Purchase Additional Stock. If, the Warrantholder's total
----------------------------------
cost of equipment leased pursuant to the Leases exceeds $1,500,000,
Warrantholder shall have the right to purchase from the Company, at the
Exercise Price (adjusted as set forth herein), an additional number of shares,
which number shall be determined by (i) multiplying the amount by which the
Warrantholder's total equipment cost exceeds $1,500,000 by 8.1%, and (ii)
dividing the product thereof by the Exercise Price per share referenced above.
(f) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit ___ (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the charter that affects the
Warrantholder's rights under the Charter. The Company shall provide
Warrantholder with prior written notice of any dilutive issuance of its stock or
other equity security as provided in the Charter to occur after the Effective
Date of this Warrant, which notice shall include (a) the price at which such
stock or security is to be sold, (b) the number of shares to be issued, and (c)
such other information as necessary for Warrantholder to determine if a dilutive
event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any
---------------------
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) there shall be any Merger Event; (iv) there shall be an
initial public offering; or (iii) there shall be any voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, in connection
with each such event, the Company shall send to the Warrantholder: (A) at
least twenty (20) days' prior written notice of the date on which the books of
the Company shall close or a record shall be taken for such dividend,
distribution (specifying the date on which the holders of Preferred Stock
shall be entitled thereto) or for determining rights to vote in respect of
such Merger Event, dissolution, liquidation or winding up; (B) in the case of
any such Merger Event, dissolution, liquidation or winding up, at least twenty
(20) days' prior written notice of the date when the same shall take place
(and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up);
and (C) in the case of a public offering, the Company shall give the
Warrantholder at least twenty (20) days written notice prior to the effective
date hereof.
Each such written notice shall set forth, in reasonable detail, (i) the event
requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by
which such adjustment was calculated, (iv) the Exercise Price, and (v) the
number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained
4
<PAGE>
in any insufficient notice received by Warrantholder. The notice period shall
begin on the date such notice is effectively given under Section 12(e) of this
Warrant Agreement.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
and the issuance and delivery of any certificate in a name other than that of
the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition, as of the
Effective Date:
(i) The authorized capital of the Company consists of (A) 34,622,620
shares of Common Stock, of which 492,099 shares are issued and outstanding, and
(b) 22,456,598 shares of preferred stock, of which 21,974,535 shares are issued
and outstanding and are convertible into shares of Common Stock pursuant to
Article IV, Section 8.4 of the Charter.
(ii) The Company has reserved (A) 1,841,746 shares of Common Stock
for issuance under its 1993 Stock Option Plan, under which 25,432 options are
outstanding, and (B) 3,440,265 shares of Common Stock for issuance under
outstanding warrants. There are no other options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of the Company's capital stock or
other securities of the Company.
(iii) In accordance with the Company's Charter, no shareholder of the
Company has preemptive rights to purchase new issuances of the Company's capital
stock except as provided in Section 2.4 of the Cardima, Inc. Third Amended and
Restated Stockholders' Rights Agreement (the "Stockholders' Agreement").
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are
5
<PAGE>
customary for corporations engaged in a similar business and similarly
situated and as otherwise may be required pursuant to the terms of any other
contract or agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement and the Stockholders' Agreement, the Company is not, pursuant
to the terms of any other agreement currently in existence, under any obligation
to register under the 1933 Act any of its presently outstanding securities or
any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the
------------------------
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within
ten days after receipt of such request, a written statement confirming the
Company's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule, as such Rule may be amended
from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance upon the
following representations and covenant of the Warrantholder;
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption under the 1933 Act.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company,
6
<PAGE>
without expense to such holder, one or more new certificates or the Warrant or
for such shares of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
--------------
in financial and business matters as to be capable of evaluating the merits
and risks of its investment, and has the ability to bear the economic risks of
its investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
---------
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interest in
all of the Warrants exceed three (3) transfers. The transfer shall be recorded
on the books of the Company upon receipt by the Company of a notice of transfer
in the form attached hereto as Exhibit III (the "Transfer Notice"), at its
principal offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
12. MISCELLANEOUS
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or five (5) days after deposit in the United States mail,
by registered or certified mail, addressed (i) to the Warrantholder at 6111
North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Group, cc: Legal Department, attn: General Counsel, (and/or, if by facsimile,
(708) 518-5466 and (708) 518-5088 and (ii) to the Company at 47266 Benicia
Street, Fremont, CA 94539-1372, attention: President (and/or if by facsimile,
(510) 657-4476) or at such other address as any such party may subsequently
designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The
7
<PAGE>
Company expressly agrees that it shall not oppose an application by the
Warrantholder or any other person entitled to the benefit of this Agreement
requiring specific performance of any or all provisions hereof or enjoining
the Company from continuing to commit any such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
--------
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended
----------
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. If the purchase price for the Leases referenced
--------------------
in the preamble of this Warrant Agreement exceeds $1,000,000, the Company will
also provide Warrantholder with an opinion from the Company's counsel with
respect to those same representations, warranties and covenants. The Company
shall also supply such other documents as the Warrantholder may from time to
time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be
executed by its officers thereunto duly authorized as of the Effective Date.
Company: CARDIMA, INC.
By: /s/ Phil Radlick
----------------------------
Title:
---------------------------
Warrantholder: COMDISCO, INC.
By:
----------------------------
Title:
---------------------------
8
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To:
------------------
(1) The undersigned Warrantholder hereby elects to purchase________shares of
the Series_____Preferred Stock of__________, pursuant to the terms of the
Warrant Agreement dated the____day of____________, 19__ (the "Warrant
Agreement") between_________________________________and the Warrantholder,
and tenders herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series_______Preferred stock of ,
the undersigned hereby ____________________, the undersigned hereby
confirms and acknowledges the investment representations and warranties
made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series_______Preferred Stock in the name of the undersigned or in such
other name as is specified below.
- -------------------------------
(Name)
- -------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
-----------------------------
Title:
--------------------------
Date:
---------------------------
9
<PAGE>
EXHIBIT II
ACKNOWLEDGEMENT OF EXERCISE
The undersigned__________________, hereby acknowledge receipt of the
"Notice of Exercise" from Comdisco, Inc., to purchase_______shares of the Series
Preferred Stock of_______, pursuant to the terms of the Warrant Agreement, and
further acknowledges that_______shares remain subject to purchase under the
terms of the Warrant Agreement.
Company: Cardima, Inc.
By:
------------------------------
Title:
---------------------------
Date:
----------------------------
10
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
-------------------------------------
(Please Print)
whose address is
------------------------------------------
- ----------------------------------------------------------
Dated
--------------------------------------
Holder's Signature
-------------------------------------
Holder's Address
--------------------------------------
-------------------------------------------------------
Signature Guaranteed:
----------------------------------
NOTE: The signature to this Transfer Notice must correspond with the name
as it appears on the face of the Warrant Agreement, without
alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other representative
capacity should file proper evidence of authority to assign the
foregoing Warrant Agreement.
11
<PAGE>
EXHIBIT 10.18
FIRST PART
MAY 1994 ELECTROPHYSIOLOGY CATHETER LICENSE AGREEMENT
This agreement is between BSI Corporation, a Minnesota corporation, 9924 West
74/th/ Street, Eden Prairie, MN 55344 ("BSI"), and CARDIMA, Inc., 47201
Lakeview Blvd., Fremont, CA 94537-5120 ("CARDIMA").
WHEREAS BSI has developed technology and know-how relating to surface
modification for which it has obtained and continues to seek patent coverage;
WHEREAS the parties believe that BSI's technology and know-how will improve the
performance of various products and processes of CARDIMA, CARDIMA desires to
acquire a limited license under BSI's know-how and patent rights, and the
parties have entered into a confidentiality agreement effective March 25, 1994
(the "Mutual Confidential Disclosure Agreement");
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below and for other good and valuable consideration of which receipt is
acknowledged, the parties agree as follows,
1. DEFINITIONS
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a. "Effective Date" means the date upon which this Agreement becomes fully
executed.
b. "Patent Rights" means U.S. patents [***] and the patent applications from
which they were derived and U.S. patent applications serial [***] together
with all divisions, continuations based thereon and all U.S. patents
issuing therefrom, and all foreign patents and patent applications claiming
priority from any of the above U.S. patent applications. Patent Rights
shall include Improvement Patents as defined below.
c. "Licensed Product" means electrophysiology catheters used for measuring and
mapping the electrical properties of heart tissue or for therapeutic
ablative or occlusive procedures to treat cardiac arrhythmias, designed
such that the measuring, mapping or ablative components at the distal tip
perform such function while positioned within coronary arteries and
coronary veins and not in the chambers of the heart ("Electrophysiology
Catheters"), which when sold bear labels indicating specific utility for
mapping, measuring or ablating tissue with the coronary arteries or
coronary veins and containing no statement or suggestion of utility within
chambers of the heart and either: (i) when manufactured, used or sold
would infringe any claim of Patent Rights but for the license granted
herein; or (ii) are produced through the use of BSI's Know-how. For the
avoidance of doubt, Licensed Product does not include catheters designed or
labeled to suggest utility for performing measuring, mapping or ablative
functions on tissue within chambers of the heart.
d. "Know-how" means all of BSI's trade secrets and other technical
information, proprietary or otherwise, developed by or for BSI specifically
for the surface-treatment of medical devices to produce Licensed Product,
which BSI has the right to transmit to others. BSI shall transmit such
Know-how to CARDIMA in written form and marked "Confidential" or
"Proprietary" or if transmitted to CARDIMA by BSI verbally, such Know-how
must be identified as confidential or proprietary by written notification
to CARDIMA within thirty (30) days of its verbal transmission. Know-how
also includes, but is not limited to, information contained in pending
patent applications and information that is Confidential Information as
defined in Paragraph 11.
e. "Net Sales" means the total actual billing for sales of Licensed Products,
less the following deductions where they are applicable with respect to
such billings and when separately shown on invoices or otherwise paid by
CARDIMA with respect to such billings: (i) discounts actually allowed and
taken, in amounts customary in the trade; (ii) customs, duties, taxes or
other governmental excise or charge upon or measured by the production,
sale, transportation, delivery or use of Licensed Product and actually paid
by CARDIMA; (iii) amounts allowed or credited on rejections or returns; and
(iv) transportation charges prepaid or allowed.
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f. "Affiliate" means any entity which owns, is at least 49% owned by, or is
under common (at least 49%) ownership with CARDIMA.
g. A Licensed Product shall be considered sold when it is shipped or when it
is invoiced, whichever is earlier. CARDIMA agrees that in the event any
Licensed Product is sold to an Affiliate for purposes of resale, Earned
Royalties for that Licensed Product shall be computed upon the weighted
average selling price at which such Licensed Product is sold to all non-
Affiliates in the same quarter in arm's length transactions. The weighted
average selling price shall be computed by dividing Net Sales to non-
Affiliates in such quarter by the total number of units sold to non-
Affiliates in such quarter. For purposes of this Agreement, each Licensed
Product shall be sold only once in a royalty generating transaction, and
subsequent sales and/or transfers shall not result in a second or
additional royalty payment hereunder.
h. "Improvement Patents" means any U.S. patents or patent applications, and
all foreign counterparts, divisions, continuations, continuations-in-part,
reissues and extensions thereof:
i) which are filed on an invention conceived or reduced to practice by
BSI during the exclusive term of this Agreement,
ii) with respect to which BSI has the right to grant a license, and,
iii) which contain one or more claims that are of sufficient breadth to
cover Electrophysiology Catheters or a surface treatment process
employed to produce Electrophysiology Catheters or a reagent used in
such process.
2. LICENSE
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Subject to the conditions and limitations provided in this Agreement, BSI
grants to CARDIMA, as of the Effective Date, an exclusive license under
BSI's Patent Rights and Know-how to make, have made for it, use and sell
Licensed Product. BSI agrees that during the term of this Agreement it
will not grant a license to any third party directed specifically to
Licensed Product. CARDIMA acknowledges that BSI may have granted and shall
retain the right to grant licenses to others for the manufacture, use and
sale of materials of construction that may have utility in the fabrication
of Licensed Product and that the license granted herein is subject to the
rights, if any, of third parties who acquire such materials of
construction, but BSI will not grant a license for the manufacture of
materials of construction if BSI knows or has reason to believe that such
materials of construction are intended for use in the manufacture of
Electrophysiology Catheters. The license granted herein does not include
the right to sublicense except as set out below, and is expressly limited
to the specific Licensed Product defined herein. The foregoing license
rights of CARDIMA shall include the right to modify Licensed Products, but
no such modification to BSI's Know-how shall operate to remove such product
from the definition of Licensed Product. CARDIMA shall have the right to
sublicense its Affiliates, but only upon the advance written consent of
BSI, which consent shall not be unreasonably withheld. CARDIMA alone shall
be liable to BSI for payment of Royalties and the making of reports called
for below, for all sales made by CARDIMA and its Affiliates, and CARDIMA
shall be directly liable to BSI for any breach of the confidentiality
provisions of the Agreement by an Affiliate sublicensee. Payment to BSI
will be [***] in the United States.
3. LICENSE FEES AND ROYALTIES
--------------------------
a. On or before [***], CARDIMA shall pay to BSI a License Fee of [***].
CARDIMA shall also pay to BSI a royalty for the Patent Rights and Know-how
license granted herein which, for each calendar quarter during the term of
this Agreement, will be the greater of (i) an Earned Royalty on Net Sales
of Licensed Product during that quarter which shall be calculated at the
rate of [***] of Net Sales, or (ii) a Minimum Royalty for that calendar
quarter as defined in the next sentence. The Minimum Royalty shall be [***]
per calendar quarter, commencing with the calendar quarter beginning [***].
For each subsequent calendar year, the quarterly Minimum Royalty shall
increase by [***]; such Minimum Royalty payment shall never exceed [***]
per calendar quarter. CARDIMA shall have the right to supplement Earned
Royalties to the extent necessary to meet Minimum Royalties.
b. CARDIMA shall have the right to recover the License Fee paid herein but
only as provided for under a separate Credit Pool Agreement of even date
between the parties (the "Credit Pool Agreement")
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4. ROYALTY PAYMENTS, REPORTS, RECORDS
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a. During the term of this Agreement, CARDIMA will make written reports to BSI
within [***] after the last day of each calendar quarter
ending March 31, June 30, September 30, and December 31. Each report shall
state the Net Sales, Earned Royalty, corrections of error in prior royalty
payments, and data and calculations used by CARDIMA to determine each such
amount. Payment in full of the royalty BSI shall accompany each report.
b. Within [***] days after the end of each fiscal year (each fiscal year
ends on December 31) during which royalties are payable under this
Agreement, CARDIMA will furnish to BSI a copy of its audited financial
statements.
c. CARDIMA will maintain, for a period of [***] following the sale of Licensed
Product, true and accurate records supporting the reports and payments
under this Agreement, and BSI shall have the right to carry out an
independent audit of such records no more frequently than once per calendar
year by a certified public accountant of its choice. Such accountant shall
have reasonable access to CARDIMA's offices and the relevant records, files
and books of account, and such accountant shall have the right to examine
any other records reasonably necessary to determine the accuracy of the
calculations provided by CARDIMA under Paragraphs 3 and 4. Any such audit
shall be at BSI's expense unless cumulative underpayment errors are found
that exceed [***] of any payment actually made for an entire fiscal year to
BSI, in which case CARDIMA will bear the cost of such audit.
5. TERM
----
Unless earlier terminated, the term of the license granted herein shall
begin upon the Effective Date, and shall extend until expiration of the
last to expire patent of Patent Rights that covers Licensed Product or for
a period of fifteen (15) years following the first bona fide sale of
Licensed Product, whichever is longer. Upon expiration of such term and the
receipt by BSI of all royalties payable to it under this Agreement Know-how
license granted herein shall become paid up.
6. PATENT MARKING
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a. CARDIMA shall see to it that all Licensed Products sold by it or its
Affiliates shall be appropriately marked with the applicable patent numbers
of patents within the Patent Rights in conformity with applicable law.
b. Should any Patent Rights licensed hereunder be infringed by the
manufacture, use or sale of any Electrophysiology Catheter by any third
party, BSI shall have the right, but not the obligation, to prosecute any
action it deems necessary. If BSI fails to cause such infringement to
cease or to commence prosecution of such action within sixty (60) days
following written request by CARDIMA to BSI, then CARDIMA may, in its own
name but at its own expense, prosecute such action. Should CARDIMA
prosecute such action, it shall indemnify, defend, and hold harmless BSI
from any losses, liabilities, claims, counterclaims, law suit expenses
(including attorney's fees), costs and judgments (collectively "Losses")
arising out of any litigation brought by CARDIMA (except to the extent that
any such Losses arise from BSI's infringement of the intellectual property
of others) and CARDIMA shall have the right to control the action and to
retain any and all damages resulting therefrom; provided, however, that
CARDIMA shall not settle any such infringement action without the advance
written permission of BSI, which permission will not be unreasonably
withheld. If BSI elects to prosecute any such action, it shall do so at
its own expense and it shall have the right to control the action and to
retain any and all damages resulting therefrom. In any such action, the
prosecuting party shall promptly notify the non-prosecuting party of its
decision to prosecute and the non-prosecuting party shall, at its own
expense, be entitled to non-controlling participation through counsel of
its own selection.
7. ROYALTY REDUCTION
-----------------
The Earned Royalty rate (but not Minimum Royalties) shall be prospectively
[***] to the extent that and during the term that the manufacture, use or
sale of Licensed Product is not covered by a claim of Patent Rights.
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8. TERMINATION
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a. CARDIMA shall have the right to terminate this Agreement in its entirety
upon thirty (30) days advance written notice. Upon termination of this
Agreement, CARDIMA shall have no further rights under Patent Rights or
Know-how as provided in this, Agreement. However, CARDIMA shall be allowed
to sell any inventory of Licensed Products existing at the time of
termination for a period of twelve (12) months thereafter, thereafter
destroying any remaining inventory, provided CARDIMA accounts for such
sales and pays BSI the Earned Royalty for such sales under Paragraph 3
hereof. Upon such termination notice by CARDIMA and beginning with the
following calendar quarter, the Minimum Royalties payable under Paragraph
3(a) shall not be applicable during liquidation of such inventory.
b. BSI may terminate this Agreement upon thirty (30) days written notice for
any material breach or default by CARDIMA, including without limitation,
failure to comply with the reporting requirements of Paragraph 4 or the
confidentiality provisions of Paragraph 11, failure to make any reports and
payments (including Minimum Royalty payments) when due, and withholding or
notice of intent to withhold any royalties provided for in this Agreement.
The Agreement will terminate at the end of the 30 day period unless during
that period CARDIMA shall cure such breach or default. In addition,
failure of CARDIMA to begin bona fide commercial sales of License Product
by December 31, 1996 shall permit BSI to terminate this Agreement upon 90
days written notice.
c. Either party may terminate this Agreement if the other party hereto is in
insolvency, dissolution, bankruptcy or receivership proceedings affecting
the operation of its business.
d. Upon termination of this Agreement under any of the provisions of this
Paragraph (but subject to the provisions of Paragraph 8(a) referring to the
sale of inventory), CARDIMA shall cease making, having made for it, using
and selling Licensed Products that are produced through the use of BSI's
Know-how. BSI shall have the right to seek equitable relief to enforce the
provisions of this Paragraph 8(d). Within 30 days of the effective date of
termination of this Agreement, each party shall return to the other party
all copies of documents and other materials containing or disclosing any of
the other party's Confidential Information.
9. CONTINUING OBLIGATIONS
----------------------
Upon any termination of this Agreement, the following rights and
obligations shall continue to the degree necessary to permit their complete
fulfillment or discharge: (i) BSI's right to receive and CARDIMA's
obligation to pay accrued royalties and royalties becoming due for the sale
of inventory under Paragraph 8(a); (ii) CARDIMA's obligation to maintain
records and BSI's right to audit under Paragraph 4; (iii) CARDIMA's
reporting obligations under Paragraph 4; (iv) any cause of action or claim
of either party, accrued or to accrue, because of any breach or default by
the other party; and (v) each party's obligation to maintain
confidentiality under Paragraph 11 and (vi) CARDIMA's obligation to
forebear from use of BSI's Know-how as provided in Paragraph 8(d) hereof.
10. REPRESENTATIONS AND WARRANTIES
------------------------------
Each party warrants to the other that it has the full and unrestricted
right to enter into this Agreement. At the time of execution of this
Agreement, BSI represents that it has no knowledge of any charge made
against it alleging (i) infringement related to Patent Rights, (ii)
misappropriation of Know-how, or (iii) that its coatings are unsafe.
However, nothing in this Agreement shall be construed as (i) a warranty or
representation by BSI as to the validity or scope of any Patent Rights or
that any Licensed Product or any process practiced under the License
granted in this Agreement does not infringe any patents of third persons;
or (ii) a requirement that BSI file any patent application, secure any
patent, maintain any patent in force, or bring or prosecute actions or
suits against third parties for infringement of any patent, however, BSI
agrees that it shall take reasonable efforts to maintain all patents issued
as of the Effective Date of this Agreement; or (iii) conferring any right
on either party to use in advertising, publicity, or otherwise any
trademark or trade name of the other; or (iv) granting by implication,
estoppel, or otherwise any license other than that specifically granted
herein. Without limiting the foregoing, BSI does not make any
representations, extend any warranties of any kind, either express or
implied, or assume any responsibilities whatever with respect to use, sale,
or other disposition by CARDIMA or its vendees or transferees of Licensed
Products. At the time of execution of this Agreement, BSI warrants to
CARDIMA that, subject to
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outstanding licenses and rights of the government (if any), to the best
to its knowledge, BSI owns all of the rights to the Patent Rights and
Know-how, and to the use of such Patent Rights and Know-how to produce
Licensed Product. BSI warrants that at the time of execution of this
Agreement it is under no contractual impediment to granting CARDIMA the
license granted herein.
11. CONFIDENTIALITY
---------------
The parties agree to retain in confidence all Know-how and other
information received from the other and clearly marked as "Proprietary" or
"Confidential" or the like, including without limitation, information
required to be maintained in confidence under prototype development or
manufacturing scale-up or post scale-up relationships between the parties.
The parties agree not to disclose any of such information to any third
party, nor use the same, except in accordance with this Agreement. Each
party's obligation of non-disclosure and non-use shall not apply to
information (i) which at the time of its disclosure to the receiving party
is available to the public, or which is independently developed by the
receiving party, (ii) which the receiving party can show was previously in
its possession, (iii) that is published or otherwise becomes available to
the public through no fault of the receiving party, or (iv) that the
receiving party can show was received by it from a third party without
breach of a confidential obligation (except information received by CARDIMA
from Target Therapeutics, Inc.), or (v) that is required to be disclosed by
any government agency. Notwithstanding the above, CARDIMA specifically
agrees that it will not disclose to any affiliates or other third party any
of BSI's Know-how relating to the manufacture of BSI's chemical reagents,
the precise chemical composition of such reagents, how such reagents are
tested, how they are quality controlled, and any other specific information
concerning the production of such reagents. The provisions of this
Paragraph shall survive termination of this Agreement for any reason, and
shall not reduce any prior obligations of confidentiality between the
parties contained in the Mutual Confidential Disclosure Agreement.
12. PRODUCT LIABILITY
-----------------
CARDIMA will defend BSI against, and at CARDIMA's option settle, any claim,
suit or proceeding arising from the design, manufacture, use, or sale of
Licensed Products, and will pay any final award or judgment on such claim,
suit or proceeding entered against BSI by a court of competent
jurisdiction, except to the extent that such claim, suit or proceeding, or
such award or judgment is due to BSI's negligent conduct; provided,
however, that CARDIMA shall be relieved of the foregoing obligations unless
BSI
i) notifies CARDIMA promptly in writing of such claim, suit or
proceeding;
ii) tenders full control of the defense or settlement thereof to CARDIMA;
and
iii) provides CARDIMA with all information reasonably requested by CARDIMA
at CARDIMA's expense.
CARDIMA's obligations under this Paragraph 12 shall not extend to claims of
patent infringement or other infringement of third party intellectual
property rights to the extent that such claims arise from the use of BSI's
Know-how, or Patent Rights.
13. OTHER
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a. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successor and assigns. However, this Agreement
may not be assigned by either party (other than to an acquirer who acquires
substantially all of the business or assets of the party) except with the
advance written permission of the other party, which shall not be
unreasonably withheld, and any assignment by either party of this Agreement
or any interest therein not made in accordance with this paragraph shall be
void.
b. Any waiver of or failure to enforce any provision of this Agreement shall
not operate as a waiver of or failure to enforce any other provision or as
a continued waiver or failure to enforce such provision. Moreover, should
any provision of this Agreement or its application to any extent be held
invalid or unenforceable, the remainder of this Agreement and the
application thereof shall not be effected thereby and shall continue valid
and enforceable to the fullest extent permitted by law or equity. This
Agreement,
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together with the Credit Pool Agreement of even date between the parties
and the Mutual Confidential Disclosure Agreement, and all addenda and
writings required or contemplated in this Agreement or the Credit Pool
Agreement, constitutes the entire Agreement between the parties with
respect to the License granted herein. This Agreement shall not be
altered or otherwise amended except by an instrument in writing signed by
both parties.
c. All communications or other notices required or permitted under this
Agreement shall be in writing and shall be deemed to be given when
personally delivered, or when given by registered or certified mail,
postage prepaid, and addressed to the parties at the addresses set out
above. Either party may change the person and/or address to which notices
hereunder shall be given by notice to the other party in the manner set out
above.
d. Nothing in this Agreement authorizes either BSI or CARDIMA to act as agent
for the other as to any matter, or to make any representations to any third
party indicating or implying the existence of any such agency relationship.
BSI and CARDIMA shall each refrain from any such representations. The
relationship between BSI and CARDIMA is that of independent contractors.
e. For all purposes under this Agreement, the parties agree and admit that
jurisdiction and venue are proper in the Federal District Court, District
of Minnesota. This Agreement shall for all purposes be governed and
interpreted in accordance with the laws of the State of Minnesota except
its conflict of laws provision.
The parties have executed this Agreement on the date last written below.
BSI Corporation CARDIMA, Inc.
/s/ /s/ Duane Dickens
- ------------------------ ---------------------------------
Name Name
Vice President Vice President, New Product Dev.
- ------------------------ ---------------------------------
Title Title
5/11/94 5/17/94
- ------------------------ ---------------------------------
Date Date
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MAY 1994 CARDIMA/BSI CREDIT POOL AGREEMENT
This Credit Pool Agreement is made and entered into by and between BSI
Corporation, a Minnesota corporation having offices at 9924 West 74th Street,
Eden Prairie, MN 55344 ("BSI") and CARDIMA, Inc., at 47201 Lakeview Boulevard,
Fremont, CA 94537 ("CARDIMA").
WHEREAS CARDIMA and BSI have entered into a License Agreement of even date and
may enter into other and further License Agreements from time to time;
NOW, THEREFORE, the parties agree as follows,
1. CREDIT POOL
-----------
There shall be established a BSI/CARDIMA Credit Pool consisting of the combined
License Fees paid to BSI under the License Agreements of Attachment A. On a
[***] basis, CARDIMA shall have the right to apply monies in the Credit Pool, if
any, against up to [***] of the Earned Royalty under the License Agreements for
that quarter in excess of the combined Minimum Royalty due under the License
Agreements for that quarter, and the Credit Pool shall be reduced by the amount
so applied. The Credit Pool will never be reduced to less than zero. As used
herein, "License Fees", "Earned Royalty" and "Minimum Royalty" shall be as
defined in the License Agreement between BSI and CARDIMA of even date.
2. SCHEDULE OF LICENSES
--------------------
The License Agreements to which this Credit Pool Agreement shall be the License
Agreement between the parties of even date and such other and further License
Agreements as the parties may, by mutual consent, include on Attachment A.
3. NO CONFLICT
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No more than one Earned Royalty shall be paid by CARDIMA for any Licensed
Product defined in any License Agreement, even if such product is covered by
more than one License Agreement, but the Earned Royalty rate for that product
shall be the highest rate provided in the License Agreements that cover that
product.
4. EFFECTIVE DATE
--------------
This Credit Pool Agreement shall become effective as of the Effective Date and
shall remain in effect until every License Agreement included on Attachment A
has expired or has been terminated.
5. ENFORCEABILITY
--------------
Any waiver of or failure to enforce any provision of this Credit Pool Agreement
shall not operate as a waiver of or failure to enforce any other provision, or
as a continued waiver or failure to enforce such provision. Moreover, should any
provision of this Credit Pool Agreement or its application to any extent be held
invalid or unenforceable, the remainder of this Credit Pool Agreement and the
application thereof shall not be affected thereby and shall continue valid and
enforceable to the fullest extent permitted by law or equity. This Credit Pool
Agreement, together with all License Agreements, along with all addenda and
writing required or contemplated in this Credit Pool Agreement or the License
Agreements, constitutes the entire agreement between the parties with respect to
the subject matter hereof. This Credit Pool Agreement shall not be altered or
otherwise amended except by an instrument in writing signed by both parties.
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6. OTHER
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a. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and assigns. However, this Agreement
may not be assigned by either party (other than to an acquirer who acquires
substantially all of the business or assets of the party) except with the
advance written permission of the other party, which shall not be
unreasonably withheld, and any assignment by either party of this Agreement
or any interest therein not made in accordance with this paragraph shall be
void.
b. All communications or other notices required or permitted under this
Agreement shall be in writing and shall be deemed to be given when
personally delivered, or when given by registered or certified mail,
postage prepaid, and addressed to the parties at the addresses set out
above. Either party may change the person and/or address to which notices
hereunder shall be given by notice to the other party in the manner set out
above.
c. Nothing in this Agreement authorizes either BSI or CARDIMA to act as
agent for the other as to any matter, or to make any representations to any
third party indicating or implying the existence of any such agency
relationship. BSI and CARDIMA shall each refrain from any such
representations. The relationship between BSI and CARDIMA is that of
independent contractors.
d. For all purposes under this Agreement, the parties agree and admit
that jurisdiction and venue are proper in the Federal District Court,
District of Minnesota. This Agreement shall for all purposes be governed
and interpreted in accordance with the laws of the State of Minnesota
except for its conflict of law provisions.
The parties have executed this Agreement on the date last written below (the
"Effective Date").
CARDIMA, Inc. BSI CORPORATION
Name /s/ Duane Dickens Name /s/
----------------- ---
Title Vice President, New Product Dev. Title Vice President
-------------------------------- --------------
Date May 17, 1994 Date May 11, 1994
------------ ------------
[CARDIMA99/SEH]
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ATTACHMENT A
SCHEDULE OF LICENSES
A) May 1994 Electrophysiology Catheter License Agreement
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EXHIBIT 10.19
DISTRIBUTION AGREEMENT
----------------------
This agreement is made as of 15 day of June , 1995 between CARDIMA,
------ ----- --
INC., a California corporation having its principal place of business at 47266
Benicia Street, Fremont, CA 94538 ("Cardima") and PARAMEDIC CO., LTD. having
--------------------
its principal place of business at Akasaka Royal Office Building, Akasaka
6 - 9 - 17, Minato-Ku, Tokyo, Japan 107 ("Distributor').
In consideration of the mutual promises contained herein, Cardima and
Distributor agree as follows:
1. DEFINITION. As used in this Agreement:
(a) "Products" shall mean those products listed in Exhibit A attached
hereto, as it may be amended.
(b) "Standard Terms of Condition of Sale" means Cardima's terms and
conditions of sale of its products generally as modified by Cardima from time to
time.
(c) "Territory" means Japan
-----
2. APPOINTMENT AND AUTHORITY OF DISTRIBUTOR.
(a) Appointment. Subject to the terms and conditions of this
-----------
Agreement, Cardima hereby appoints Distributor, and Distributor accepts such
appointment, as Cardima's exclusive distributor in the Territory.
(b) Independent Contractors. It is understood that both parties hereto
-----------------------
are independent contractors and are engaged in the operation of their own
businesses. Neither party hereto is to be considered the agent of the other
party for any purpose whatsoever, and neither party has any authority to enter
into any contracts or assume any obligations for the other party or make any
warranties or representations on behalf of the other party.
3. OBLIGATIONS OF DISTRIBUTOR.
(a) Registration and Marketing of Products. Distributor agrees to use
--------------------------------------
its best effort to investigate, obtain government approval for, promote and
distribute the Products, at its own expense, in the Territory as soon as it is
feasible after the date of this Agreement, using generally the same channels and
methods, exercising the same diligence and adhering to the same standards which
it employs with respect to the other medical application products sold by
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Distributor, as well as Distributor's own products, if any. In particular,
Distributor shall, at its own expense:
(i) Exercise due diligence to promptly obtain and maintain
government approvals to import, register and market the Products in each
jurisdiction in the Territory and to diligently proceed to secure and maintain,
as may be required from time to time, government importing, registration and
marketing approvals, import and export licenses, customs clearances and currency
authorizations and any permits necessary in each jurisdiction in the Territory.
Distributor shall keep Cardima generally informed of the regulatory requirements
in each jurisdiction in the Territory and shall submit to the government health
authorities in each jurisdiction in the Territory where the sale of the Products
is planned a complete application for registration and marketing approval of the
Products by the date set forth in any marketing plan required by Cardima below.
Distributor shall file for regulatory approval by the date or dates set forth on
Exhibit B attached hereto. If Cardima so requests, Distributor shall notify
Cardima each time it submits an application for government approval for the
Products and shall, at Cardima's request, supply with copies of or access to
Distributor's filings and clinical data and shall keep Cardima fully informed of
the progress of each such application. Cardima and Distributor agree to disclose
promptly to the other all reports and any information which they have available
or which become available to them relating to any deleterious physiological
effects caused by or related to the Products. In the event that all necessary
registrations, licenses and permits required to sell and distribute the Products
in the Territory for clinical use (if applicable) are not obtained within twelve
(12) months after the effective date of this Agreement, Manufacturer may, in its
sole discretion, terminate this Agreement upon written notice to Distributor.
(ii) Prior to thirty (30) days after signing this agreement,
Distributor must submit to Cardima a complete and accurate marketing plan,
prepared by Distributor in good faith, which shall be subject to approval by
Cardima, for the Products in each jurisdiction in the Territory as well as a
financial statement acceptable to Cardima. If and as requested by Cardima, such
plan shall be updated and delivered to Cardima annually and shall include, at
minimum, information on competitive products; proposed labeling (including
label, package insert, introductory folder and advertising); estimated sales
volume; anticipated quantities of the Products to be purchased from Cardima;
distribution and promotional plans; schedule for submission of applications for
government registration and marketing approval; and marketing approval. All
Product labels, package inserts and claims, which are prepared for or by
Distributor, shall meet all legal requirements of the jurisdiction in which the
Products are marketed and shall be subject to Cardima's prior review and
approval.
2
<PAGE>
(iii) Commence marketing of the Products throughout the Territory
immediately after receipt of government health registration approvals.
Distributor shall be deemed to have commenced the marketing of the Products only
when it shall have offered the Products regularly for sale.
(iv) Use its best efforts to distribute and sell the Products for
use only by qualified individuals, as appropriate in the Territory, in
compliance with local laws and regulations and good commercial practice and for
uses and applications reasonably approved by Cardima for the Products.
Distributor shall be subject to performance criteria applied to distributors of
the Products generally and as governed by market opportunity, as communicated by
Cardima from time to time after discussion and agreement with the Distributor.
(v) Purchase or cause to be purchased from Cardima all
quantities of the Products required by Distributor in order to meet demand by
purchasers and potential purchasers of the Products in the Territory.
Distributor shall not distribute nor market products competitive with the
Products in the Territory during the term of this Agreement without the prior
written consent of Cardima. If Cardima does not approve the request for
distribution of competitive products, the Distributor must withdraw the
competitive products from its market place or this agreement is subject to
termination in thirty (30) days at Cardima's discretion. Distributor shall not
make any changes, alterations, modifications or additions to the Products
without prior written approval of Cardima.
(b) Purchase Commitment. Distributor hereby agrees to purchase from
--------------------
Cardima during the first calendar quarter periods commencing from receipt of
government approval ("Purchase Commitment") the dollar value in Products set
forth on the Purchase Commitment, Exhibit C, for the next four calendar quarter
periods. Throughout the term of this Agreement, if (i) the parties cannot agree
on Purchase Commitments, or (ii) Distributor fails to purchase Distributor's
Purchase Commitment in any given calendar quarter and Distributor's Purchase
Commitment in the next calendar quarter plus the deficit in Distributor's
Purchase Commitment from the preceding calendar quarter, then, without prejudice
to Cardima's other rights under this Agreement (including the right to terminate
this Agreement upon written notice to Distributor), Cardima may appoint one or
more additional distributors for sale of the Products in the Territory.
Products returned to Cardima for reason other than Product defect shall not
count towards the fulfillment of Distributor's relevant Purchase Commitment.
Within first five (5) days of every month, Distributor shall provide Cardima
with a ninety (90) day rolling forecast showing prospective orders by Product
and Distributor's anticipated Products purchase order submission date.
3
<PAGE>
Such rolling forecasts shall be non-binding and shall be used by Cardima for
information purposes only.
(c) Reports. Distributor shall, at its expense, submit regular reports
--------
to Cardima on a monthly basis (unless otherwise agreed) accurately describing
the sales of the Products by Distributor for the previous month (including
prices, unit sales and other information as may be reasonably requested by
Cardima from time to time) and forecasted sales on an as requested basis for the
upcoming year in the Territory. The Distributor's price list to their customers
must be submitted once a year to Cardima. Such reports shall be in a form
reasonably acceptable to Cardima, see Exhibit D.
(d) Prohibited Sales. Distributor agrees not to sell, and agrees to
-----------------
use reasonable efforts to ensure that Distributor's agents and customers do not
sell or use, any of the Products outside of the Territory.
(e) Product Presentation. Distributor agrees to present the Products
---------------------
fairly to potential customers, not to disparage the Products, any Product
trademarks or Cardima in any way and to do all things reasonable to promote the
reputation of the Products and the value of any Product trademarks.
(f) Marketing Plan. Distributor agrees to provide Cardima with its
---------------
formal marketing plan intended for the marketing of the Products for the
duration of the contract. This marketing plan must be submitted at the time the
contract is signed and in a form reasonably acceptable to Cardima.
(g) Financial Statements. Distributor agrees to provide Cardima with
---------------------
an up to date financial statement at the time the contract is signed and in a
form reasonably acceptable to Cardima.
(h) Pre-clinical and Clinical Trials. Distributor shall assist and
---------------------------------
support Cardima in organizing and conducting pre-clinical and clinical trials
required to obtain registrations, licenses and permits required to comply with
the laws and regulations of the Territory for sale and distribution of the
Products; provided, however, that no activities in connection with organizing
and conducting such trials shall be initiated by Distributor without Cardima's
prior written approval.
4. OBLIGATIONS OF CARDIMA.
(a) Requirements by Distributor. Cardima shall supply Distributor's
----------------------------
requirements for the Products in the Territory, but subject to
4
<PAGE>
Distributor's commitments to other Products purchasers and, consistent with
Distributor's forecasts of its expected requirements for the Products (as
described in Section 3 above). If Cardima believes it will not be able to
satisfy Distributor's requirements for the Products, it shall promptly notify
Distributor, specifying the reasons for the expected delay and its duration. If
such a delay in shipment of the Product to the Distributor is thirty (30) days
or more, the Purchase commitment set forth in Exhibit C shall not apply to the
next calendar quarter. Notwithstanding the foregoing, Cardima shall have no
obligation to supply Products to Distributor during any period for which
Distributor's payments to Cardima hereunder are thirty (30) days or more past
due.
(b) Registration and Marketing Support. To assist Distributor in
-----------------------------------
registering and marketing the Products in the Territory, Cardima shall:
(i) Provide Distributor with materials necessary to obtain health
registrations, to the extent practicable.
(ii) Provide Distributor with information on marketing and
promotional plans of Cardima for the Products as well as copies of marketing,
advertising, sales and promotional literature concerning the Products produced
by or for Cardima, if any.
(iii) Provide Distributor with certain certificates of analysis
concerning the Products purchased by Distributor, certificates of free sale,
trademark authorizations and any other documents which Distributor may require
for registration purposes, at Distributor's request and expense, if available.
(c) Financial Statements. Cardima agrees to provide Distributor with
---------------------
an up to date financial statement at the time the contract is signed and in a
form reasonably acceptable to Distributor.
5. TRADEMARKS AND TRADE NAMES.
(a) Use. During the term of this Agreement, Distributor shall have the
----
right to indicate to the public that Distributor is an authorized distributor of
Cardima's Products and to advertise within the Territory such Products under the
trademarks, marks, and trade names that Cardima may adopt from time to time
("Cardima's Trademarks"). Distributor shall not alter or remove any Cardima's
Trademark applied to the Products at the factory. Except as set forth in this
Section 11, nothing contained in this Agreement shall grant to Distributor any
right, title or interest in Cardima's Trademarks. At no time
5
<PAGE>
during or after the term of this Agreement shall Distributor challenge or assist
others to challenge Cardima's Trademarks or the registration thereof or attempt
to register any trademarks, marks or trade names confusingly similar to those of
the Cardima.
(b) Approval of Representations. All representations of Cardima's
----------------------------
Trademarks that Distributor intends to use shall first be submitted to Cardima
for approval which shall not be unreasonably withheld, of design, color, and
other details or shall be exact copies of those used by Cardima. If any of
Cardima's Trademarks are to be used in conjunction with another trademark on or
in relation to the Products, then Cardima's mark shall be presented equally
legibly, equally prominent, and of greater size than the other but nevertheless
separated from the other so that each appears to be a mark in its own right,
distinct from the other mark.
6. TERMS AND CONDITIONS OF SALE.
(a) Terms of Orders. All purchases of the Products by Distributor
----------------
from Cardima during the term of this Agreement shall be subject to the terms and
conditions of this Agreement and to Cardima's published Standard Terms and
Conditions of Sale as in effect at the time of such purchase, provided that in
the event of any conflict between the terms of this Agreement and the Standard
Terms and Conditions of Sale of Cardima then in effect, this Agreement shall be
controlling. Distributor's purchase order forms shall be deemed to have no terms
and conditions. Distributor disclaims any such terms and conditions and such
disclaimer shall be deemed to be a continuing disclaimer throughout the term of
this agreement. Without limiting the foregoing, all purchase orders submitted
by Distributor to Cardima shall be subject to acceptance by Cardima at its
offices in Fremont, California.
(b) Packaging. All quantities of the Products purchased from Cardima
----------
by Distributor shall be in the form of labeled, standard unit packages and in a
form and formulation consistent with the Products sold by Cardima for use in the
United States, unless otherwise agreed by Cardima and Distributor in writing,
which agreement by Cardima and Distributor will not be unreasonably withheld.
Cost of normal packaging of the Product for shipment to Distributor shall be
paid by Cardima; however, the cost of special packaging agreed by Cardima shall
be paid by Distributor.
(c) Order and Acceptance. All orders for Products submitted by
---------------------
Distributor shall be initiated by written purchase orders sent to Cardima and
requesting a delivery date during the term of this Agreement; provided however,
that an order may initially be placed orally or by facsimile. A written
confirmation
6
<PAGE>
purchase order is to be received by Cardima within five (5) days after an oral
order is placed. No order shall be binding upon Cardima until accepted by
Cardima in writing, and Cardima shall have no liability to Distributor with
respect to purchase orders that are not accepted. No partial shipment of an
order shall constitute the acceptance of the entire order, absent the written
acceptance of such entire order. Cardima shall use its own reasonable best
efforts to deliver Products at the times specified either in Cardima's quotation
or in Cardima's written acceptance of Distributor's purchase orders. Cardima
will send a facsimile acceptance or non-acceptance of purchase orders within two
business days. The Purchase Commitment set forth in Exhibit C shall not apply to
the next calendar quarter after a purchase order is not accepted by Cardima.
Notwithstanding the foregoing, Cardima shall have no obligation to supply
Products to Distributor during any period for which Distributor's payments to
Cardima hereunder are thirty (30) days or more past due.
7
<PAGE>
(d) Shipping. All products delivered pursuant to the terms of this
---------
Agreement shall be suitably packed for air freight shipment in Cardima's
standard shipping cartons, marked for shipment at Cardima's manufacturing plant
to Distributor's address set forth above, and delivered to Distributor or
Distributor's carrier agent F.O.B. Cardima's Distribution Site, at which time
title to such Products and risk of loss shall pass to Distributor. All
shipments of Products shall include a Certificate of Sterilization for each lot.
Cardima shall deliver Products to the carrier selected by Distributor. In the
event that Distributor does not provide written notice of such carrier, Cardima
shall select the carrier. Distributor shall also bear all applicable taxes,
duties, and similar charges that may be assessed against the Products after
delivery to the carrier at Cardima's Distribution Site. Cardima's Distribution
Site shall initially be its Fremont, California facility and may be changed upon
written notice from Cardima to Distributor. Cardima will assist Distributor
with the process of contacting insurance carriers here in the USA and in
facilitating claims to the carriers arising from damage or loss of shipments of
Cardima products to Distributor.
(e) Price and Payment. Cardima shall sell Products to Distributor at
------------------
prices communicated in writing by Cardima to its Product distributors generally
from time to time, including communication in the form of "newsletter". All
costs of transportation and insurance of the Products from Cardima's place of
manufacture to points of destination shall be the responsibility of, and borne
by, Distributor. All taxes, fees, duties and other charges with respect to the
sale by Cardima to Distributor of the Products shall be paid by Distributor or
reimbursed by Distributor to Cardima. All payments due Cardima pursuant to this
Agreement shall be paid, by any reasonable method specified by Cardima in
writing from time to time, within sixty (60) days after the end of the month of
the date of shipment of the Products to Distributor and in any case shall be
made in US $. If Distributor fails to make any payment to Cardima when due,
Cardima may, without affecting its rights under this Agreement, cancel or delay
any future shipments of the Products to Distributor. Any amount not paid when
due shall be subject to an interest charge of the lesser of (i) one and one-half
percent (1 1/2%) per month, computed on the unpaid daily balance and (ii) the
maximum rate permitted by law. All payments to Cardima pursuant to this
Agreement shall be made in United States currency in immediately available
funds.
(f) Amendments to Schedule A. Cardima may, at its discretion, amend
-------------------------
Schedule A hereto, by adding or subtracting Products due to new Product
introduction or Product deletion, upon ninety (90) days prior written notice to
Distributor in the form of a dated substituted Schedule A.
8
<PAGE>
(g) Property Rights. Distributor agrees that Cardima owns all right,
----------------
title, and interest in the product lines that include the Products and in all of
Cardima's patents, trademarks, trade names, inventions, copyrights, know-how,
and trade secrets relating to the design, manufacture, operation or service of
the Products. The use by Distributor of any of these property rights is
authorized only for the purposes herein set forth, and upon termination of this
Agreement for any reason such authorization shall cease. The Products are
offered for sale and are sold by Cardima subject in every case on the condition
that such sale does not convey any license, expressly or by implication, to
manufacture, duplicate or otherwise copy or reproduce any of the Products.
Distributor shall not make any changes, alterations, modifications or additions
to the Products without prior written approval of Cardima.
7. PRODUCT WARRANTY. Cardima warrants that the Products sold to
Distributor will at all times comply with the requirements of and regulations
adopted pursuant to the US Federal Food, Drug, and Cosmetic Act. Cardima will
provide, when requested by Distributor, certification that to the best of its
knowledge it is in compliance with US laws, statutes, rules, regulations and
relevant orders relating to the manufacture, use, distribution and sale of the
Product. CARDIMA'S SOLE OBLIGATION UNDER THE FOREGOING WARRANTY SHALL BE, AT
CARDIMA'S SOLE ELECTION, TO EITHER REPLACE THE RELEVANT PRODUCT OR REFUND
DISTRIBUTOR'S PURCHASE PRICE FOR SUCH PRODUCT. IN NO EVENT SHALL CARDIMA BE
LIABLE FOR THE COST OF PROCUREMENT OF SUBSTITUTE GOODS BY THE CUSTOMER OR FOR
ANY SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES FOR BREACH OF WARRANTY. Such
obligation shall be subject to Cardima being granted the reasonable opportunity
to inspect the allegedly defective Product at the location of its use or storage
and, upon request in accordance with Cardima's instruction, return of the
Product to Cardima at Cardima's cost. Any such replacement of Products may be
made by substitution of any similar product. NOTWITHSTANDING THE FOREGOING,
CARDIMA SHALL HAVE NO WARRANTY OR OTHER OBLIGATION WITH RESPECT TO ANY PRODUCT
SOLD HEREUNDER IF SUCH PRODUCT HAS EXPIRED CONSISTENT WITH LABELS OR OTHER
PUBLICATIONS BY CARDIMA OR HAS NOT BEEN USED, HANDLED OR STORED IN ACCORDANCE
WITH INDUSTRY PRACTICE AND GUIDELINES WHICH MAY BE COMMUNICATED BY CARDIMA.
In the event that a claim is made against Paramedic Co., Ltd. based on the
use of an allegedly non-complying Product, Cardima agrees to discuss in good
faith, contribution toward settling such claim.
9
<PAGE>
EXCEPT AS EXPRESSLY PROVIDED ABOVE, CARDIMA GRANTS NO OTHER WARRANTIES OR
CONDITIONS, EXPRESS OR IMPLIED, BY STATUTE, THIS AGREEMENT OR ANY COMMUNICATION
BY CARDIMA, REGARDING THE PRODUCT, THEIR FITNESS FOR ANY PARTICULAR PURPOSE,
THEIR QUALITY, THEIR MERCHANTABILITY OR OTHERWISE.
8. CONFIDENTIALITY. Distributor acknowledges that by reason of
Distributor's relationship to Cardima hereunder, Distributor will have access to
certain information and materials concerning Cardima's business plans,
customers, technology, and products that are confidential and of substantial
value to Cardima, which value would be impaired if such information were
disclosed to third parties. Distributor agrees that Distributor will not use in
any way for Distributor's own account or the account of any third party, nor
disclose to any third party, any such confidential information revealed to
Distributor by Cardima. Distributor shall take every reasonable precaution to
protect the confidentiality of such information. Upon request by Distributor,
Cardima shall advise whether or not Cardima considers any particular information
to be confidential. Distributor shall not publish any technical description of
the Products beyond the description published by Cardima (except to translate
that description into appropriate languages for the Territory). In the event of
termination of this Agreement, there shall be no use or disclosure by
Distributor of any confidential information of Cardima, and Distributor shall
not manufacture or have manufactured any compositions, devices, components or
assemblies utilizing any of Cardima's confidential information.
9. LIMITATION OF LIABILITY. CARDIMA'S LIABILITY ARISING OUT OF THIS
AGREEMENT AND/OR SALE OF THE PRODUCTS SHALL BE LIMITED TO THE AMOUNT PAID BY THE
CUSTOMER FOR THE PRODUCTS. IN NO EVENT SHALL CARDIMA BE LIABLE FOR COSTS OF
PROCUREMENT OF SUBSTITUTE GOODS BY ANYONE. IN NO EVENT SHALL CARDIMA BE LIABLE
TO DISTRIBUTOR OR ANY OTHER ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL,
OR INDIRECT DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY, WHETHER OR NOT
CARDIMA HAS BEEN ADVISED ON THE POSSIBILITY OF SUCH DAMAGE.
10. PATENT INDEMNITY.
(a) Indemnification. Distributor agrees that Cardima has the right to
---------------
defend, or at Cardima's option to settle, and Cardima agrees, at Cardima's own
expense, to defend or at Cardima's option to settle any claim, suit or
proceeding brought against Distributor or Distributor's customers on the issue
of infringement of any United States of America patent by the Products sold
10
<PAGE>
hereunder or the use thereof, subject to the limitations hereinafter set forth.
Cardima shall have sole control of any such action or settlement negotiations,
and Cardima agrees to pay, subject to the limitations herein after set forth,
any final judgment entered against Distributor or Distributor's customer on such
issue in any such suit or proceeding defended by Cardima. Distributor agrees
that Cardima at Cardima's sole option shall be relieved of the foregoing
obligations unless Distributor or Distributor's customer notifies Cardima
promptly in writing of such claim, suit or proceeding and gives Cardima
authority to proceed as contemplated herein, and, at Cardima's expense, gives
Cardima proper and full information and assistance to settle and/or defend any
such claim, suit or proceeding. Cardima shall not be liable for any costs or
expenses incurred without Cardima's prior written authorization.
(b) Limitation. Notwithstanding the provisions of Subsection 10(a)
-----------
above, Cardima assumes no liability for (i) infringements covering completed
equipment or any composition, assembly, circuit, combination, method or process
in which any of the Products may be used but not covering the Products when used
alone or (ii) infringements involving the modification or servicing of the
products, or any part thereof, unless such modification or servicing was done by
Cardima.
(c) Entire Liability. THE FOREGOING PROVISIONS OF THIS SECTION 10
-----------------
STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF CARDIMA AND THE EXCLUSIVE REMEDY
OF DISTRIBUTOR AND DISTRIBUTOR'S CUSTOMERS, WITH RESPECT TO ANY ALLEGED
INFRINGEMENTS OF PATENTS OR ANY PART THEREOF.
11. INDEMNIFICATION. Cardima and Distributor each agree to indemnify and
hold the other party harmless from and against any and all claims made by any
person or entity arising out of the processing, marketing, distribution and sale
of the Products, where and to the extent such damages have been caused by the
fault of such party or its employees or agents. The indemnifying party shall
have the right to defend or, at its option, to settle such claims, and if it
chooses to exercise such right, it shall have control over any such claim or
settlement negotiations. The indemnifying party shall be relieved of the
foregoing obligations unless the indemnified party gives prompt notice in
writing of any such claim, suit or proceeding and, at the indemnifying party's
expense, gives the indemnifying party proper and full information and assistance
to settle and/or defend any such claims, suit or proceeding.
12. TERM AND TERMINATION.
11
<PAGE>
(a) Term and Renewal. This agreement shall commence on the date first
-----------------
set forth above and shall continue in force for the fixed term ending on April
30, 1998, unless terminated earlier under the provisions of this Section. At the
end of the fixed term, this Agreement may be renewable for additional one (1)
year period in accordance with the terms and conditions agreed to by Cardima in
writing not less than thirty (30) days in advance. The parties shall be required
to give notice to the other of its intention to terminate this Agreement at
least sixty (60) days prior to the expiration of the fixed term hereof or of any
renewal period.
(b) Termination. Either party may at its option, terminate this
------------
Agreement by giving to the other not less than thirty (30) days prior written
notice in the event that the other party shall at any time commit a material
breach of any of its obligations hereunder and shall fail to correct any such
breach during the period of such notice. This Agreement shall terminate
automatically without further notice or action by either party if the other
party shall become insolvent, shall make or seek to make an arrangement with or
an assignment for the benefit of creditors, or if proceedings in voluntary or
involuntary bankruptcy shall be instituted by, on behalf of or against such
other party, or if a receiver or trustee of such other party's property shall be
appointed. This Agreement shall also terminate immediately upon written notice
if Distributor cannot provide evidence of its credit worthiness reasonably
satisfactory to Cardima upon Cardima's written request.
(c) Termination for Noncompliance with Purchase Commitment. In the
-------------------------------------------------------
event that Distributor fails to meet the purchase commitment levels set forth in
Exhibit C by the end of the first year, then this Agreement shall terminate
automatically at such time with thirty (30) days notice unless Cardima, at its
sole discretion, notifies Distributor in writing that this Agreement shall
continue in full force and effect notwithstanding Distributor's noncompliance
with such performance levels. Following the first year, if Distributor fails to
meet the purchase commitment levels set forth in Exhibit C for two (2)
consecutive quarters, as shown by Distributor's reports submitted in accordance
with Section 3 (c) herein, then this Agreement shall terminate automatically at
such time without notice unless Cardima, at its sole discretion, notifies
Distributor in writing that this Agreement shall continue in full force and
effect notwithstanding Distributor's noncompliance with such performance levels.
(d) Effect of Termination. Distributor shall terminate all Product
----------------------
distribution activities in the Territory immediately upon any termination of
this Agreement. In addition, Distributor shall deliver to Cardima or destroy,
upon request, all Product materials supplied by Cardima and all Product
12
<PAGE>
descriptive and marketing materials of any kind. The obligations of Cardima and
Distributor pursuant to Sections 8 (Confidentiality), 9 (Limitation on
Liability), and 13 (General Provisions) of this Agreement shall survive any
termination of this Agreement. Nothing herein shall limit any remedies which a
party may have for the other's default, except as expressly provided herein.
Neither party shall be liable to the other for any damage in connection with
such party's termination of this Agreement by notice, in accordance with this
Section. Distributor will be permitted to return to Cardima all re-saleable
goods and be reimbursed the original purchase price plus freight and import
duties (landed cost) of the returned goods.
(e) Notwithstanding the above termination clauses 12(b), (c), and (d),
there will always be a granted period of thirty (30) days in which the
Distributor has the opportunity and possibility to rectify the cited cause of
termination. Any definitive termination will be served to the Distributor in
writing in the manner prescribed by 13(e) after discussion between the parties.
13. GENERAL PROVISIONS
(a) Governing Law. This Agreement shall be governed by and interpreted
--------------
in accordance with the internal laws of the State of California, United States
of America.
(b) Jurisdiction and Venue. The Federal and State courts within the
-----------------------
state of California shall have exclusive jurisdiction and venue over any dispute
arising out of this Agreement, and Distributor hereby consents to the
jurisdiction of such courts. Notwithstanding the foregoing, the parties agree to
submit any dispute hereunder to binding arbitration under the rules and auspices
of the International Chamber of Commerce, to be held in San Jose, California,
before a single arbitrator; provided, that the parties may, without limiting the
authority of the arbitrator, seek injunctive relief from any court having
jurisdiction thereof, as above.
(c) Entire Agreement. This Agreement represents the entire agreement
and understanding of Cardima and Distributor with respect to distribution of the
Products, supersedes all previous agreements and understandings related thereto
and may only be amended or modified in writing signed by authorized
representatives of Distributor and Cardima.
13
<PAGE>
(d) Assignment. Distributor shall not assign any of its rights or
-----------
obligations pursuant to this Agreement without the prior written consent of
Cardima.
(e) Notices. All notices under this Agreement shall be in writing and
--------
shall be deemed given if sent by telex, telecopier or telegram (except for legal
process in each such case), certified or registered mail or commercial courier
(return receipt or confirmation of delivery requested), or by personal delivery
to the party to receive such notices or other communications called for by this
Agreement at the following addresses (or at such other address for a party as
shall be specified by such party by like notice):
CARDIMA:
- --------
Cardima, Inc.
47266 Benicia Street
Fremont, CA 94538
Attention: Mr. David Darmitzel
DISTRIBUTOR:
- ------------
Paramedic Co., Ltd.
Akasaka Royal Office Building
Akasaka 6 - 9 - 17, Minato-Ku
Tokyo, Japan 107
Attention: Hibiko Ode
----------
(g) Limitation of Damage. In no event shall either party be liable to
---------------------
the other for incidental or consequential damages, even if such party shall have
been advised of the possibility of the same.
(h) Force Majeure. Each of the parties hereto shall be excused from
--------------
the performance of its obligations by force majeure, and such excuse shall
continue so long as the condition constituting such force majeure continues plus
thirty days after the termination of such condition. For the purposes of this
14
<PAGE>
Agreement, "force majeure" is defined to include causes beyond the control of
Distributor or Cardima, including without limitation acts of God, acts,
regulations or laws of any government, war, civil commotion, destruction of
production facilities or materials by fire, earthquake or storm, labor
disturbances, epidemic and failure of public utilities or common carriers.
(i) Legal Expense. The prevailing party in any legal action brought by
--------------
one party against the other and arising out of this Agreement shall be entitled,
in addition to any other rights and remedies that such prevailing party may
have, to reimbursement for expenses incurred by such prevailing party, including
court costs and reasonable attorney's fees.
(j) Counterparts. This Agreement may be executed in two or more
-------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(k) Partial Invalidity. If any provision of this Agreement is held to
-------------------
be invalid, then the remaining provisions shall nevertheless remain in full
force and effect. The parties agree to renegotiate in good faith any term held
invalid and to be bound by the mutually agreed substitute provision.
(l) Waiver. The failure of either party to enforce at any time the
-------
provisions of this Agreement shall in no way be constituted to be a present or
future waiver of such provisions, and shall not in any way affect the right of
either party to enforce each and every such provision thereafter.
CARDIMA, INC. PARAMEDIC CO., LTD.
By:
------------------------ --------------------------
- --------------------------- --------------------------
(Printed Name) (Printed Name)
Title: Title:
----------------- -------------------
15
<PAGE>
EXHIBIT 10.20
DISTRIBUTION AGREEMENT
----------------------
This agreement is made as of 14 day of July , 1995 between CARDIMA,
------ ----- --
INC., a California corporation having its principal place of business at 47266
Benicia Street, Fremont, CA 94538 ("Cardima") and WERFEN DISTRIBUTION AG,
-----------------------
Birkenstrasse 49, 6343 Rotkruez, Switzerland ("Distributor").
- --------------------------------------------
In consideration of the mutual promises contained herein, Cardima and
Distributor agree as follows:
1. DEFINITION. As used in this Agreement:
(a) "Products" shall mean those products listed in Exhibit A attached
hereto, as it may be amended.
(b) "Standard Terms of Condition of Sale" means Cardima's terms and
conditions of sale of its products generally as modified by Cardima from time to
time.
(c) "Territory" means Spain, Portugal and France
---------------------------
2. APPOINTMENT AND AUTHORITY OF DISTRIBUTOR.
(a) Appointment. Subject to the terms and conditions of this Agreement,
------------
Cardima hereby appoints Distributor, and Distributor accepts such appointment,
as Cardima's exclusive distributor in the Territory.
(b) Independent Contractors. It is understood that both parties hereto are
------------------------
independent contractors and are engaged in the operation of their own
businesses. Neither party hereto is to be considered the agent of the other
party for any purpose whatsoever, and neither party has any authority to enter
into any contracts or assume any obligations for the other party or make any
warranties or representations on behalf of the other party.
3. OBLIGATIONS OF DISTRIBUTOR.
(a) Registration and Marketing of Products. Distributor agrees to use its
---------------------------------------
best effort to investigate, obtain government approval for, promote and
distribute the Products, at its own expense, in the Territory as soon as it is
feasible after the date of this Agreement, using generally the same channels and
methods, exercising the same diligence and adhering to the same standards which
it employs with respect to the other medical application products sold by
Distributor, as well as Distributor's own products, if any. Unless prohibited by
1
<PAGE>
local law, all such registrations and approvals obtained by Distributor shall
be in the name of Cardima. In particular, Distributor shall, at its own
expense:
(i) Exercise due diligence to promptly obtain and maintain
government approvals to import, register and market the Products in each
jurisdiction in the Territory and to diligently proceed to secure and maintain,
as may be required from time to time, government importing, registration and
marketing approvals, import and export licenses, customs clearances and currency
authorizations and any permits necessary in each jurisdiction in the Territory.
Distributor shall keep Cardima generally informed of the regulatory requirements
in each jurisdiction in the Territory and shall submit to the government health
authorities in each jurisdiction in the Territory where the sale of the Products
is planned a complete application for registration and marketing approval of the
Products by the date set forth in any marketing plan required by Cardima below.
Distributor shall file for regulatory approval by the date or dates set forth on
Exhibit B attached hereto. If Cardima so requests, Distributor shall notify
Cardima each time it submits an application for government approval for the
Products and shall, at Cardima's request, supply with copies of or access to
Distributor's filings and clinical data and shall keep Cardima fully informed of
the progress of each such application. Cardima and Distributor agree to disclose
promptly to the other all reports and any information which they have available
or which become available to them relating to any deleterious physiological
effects caused by or related to the Products. In the event that all necessary
registrations, licenses and permits required to sell and distribute the Products
in the Territory for clinical use (if applicable) are not obtained within nine
(9) months after the effective date of this Agreement, Manufacturer may, in its
sole discretion, terminate this Agreement upon written notice to Distributor.
(ii) Prior to thirty (30) days after signing this agreement,
Distributor must submit to Cardima a complete and accurate marketing plan,
prepared by Distributor in good faith, which shall be subject to approval by
Cardima, for the Products in each jurisdiction in the Territory as well as a
financial statement acceptable to Cardima. If and as requested by Cardima, such
plan shall be updated and delivered to Cardima annually and shall include, at
minimum, information on competitive products; proposed labeling (including
label, package insert, introductory folder and advertising); estimated sales
volume; anticipated quantities of the Products to be purchased from Cardima;
distribution and promotional plans; schedule for submission of applications for
government registration and marketing approval; and marketing approval. All
Product labels, package inserts and claims, which are prepared for or by
Distributor, shall meet all legal requirements of the jurisdiction in which the
Products are marketed and shall be subject to Cardima's prior review and
approval.
2
<PAGE>
(iii) Commence marketing of the Products throughout the
Territory immediately after receipt of government health registration approvals.
Distributor shall be deemed to have commenced the marketing of the Products only
when it shall have offered the Products regularly for sale.
(iv) Use its best efforts to distribute and sell the Products
for use only by qualified individuals, as appropriate in the Territory, in
compliance with local laws and regulations and good commercial practice and for
uses and applications reasonably approved by Cardima for the Products.
Distributor shall be subject to performance criteria applied to distributors of
the Products generally and as governed by market opportunity, as communicated by
Cardima from time to time after discussion and agreement with the Distributor.
(v) Purchase or cause to be purchased from Cardima all
quantities of the Products required by Distributor in order to meet demand by
purchasers and potential purchasers of the Products in the Territory.
Distributor shall not distribute nor market products competitive with the
Products in the Territory during the term of this Agreement without the prior
written consent of Cardima. If Cardima does not approve the request for
distribution of competitive products, the Distributor must withdraw the
competitive products from its market place or this agreement is subject to
termination in thirty (30) days at Cardima's discretion. Distributor shall not
make any changes, alterations, modifications or additions to the Products
without prior written approval of Cardima.
(b) Purchase Commitment. Distributor hereby agrees to work on a best
--------------------
efforts basis during the first contractual year to develop the market and
increase sales of Cardima products. Distributor hereby agrees to purchase from
Cardima during the first calendar quarter periods commencing October 15, 1996
the dollar value in Products set forth on a Purchase Commitment, Exhibit C, for
the next four calendar quarter periods. The Purchase Commitment, Exhibit C,
will be created on or before September 15, 1996 and be based upon the sales
results up to that date and based upon mutually agreed to sales potential of the
products for the following four calendar quarter periods. Throughout the term
of this Agreement, if (i) the parties cannot agree on Purchase Commitments, or
(ii) Distributor fails to purchase Distributor's Purchase Commitment in any
given calendar quarter and Distributor's Purchase Commitment in the next
calendar quarter plus the deficit in Distributor's Purchase Commitment from the
preceding calendar quarter, then, without prejudice to Cardima's other rights
under this Agreement (including the right to terminate this Agreement upon
written notice to Distributor), Cardima may appoint one or more additional
distributors for sale of the Products in the Territory. Products returned to
Cardima for reason other
3
<PAGE>
than Product defect shall not count towards the fulfillment of Distributor's
relevant Purchase Commitment. Within first five (5) days of every month,
Distributor shall provide Cardima with a ninety (90) day rolling forecast
showing prospective orders by Product and Distributor's anticipated Products
purchase order submission date. Such rolling forecasts shall be non-binding and
shall be used by Cardima for information purposes only.
(c) Reports. Distributor shall, at its expense, submit regular reports to
--------
Cardima on a monthly basis (unless otherwise agreed) accurately describing the
sales of the Products by Distributor for the previous month (including prices,
unit sales and other information as may be reasonably requested by Cardima from
time to time) and forecasted sales on an as requested basis for the upcoming
year in the Territory. The Distributor's price list to their customers must be
submitted once a year to Cardima. Such reports shall be in a form reasonably
acceptable to Cardima, see Exhibit D.
(d) Prohibited Sales. Distributor agrees not to actively solicit sales,
-----------------
and agrees to use reasonable efforts to ensure that Distributor's agents and
customers do not actively solicit sales of the Products outside of the
Territory.
(e) Product Presentation. Distributor agrees to present the Products
---------------------
fairly to potential customers, not to disparage the Products, any Product
trademarks or Cardima in any way and to do all things reasonable to promote the
reputation of the Products and the value of any Product trademarks.
(f) Marketing Plan. Distributor agrees to provide Cardima with its formal
---------------
marketing plan intended for the marketing of the Products for the duration of
the contract. This marketing plan must be submitted at the time the contract is
signed and in a form reasonably acceptable to Cardima.
(g) Finances and Personnel. Distributor shall devote sufficient financial
----------------------
resources and technically qualified sales and training personnel to the Products
to fulfill Distributor's responsibilities under this Agreement. Distributor
shall, at Distributor's own expense, maintain a sufficient inventory of the
Products at all times during the term of this Agreement as necessary in order to
meet the requirements of any customer or potential customer within the
Territory.
(h) Pre-clinical and Clinical Trials. Distributor shall assist and
---------------------------------
support Cardima in organizing and conducting pre-clinical and clinical trials
required to obtain registrations, licenses and permits required to comply with
the laws and regulations of the Territory for sale and distribution of the
Products; provided, however, that no activities in connection with organizing
and
4
<PAGE>
conducting such trials shall be initiated by Distributor without Cardima's
prior written approval.
4. OBLIGATIONS OF CARDIMA.
(a) Requirements by Distributor. Cardima shall supply Distributor's
----------------------------
requirements for the Products in the Territory, but subject to Distributor's
commitments to other Products purchasers and, consistent with Distributor's
forecasts of its expected requirements for the Products (as described in Section
3 above). If Cardima believes it will not be able to satisfy Distributor's
requirements for the Products, it shall promptly notify Distributor, specifying
the reasons for the expected delay and its duration. Notwithstanding the
foregoing, Cardima shall have no obligation to supply Products to Distributor
during any period for which Distributor's payments to Cardima hereunder are
thirty (30) days or more past due.
(b) Registration and Marketing Support. To assist Distributor in
-----------------------------------
registering and marketing the Products in the Territory, Cardima shall:
(i) Provide Distributor with materials necessary to obtain
health registrations, to the extent practicable.
(ii) Provide Distributor with information on marketing and
promotional plans of Cardima for the Products as well as copies of marketing,
advertising, sales and promotional literature concerning the Products produced
by or for Cardima, if any.
(iii) Provide Distributor with certain certificates of
analysis concerning the Products purchased by Distributor, certificates of free
sale, trademark authorizations and any other documents which Distributor may
require for registration purposes, at Distributor's request and expense, if
available.
5. TRADEMARKS AND TRADE NAMES.
(a) Use. During the term of this Agreement, Distributor shall have the
----
right to indicate to the public that Distributor is an authorized distributor of
Cardima's Products and to advertise within the Territory such Products under the
trademarks, marks, and trade names that Cardima may adopt from time to time
("Cardima's Trademarks"). Distributor shall not alter or remove any Cardima's
Trademark applied to the Products at the factory. Except as set forth in this
Section 11, nothing contained in this Agreement shall grant to
5
<PAGE>
Distributor any right, title or interest in Cardima's Trademarks. At no time
during or after the term of this Agreement shall Distributor challenge or assist
others to challenge Cardima's Trademarks or the registration thereof or attempt
to register any trademarks, marks or trade names confusingly similar to those of
the Cardima.
(b) Approval of Representations. All representations of Cardima's
----------------------------
Trademarks that Distributor intends to use shall first be submitted to Cardima
for approval which shall not be unreasonably withheld, of design, color, and
other details or shall be exact copies of those used by Cardima. If any of
Cardima's Trademarks are to be used in conjunction with another trademark on or
in relation to the Products, then Cardima's mark shall be presented equally
legibly, equally prominent, and of greater size than the other but nevertheless
separated from the other so that each appears to be a mark in its own right,
distinct from the other mark.
6. TERMS AND CONDITIONS OF SALE.
(a) Terms of Orders. All purchases of the Products by
----------------
Distributor from Cardima during the term of this Agreement shall be subject to
the terms and conditions of this Agreement and to Cardima's published Standard
Terms and Conditions of Sale as in effect at the time of such purchase, provided
that in the event of any conflict between the terms of this Agreement and the
Standard Terms and Conditions of Sale of Cardima then in effect, this Agreement
shall be controlling. Distributor's purchase order forms shall be deemed to
have no terms and conditions. Distributor disclaims any such terms and
conditions and such disclaimer shall be deemed to be a continuing disclaimer
throughout the term of this agreement. Without limiting the foregoing, all
purchase orders submitted by Distributor to Cardima shall be subject to
acceptance by Cardima at its offices in Fremont, California.
(b) Packaging. All quantities of the Products purchased from Cardima by
----------
Distributor shall be in the form of labeled, standard unit packages and in a
form and formulation consistent with the Products sold by Cardima for use in the
United States, unless otherwise agreed by Cardima and Distributor in writing,
which agreement by Cardima and Distributor will not be unreasonably withheld.
Cost of normal packaging of the Product for shipment to Distributor shall be
paid by Cardima; however, the cost of special packaging agreed by Cardima shall
be paid by Distributor.
(c) Order and Acceptance. All orders for Products submitted by
---------------------
Distributor shall be initiated by written purchase orders sent to Cardima and
requesting a delivery date during the term of this Agreement; provided however,
6
<PAGE>
that an order may initially be placed orally or by facsimile. A written
confirmation purchase order is to be received by Cardima within five (5) days
after an oral order is placed. No order shall be binding upon Cardima until
accepted by Cardima in writing, and Cardima shall have no liability to
Distributor with respect to purchase orders that are not accepted. No partial
shipment of an order shall constitute the acceptance of the entire order, absent
the written acceptance of such entire order. Cardima shall use its own
reasonable best efforts to deliver Products at the times specified either in
Cardima's quotation or in Cardima's written acceptance of Distributor's purchase
orders. Notwithstanding the foregoing, Cardima shall have no obligation to
supply Products to Distributor during any period for which Distributor's
payments to Cardima hereunder are thirty (30) days or more past due.
7
<PAGE>
(d) Shipping. All products delivered pursuant to the terms of this
---------
Agreement shall be suitably packed for air freight shipment in Cardima's
standard shipping cartons, marked for shipment at Cardima's manufacturing plant
to Distributor's address set forth above, and delivered to Distributor or
Distributor's carrier agent F.O.B. Cardima's Distribution Site, at which time
title to such Products and risk of loss shall pass to Distributor. All
shipments of Products shall include a Certificate of Sterilization for each lot.
Cardima shall deliver Products to the carrier selected by Distributor. In the
event that Distributor does not provide written notice of such carrier, Cardima
shall select the carrier. All freight, insurance, and other shipping expenses,
as well as any special packing expense, shall be paid by Distributor.
Distributor shall also bear all applicable taxes, duties, and similar charges
that may be assessed against the Products after delivery to the carrier at
Cardima's Distribution Site. Cardima's Distribution Site shall initially be its
Fremont, California facility and may be changed upon written notice from Cardima
to Distributor.
(e) Price and Payment. Cardima shall sell Products to Distributor at
------------------
prices communicated in writing by Cardima to its Product distributors generally
from time to time, including communication in the form of "newsletter". All
costs of transportation and insurance of the Products from Cardima's place of
manufacture to points of destination shall be the responsibility of, and borne
by, Distributor. All taxes, fees, duties and other charges with respect to the
sale by Cardima to Distributor of the Products shall be paid by Distributor or
reimbursed by Distributor to Cardima. All payments due Cardima pursuant to this
Agreement shall be paid, by any reasonable method specified by Cardima in
writing from time to time, within sixty (60) days after the date of shipment of
the Products to Distributor and in any case shall be made in US $. If
Distributor fails to make any payment to Cardima when due, Cardima may, without
affecting its rights under this Agreement, cancel or delay any future shipments
of the Products to Distributor. Any amount not paid when due shall be subject
to an interest charge of the lesser of (i) one and one-half percent (1 1/2%) per
month, computed on the unpaid daily balance and (ii) the maximum rate permitted
by law. All payments to Cardima pursuant to this Agreement shall be made in
United States currency in immediately available funds.
(f) Amendments to Schedule A. Cardima may, at its discretion, amend
-------------------------
Schedule A hereto, by adding or subtracting Products due to new Product
introduction or Product deletion, upon ninety (90) days prior written notice to
Distributor in the form of a dated substituted Schedule A.
(g) Property Rights. Distributor agrees that Cardima owns all right,
----------------
title, and interest in the product lines that include the Products and in all of
8
<PAGE>
Cardima's patents, trademarks, trade names, inventions, copyrights, know-how,
and trade secrets relating to the design, manufacture, operation or service of
the Products. The use by Distributor of any of these property rights is
authorized only for the purposes herein set forth, and upon termination of this
Agreement for any reason such authorization shall cease. The Products are
offered for sale and are sold by Cardima subject in every case on the condition
that such sale does not convey any license, expressly or by implication, to
manufacture, duplicate or otherwise copy or reproduce any of the Products.
Distributor shall not make any changes, alterations, modifications or additions
to the Products without prior written approval of Cardima.
7. PRODUCT WARRANTY. Cardima warrants that the Products sold to Distributor
will at all times comply with the requirements of and regulations adopted
pursuant to the US. Federal Food, Drug, and Cosmetic Act. Cardima will provide,
when requested by Distributor, certification that to the best of its knowledge
it is in compliance with US laws, statutes, rules, regulations and relevant
orders relating to the manufacture, use, distribution and sale of the Product.
CARDIMA'S SOLE OBLIGATION UNDER THE FOREGOING WARRANTY SHALL BE, AT CARDIMA'S
SOLE ELECTION, TO EITHER REPLACE THE RELEVANT PRODUCT OR REFUND DISTRIBUTOR' S
PURCHASE PRICE FOR SUCH PRODUCT. IN NO EVENT SHALL CARDIMA BE LIABLE FOR THE
COST OF PROCUREMENT OF SUBSTITUTE GOODS BY THE CUSTOMER OR FOR ANY SPECIAL,
CONSEQUENTIAL, OR INCIDENTAL DAMAGES FOR BREACH OF WARRANTY. Such obligation
shall be subject to Cardima being granted the reasonable opportunity to inspect
the allegedly defective Product at the location of its use or storage and, upon
request in accordance with Cardima's instruction, return of the Product to
Cardima at Cardima's cost. Any such replacement of Products may be made by
substitution of any similar product. NOTWITHSTANDING THE FOREGOING, CARDIMA
SHALL HAVE NO WARRANTY OR OTHER OBLIGATION WITH RESPECT TO ANY PRODUCT SOLD
HEREUNDER IF SUCH PRODUCT HAS EXPIRED CONSISTENT WITH LABELS OR OTHER
PUBLICATIONS BY CARDIMA OR HAS NOT BEEN USED, HANDLED OR STORED IN ACCORDANCE
WITH INDUSTRY PRACTICE AND GUIDELINES WHICH MAY BE COMMUNICATED BY CARDIMA.
EXCEPT AS EXPRESSLY PROVIDED ABOVE, CARDIMA GRANTS NO OTHER WARRANTIES OR
CONDITIONS, EXPRESS OR IMPLIED, BY STATUTE, THIS AGREEMENT OR ANY COMMUNICATION
BY CARDIMA, REGARDING THE PRODUCT, THEIR FITNESS FOR ANY PARTICULAR PURPOSE,
THEIR QUALITY, THEIR MERCHANTABILITY OR OTHERWISE.
9
<PAGE>
8. CONFIDENTIALITY. Distributor acknowledges that by reason of Distributor's
relationship to Cardima hereunder, Distributor will have access to certain
information and materials concerning Cardima's business plans, customers,
technology, and products that are confidential and of substantial value to
Cardima, which value would be impaired if such information were disclosed to
third parties. Distributor agrees that Distributor will not use in any way for
Distributor's own account or the account of any third party, nor disclose to any
third party, any such confidential information revealed to Distributor by
Cardima. Distributor shall take every reasonable precaution to protect the
confidentiality of such information. Upon request by Distributor, Cardima shall
advise whether or not Cardima considers any particular information to be
confidential. Distributor shall not publish any technical description of the
Products beyond the description published by Cardima (except to translate that
description into appropriate languages for the Territory). In the event of
termination of this Agreement, there shall be no use or disclosure by
Distributor of any confidential information of Cardima, and Distributor shall
not manufacture or have manufactured any compositions, devices, components or
assemblies utilizing any of Cardima's confidential information.
9 LIMITATION OF LIABILITY. CARDIMA'S LIABILITY ARISING OUT OF THIS AGREEMENT
AND/OR SALE OF THE PRODUCTS SHALL BE LIMITED TO THE AMOUNT PAID BY THE CUSTOMER
FOR THE PRODUCTS. IN NO EVENT SHALL CARDIMA BE LIABLE FOR COSTS OF PROCUREMENT
OF SUBSTITUTE GOODS BY ANYONE. IN NO EVENT SHALL CARDIMA BE LIABLE TO
DISTRIBUTOR OR ANY OTHER ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR
INDIRECT DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY, WHETHER OR NOT
CARDIMA HAS BEEN ADVISED ON THE POSSIBILITY OF SUCH DAMAGE.
10. PATENT INDEMNITY.
(a) Indemnification. Distributor agrees that Cardima has the right to
---------------
defend, or at Cardima's option to settle, and Cardima agrees, at Cardima's own
expense, to defend or at Cardima's option to settle any claim, suit or
proceeding brought against Distributor or Distributor's customers on the issue
of infringement of any United States of America patent by the Products sold
hereunder or the use thereof, subject to the limitations hereinafter set forth.
Cardima shall have sole control of any such action or settlement negotiations,
and Cardima agrees to pay, subject to the limitations herein after set forth,
any final judgment entered against Distributor or Distributor's customer on such
issue in any such suit or proceeding defended by Cardima. Distributor agrees
that Cardima at Cardima's sole option shall be relieved of the foregoing
obligations
10
<PAGE>
unless Distributor or Distributor's customer notifies Cardima promptly in
writing of such claim, suit or proceeding and gives Cardima authority to proceed
as contemplated herein, and, at Cardima's expense, gives Cardima proper and full
information and assistance to settle and/or defend any such claim, suit or
proceeding. Cardima shall not be liable for any costs or expenses incurred
without Cardima's prior written authorization.
(b) Limitation. Notwithstanding the provisions of Subsection 10(a)
-----------
above, Cardima assumes no liability for (i) infringements covering completed
equipment or any composition, assembly, circuit, combination, method or process
in which any of the Products may be used but not covering the Products when used
alone or (ii) infringements involving the modification or servicing of the
products, or any part thereof, unless such modification or servicing was done by
Cardima.
(c) Entire Liability. THE FOREGOING PROVISIONS OF THIS SECTION 10
-----------------
STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF CARDIMA AND THE EXCLUSIVE REMEDY
OF DISTRIBUTOR AND DISTRIBUTOR'S CUSTOMERS, WITH RESPECT TO ANY ALLEGED
INFRINGEMENTS OF PATENTS OR ANY PART THEREOF.
11. INDEMNIFICATION. Cardima and Distributor each agree to indemnify and
hold the other party harmless from and against any and all claims made by any
person or entity arising out of the processing, marketing, distribution and sale
of the Products, where and to the extent such damages have been caused by the
fault of such party or its employees or agents. The indemnifying party shall
have the right to defend or, at its option, to settle such claims, and if it
chooses to exercise such right, it shall have control over any such claim or
settlement negotiations. The indemnifying party shall be relieved of the
foregoing obligations unless the indemnified party gives prompt notice in
writing of any such claim, suit or proceeding and, at the indemnifying party's
expense, gives the indemnifying party proper and full information and assistance
to settle and/or defend any such claims, suit or proceeding.
12. TERM AND TERMINATION.
(a) Term and Renewal. This agreement shall commence on the date first
-----------------
set forth above and shall continue in force for the fixed term ending on the day
which shall be determined by adding 30 days to the date Cardima is able to
obtain the CE Mark plus three calendar years (Cardima expects to obtain the CE
mark on September 15, 1995, which, for example, would mean this agreement
11
<PAGE>
terminates October 15, 1998), unless terminated earlier under the provisions of
this Section. At the end of the fixed term, this Agreement may be renewable for
additional one (1) year period in accordance with the terms and conditions
agreed to by Cardima in writing not less than thirty (30) days in advance. The
parties shall be required to give notice to the other of its intention to
terminate this Agreement at least sixty (60) days prior to the expiration of the
fixed term hereof or of any renewal period.
(b) Termination. Either party may at its option, terminate this Agreement
------------
by giving to the other not less than thirty (30) days prior written notice in
the event that the other party shall at any time commit a material breach of any
of its obligations hereunder and shall fail to correct any such breach during
the period of such notice. This Agreement shall terminate automatically without
further notice or action by either party if the other party shall become
insolvent, shall make or seek to make an arrangement with or an assignment for
the benefit of creditors, or if proceedings in voluntary or involuntary
bankruptcy shall be instituted by, on behalf of or against such other party, or
if a receiver or trustee of such other party's property shall be appointed.
This Agreement shall also terminate immediately upon written notice if
Distributor cannot provide evidence of its credit worthiness reasonably
satisfactory to Cardima upon Cardima's written request.
(c) Termination for Noncompliance with Purchase Commitment. In the event
-------------------------------------------------------
that Distributor fails to meet the purchase commitment levels set forth in
Exhibit C by the end of the first year, then this Agreement shall terminate
automatically at such time with thirty (30) days notice unless Cardima, at its
sole discretion, notifies Distributor in writing that this Agreement shall
continue in full force and effect notwithstanding Distributor's noncompliance
with such performance levels. Following the first year, if Distributor fails to
meet the purchase commitment levels set forth in Exhibit C for two (2)
consecutive quarters, as shown by Distributor's reports submitted in accordance
with Section 3 (c) herein, then this Agreement shall terminate automatically at
such time without notice unless Cardima, at its sole discretion, notifies
Distributor in writing that this Agreement shall continue in full force and
effect notwithstanding Distributor's noncompliance with such performance levels.
(d) Effect of Termination. Distributor shall terminate all Product
----------------------
distribution activities in the Territory immediately upon any termination of
this Agreement. In addition, Distributor shall deliver to Cardima or destroy,
upon request, all Product materials supplied by Cardima and all Product
descriptive and marketing materials of any kind. The obligations of Cardima and
Distributor pursuant to Sections 8 (Confidentiality), 9 (Limitation on
Liability),
12
<PAGE>
and 13 (General Provisions) of this Agreement shall survive any termination of
this Agreement. Nothing herein shall limit any remedies which a party may have
for the other's default, except as expressly provided herein. Neither party
shall be liable to the other for any damage in connection with such party's
termination of this Agreement by notice, in accordance with this Section.
Distributor will be permitted to return to Cardima all re-saleable goods and be
reimbursed the original purchase price plus freight and import duties (landed
cost) of the returned goods.
(e) Notwithstanding the above termination clauses 12(b), (c), and (d),
there will always be a granted period of thirty (30) days in which the
Distributor has the opportunity and possibility to rectify the cited cause of
termination. Any definitive termination will be served to the Distributor in
writing in the manner prescribed by 13(e) after discussion between the parties.
13. GENERAL PROVISIONS
(a) Governing Law. This Agreement shall be governed by and interpreted in
--------------
accordance with the internal laws of the State of California, United States of
America.
(b) Jurisdiction and Venue. The Federal and State courts within the state
-----------------------
of California shall have exclusive jurisdiction and venue over any dispute
arising out of this Agreement, and Distributor hereby consents to the
jurisdiction of such courts. Notwithstanding the foregoing, the parties agree
to submit any dispute hereunder to binding arbitration under the rules and
auspices of the International Chamber of Commerce, to be held in San Jose,
California, before a single arbitrator; provided, that the parties may, without
limiting the authority of the arbitrator, seek injunctive relief from any court
having jurisdiction thereof, as above.
(c) Entire Agreement. This Agreement represents the entire agreement and
-----------------
understanding of Cardima and Distributor with respect to distribution of the
Products, supersedes all previous agreements and understandings related thereto
and may only be amended or modified in writing signed by authorized
representatives of Distributor and Cardima.
(d) Assignment. Distributor shall not assign any of its rights or
-----------
obligations pursuant to this Agreement without the prior written consent of
Cardima.
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<PAGE>
(e) Notices. All notices under this Agreement shall be in writing and
--------
shall be deemed given if sent by telex, telecopier or telegram (except for legal
process in each such case), certified or registered mail or commercial courier
(return receipt or confirmation of delivery requested), or by personal delivery
to the party to receive such notices or other communications called for by this
Agreement at the following addresses (or at such other address for a party as
shall be specified by such party by like notice):
CARDIMA:
- --------
Cardima, Inc.
47266 Benicia Street
Fremont, CA 94538
Attention: Mr. David Darmitzel
DISTRIBUTOR:
- ------------
WERFEN DISTRIBUTION, AG
-----------------------
Birkenstrasse 49
6343 Rotkruez
SWITZERLAND
Attention: Mr. Ivan Cohen
(g) Limitation of Damage. In no event shall either party be liable to the
---------------------
other for incidental or consequential damages, even if such party shall have
been advised of the possibility of the same.
(h) Force Majeure. Each of the parties hereto shall be excused from the
--------------
performance of its obligations by force majeure, and such excuse shall continue
so long as the condition constituting such force majeure continues plus thirty
days after the termination of such condition. For the purposes of this
Agreement, "force majeure" is defined to include causes beyond the control of
Distributor or Cardima, including without limitation acts of God, acts,
regulations or laws of any government, war, civil commotion, destruction of
production
14
<PAGE>
facilities or materials by fire, earthquake or storm, labor disturbances,
epidemic and failure of public utilities or common carriers.
(i) Legal Expense. The prevailing party in any legal action brought by
---------------
one party against the other and arising out of this Agreement shall be entitled,
in addition to any other rights and remedies that such prevailing party may
have, to reimbursement for expenses incurred by such prevailing party, including
court costs and reasonable attorney's fees.
(j) Counterparts. This Agreement may be executed in two or more
-------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(k) Partial Invalidity. If any provision of this Agreement is held to be
-------------------
invalid, then the remaining provisions shall nevertheless remain in full force
and effect. The parties agree to renegotiate in good faith any term held
invalid and to be bound by the mutually agreed substitute provision.
(l) Waiver. The failure of either party to enforce at any time the
-------
provisions of this Agreement shall in no way be constituted to be a present or
future waiver of such provisions, and shall not in any way affect the right of
either party to enforce each and every such provision thereafter.
CARDIMA, INC. PARAMEDIC CO., LTD.
By: /s/ Phillip Radlick /s/ Ivan Cohen
--------------------------- ---------------------------------
Phillip Radlick, Ph.D. Mr. Ivan Cohen
- ------------------------------ ---------------------------------
(Printed Name) (Printed Name)
Title: President/CEO Title: Director
----------------------- ---------------------------
15
<PAGE>
[IZASA LETTERHEAD APPEARS HERE]
To: CARDIMA
Attention: Mr. David Smith Nr. of pages: 1
(including this page)
From: Josep Gatell
Date: 15/05/96
CC: Mr. Gabriel Vegh/Mr. Jean Caillibotte (IL France)
Subject: DISTRIBUTION IN FRANCE
Dear David:
As indicated to you by phone on the past Thursday, May 8th, I would like to
confirm in writing through the present fax, our decision to remove France from
the distribution agreement between you and our Company Werfen Distribution AG.
This decision is taken on view of the difficulties that our Company IL France is
having to properly promote and sale your products. Our association was designed
to provide both companies with a good results, and we wish Cardima succeed
everywhere.
We are sorry for the few months we have lost there, and we hope that you will be
able to establish a right distribution partner.
Finally I hope that everything is going well in your domestic front.
Best regards,
/s/ Josep Gatell
Josep Gatell
General Manager
Hospital Group
16
<PAGE>
Exhibit 10.21
.
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is entered into by and between
CARDIMA, INC. (the "Company") and GABRIEL B. VEGH ("Vegh").
1. Term of the Agreement. The Company hereby employs Vegh and Vegh hereby
---------------------
accepts employment with the Company in an "at-will" employment relationship
subject to the termination provisions set forth in paragraph 6 hereof.
2. Duties and Obligations.
----------------------
a. Vegh shall be a member of the Board of Directors of the Company
pursuant to the terms specified herein and shall be considered a founder of the
Company.
b. Vegh's duties while employed by the Company shall initially be as
Executive Vice President and Chief Operating Officer of the Company. In such
position, Vegh shall initially have responsibility for all operations of the
Company, including product development and sales and marketing, and at all times
report to and follow the instructions of the Board of Directors of the Company.
It is understood and agreed that the Company intends to hire a Chief Executive
Officer as determined in the discretion of the Board of Directors. After the
hiring of a Chief Executive Officer, Vegh shall have such title and bear such
responsibilities as shall be assigned by the Board of Directors; provided,
however, that if (i) such position is not considered an officer of the Company
and (ii) Vegh shall not have responsibility for, at a minimum, specified and
substantial product development and operational activities, then Vegh may treat
such assignment as a termination of employment for purposes of Section 6 of this
Agreement.
c. Vegh agrees that to the best of his ability and experience he will at
all times loyally and conscientiously perform all of the duties and obligations
required of and from him pursuant to the express and implicit terms hereof, and
to the reasonable satisfaction of the Company.
d. Vegh will execute the Company's Proprietary Information and Inventions
Agreement upon his acceptance of employment with the Company.
3. Equity Interest in the Company. In consideration of his agreement with
------------------------------
the Company, Mr. Vegh shall, concurrent with the execution of this Agreement,
enter into a Restricted Stock Purchase
<PAGE>
Agreement (the "Stock Agreement"), pursuant to which he shall be issued 466,667
shares of Common Stock of the Company (the "Shares") for a purchase price of
$.01 per share. Under the terms of the Stock Agreement, the Shares shall vest
according to the following schedule: (i) 25% immediately and (ii) the remaining
75% over three years ratably on a monthly basis.
4. Devotion of Entire Business Time to the Company's Business.
----------------------------------------------------------
a. During the term of his employment, Vegh shall devote all of his
business time and attention to the business of the Company and the Company shall
be entitled to all of the benefits and profits arising from or incident to all
such work, services, and advice of Vegh.
b. During the term of this Agreement, Vegh shall not, whether directly or
indirectly, render any services of a commercial or professional nature to any
person or organization, whether for compensation or otherwise, without the prior
written consent of the Board of Directors of the Company; provided, however,
that it is agreed and acknowledged that Vegh is a stockholder and member of the
Board of Directors of Armus Corporation, Inc. ("Armus"), a company engaged in
the development, marketing and sale of software to automate the detection of
cardiac arrhythmias. If requested by the Board of the Company, after
declaration that the business of Armus represents a corporate opportunity of the
Company, then Vegh shall resign his position as a member of the Board of
Directors of Armus.
c. During the term of his employment, Vegh shall not, directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, (other than in Target Therapeutics, Inc.), corporate
officer, director, or in any other individual or representative capacity, engage
or participate in any business that is competitive in any manner whatsoever with
the business of the Company; provided, however, that it is agreed and
acknowledged that this representation is subject to the same limitation as b.
above.
5. Compensation and Benefits.
-------------------------
a. The Company shall pay to Vegh a monthly salary of Eleven Thousand Two
Hundred Fifty Dollars ($11,250.00), less all applicable withholdings, prorated
for any partial employment period and payable in accordance with the Company's
payroll schedule. In addition, Vegh shall (a) be paid a bonus equal to 11.1% of
the amount paid to him during the current fiscal year, less applicable
deductions, as soon as practicable after the end of such fiscal year, and (b) be
eligible to receive an additional bonus, at the
2
<PAGE>
discretion of the Board of Directors of the Company, of up to 11.1% of the
amount paid to him during the current fiscal year, less applicable deductions.
After such fiscal year, any adjustments in the monthly salary and any and all
bonuses shall be determined by the Board of Directors or an appropriate
committee thereof.
b. Vegh shall be eligible to receive all employee benefits provided to
other Company employees pursuant to the Company's policy regarding said
benefits, including health insurance coverage.
6. Termination of Employment.
-------------------------
a. This Agreement is terminable at any time for any reason, with or
without cause, by either party hereto. In the event that (i) Vegh's employment
is involuntarily terminated by the Company other than for "good cause" or (ii)
Vegh voluntarily terminates his employment with the Company directly as a result
of the last sentence of Section 2b. of this Agreement, then in either such case,
Vegh shall immediately resign from all positions with the Company, including as
a member of the Board of Directors, and enter into a consulting arrangement for
six months commencing immediately after his termination date during which he
shall not compete with the Company. In consideration for such consulting
arrangement, he shall continue to be paid his salary and benefits for six
months; provided, however, if he shall obtain new employment during such six
months, any salary paid pursuant to such arrangement shall be offset from
amounts due under this Agreement. For purposes of this Agreement, "good cause"
shall mean any of the following: gross misconduct or acts or omission that
involve fraud, embezzlement or misappropriation of any property or proprietary
information of the Company.
b. In the event that Vegh dies or is mentally or physically disabled for
one hundred twenty (120) consecutive days or for 150 days within any 365 day
period, he shall be considered to have terminated his employment and continue to
be paid his salary and benefits for one year. As used in this paragraph 6b.,
"disabled" means the inability of Vegh to diligently and expeditiously perform
his duties and obligations under this Agreement.
c. If the events described in Section 6a. occur or the events described in
6b. occur otherwise than while Vegh is performing his duties, Vegh shall become
vested over the following six months in the lesser of (i) an additional six
months of shares covered by the Stock Agreement or (ii) the remaining unvested
shares pursuant to the Stock Agreement. If the events described in 6b. above
occur while Vegh is performing his duties, he shall
3
<PAGE>
immediately become vested in all remaining shares covered by the Stock
Agreement.
d. In the event that Vegh's employment is involuntarily terminated by the
Company for "good cause," Vegh shall immediately resign from all positions with
the Company, including as a member of the Board of Directors and the Company's
obligations hereunder shall immediately terminate.
7. Miscellaneous.
-------------
a. Effective Date. This Agreement shall become effective as of the date
--------------
last written below.
b. Governing Law. This agreement shall be interpreted, construed,
-------------
governed and enforced according to the laws of the State of California. If any
provision of this Agreement is determined by a court of law to be illegal or
unenforceable, then such provision will be enforced to the maximum extent
possible and the other provisions will remain in full force and effect.
c. Arbitration. Any dispute between the parties hereto involving the
-----------
construction or application of any terms or conditions of this Agreement, or any
claims arising out of or relating to this Agreement, or the breach thereof, or
any claims arising out of the Vegh's employment with the Company or the
termination thereof (including but not limited to any claim of violation of
statutory right) will be submitted to and settled by final and binding
arbitration in Palo Alto, California, in accordance with the rules of the
American Arbitration Association then in effect, and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
d. Successors and Assigns. The rights and obligations of the Company
----------------------
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. Vegh shall not be entitled to assign any
of his rights or obligations under this Agreement.
e. Entire Agreement. This Agreement together with the Stock Agreement and
----------------
the Proprietary Information and Inventions Agreement constitute the entire
agreement between the parties with respect to the employment of Vegh. This
Agreement can be amended or modified only in a writing signed by the Vegh and an
authorized representative of the Company.
4
<PAGE>
Dated: May 21, 1993 /s/ Gabriel B. Vegh
__________________________________________
Gabriel B. Vegh
CARDIMA, INCORPORATED
Dated: May 16, 1993 By: /s/ Joseph S. Lacob
_______________________________________
Joseph S. Lacob, Chairman of the Board
5
<PAGE>
Exhibit 10.22
Cardima, Inc.
47266 Benicia Street
Fremont, California 94538
October 26, 1994
VIA CALIFORNIA OVERNIGHT
- ------------------------
Mr. Phil Radlick
23411 Summerfield No. 29B
Aliso Viejo, CA 92656
Dear Phil:
It is my pleasure to offer you the position of President, Chief
Executive Officer and member of the Board of Directors at Cardima, Inc. This
letter ("Letter Agreement") will serve to confirm the offer of the terms of your
employment with Cardima, Inc. ("Cardima" or the "Company"), such employment to
begin the week of October 31, 1994. If the terms discussed below are acceptable
to you, please sign this Letter Agreement where indicated and return it to me at
the above address.
1. Duties and Obligations.
----------------------
a. Your position at the Company will be President and Chief
Executive Officer of the Company. You will report to and follow the instructions
of the Board of Directors of the Company. You will also be a member of the Board
of Directors of the Company.
b. You agree that to the best of your ability and experience you
will at all times loyally and conscientiously perform all of the duties and
obligations required of and from you pursuant to the express and implicit terms
hereof, and to the reasonable satisfaction of the Company.
2. Compensation.
------------
a. Salary. You will be paid a monthly salary of $14,583.33
------
less applicable withholdings ($175,000 annually; hereafter "Salary"). The
Company will reimburse all reasonable business expenses that are incurred in the
ordinary course of business and in accordance with the Company's policies as in
effect from time to time. You may also
<PAGE>
Mr. Phil Radlick October 26, 1994
Page 2
be entitled to increases in your salary in accordance with the Company's policy
and as are adopted and approved by the Board of Directors from time to time.
b. Bonuses. A bonus of up to $25,000 will be awarded to you at
-------
the end of 1995, based upon the completion of performance milestones to the
satisfaction of the Board of Directors, which milestones have been mutually
agreed upon by you and the Board of Directors. Such milestones are expected to
include the successful closing of a new round of financing, achieving mutually
agreed upon revenue targets and other matters. Thereafter, you will be awarded
an annual bonus as determined by the Board of Directors.
c. Non-Salary Benefits. You will be eligible for corporate
-------------------
benefits such as health and disability insurance, vacation, etc. as provided for
by the Company.
d. Stock Options. Subject to the approval of the Company's
-------------
Board of Directors, you will receive a stock option to acquire 466,667 shares of
the Company's Common Stock. All options granted will vest over a four (4) year
period, at a rate of one-eighth (1/8th) after six (6) months and ratably over
the ensuing forty-two (42) month period. The price per share will be the fair
market value of the Company's Common Stock on the date of grant. Such terms
will be reflected in a definitive Stock Option Agreement (the "Stock Option
Agreement") between you and the Company.
e. Relocation Expenses. You will be entitled to reimbursement
-------------------
of reasonable mutually agreed upon expenses in connection with your relocation
in California.
3. Term.
----
a. Employment with the Company is "at-will," not for a specific
term, and can be terminated by you or by the Company at any time for any reason,
with or without cause, subject to the termination provisions set forth herein.
Any contrary representations which may have been made or which may be made to
you are suspended by this offer.
b. In the event that your employment is involuntarily
terminated by the Company other than for "good cause," then you will immediately
resign from all positions with the Company, including your membership on the
Board of Directors, and enter into a consulting arrangement for six (6) months
commencing immediately after your termination date. In consideration for such
consulting arrangement, you will continue to be paid your salary and benefits
for six (6) months and will become vested over such six (6) months in the lesser
of (i) an additional six (6) months of shares covered by your Stock Option
Agreement; (ii) the remaining unvested shares pursuant to the Stock Option
Agreement; provided,
<PAGE>
Mr. Phil Radlick October 26, 1994
Page 3
however, if you obtain new employment during such six (6) month period, any
salary paid pursuant to such arrangement will be offset from amounts due under
this Letter Agreement and vesting of shares covered by your Stock Option
Agreement will cease as of the date you accept such new employment. For purposes
of this Letter Agreement, "good cause" will mean any of the following: gross
misconduct or acts or omission that involve fraud, embezzlement or
misappropriation of any property or proprietary information of the Company.
c. In the event that your employment is voluntarily terminated
or involuntarily terminated by the Company for "good cause," the Company's
obligations hereunder will immediately terminate.
4. Devotion of Entire Business Time to the Company's Business.
----------------------------------------------------------
a. During the term of your employment, you will devote all of
your business time and attention to the business of the Company and the Company
will be entitled to all of the benefits and profits arising from or incident to
all such work, services and advice.
b. During the term of your employment, you will not, whether
directly or indirectly, render any services of a commercial or professional
nature to any person or organization, whether for compensation or otherwise,
without the prior written consent of the Board of Directors of the Company.
c. During the term of your employment, you will not, directly
or indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in any business that is
competitive in any manner whatsoever with the business of the Company.
5. Proprietary Information and Inventions Agreement; Outside
---------------------------------------------------------
Activities. Your acceptance of this offer is contingent upon the execution of
- ----------
the Company's Proprietary Information and Inventions Agreement, a copy of which
will be provided for your review and execution prior to the commencement of your
employment.
If you accept this offer, the terms described in this Letter Agreement
will be the terms of your employment. Any additions or modifications of these
terms would have to be in writing and signed by yourself and the Chairman of the
Board.
<PAGE>
Mr. Phil Radlick October 26, 1994
Page 4
The terms of this offer and the Proprietary Information and Inventions
Agreement must be agreed to as a condition of your employment. To accept this
offer, please sign below.
We look forward to working with you to make Cardima a success. If
there are any aspects of our offer which you would like clarified, please let me
know.
Very truly yours,
/s/ Joseph S. Lacob
____________________________________
Joseph S. Lacob
Chairman of the Board of Directors
I accept this offer on the foregoing terms.
/s/ Phil Radlick
______________________________________
Phil Radlick
10/31/94
______________________________________
Date
<PAGE>
EXHIBIT 11.1
CARDIMA, INC.
COMPUTATION OF NET LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994 1995 1996
------- ------------ --------
<S> <C> <C> <C>
Historical:
Weighted average common stock outstanding..... 67 68 73
Shares related to Staff Accounting Bulletins
Nos. 55, 64 and 83:
Stock Options................................ 583 583 583
Preferred Stock.............................. 2,357 2,357 2,357
------- ------- --------
Total shares used in calculating net loss per
share......................................... 3,007 3,008 3,013
======= ======= ========
Net loss....................................... $(3,655) $(5,200) $ (7,754)
======= ======= ========
Net loss per share............................. $ (1.22) $ (1.73) $ (2.57)
======= ======= ========
Pro forma:
Shares used in calculating net loss per share
(per above).................................. 3,013
Preferred Stock if converted.................. 3,312
--------
Total shares used in calculating pro forma net
loss per share................................ 6,325
========
Net loss....................................... $ (7,754)
========
Pro forma net loss per share................... $ (1.23)
========
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 21, 1997 (except as to Note 7, as to which
the date is March 12, 1997), in the Registration Statement (Form S-1) and
related Prospectus of Cardima, Inc. for the registration of shares of its
common stock.
/s/ Ernst & Young LLP
Palo Alto, California
March 12, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF HELLER, EHRMAN, WHITE & MCAULIFFE
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-1) and the related Prospectus of Cardima, Inc.
for the registration of shares of its Common Stock.
Heller, Ehrman, White & McAuliffe
Palo Alto, California
March 12, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996
<CASH> 2,993 907
<SECURITIES> 0 0
<RECEIVABLES> 46 68
<ALLOWANCES> 0 30
<INVENTORY> 268 377
<CURRENT-ASSETS> 3,429 1,581
<PP&E> 747 1,400
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 4,735 5,596
<CURRENT-LIABILITIES> 782 3,731
<BONDS> 0 0
0 0
13,895 17,453
<COMMON> 8 595
<OTHER-SE> (10,396) (18,150)
<TOTAL-LIABILITY-AND-EQUITY> 4,735 3,964
<SALES> 362 593
<TOTAL-REVENUES> 362 593
<CGS> 830 1,413
<TOTAL-COSTS> 830 1,413
<OTHER-EXPENSES> 4,627 7,009
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 117 57
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,200) (7,754)
<EPS-PRIMARY> 0 1.23
<EPS-DILUTED> 0 0
</TABLE>
