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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: January 27, 1999
(Date of earliest event reported: January 21, 1999)
Commission File Number: 0-22419
CARDIMA, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-3177883
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(State of incorporation or organization) (IRS Employer I.D. No.)
47266 Benicia Street, Fremont, CA 94538-7330
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(Address of principal executive offices)
(510)354-0300
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(Registrant's telephone number, including area code)
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Item 5. Other Events
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On January 21, 1999, Cardima, Inc. (the "Company") issued and sold
5,803,500 shares of its Common Stock for a purchase price of $2.00 per share to
certain accredited investors in a private placement (the "Private Placement").
In addition, the Company issued 354,806 shares of its Common Stock to the
placement agent (the "Placement Agent") in lieu of commissions payable to the
Placement Agent. In addition, the Company issued the Placement Agent a warrant
to purchase 580,350 shares of its Common Stock at an exercise price of $2.20 per
share (the "Warrant"). The Company has agreed to file a registration statement
on Form S-3 relating to the resale of the shares of Common Stock (1) sold in the
Private Placement, (2) issued to the Placement Agent in lieu of commissions, and
(3) issuable upon exercise of the Warrant.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits
(4.1) Form of Share Purchase Warrant
(10.1) Form of Subscription Agreement
(10.2) Sales Agency Agreement dated January 21, 1999
(99) Press Release dated January 25, 1999.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
CARDIMA, INC.
By: /s/ Phillip Radlick, Ph.D.
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Phillip Radlick, Ph.D.
President and Chief Executive Officer
Date: January 27, 1999
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EXHIBIT 4.1
Warrant No. CA-1
Warrant to Purchase [ ] Shares
SHARE PURCHASE WARRANT
To Purchase Shares of Common Stock (par value $0.001)
of
Cardima, Inc.
(a Delaware corporation)
Expires [ ], 2004
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NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE
TRANSFERRED EXCEPT IN A TRANSACTION REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR WHICH IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THAT ACT.
VOID AFTER 5:00 P.M. NEW YORK TIME, ON [ ], 2004
CARDIMA, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
[ ] Shares of Common Stock
THIS CERTIFIES that, for good and valuable consideration received,
[ ] (the "Holder"), is entitled to subscribe for and purchase from Cardima,
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Inc., a Delaware corporation (the "Company"), upon the terms and conditions
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set forth herein, at any time or from time to time until 5:00 P.M. New York City
time on [ ], 2004 (the "Expiration Date"), all or any portion of [ ]
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shares of common stock of the Company, par value $0.001 per share, subject to
adjustment as provided herein (the "Warrant Shares"), at a price of $2.20 per
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share, subject to adjustment as provided herein (as so adjusted, the "Exercise
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Price"). This Warrant shall not be redeemable by the Company. The term "Shares"
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as used herein shall mean the Company's Common Stock, par value $0.001 per
share. This Warrant is the Warrant or one of the Warrants (collectively,
including any Warrant issued upon the exercise or transfer of any such Warrant,
in whole or in part, the "Warrants") issued pursuant to the Sales Agency
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Agreement, dated [ ], 1999, between the Company and Sunrise Securities
Corp. (the "Sales Agency Agreement"). As used herein, the term "this Warrant"
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shall mean and include this Warrant and any Warrant or Warrants hereafter
issued as a consequence of the exercise or transfer of this Warrant in whole
or in part. This Warrant may be assigned, in whole or in part, to (i) one or
more officers or partners of the Holder (or the officers or partners of any
such partner); (ii) a successor to the Holder, or the officers or partners of
such successor; (iii) a purchaser of substantially all of the assets of the
Holder; or (iv) by operation of law; and the term the "Holder" as used herein
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shall include any transferee to whom this Warrant has been transferred in
accordance with the above. No such sale, transfer, assignment or hypothecation
of this Warrant, or of the Warrant Shares, will be permitted unless (a) a
registration statement under the Securities Act of 1933, as amended (the
"Act"), with respect thereto has become effective and appropriate
---
qualification or other action has been taken under state securities laws, or
(b) there is presented to the Company notice of the proposed transfer and a
legal opinion reasonably satisfactory to the Company that such registration
and qualification or other action is not required.
1. Method of Exercise. This Warrant may be exercised at any time
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prior to the Expiration Date, as to the whole or any lesser number of Warrant
Shares, by the surrender of this Warrant accompanied by a duly completed and
executed Notice of Exercise (in the form attached hereto) to the Company at its
office at 47266 Benicia Street, Freemont, California 94538, or at such other
place as may be designated in writing by the Company, together with a certified
or bank cashier's check payable to the order of the Company in an amount equal
to the Exercise Price multiplied by the number of Warrant Shares for which this
Warrant is being exercised. In lieu of the payment of the Exercise Price, the
Holder shall have the right (but not the obligation), during the Exercise
Period, to require the Company to convert this Warrant, in whole or in part,
into Warrant Shares as provided for in this Section 1 (the "Conversion Right").
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Upon exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of the Exercise Price) that number of Shares
equal to the product of (i) the number of Warrant Shares issuable upon exercise
of the portion of the Warrant being converted, multiplied by (ii)
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the quotient obtained by dividing (x) the value of the Warrant (on a per
Warrant Share basis immediately prior to the exercise of the Conversion Right)
at the time the Conversion Right is exercised (determined by subtracting the
Exercise Price from the "Conversion Market Price" (as defined below)) by (y)
the Conversion Market Price of one Share immediately prior to the exercise of
the Conversion Right. The Conversion Rights provided under this Section 1 may
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be exercised in whole or in part and at any time and from time to time while
any Warrants remain outstanding. In order to exercise the Conversion Right,
the Holder shall surrender to the Company, at its offices, this Warrant
accompanied by a duly completed and executed Conversion Notice (in the form
attached hereto). The presentation and surrender shall be deemed a waiver of
the Holder's obligation to pay all or any portion of the aggregate purchase
price payable for the Warrant Shares being issued upon such exercise of this
Warrant. This Warrant (or so much thereof as shall have been surrendered for
exercise or conversion) shall be deemed to have been exercised or converted,
as the case may be, immediately prior to the close of business on the day of
surrender of this Warrant for exercise or conversion in accordance with the
foregoing provisions. As promptly as practicable on or after the exercise or
conversion date, as the case may be, the Company shall issue and shall deliver
to the Holder (i) a certificate or certificates representing the largest
number of whole Warrant Shares which the Holder shall be entitled as a result
of the exercise or conversion, and (ii) if such Warrant is being exercised or
converted in part only, a new Warrant exercisable for the number of Warrant
Shares equal to the unconverted portion of the Warrant. Upon any exercise or
conversion of this Warrant, in lieu of any fractional Warrant Shares to which
the Holder shall be entitled, the Company shall pay to the Holder cash in
accordance with the provisions of Section 5(f) hereof. For purposes hereof,
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the term "Conversion Market Price" shall be the per share closing price of the
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Shares on the last trading day immediately prior to the date on which the
Conversion Right is exercised, determined in accordance with the procedures
set forth in Section 5(f) for determining the "Current Market Price."
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2. Issuance of Certificates. Upon each exercise of the Holder's
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rights to purchase Warrant Shares, the Holder shall be deemed to be the holder
of record of the Warrant Shares issuable upon such exercise, notwithstanding
that the transfer books of the Company shall then be closed or certificates
representing such Warrant Shares shall not then have been actually delivered to
the Holder. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant shall be exercised in part only, upon
surrender of this Warrant for cancellation, the Company shall execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares subject to purchase hereunder.
3. Recording of Transfer. Any Warrants issued upon the transfer or
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exercise in part of this Warrant shall be numbered and shall be registered in a
Warrant Register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by the Holder's duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney,
executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to
the person entitled thereto. This Warrant may be exchanged, at the option of the
Holder hereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares, upon surrender to the Company or its
duly authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause this Warrant to be transferred on its books to any person
if, in the written opinion of counsel to the Company, such transfer does not
comply with the provisions of the Act and the rules and regulations thereunder.
3
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4. Reservation of Shares. The Company shall at all times reserve
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and keep available out of its authorized and unissued Shares, solely for the
purpose of providing for the exercise of this Warrant, such number of shares of
Shares as shall, from time to time, be sufficient therefor. The Company
covenants that all Shares issuable upon exercise of this Warrant, upon receipt
by the Company of the full payment therefor, shall be validly issued, fully
paid, nonassessable and free of preemptive rights.
5. Exercise Price and Number of Warrant Shares Adjustments. Subject
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to the provisions of this Section 5, the Exercise Price in effect from time to
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time and the number of Warrant Shares purchasable upon the exercise of this
Warrant shall be subject to adjustment, as follows:
(a) In case the Company shall at any time after the date hereof
(i) declare a dividend or make a distribution on the outstanding Shares
payable in shares of its capital stock or securities convertible into or
exchangeable for capital stock, (ii) subdivide the outstanding Shares, (iii)
combine the outstanding Shares into a smaller number of shares, or (iv) issue
any shares by reclassification of the Shares (other than a change in par
value, or from par value to no par value, or from no par value to par value,
but including any such reclassification in connection with the consolidation
or merger of the Company with or into another corporation (other than a merger
in which the Company is the continuing corporation and which does not result
in any reclassification or change of the then outstanding Shares or other
shares issuable upon exercise of the Warrants)), then, in each case, the
----
Exercise Price in effect, and the number of Shares issuable upon exercise of
the Warrants outstanding, at the time of the record date for such dividend or
at the effective date of such subdivision, combination or reclassification,
shall be proportionately adjusted so that the holders of the Warrants after
such time shall be entitled to receive the aggregate number and kind of Shares
which, if such Warrants had been exercised immediately prior to such time,
such holders would have owned upon such exercise and immediately thereafter
been entitled to receive by virtue of such dividend, subdivision, combination
or reclassification. Such adjustment shall be made successively whenever any
event listed above shall occur.
(b) In case the Company shall distribute to all holders of Shares
(including any such distribution made to the shareholders of the Company in
connection with a consolidation or merger in which the Company is the surviving
or continuing corporation) evidences of its indebtedness, cash or assets (other
than distributions and dividends payable in Shares), or rights, options or
warrants to subscribe for or purchase Shares or securities convertible into or
exchangeable for Shares, then, in each case, the Exercise Price shall be
----
adjusted by multiplying the Exercise Price in effect immediately prior to the
record date for the determination of shareholders entitled to receive such
distribution by a fraction, the numerator of which shall be the Current Market
Price per Share (as determined pursuant to Section 5(f) hereof) on such record
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date, less the fair market value (as determined pursuant in good faith by the
Board of Directors of the Company, whose determination shall be conclusive
absent manifest error) of the portion of the evidences of indebtedness or assets
so to be distributed, or of such rights, options or warrants or convertible or
exchangeable securities, or the amount of such cash, applicable to one Share,
and the denominator of which shall be such Current Market Price per Share. Such
adjustment shall become effective at the close of business on such record date.
(c) (i) In the event that the Company shall sell or issue at
any time after the date hereof Shares (other than Excluded Stock, as defined
below) at a consideration per share less than the Exercise Price in effect
immediately prior to the time of such sale or issuance, then, upon such sale
----
or issuance, the Exercise Price shall be reduced to an adjusted price
(calculated to the nearest cent) determined by dividing (i) the sum of (A) the
total number of shares of Stock Outstanding (as defined below) immediately
prior to such sale or issuance multiplied by the then-existing Exercise Price,
plus (B) the aggregate of the amount of all consideration, if any, received by
the Company upon such sale or issuance, by (ii) the total number of shares of
Stock Outstanding immediately after such sale or issuance.
In no event shall any such adjustment be made if it would increase the Exercise
Price in effect immediately prior to such adjustment, except as provided in
Section 5(c)(iv) and 5(c)(v) below.
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(ii) For purposes of this Section 5(c), the following
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definitions shall apply:
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(A) "Convertible Securities" shall mean any indebtedness or
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equity securities convertible into or exchangeable for Shares.
(B) "Options" shall mean any rights, warrants or options
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to subscribe for or purchase Shares or Convertible Securities.
(C) "Stock Outstanding" shall mean the aggregate of all
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Shares outstanding and all Shares issuable upon exercise of all outstanding
Options and conversion of all outstanding Convertible Securities.
(iii) For the purposes of this Section 5(c), the following
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provisions shall also be applicable:
(A) Cash Consideration. In case of the sale or issuance
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(otherwise than conversion or exchange of Convertible Securities) of
additional Shares, Options or Convertible Securities for cash, the
consideration received by the Company therefor shall be deemed to be the
amount of cash received by the Company for such Shares (or, if such Shares are
offered by the Company for subscription, the subscription price, or, if such
Shares are sold to underwriters or dealers for public offering without a
subscription offering, the public offering price), without deducting therefrom
any compensation or discount paid or allowed to underwriters or dealers or
others performing similar services or for any expenses incurred in connection
therewith.
(B) Non-Cash Consideration. In case of the sale or
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issuance (otherwise than upon conversion or exchange of Convertible
Securities) of additional Shares, Options or Convertible Securities for a
consideration other than cash or a consideration a part of which shall be
other than cash, the fair value of such consideration as determined by the
Board of Directors of the Company in the good faith exercise of its business
judgment, irrespective of the accounting treatment thereof, shall be deemed to
be the value, for purposes of this Section 5(c), of the consideration other
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than cash received by the Company for such securities.
(C) Options and Convertible Securities. In case the
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Company shall in any manner issue or grant any Options or any Convertible
Securities, the total maximum number of Shares issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of
such Convertible Securities at the time such Convertible Securities first
become convertible or exchangeable shall (as of the date of issue or grant of
such Options or, in the case of the sale or issue of Convertible Securities
(other than where the same are issuable upon the exercise of Options), as of
the date of such sale or issue) be deemed to be issued and to be outstanding
for the purpose of this Section 5(c) and to have been issued for the sum of
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the amount (if any) paid for such Options or Convertible Securities and the
amount (if any) payable upon the exercise of such Options or upon conversion
or exchange of such Convertible Securities at the time such Convertible
Securities first become convertible or exchangeable; provided that, subject to
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the provisions of Section 5(c)(iv), no further adjustment of the Exercise
-----------------
Price shall be made upon the actual issuance of any such Shares or Convertible
Securities or upon the conversion or exchange of any such Convertible
Securities.
(iv) In the event that the purchase price provided for in
any Option referred to in subsection 5(c)(iii)(C) or the rate at which any
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Convertible Securities referred to in subsection 5(c)(iii)(C) are convertible
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into or exchangeable for Shares shall change at any time or any additional
consideration shall be payable in connection with the exercise of any Option
or the conversion or exchange of any Convertible Securities (other than under
or by reason of provisions designed to protect against dilution upon the
occurrence of events of the type described in this Section 5), then, for
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purposes of any adjustment required by Section 5(c), the Exercise Price in
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effect at the time of such event shall forthwith be readjusted to the Exercise
Price that would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, conversion rate or additional consideration, as the case may be, at the
time initially granted, issued or sold; provided, that if such readjustment is
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an increase in the Exercise Price, such readjustment shall not exceed the
amount (as
5
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adjusted by Sections 5(a), 5(b) or 5(c)) by which the Exercise Price was
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decreased pursuant to Section 5(c) upon the issuance of the Option or
Convertible Securities.
(v) In the event of the termination or expiration of any
right to purchase Shares under any Option granted after the date of this
Warrant or of any right to convert or exchange Convertible Securities issued
after the date of this Warrant, the Exercise Price shall, upon such
termination, be readjusted to the Exercise Price that would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the Shares issuable
thereunder shall no longer be deemed to be Stock Outstanding; provided, that
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if such readjustment is an increase in the Exercise Price, such readjustment
shall not exceed the amount (as adjusted by Sections 5(a), 5(b) or 5(c)) by
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which the Exercise Price was decreased pursuant to Section 5(c) upon the
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issuance of the Option or Convertible Securities. The termination or
expiration of any right to purchase Shares under any Option granted prior to
the date of this Warrant or of any right to convert or exchange Convertible
Securities issued prior to the date of this Warrant shall not trigger any
adjustment to the Exercise Price, but the shares of Stock issuable under such
Options or Convertible Securities shall no longer be counted in determining
the number of shares of Stock Outstanding on the date of issuance of this
Warrant for purposes of subsequent calculations under this Section 5(c).
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(vi) Notwithstanding anything herein to the contrary, the
Exercise Price shall not be adjusted pursuant to this Section 5(c) by virtue
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of the issuance and/or sale of "Excluded Stock," which shall mean the
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following: (a) Shares, Options or Convertible Securities to be issued and/or
sold to employees, advisors, directors, or officers of, or consultants to, the
Company or any of its subsidiaries pursuant to a stock grant, stock option
plan, restricted stock agreements, stock purchase plan, pension or profit
sharing plan or other stock agreement or arrangement; (b) Shares, Options
and/or Convertible Securities to be issued pursuant to Options and/or
Convertible Securities outstanding as of the date of this Warrant; and (c)
Shares and/or Options to be issued pursuant to the Sales Agency Agreement. For
all purposes of this Section 5(c), all shares of Excluded Stock shall be
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deemed to have been issued for an amount of consideration per share equal to
the initial Exercise Price (subject to adjustment in the manner set forth in
Section 5(a) and 5(b)).
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(d) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
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thereof to be sent by registered mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the adjusted number of
Warrant Shares issuable hereunder and the exercise price thereof after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment and the computation thereof, which officer's certificate shall be
conclusive evidence of the correctness of any such adjustment absent manifest
error.
(e) The Company shall not be required to issue fractions of
Shares or other shares of the Company upon the exercise of this Warrant. If
any fraction of a share would be issuable upon the exercise of this Warrant
(or specified portions thereof), the Company may issue a whole share in lieu
of such fraction or the Company may purchase such fraction for an amount in
cash equal to the same fraction of the Current Market Price of such Shares on
the date of exercise of this Warrant.
(f) The "Current Market Price" per Share on any date shall be
--------------------
deemed to be the average of the daily closing prices for the Shares for the
five (5) consecutive trading days immediately preceding the date in question.
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sale takes place on such day, the average of
the closing bid and asked prices regular way, in either case on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any
national securities exchange, the highest reported bid price for the Shares as
furnished by the National Association of Securities Dealers, Inc. through
NASDAQ or a similar organization if NASDAQ is no longer reporting such
information. If on any such date the Shares are not listed or admitted to
trading on any national securities exchange and are not quoted by NASDAQ or
any similar organization, the
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Current Market Price per Share shall be the fair value of a Share on such
date, as determined in good faith by the Board of Directors of the Company,
whose determination shall be conclusive absent manifest error.
(g) No adjustment in the Exercise Price shall be required if such
adjustment is less than $0.05; provided, however, that any adjustments which by
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reason of this Section 5(g) are not required to be made shall be carried forward
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and taken into account in any subsequent adjustment. All calculations under
this Section 5 shall be made to the nearest cent or to the nearest thousandth of
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a share, as the case may be.
(h) Upon each adjustment of the Exercise Price as a result of the
calculations made in this Section 5, the Warrants shall thereafter evidence the
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right to purchase, at the adjusted Exercise Price, that number of Shares
(calculated to the nearest hundredth) obtained by dividing (i) the product
obtained by multiplying the number of Shares purchasable upon exercise of the
Warrants prior to adjustment of the number of Shares by the Exercise Price in
effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in
effect after such adjustment of the Exercise Price.
6. Consolidations and Mergers. (a) In case of any consolidation
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with or merger of the Company with or into another corporation (other than a
merger or consolidation in which the Company is the surviving or continuing
corporation and which does not result in any reclassification of the outstanding
Shares or the conversion of such outstanding Shares into shares of other stock
or other securities or property), or in case of any sale, lease or conveyance to
another corporation of the property and assets of any nature of the Company as
an entirety or substantially as an entirety (such actions being hereinafter
collectively referred to as "Reorganizations"), there shall thereafter be
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deliverable upon exercise of this Warrant (in lieu of the number of Shares
theretofore deliverable) the kind and amount of shares of stock or other
securities, cash or other property which would otherwise have been deliverable,
upon such Reorganization, to a holder of the number of Shares upon the exercise
of this Warrant if this Warrant had been exercised in full immediately prior to
such Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, shall be made
in the application of the provisions herein set forth with respect to the rights
and interests of the Holder so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of this Warrant.
Notwithstanding the foregoing, the Company shall not effect any such
Reorganization unless upon or prior to the consummation thereof the successor
corporation, or, if the Company shall be the surviving corporation in any such
Reorganization and is not the issuer of the shares of stock or other securities
or property to be delivered to holders of Shares outstanding at the effective
time thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the Holder such shares of stock, securities, cash or
other property as the Holder shall be entitled to purchase in accordance with
the foregoing provisions.
(b) In case of any reclassification or change of the Shares
issuable upon exercise of this Warrant (other than a change in par value or
from no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in the Shares into two or more classes
or series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing
corporation and in which there is a reclassification or change (including a
change to the right to receive cash or other property) of the Shares (other
than a change in par value, or from no par value to a specified par value, or
as a result of a subdivision or combination, but including any change in the
Shares into two or more classes or series of shares), the Holder shall have
the right thereafter to receive upon exercise of this Warrant solely the kind
and amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such reclassification, change,
consolidation or merger by a holder of the number of Shares for which this
Warrant might have been exercised immediately prior to such reclassification,
change, consolidation or merger. Thereafter, appropriate provision shall be
made for adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 5.
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(c) The above provisions of this Section 6 shall similarly
---------
apply to successive Reorganizations, reclassifications and changes of Shares
and to successive consolidations, mergers, sales, leases, or conveyances.
7. Notice of Certain Events. In case at any time any of the
------------------------
following occur:
(a) The Company shall take a record of the holders of its
Shares for the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) The Company shall offer to all the holders of its Shares any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) The Company shall take any action to effect any
Reorganization, reclassification or change of outstanding Shares or any
consolidation, merger, sale, lease or conveyance of property, in each case as
described in Section 6; or
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(d) The Company shall take any action to effect any liquidation,
dissolution or winding-up of the Company or a sale of all or substantially all
of its property, assets and business;
then, and in any one or more of such cases, the Company shall give written
- ----
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
fifteen (15) days prior to (i) the date as of which the holders of record of
Shares to be entitled to receive any such dividend, distribution, rights,
warrants or other securities are to be determined, (ii) the date on which any
such offer to holders of Shares is made, or (iii) the date on which any such
Reorganization, reclassification, change of outstanding Shares, consolidation,
merger, sale, lease, conveyance of property, liquidation, dissolution or
winding-up is expected to become effective and the date as of which it is
expected that holders of record of Shares shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, change of outstanding shares, consolidation, merger, sale,
lease, conveyance of property, liquidation, dissolution or winding-up.
8. Registration Rights. (a) By its acceptance hereof, the Company
-------------------
agrees that it shall, at its expense, (i) not later than 30 business days after
the Final Closing (as defined in the Sales Agency Agreement) (the "Filing
------
Deadline") file a registration statement or amend an existing effective
- --------
registration statement (in either case, the "Resale Registration Statement")
-----------------------------
with the Securities and Exchange Commission (the "Commission") to register under
----------
the Act the resale by the undersigned of the Warrant Shares, (ii) use its
reasonable best efforts to cause the Resale Registration Statement to become
effective under the Act as promptly as practicable, (iii) after the Resale
Registration Statement is declared effective under the Act, furnish the
undersigned with such number of copies of the final prospectus included in the
Resale Registration Statement (the "Prospectus") as the undersigned may
----------
reasonably request to facilitate the resale of Warrant Shares, and (iv) use its
reasonable best efforts to cause such Resale Registration Statement to remain
effective until such time as the undersigned becomes eligible to resell the
Warrant Shares pursuant to Rule 144 under the Act.
(b) The Company will prepare and file with the Commission such
amendments and Prospectus supplements, including post-effective amendments to
the Resale Registration Statement, as the Company determines may be necessary or
appropriate, and use its reasonable best efforts to have such post-effective
amendments declared effective as promptly as practicable; cause the Prospectus
to be supplemented by any Prospectus supplement, and as so supplemented, to be
filed with the Commission; and promptly notify the undersigned when a
Prospectus, and any Prospectus supplement or post-effective amendment must be
filed or has been filed and, with respect to any post-effective amendment, when
the same has become effective.
8
<PAGE>
(c) In connection with the Resale Registration Statement, the
undersigned shall furnish the Company such information as the Company shall
reasonably request.
(d) In connection with the Resale Registration Statement
pursuant to the provisions of this Section 8, the Company shall use its best
---------
efforts to cause the Warrant Shares so registered to be registered or
qualified for sale under the securities or blue sky laws of such jurisdictions
as the holders of at least a majority of all Shares underlying all Warrants
issued pursuant to the Sales Agency Agreement (the "Majority Holders") may
----------------
reasonably request; provided, however, that the Company shall not be required
-------- -------
to qualify to do business in any state by reason of this Section 8(d) in which
------------
it is not otherwise required to qualify to do business or otherwise subject
itself to general service of process in any such state.
(e) In connection with the Resale Registration Statement
pursuant to the provisions of this Section 8, the Company shall furnish the
---------
Holder with an opinion of its counsel (reasonably acceptable to the Majority
Holders) to the effect that (i) the Resale Registration Statement has become
effective under the Act and no order suspending the effectiveness of the
Resale Registration Statement, preventing or suspending the use of the Resale
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto has been issued, nor has the Commission or any
securities or blue sky authority of any jurisdiction instituted or threatened
to institute any proceedings with respect to such an order, and (ii) the
Resale Registration Statement and each prospectus forming a part thereof
(including each preliminary prospectus and the Prospectus), and any amendment
or supplement thereto, complies as to form with the Act and the rules and
regulations thereunder.
(f) The Company may at any time refuse to permit the
undersigned to resell any Warrant Shares pursuant to the Resale Registration
Statement upon delivery to the undersigned of a written certificate to the
effect that withdrawal of the Resale Registration Statement is necessary
because a sale thereunder in then current form would constitute a violation of
federal securities laws. In the event of a withdrawal, the Company shall use
its best efforts to amend the Resale Registration Statement and/or take all
other necessary actions to again permit sales in compliance with the federal
securities laws.
(g) Until the effectiveness of the Resale Registration
Statement, the Company will not, without the written consent of the Majority
Holders, grant to any persons the right to request the Company to register any
securities of the Company, provided that the Company may grant such
--------
registration rights to other persons so long as such rights do not conflict
with the rights of the Holder.
9. Indemnification. (a) Subject to the conditions set forth below,
---------------
the Company agrees to indemnify and hold harmless the Holder, its officers,
directors, partners, employees, agents and counsel, and each person, if any, who
controls any such person within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
------------
from and against any and all loss, liability, charge, claim, damage and expense
whatsoever (which shall include, for all purposes of this Section 9, without
---------
limitation, reasonable attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), as and when incurred, arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in the Resale Registration Statement,
preliminary prospectus or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale of
any of the Warrant Shares, or (B) in any application or other document or
communication (in this Section 9 collectively called an "application") executed
--------- -----------
by or on behalf of the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to register or
qualify any of the Warrants and/or the Warrant Shares under the securities or
blue sky laws thereof or filed with the Commission or any securities exchange;
or any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to the Holder by
or on behalf of such person expressly for inclusion in the Resale Registration
Statement, preliminary prospectus or the Prospectus, or any amendment or
supplement thereto, or in any application, as the
9
<PAGE>
case may be, or (ii) any breach of any representation, warranty, covenant or
agreement of the Company contained in this Warrant. The foregoing agreement to
indemnify shall be in addition to any liability the Company may otherwise
have, including liabilities arising under this Warrant.
If any action is brought against the Holder or any of its officers,
directors, partners, employees, agents or counsel, or any controlling persons of
such person (an "indemnified party") in respect of which indemnity may be sought
-----------------
against the Company pursuant to the foregoing paragraph, such indemnified party
or parties shall promptly notify the Company in writing of the institution of
such action (but the failure so to notify shall not relieve the Company from any
liability pursuant to this Section 9(a) except to the extent the Company has
------------
been prejudiced in any material respect by such failure) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action or the Company shall not have
promptly employed counsel reasonably satisfactory to such indemnified party or
parties to have charge of the defense of such action or such indemnified party
or parties shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to the Company, in any of which
events such fees and expenses shall be borne by the Company, and the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this Section 9 to the contrary
---------
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent, which shall not be
unreasonably withheld. The Company shall not, without the prior written consent
(which shall not be unreasonably withheld) of each indemnified party that is not
released as described in this sentence, settle or compromise any action, or
permit a default or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, in respect of which indemnity may be
sought hereunder (whether or not any indemnified party is a party thereto),
unless such settlement, compromise, consent or termination includes an
unconditional release of each indemnified party from all liability in respect of
such action. The Company agrees promptly to notify the Holder of the
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the sale of any Warrant Shares or any
preliminary prospectus, prospectus, registration statement or amendment or
supplement thereto, or any application relating to any sale of any Warrant
Shares.
(b) The Holder agrees to indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who shall
have signed any registration statement covering Warrant Shares held by the
Holder and any Eligible Holder, each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, and its or their respective counsel, to the same extent as the
foregoing indemnity from the Company to the Holder in Section 9(a), but only
------------
with respect to statements or omissions, if any, made in the Resale
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with
written information furnished to the Company with respect to the Holder by or
on behalf of the Holder expressly for inclusion in the Resale Registration
Statement or the Prospectus, or any amendment or supplement thereto, or in any
application, as the case may be; provided, however, that the Holder shall not
-------- -------
be liable in an amount greater than the gross proceeds received by the Holder
in connection with the sale of the Holder's Warrant Shares. If any action
shall be brought against the Company or any other person so indemnified based
on the Resale Registration Statement or the Prospectus, or any amendment or
supplement thereto, or in any application, and in respect of which indemnity
may be sought against the Holder pursuant to this Section 9(b), the Holder
------------
shall have the rights and duties given to the Company, and the Company and
each other person so indemnified shall have the rights and duties given to the
indemnified parties, by the provisions of Section 9(a).
------------
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 9(a) or
------------
9(b) (subject to the limitations thereof) but it is found in a final judicial
- ----
determination, not subject to further appeal, that such indemnification may not
be enforced in such
10
<PAGE>
case, even though this Warrant expressly provides for indemnification in such
case, or (ii) any indemnified or indemnifying party seeks contribution under
the Act, the Exchange Act or otherwise, then the Company (including for this
purpose any contribution made by or on behalf of any director of the Company,
any officer of the Company who signed the Resale Registration Statement, any
controlling person of the Company, and its or their respective counsel), as
one entity, and the holders of all Shares included in the Resale Registration
Statement in the aggregate (including for this purpose any contribution made
by or on behalf of an indemnified party), as a second entity, shall contribute
to the losses, liabilities, claims, damages and expenses whatsoever to which
any of them may be subject, on the basis of relevant equitable considerations
such as the relative fault of the Company and such holders in connection with
the facts which resulted in such losses, liabilities, claims, damages and
expenses. The relative fault, in the case of an untrue statement, alleged
untrue statement, omission or alleged omission, shall be determined by, among
other things, whether such statement, alleged statement, omission or alleged
omission relates to information supplied by the Company or by such holders, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement, alleged statement, omission or alleged
omission. The Company and the Holder agree that it would be unjust and
inequitable if the respective obligations of the Company and the holders of the
Shares included in the Resale Registration Statement for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses (even if the Holder and the other
holders were treated as one entity for such purpose) or by any other method of
allocation that does not reflect the equitable considerations referred to in
this Section 9(c). In no case shall any holder of the Shares included in the
------------
Resale Registration Statement be responsible for a portion of the contribution
obligation imposed on all holders of the Shares included in the Resale
Registration Statement in excess of its pro rata share based on the number of
Shares owned (or which would be owned upon exercise of all Warrants) by it and
included in such registration as compared to the number of Shares owned (or
which would be owned upon exercise of all Warrants) by all such holders and
included in such registration, nor shall any holder of the Shares included in
the Resale Registration Statement be responsible for an amount greater than
the gross proceeds received by such holder in connection with the applicable
registration. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. For
purposes of this Section 9(c), each person, if any, who controls any holder of
------------
the Shares included in the Resale Registration Statement within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partner, employee, agent and counsel of each such holder or control
person shall have the same rights to contribution as such holder or control
person, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, each officer of
the Company who shall have signed the Resale Registration Statement, each
director of the Company and its or their respective counsel shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 9(c). Anything in this Section 9(c) to the contrary
------------
notwithstanding, no party shall be liable for contribution with respect to the
settlement of each claim or action effected without its written consent. This
Section 9(c) is intended to supersede any right to contribution under the Act,
- ------------
the Exchange Act or otherwise.
(d) Notwithstanding anything to the contrary contained in this
Section 9 or elsewhere herein, to the extent the Commission requires that, in
- ---------
order to register the Warrant Shares in any registration statement
contemplated hereunder without the Holder having previously exercised the
Warrants, this Warrant be included in the Resale Registration Statement or if
the Majority Holders otherwise request, then the Company shall so include this
Warrant in the Resale Registration Statement and, in any such case, the terms
of this Section 9 shall be deemed to apply to this Warrant to the same extent
as to the Warrant Shares.
10. Taxes. The issuance of any Warrant Shares or other securities
-----
upon the exercise of this Warrant and the delivery of certificates or other
instruments representing such Warrant Shares or other securities shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder (except for any tax that is
payable in respect of any such transfer and any related exercise of this Warrant
and that would be payable pursuant to the first sentence of this Section 10 were
----------
such certificate to be issued in the name of the Holder) and the Company shall
not be required to issue or deliver any such certificate unless and until the
person or persons requesting the issue thereof
11
<PAGE>
shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
11. Legend. The certificate or certificates evidencing the Warrant
------
Shares shall bear the following legend (until such time as the applicable
Warrant Shares are sold under an effective registration statement or pursuant to
Rule 144 under the Act):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR STATE
SECURITIES LAWS, BUT HAVE BEEN ISSUED OR TRANSFERRED PURSUANT TO
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT. SUCH
SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT UNDER SUCH ACT, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
12. Replacement of Warrants. Upon receipt of evidence satisfactory
-----------------------
to the Company of the loss, theft, destruction or mutilation of any Warrant (and
upon surrender of any Warrant if mutilated), and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
13. No Rights as Stockholder. The Holder of any Warrant shall not
------------------------
have, solely on account of such status, any rights of a stockholder of the
Company, either at law or in equity, or to any notice of meetings of
stockholders or of any other proceedings of the Company, except as provided in
this Warrant.
14. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of this Warrant, to the address
of such Holder as shown on the Warrant Register; or
(b) If to the Company, to the address set forth on the first
page of this Warrant or to such other address as the Company may designate by
notice to the Holder.
15. Successors. All the covenants, agreements, representations and
----------
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
16. Headings. The Article and Section headings in this Warrant are
--------
inserted for purposes of convenience only and shall have no substantive effect.
17. Governing Law. This Warrant shall be construed in accordance
-------------
with the laws of the State of New York applicable to contracts made and
performed within such State, without regard to principles of conflicts of law.
18. Modification of Agreement. This Warrant shall not otherwise be
-------------------------
modified, supplemented or amended in any respect unless such modification,
supplement or amendment is in writing and
12
<PAGE>
signed by the Company and the Holder of this Warrant and Holders of any
portion of the Warrant subsequently assigned or transferred in accordance with
the terms of this Warrant.
19. Consent to Jurisdiction. The Company and the Holder irrevocably
-----------------------
consent to the jurisdiction of the courts of the State of New York and of any
federal court located in such State in connection with any action or proceeding
arising out of or relating to this Warrant, any document or instrument delivered
pursuant to, in connection with or simultaneously with this Warrant, or a breach
of this Warrant or any such document or instrument. In any such action or
proceeding, the Company waives personal service of any summons, complaint or
other process and agrees that service thereof may be made in accordance with
Section 14 hereof.
- ----------
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the date set forth below.
Dated: [ ], 1999 CARDIMA, INC.
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
13
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Warrant)
FOR VALUE RECEIVED, ___________________________________________ hereby
sells, assigns, and transfers unto _______________________________________,
having an address at ________________________________________, the attached
Warrant to the extent of the right to purchase shares of Common Stock, par value
$0.001 per share, of Cardima, Inc., Incorporated (the "Company"), together with
-------
all right, title, and interest therein, and does hereby irrevocably constitute
and appoint as attorney to transfer such Warrant on the books of
the Company, with full power of substitution.
Dated:__________________________, _____
______________________________________
Print name of holder of Warrant
By:___________________________________
Name:
Title:
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
14
<PAGE>
NOTICE OF EXERCISE
The undersigned hereby exercises its rights to purchase
____________________ Warrant Shares covered by the within Warrant and tenders
payment herewith in the amount of $____________________________ in accordance
with the terms thereof, and requests that certificates for such securities be
issued in the name of, and delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_________________________ Name:________________________________
(Print)
_______________________________________
(Signature)
(Signature must conform to the name of
the warrant Holder specified on the
face of the Warrant)
Address:
15
<PAGE>
CONVERSION NOTICE
The undersigned hereby exercises its Conversion Rights to receive
____________________ Warrant Shares covered by the within Warrant. Based upon a
Conversion Market Price of $___________ per Share, the undersigned hereby
requests that a certificate for such Warrant Shares be issued in the name of,
and delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_________________________ Name:________________________________
(Print)
_______________________________________
(Signature)
(Signature must conform to the name of
the warrant Holder specified on the
face of the Warrant)
Address:
16
<PAGE>
EXHIBIT 10.1
CARDIMA, INC.
-------------
SUBSCRIPTION AGREEMENT
Cardima, Inc.
47266 Benicia Street
Fremont, California 94538-7330
Attn.: President
Ladies and Gentlemen:
1. Subscription. The undersigned is hereby purchasing from Cardima,
------------
Inc., a Delaware corporation (the "Company"), ________________ shares (the
-------
"Shares") of the Company's common stock, par value $0.001 (the "Common Stock"),
- ------- ------------
for a purchase price of $2.00 per share and an aggregate purchase price of
$___________ (the "Purchase Price"). This Subscription is being made in
connection with the Company's private placement of Shares solely to "Accredited
Investors" (the "Offering"). The Terms of the Offering are more specifically
--------
described on Annex A hereto.
-------
2. Closing. On the date hereof (the "Closing"), payment of the Purchase
------- -------
Price is being made by electronic wire transfer in accordance with the following
instructions:
Bank Name: Chase, NYC
ABA #: 021000021
Credit: United States Trust Company of New York
Account #: 920-1-073195
Further Credit: Sunrise/Cardima, Inc.
Account #: 09032800
Attention: James Logan
or by delivery of a bank check or certified check made payable to "Cardima, Inc.
- - Escrow Account," in either case against delivery to the undersigned of a
certificate representing the Shares. All checks should be delivered, together
with an executed copy of this Subscription Agreement, to the Placement Agent for
this Offering as follows:
-1-
<PAGE>
Sunrise Securities Corp.
135 East 57th Street
11th floor
New York, New York
Attention: Alan Swerdloff, Vice President
3. Representations and Warranties of the Company. To induce the
---------------------------------------------
undersigned to enter into this Agreement and to purchase the Shares, the Company
hereby represents and warrants to the undersigned the following:
(a) Organization Standing, Etc. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own or lease its
properties and to carry on its business as it is now being conducted. The
Company has the requisite corporate power and authority to issue the Shares and
to perform its obligations under this Subscription Agreement.
(b) Valid Issuance. The Shares, when issued and delivered pursuant to
--------------
terms of this Subscription Agreement, will be duly authorized, validly issued
and enforceable in accordance with their respective terms and the terms of this
Subscription Agreement.
(c) Corporate Acts and Proceedings. This Subscription Agreement and
------------------------------
the Offering have been duly authorized by all necessary corporate action on
behalf the Company. This Subscription Agreement has been duly executed and
delivered by authorized officers of the Company, is a valid and binding
agreement on the part of the Company and is enforceable against the Company in
accordance with its terms. All corporate actions necessary to the
authorization, creation, issuance and delivery of the Shares and the conducting
of the Offering have been taken by the Company.
(d) Compliance with Applicable Laws and Other Instruments. Neither
-----------------------------------------------------
the execution or delivery of, nor the performance of or compliance with this
Subscription Agreement, the issuance of the Shares nor the consummation of the
transactions contemplated hereby will, with or without the giving of notice or
passage of time, result in any material breach of, or constitute a material
default under, or result in the imposition of any material lien or encumbrance
upon any asset or property of the Company pursuant to, any material agreement or
other instrument to which the Company is a party or by which it or any of its
properties, assets or rights is bound or affected, and will not violate the
Company's Certificate of Incorporation or Bylaws.
(e) Securities Laws. Based in part upon the representations of the
---------------
undersigned in Section 5 hereof, no consent, authorization, approval, permit or
---------
order of or filing with any governmental or regulatory authority is required
under current laws and regulations in
-2-
<PAGE>
connection with the execution and delivery of this Agreement or the offer,
issuance, sale or delivery of the Shares, other than (i) the filing of a Form
D pursuant to Regulation D under the Securities Act of 1933, as amended (the
"Act"), (ii) the filing, if required, of any notice with any state whose
---
laws require such filing, and (iii) the qualification thereof, if required,
under other applicable state laws, which qualification has been or will be
effected as a condition of the Offering. Under the circumstances contemplated
by this Subscription Agreement, the offer, issuance, sale and delivery of the
Shares will not, under current laws and regulations, require compliance with
the prospectus delivery or registration requirements in the Act.
(f) Capital Stock. The authorized and issued capital stock of the
-------------
Company as of the Closing is correctly set forth in the unaudited interim
financial statements for the quarter ended September 30, 1998. All of the
outstanding shares of the Company were duly authorized and validly issued and
are fully paid and nonassessable. Except as described in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, as amended (the
"Form 10-K"), quarterly report on Form 10-Q for the quarter ended March 31,
---------
1998, as amended, quarterly report on Form 10-Q for the quarter ended June 30,
1998, as amended, or quarterly report on Form 10-Q for the quarter ended
September 30, 1998 (collectively, the "SEC Filings"), in each case as filed with
-----------
the Securities and Exchange Commission (the "Commission"), there are no
----------
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatever, other than in connection with the Offering,
pursuant to which the Company is obligated to issue any securities of any kind
representing an ownership interest in the Company. Neither the offer nor the
issuance or sale of the Shares constitutes an event under any anti-dilution
provisions of any securities issued (or issuable pursuant to outstanding rights,
warrants or options) by the Company or any agreements with respect to the
issuance of securities by the Company, which will either increase the number of
securities issuable pursuant to such provisions or decrease the consideration
per share to be received by the Company pursuant to such provisions. No holder
of any securities of the Company is entitled to any preemptive or similar rights
to purchase any securities of the Company in connection with the Offering.
(g) Executive Summary; SEC Filings. The Company has furnished the
------------------------------
undersigned a copy of an Executive Summary dated December 9, 1998 (the
"Executive Summary"). The Company has furnished, or made available through the
- ------------------
EDGAR Internet web site of the Commission, to the undersigned true and complete
copies of the SEC Filings. As of their respective filing dates, the SEC Filings
complied in all material respects with the applicable requirements of the
Exchange Act of 1934, as amended (the "Exchange Act"). Neither the Executive
------------
Summary nor the SEC Filings as of their respective dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading, except to
the extent amendments thereto were made in compliance with Commission rules and
regulations subsequent to the date thereof.
-3-
<PAGE>
4. Transfer Restrictions.
---------------------
(a) The undersigned realizes that the Shares are not registered under
the Act or any foreign or state securities laws. The undersigned agrees that
the Share will not be sold, offered for sale, pledged, hypothecated or otherwise
transferred (collectively, "Transfer"), except in compliance with the Act and
--------
applicable foreign and state securities laws. The undersigned understands that
he can only Transfer the Shares pursuant to registration under the Act or
pursuant to an exemption therefrom. The undersigned understands that to
Transfer the Shares may require in certain jurisdictions specific approval by
the appropriate governmental agency or commission in such jurisdiction. The
undersigned has been advised that, except as set forth in Section 6 hereof, the
---------
Company has no obligation, and does not intend, to cause the Shares to be
registered under the Act or the securities law of any other jurisdiction or to
comply with the requirements for any exemption under the Act, including but not
limited to, those provided by Rule 144 and Rule 144A promulgated under the Act,
or under the securities law of any other jurisdiction.
(b) To enable the Company to enforce the transfer restrictions
contained in Section 4(a) hereof, the undersigned hereby consents to the placing
------------
of legends upon, and stop-transfer orders with the transfer agent of the Common
Stock with respect to, the Shares.
5. Representations and Warranties of the Undersigned. To induce the
-------------------------------------------------
Company to accept the undersigned's subscription, the undersigned hereby
represents and warrants to the Company that:
(a) the undersigned, if an individual, has reached the age of majority
in the jurisdiction in which he resides, is a bona fide resident of the
jurisdiction contained in the address set forth on the signature page of this
Subscription Agreement, is legally competent to execute this Subscription
Agreement, and does not intend to change residence to another jurisdiction;
(b) the undersigned, if an entity, is duly authorized to execute this
Subscription Agreement and this Subscription Agreement, when executed and
delivered by the undersigned, will constitute a legal, valid and binding
obligation enforceable against he undersigned in accordance with its terms; and
the execution, delivery and performance of this Subscription Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate or other necessary action on the part of the
undersigned;
(c) the Shares subscribed for hereby are being acquired by the
undersigned for investment purposes only, for the account of the undersigned and
not with the view to any resale or distribution thereof, and the undersigned is
not participating, directly or indirectly, in a distribution of such Shares and
will not take, or cause to be taken, any action that would cause the undersigned
to be deemed an "underwriter" of such Shares as defined in Section 2(11) of the
Act;
-4-
<PAGE>
(d) the undersigned has had access to all materials, books, records,
documents and information relating to the Company which the undersigned has
requested, including (i) the Executive Summary, (ii) the SEC Filings, and (iii)
the Company's Proxy Statement dated April 23, 1998 (the "Proxy Statement"), and
---------------
has been provided the opportunity to verify the accuracy of the information
contained therein;
(e) the undersigned acknowledges and understands that investment in
the Share involves a high degree of risk, including without limitation, the
risks set forth in the Executive Summary and in the SEC Filings under the
caption "Factors Affecting Future Results" in "Management's Discussion and
Analysis of Financial Condition and Results of Operations";
(f) the undersigned acknowledges that the undersigned has been offered
an opportunity to ask questions of, and receive answers from, officers of the
Company concerning all material aspects of the Company and its business and the
Offering, and that any request for such information has been fully complied with
to the extent the Company possesses such information or can acquire it without
unreasonable effort or expense;
(g) the undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of an investment in the Company and can afford a complete loss of his
investment in the Company;
(h) The undersigned has, in connection with its decision to purchase
the Shares, relied solely upon this Agreement, the Executive Summary, SEC
Filings and the Proxy Statement.
(i) The undersigned represents and warrants to and covenants with the
Company that the undersigned has not engaged and will not engage in any sales of
the Shares, including a short sale covered by the Shares, prior to the
effectiveness of the Resale Registration Statement (as defined in Section 6),
---------
except to the extent that any such short sale is fully covered by shares of
Common Stock of the Company other than the Shares, or such sale is otherwise
exempt from registration under the Act.
(j) the undersigned recognizes that no governmental agency has passed
upon the issuance of the Shares or made any finding or determination as to the
fairness of this Offering;
(k) if the undersigned is purchasing the Shares subscribed for hereby
in a representative or fiduciary capacity, the representations and warranties
contained herein shall be deemed to have been made on behalf of the person or
persons for whom such Shares are being purchased;
(l) the undersigned has not entered into any agreement to pay
commissions to any persons with respect to the purchase or sale of the Shares,
except commissions for which the undersigned will be responsible;
-5-
<PAGE>
(m) the undersigned acknowledges that the Company will pay to Sunrise
Securities Corp. a commission with respect to the sale of the Shares by the
Company to the undersigned (except to the extent otherwise provided in Annex A)
-------
of (i) 8.0% of the aggregate Purchase Price, payable at the option of Sunrise
Securities Corp. in cash or shares of Common Stock valued at $2.00 per share,
and (ii) five-year warrants to purchase, at a purchase price of $2.20 per share,
that number of shares of Common Stock equal to 10% of the number of Shares being
purchased by the undersigned hereunder; and
(n) the undersigned is an "Accredited Investor" as that term is
defined in Section 501(a) of Regulation D promulgated under the Act.
Specifically the undersigned is (check appropriate item(s)):
[ ] (i) a bank as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a
broker or dealer registered pursuant to Section 15 of the Exchange Act; an
insurance company as defined in Section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c)
of (d) of the Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of $5,000,000, an employee
benefit plan within the meaning of the Employment Retirement Income Security Act
of 1974, if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment advisor, or if the employee benefit
plan has total assets in excess of $5,000,000, or if a self-directed plan, with
investment decisions made solely by persons that are Accredited Investors;
[ ] (ii) a private business development company as defined in
Section 202(a)(22) of the investment Advisers Act of 1940;
[ ] (iii) an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, corporation, Massachusetts or
similar business trust, or partnership, not formed for the specific purpose
of acquiring Shares, with total assets in excess of $5,000,000;
[ ] (iv) a director or executive officer of the Company;
[ ] (v) a natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his or her purchase exceeds
$1,00,000;
-6-
<PAGE>
[ ] (vi) a natural person who had an individual income (not
including his or her spouse's income) in excess of $200,000 in 1996 and 1997 or
joint income with his or her spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching such income level in 1998;
[ ] (vii) a trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring Shares, whose
purchase is directed by a person having such knowledge and experience in
financial and business matters that he or she is capable of evaluating the
merits and risks entailed in the purchase of Shares; or
[ ] (viii) an entity in which all of the equity owners are
Accredited Investors. (If this alternative is checked, the undersigned must
identify each equity owner and provide statements signed by each demonstrating
how each is qualified as an Accredited Investor.)
6. Registration of Shares under the Act.
------------------------------------
(a) By its acceptance hereof, the Company agrees that it shall, at its
expense, (i) not later than 30 business days after the final closing of the
Offering (the "Filing Deadline") file a registration statement or amend an
---------------
existing effective registration statement (in either case, the "Resale
------
Registration Statement") with the Commission to register under the Act the
- ----------------------
resale by the undersigned of the Shares, (ii) use its reasonable best efforts to
cause the Resale Registration Statement to become effective under the Act as
promptly as practicable, (iii) after the Resale Registration Statement is
declared effective under the Act, furnish the undersigned with such number of
copies of the final prospectus included in the Resale Registration Statement
(the "Prospectus") as the undersigned may reasonably request to facilitate the
----------
resale of Shares, and (iv) use its reasonable best efforts to cause such
Registration Statement to remain effective until such time as the undersigned
becomes eligible to resell the Shares pursuant to Rule 144 under the Act.
(b) The Company will prepare and file with the Commission such
amendments and Prospectus supplements, including post-effective amendments to
the Resale Registration Statement, as the Company determines may be necessary or
appropriate, and use its reasonable best efforts to have such post-effective
amendments declared effective as promptly as practicable; cause the Prospectus
to be supplemented by any Prospectus supplement, and as so supplemented, to be
filed with the Commission; and promptly notify the undersigned when a
Prospectus, and any Prospectus supplement or post-effective amendment must be
filed or has been filed (including any filing in response to a Sale Notice) and,
with respect to any post-effective amendment, when the same has become
effective.
(c) In connection with the Resale Registration Statement, the
undersigned shall furnish the Company such information as the Company shall
reasonably request.
-7-
<PAGE>
(d) The Company acknowledges that the undersigned and other purchasers
of Shares will suffer damages if the Company fails to fulfill its obligation to
file a Resale Registration Statement by the Filing Deadline, and that it would
not be feasible to ascertain the extent of such damages. Accordingly, in the
event that the Company shall fail to file a timely Resale Registration Statement
in accordance with Section 6(a)(i) above, the Company shall issue to the
---------------
undersigned, as compensation therefor, shares of Common Stock equal to (i) 1% of
the Shares for each 30 days or part thereof the filing is delayed until 60 days
after the Filing Deadline, and (ii) 2% of the Shares for each 30 days or part
thereof the filing is delayed from 60 days after the Filing Deadline; provided,
--------
however, that the Company shall not be required to issue such shares if such
- -------
failure has been caused by (a) the failure of the undersigned to provide
information in connection with the Resale Registration Statement in accordance
with Section 6(d) above, or (b) the occurrence of a material event not in the
------------
ordinary course which may delay the filing of the Resale Registration Statement
pending public disclosure, which disclosure shall be promptly made by the
Company.
(e) At any time the Company may refuse to permit the undersigned to
resell any Shares pursuant to the Resale Registration Statement; provided,
--------
however, that in order to exercise this right, the Company must deliver a
- -------
certificate in writing to the undersigned to the effect that withdrawal of such
Resale Registration Statement is necessary because a sale pursuant to the Resale
Registration Statement in its then-current form could constitute a violation of
the federal securities laws. In such an event, the Company shall use its best
efforts to amend the Resale Registration Statement if necessary and take all
other actions necessary to allow such sale under the federal securities laws,
and shall notify the undersigned promptly after it has determined that such sale
has become permissible under the federal securities laws. The undersigned
hereby covenants and agrees that it will not sell any Shares pursuant to the
Resale Registration Statement during the periods the Resale Registration
Statement is withdrawn as set forth in this Section 6(e).
------------
7. Indemnification.
---------------
(a) The undersigned understands the meaning and legal consequences of
the representations and warranties made by the undersigned in this Subscription
Agreement, and agrees to indemnify and hold harmless the Company and each of the
Company's directors, officers, stockholders, employees, counsel, agents,
successors and assignees from and against any and all loss, damage, liability or
expenses (including, without limitation, attorneys' fees), as and when incurred,
due to or arising out of (in such case in whole or in part) any breach of any
representation or warranty made by the undersigned set forth herein or in any
other agreement or other document furnished by the undersigned to any of the
foregoing in connection with the Offering, any failure by the undersigned to
fulfill any of its covenants or agreements set forth herein, or arising out of
the resale or distribution by the undersigned of the Shares or any portion
thereof in violation of the Act or any applicable foreign or state securities or
"blue sky" law.
-8-
<PAGE>
(b) The Company understands the meaning and legal consequences of the
representations and warranties made by it in this Subscription Agreement, and
agrees to indemnify and hold harmless the undersigned and each of the
undersigned's directors, officers, stockholders, employees, counsel, agents,
successors and assigns from and against any and all loss, damage, liability or
expense (including, without imitation, attorneys' fees), as and when incurred,
due to or arising out of (in each case in whole or in part) any breach of any
representation or warranty made by the Company set forth herein, or any failure
by the Company to fulfill any of its covenants or agreements set forth herein.
(c) To the extent permitted by law, the Company will indemnify and
hold harmless each holder of Shares included in the Resale Registration
Statement (a "Holder"), the directors, if any, of such Holder, the officers, if
------
any, of such Holder, and each person, if any, who controls such Holder within
the meaning of the Act or the Exchange Act, against any losses, claims, damages,
expenses or liabilities to which any of them may become subject, under the Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages, expenses
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violation (collectively, a "Violation"): (i) any untrue statement
---------
or alleged untrue statement of a material fact contained in the Resale
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, in light of the circumstances in
which they were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the Exchange Act, any state securities law
or any rule or regulation promulgated under the Act, the Exchange Act or any
state securities law; and the Company will reimburse the Holders and each such
controlling person, promptly as such expenses are incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding.
(d) To the extent permitted by law, each Holder, severally and not
jointly, will indemnify and hold harmless, to the same extent and in the same
manner set forth in Section 7(c), the Company, each of its directors and
------------
officers who have signed the Resale Registration Statement, and each person, if
any, who controls the Company within the meaning of the Act or the Exchange Act,
against any losses, claims, damages or liabilities to which any of them may
become subject, under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened in respect thereof) arise out of or are based upon 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 the Resale
Registration Statement; and such Holder will reimburse such persons for any
legal or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action.
-9-
<PAGE>
(e) With respect to the indemnification set forth in Sections 7(c) or
-------------
(d) above, to the extent any indemnification by an indemnifying party is
- ---
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under said Sections 7(c) or (d) to the extent permitted by law; provided that
------------- --- --------
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in said
Sections 7(c) or (d), and (ii) no party guilty of fraudulent misrepresentation
- ------------- ---
(within the meaning of Section 11 of the Act) shall be entitled to contribution
from any party who was not guilty of such fraudulent misrepresentation.
8. Further Documents. The undersigned agrees that it will execute such
-----------------
other documents as may be necessary or desirable in connection with the
transactions contemplated hereby.
9. Modification. Neither this Subscription Agreement nor any provisions
------------
hereof shall be waived, modified, discharged or terminated except by an
instrument in writing signed by the party against whom any such waiver,
modification, discharge or termination is sought.
10. Notices. Any notice or other communication required or permitted to
-------
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service and delivered against receipt to the
party to whom it is to be given, (i) if to the Company, at the address set forth
on the first page hereof, (ii) if to the undersigned, at its address set forth
on the signature page hereto, or (iii) in either case, to such other address as
the party shall have furnished in writing in accordance with the provisions of
this Section 10. Notice to the estate of any party shall be sufficient if
----------
addressed to the party as provided in Section 10. Any notice or other
----------
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof. Any notice given by other
means permitted by this Section 10 shall be deemed given at the time of receipt
----------
thereof.
11. Counterparts. This Subscription Agreement may be executed through the
------------
execution of separate signature pages or in any number of counterparts, and each
such counterpart shall, for all purposes, constitute one agreement binding on
all parties, notwithstanding that all parties are not signatories to the same
counterpart.
12. Entire Agreement. This Subscription Agreement contains the entire
----------------
agreement of the parties with respect to the subject matter hereof and there are
no representations, covenants or other agreements except as stated or referred
to herein.
13. Severability. Each provision of this Subscription Agreements is
------------
intended to be severable from every other provision, and the invalidity or
illegality of any portion hereof shall not affect the validity or legality of
the remainder hereof.
-10-
<PAGE>
14. Assignability. This Subscription Agreement is not transferable or
-------------
assignable by the undersigned.
15. Applicable Law. This Subscription Agreement has been negotiated
--------------
and consummated in the State of New York and shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
conflict of laws.
16. Choice of Jurisdiction. Any action or proceeding arising directly,
----------------------
indirectly or otherwise, in connection with, out of or from this Subscription
Agreement, any breach hereof or any transaction covered hereby shall be resolved
within New York, New York. Accordingly, the parties consent and submit to the
jurisdiction of the United States federal and state courts located within New
York, New York.
17. Taxpayer Identification Number. The undersigned verifies under
------------------------------
penalties of perjury that any Taxpayer Identification Number or Social Security
Number shown on the signature page hereto is true, correct and complete.
18. Pronouns. Any personal pronoun shall be considered to mean the
--------
corresponding masculine, feminine or neuter personal pronoun, as the context
requires.
-11-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this day of , 199 .
-- ------------ -
Number of Shares Subscribed for: Shares
--------------------
INDIVIDUAL SUBSCRIBER: ENTITY SUBSCRIBER:
- ---------------------------------- ----------------------------------
(Signature of Subscriber) (Print Name of Subscriber)
By:
- ---------------------------------- -------------------------------
(Typed or Printed Name) Name:
-----------------------------
Title:
---------------------------
- ---------------------------------- ----------------------------------
(Residence Address) (Address)
- ---------------------------------- ----------------------------------
(City, State and Zip Code) (City, State and Zip Code)
- ---------------------------------- ----------------------------------
(Telephone Number) (Telephone Number)
- ---------------------------------- ----------------------------------
(Telecopier Number) (Telecopier Number)
- ---------------------------------- ----------------------------------
(Tax I.D. or Social Security Number) (Tax I.D. or Social Security Number)
ACCEPTED:
CARDIMA, INC. For entities desiring that certificates
for Shares be delivered to an address
By: other than that set forth above, set
---------------------------------- for the delivery address:
Name:
--------------------------------
Title:
-------------------------------
Dated: December , 199 -------------------------------------
----- -- (Address)
-------------------------------------
(City, State and Zip Code)
-12-
<PAGE>
EXHIBIT 10.2
CARDIMA, INC.
A minimum of 5,000,000 ($10,000,000) and
a maximum of 7,500,000 ($15,000,000)
Shares of Common Stock
SALES AGENCY AGREEMENT
----------------------
As of January 21, 1999
Sunrise Securities Corp.
135 E. 57th Street
New York, New York 10022
Dear Sirs:
Cardima, Inc., a Delaware corporation (the "Company"), proposes to
-------
offer for sale in a private offering (the "Offering"), pursuant to Rule 506 of
--------
Regulation D ("Regulation D") under the Securities Act of 1933, as amended (the
------------
"Act"), a minimum of 5,000,000 (including "Affiliate Shares," and "Insider
---
Shares", each as hereinafter defined, if any) and a maximum of 7,500,000 shares
(the "Shares") of the Company's common stock, par value $0.001 per share (the
------
"Common Stock"). This Offering is being made solely to "accredited investors"
- -------------
as defined in Regulation D. This is to confirm our agreement concerning your
acting as our exclusive placement agent (the "Placement Agent") in connection
---------------
with the Offering.
The Company has prepared and has delivered to the Placement Agent
copies of a confidential executive summary, dated December 9, 1998, relating to,
among other things, the Company, its management, and the risks associated with
an investment in the Company's securities. Such confidential executive summary,
including all documents delivered therewith and incorporated by reference
therein, is referred to herein as the "Executive Summary" unless such
-----------------
confidential executive summary or any such accompanying documents shall be
supplemented or amended in accordance with this Agreement, in which event the
term "Executive Summary" shall refer to such confidential executive summary and
-----------------
such documents as so supplemented or amended from and after the time of delivery
to the Placement Agent of such supplement or amendment.
<PAGE>
In addition, the Company has furnished or made available to the
Placement Agent the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, (the "Form 10-K"), quarterly report on Form 10-Q for
---------
the quarter ended March 31, 1998, quarterly report on Form 10-Q for the quarter
ended June 30, 1998, quarterly report on Form 10-Q for the quarter ended
September 30, 1998 (the "Most Recent 10-Q") and any other reports filed by the
----------------
Company pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the rules and regulations promulgated thereunder, prior to
- -------------
Closing (collectively, the "SEC Filings"), in each case as filed with the
-----------
Securities and Exchange Commission (the "Commission").
----------
1. Appointment of Placement Agent. On the basis of the
------------------------------
representations and warranties contained herein, and subject to the terms and
conditions set forth herein, the Company hereby appoints you as its Placement
Agent and grants to you the exclusive right to offer, as its agent, the Shares
pursuant to the terms of this Agreement. On the basis of such representations
and warranties, and subject to such conditions, you hereby accept such
appointment and agree to use your best efforts to secure subscriptions to
purchase a minimum of 5,000,000 ($10,000,000) and a maximum of 7,500,000
($15,000,000) Shares pursuant to the terms of this Agreement. The agency
created hereby is not terminable by the Company except upon termination of the
Offering or upon expiration of the Offering Period (as hereinafter defined) in
accordance with the terms of this Agreement.
2. Terms of the Offering.
---------------------
(a) A minimum of 5,000,000 ($10,000,000) and a maximum of 7,500,000
($15,000,000) Shares shall be offered for sale to prospective investors in the
Offering ("Prospective Investors") at a purchase price equal to $2.00 per Share
---------------------
(the "Purchase Price"). Certain of the shares offered for sale may be sold to
--------------
certain of the Company's current institutional investors (the "Insider Shares").
--------------
In addition, officers, directors and employees of the Company and the Placement
Agent may purchase Shares for their own accounts on the same terms and
conditions as other investors (the "Affiliate Shares"). The Affiliate Shares
----------------
and Insider Shares shall be included in determining whether the minimum and
maximum number of Shares have been subscribed for, and all references herein to
subscriptions from Prospective Investors shall be deemed to include the
Affiliate Shares and the Insider Shares.
(b) The Offering shall expire at 5:00 P.M., New York time, on February
15, 1999, unless extended from time to time for periods of up to an aggregate of
30 days by mutual agreement of the Company and the Placement Agent. Such
period, as the same may be so extended, shall hereinafter be referred to as the
"Offering Period."
---------------
(c) Each Prospective Investor who desires to purchase Shares shall be
required to deliver to the Placement Agent one copy of a subscription agreement
in the form annexed hereto as Exhibit A, including the investor questionnaire
---------
(the "Subscription Agreement"), and payment in the amount necessary to purchase
the number of Shares such Prospective Investor
<PAGE>
desires to purchase. The Placement Agent shall not have any obligation to
independently verify the accuracy or completeness of any information contained
in any Subscription Agreement or the authenticity, sufficiency or validity of
any check or other form of payment delivered by any Prospective Investor in
payment for Shares.
(d) Pursuant to an Escrow Agreement, dated as of January 21, 1999 (the
"Escrow Agreement"), the Placement Agent has established a special account with
----------------
the United States Trust Company of New York (the "Escrow Agent") entitled
------------
"Cardima, Inc. - Escrow Account" (the "Escrow Account"). The Placement Agent
--------------
shall deliver each check received from a Prospective Investor to the Escrow
Agent for deposit in the Escrow Account and shall deliver the executed copy of
the Subscription Agreement received from such Prospective Investor to the
Company. The Company shall notify the Placement Agent promptly of the
acceptance or rejection of any subscription. The Company and/or the Placement
Agent may reject any subscription.
(e) If subscriptions to purchase 5,000,000 Shares ($10,000,000) are
not received from Prospective Investors prior to the expiration of the Offering
Period and accepted by the Company, the Offering shall be canceled, all funds
received by the Escrow Agent on behalf of the Company shall be refunded in full
without interest, and this Agreement and the agency created hereby shall be
terminated without any further obligation on the part of either party, except as
provided in Section 10 hereof.
----------
(f) We agree that within 30 business days following completion of the
Offering (the "Final Closing"), the Company will file a registration statement
-------------
(the "Registration Statement") under the Act covering the resale of the Shares.
----------------------
In the event the Registration Statement is not filed by the end of such 30
business-day period (the "Filing Deadline"), the Company agrees to issue to each
---------------
purchaser of Shares an additional number of shares equal to 1.0% of the number
of Shares purchased for each 30 days or part thereof the filing is delayed until
60 days after the Filing Deadline, plus an additional 2% of the number of Shares
so purchased for each 30 days thereafter, until the Registration Statement is
filed; provided, however, that the Company shall not be required to issue such
additional shares of Common Stock if such failure has been caused by (a) the
failure of the holders of the Shares to be registered to provide information in
connection with the Registration Statement or (b) the occurrence of a material
event not in the ordinary course which may delay the filing of the Registration
Statement pending public disclosure, which disclosure shall be promptly made. We
further agree that the Company will use its reasonable best efforts to cause the
Registration Statement (A) to become effective under the Act as promptly as
practicable, and (B) to remain effective until such time as all Shares purchased
in the Offering become eligible for resale pursuant to Rule 144 under the Act.
(g) The Company may at any time refuse to permit holders of the Shares
to resell any Shares pursuant to the Registration Statement upon delivery to
such holders of a written certificate to the effect that withdrawal of the
Registration Statement is necessary because a sale thereunder in then current
form would constitute a violation of federal securities laws. In
3
<PAGE>
the event of a withdrawal, the Company shall use its best efforts to amend the
Registration Statement and/or take all other necessary actions to again permit
sales in compliance with the federal securities laws.
3. Closing.
-------
(a) Subject to the conditions set forth in Section 8 hereof, if
---------
subscriptions to purchase at least 5,000,000 Shares (including Insider Shares
and Affiliate Shares) have been received prior to the expiration of the Offering
Period and accepted by the Company, the initial closing under this Agreement
(the "Closing") shall be held at the offices of Thelen Reid & Priest LLP, 40
-------
West 57th Street, New York, New York, at 10:00 A.M., New York time, on the third
business day following the date upon which the Placement Agent receives notice
from the Company that subscriptions to purchase at least 5,000,000 Shares
(including Insider Shares and Affiliate Shares) have been so accepted or at such
other place, time and/or date as the Company and the Placement Agent shall agree
upon. The Company shall provide the notice required by the preceding sentence
as promptly as practicable. The date upon which the Closing is held shall
hereinafter be referred to as the "Closing Date."
------------
(b) Subject to the conditions set forth in Section 8 hereof, if,
---------
subsequent to the date the subscriptions referred to in Section 3(a) hereof are
-------------------
received and accepted and prior to the expiration of the Offering Period,
additional subscriptions to purchase Shares are received from Prospective
Investors, which subscriptions are accepted by the Company, one or more
additional closings under this Agreement (each, an "Additional Closing") shall
------------------
be held at the offices of Thelen Reid & Priest LLP, 40 West 57th Street at 10:00
A.M., New York time, on the third business day following the date upon which the
Placement Agent receives notice from the Company that additional subscriptions
have been so accepted, or at such other place, time or date as the Company and
the Placement Agent shall agree upon. The Company shall notify the Placement
Agent as promptly as practicable whether any additional subscriptions so
received have been accepted. The date upon which any Additional Closing is held
shall hereinafter be referred to as an "Additional Closing Date."
-----------------------
Notwithstanding anything contained herein to the contrary, in no event
shall the Company accept subscriptions to purchase in excess of 7,500,000 Shares
(including Insider Shares and Affiliate Shares).
(c) At the Closing or an Additional Closing, as the case may be, the
Company shall instruct the Escrow Agent to pay to the Placement Agent at the
Closing or an Additional Closing, from the funds deposited in the applicable
Escrow Account in payment for the Shares, the cash amounts payable to the
Placement Agent pursuant to Section 4 of this Agreement. Promptly after the
---------
Closing Date or an Additional Closing Date, as the case may be, the Company
shall deliver to the purchasers of Shares certificates representing the Shares
to which they are entitled.
4
<PAGE>
4. Compensation.
------------
(a) If subscriptions to purchase 5,000,000 Shares (including Insider
Shares and Affiliate Shares) are received from Prospective Investors prior to
the expiration of the Offering Period and accepted by the Company, you shall be
entitled to receive from the Company, as compensation for your services as
Placement Agent under this Agreement, an aggregate amount equal to 8.0% of the
gross proceeds received by the Company from the sales of the Shares (the
"Commission"), provided that no commission will be due to the Placement Agent
- -----------
with respect to the sale of the Insider Shares or the Compensatory Shares (as
defined below). At the sole option of the Placement Agent, some or all of the
Commission may be paid by the issuance of additional shares of the Company's
Common Stock (the "Compensatory Shares"), which Compensatory Shares will be
-------------------
valued at $2.00 per share. The Compensatory Shares will be entitled to the same
registration rights afforded the Shares as set forth in the Subscription
Agreement. All of the foregoing compensation is payable by the Company on the
Closing Date or Additional Closing Date, as the case may be, with respect to the
Shares sold on such date. The Company has previously paid $20,000 against the
aggregate Commission to be due the Placement Agent hereunder (the "Advance").
In the event subscriptions to purchase 5,000,000 Shares (including Insider
Shares and Affiliate Shares) are not received prior to the expiration of the
Offering Period and accepted by the Company (A) $10,000 of the Advance will be
refundable to the extent documented Offering- related expenses have not been
incurred by the Placement Agent, and (B) $10,000 of the Advance shall not be
refundable under any circumstances and will be retained by the Placement Agent.
(b) If subscriptions to purchase 5,000,000 Shares (including Insider
Shares and Affiliate Shares) are received from Prospective Investors prior to
the expiration of the Offering Period and accepted by the Company, the Company
shall sell to you or, at your discretion, your designees, in addition to the
amounts set forth in Section 4(a) above, and you (or your designees) may buy
------------
warrants (individually, a "Warrant" and collectively, the "Warrants") to
------- --------
purchase that number of shares of the Company's Common Stock (the "Warrant
-------
Shares") equal to 10% of the aggregate number of Shares issued in the Offering,
- ------
provided that no Warrants will be due the Placement Agent with respect to the
- --------
sale of the Insider Shares or the Compensatory Shares. The purchase price of
each Warrant shall equal $0.001. Each Warrant will entitle the holder thereof,
for a five year period from the later of the Closing Date or the last Additional
Closing Date (if any), to purchase one Warrant Share at an exercise price equal
to $2.20 per Warrant Share. The Warrant Shares will be entitled to the same
registration rights afforded the Shares as set forth in the Subscription
Agreement. The Warrants shall be purchasable pursuant to share purchase
agreements (the "Share Purchase Warrants") in the form attached hereto as
-----------------------
Exhibit B.
- ---------
(c) If the Offering is terminated by the Company (i) during the
Offering Period (provided you are actively pursuing the Offering during such
period), (ii) during any 30 day extension period (provided you are actively
pursuing the Offering during such period), or (iii) at the completion of the
Offering (provided that you shall have obtained offers to purchase at least the
required minimum), and the Placement Agent is not then in default hereunder or
has not
5
<PAGE>
breached the terms herein, and within six months after termination the
Company completes the sale of any of its equity securities (including securities
convertible into equity securities) for cash to any person or entity who was
introduced to the Company by the Placement Agent, in connection with the
Offering or otherwise, then in any such case, the Company shall pay to you 8.0%
----
of the gross sales price of such securities, and shall sell to you, on the terms
set forth in this Section 4, Warrants to purchase 10% of the securities so sold.
---------
5. Representations and Warranties.
------------------------------
(a) Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to, and agrees with, the Placement that:
(i) The Executive Summary as of the date thereof did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. Each contract, agreement, instrument, lease, license or
other document, if any, described in the Executive Summary has been accurately
described therein in all material respects.
(ii) The Company has furnished, or made available through the
EDGAR Internet web site of the Commission, to the undersigned true and
complete copies of the SEC Filings. As of their respective filing dates, the
SEC Filings complied in all material respects with the applicable requirements
of the Exchange Act, and the Act and the rules and regulations promulgated
under the Exchange Act and the Act. The SEC Filings do not as of their
respective dates contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of circumstances under which
they were made, not misleading. Each contract, agreement, instrument, lease,
license or other document described in the SEC Filings has been accurately
described therein in all material respects.
(iii) No document provided by the Company to Prospective
Investors pursuant to Section 6(a)(vii) hereof, and no oral information
-----------------
provided by the Company to Prospective Investors, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading.
Contracts to which the Company is a party provided by the Company to
Prospective Investors shall not be deemed to contain any untrue statement of a
material fact or to omit to state any material fact if the contract so
provided is a true, correct and complete copy of such contract, as amended or
modified through the date it is so provided.
(iv) The Company has not solicited any offer to buy or offered
to sell any Shares or any other securities of the Company during the twelve-
month period ending on the date hereof, except as may be described in the SEC
Filings or which would not be integrated with the sale of the Shares in a
manner that would require the registration of the Offering pursuant to the
6
<PAGE>
Act; and the Company has no present intention to solicit any offer to buy or
offer to sell any Shares or any other securities of the Company other than
pursuant to this Agreement or pursuant to a registered public offering of the
Company's securities which may be commenced after the completion of the
Offering.
(v) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
full power and authority and all necessary consents, authorizations,
approvals, orders, licenses, certificates and permits of and from, and
declarations and filings with (collectively, "Consents") all federal, state,
--------
local, foreign and other governmental authorities and all courts and other
tribunals, to own, lease, license and use its properties and assets and to
carry on its business in the manner described in the Executive Summary, except
where the failure to have obtained such Consents would not have a material
adverse effect on the Company and except that the Company is not qualified in
Tennessee, Massachusetts, Virginia and Ohio; and the Company has not received
any notice of proceedings relating to the revocation or modification of any
such Consent which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding would result in a material adverse
change in the financial condition, results of operations, business,
properties, assets, liabilities or future prospects of the Company. The
Company is duly qualified to do business and is in good standing in every
jurisdiction in which its ownership, leasing, licensing or use of property and
assets or the conduct of its business makes such qualification necessary,
except where such failure to qualify would not have a material adverse effect
upon the business of the Company. The Company does not have any operating
subsidiaries.
(vi) The Company has, as of the date hereof and subject to the
exercise of any outstanding Common Stock purchase rights, an authorized and
outstanding capitalization as set forth in the Most Recent 10-Q. Each
outstanding share of capital stock of the Company is duly authorized, validly
issued, fully paid and nonassessable and has not been issued and is not owned or
held in violation of any preemptive rights set forth in the Company's
Certificate of Incorporation or By-Laws, each as amended to date, or any
agreement to which the Company is a party. There is no commitment, plan or
arrangement to issue, and no outstanding option, warrant or other right calling
for the issuance of, any share of capital stock of the Company or any security
or other instrument which by its terms is convertible into, exercisable for or
exchangeable for shares of capital stock of the Company, except as may be
described in the SEC Filings. There is outstanding no security or other
instrument which by its terms is convertible into or exchangeable for any class
of share of capital stock of the Company, except as may be described in the SEC
Filings. The capital stock of the Company conforms to the description thereof
contained in the SEC Filings.
(vii) The financial statements of the Company included in the
SEC Filings (by incorporation, by reference or otherwise) fairly present, in
all material respects, the financial position, the results of operations, cash
flows and the other information purported to be shown therein at the
respective dates and for the respective periods to which they apply. Such
financial statements have been prepared in accordance with generally accepted
accounting principles
7
<PAGE>
consistently applied throughout the periods involved, are correct and complete,
in all material respects, and are in accordance with the books and records of
the Company. Except as previously disclosed to the Placement Agent, there has
at no time been a material adverse change in the financial condition, results of
operations, business, properties, assets, liabilities or future prospects of the
Company from the latest information set forth in the SEC Filings, except as may
be described in the SEC Filings as having occurred.
(viii) Ernst & Young LLP, who have audited certain financial
statements of the Company and performed certain procedures relating to
financial statement schedules and other financial information concerning the
Company, included in the SEC Filings, are independent public accountants as
required by the Act and the applicable rules and regulations thereunder.
(ix) There is no litigation, arbitration, governmental or other
proceeding (formal or informal) or claim or investigation pending or, to the
knowledge of the Company, threatened with respect to the Company or any of its
operations, businesses, properties or assets, except as may be described in the
SEC Filings or such as individually or in the aggregate do not now have and will
not in the future have a material adverse effect upon the operations, business,
properties or assets of the Company. The Company is not in violation of, or in
default with respect to, any law, rule, regulation, order, judgment or decree,
except as may be described in the SEC Filings or such as in the aggregate do not
now have and will not in the future have a material adverse effect upon the
operations, business, properties, assets or future prospects of the Company.
(x) Except as described in the SEC Filings, any real property
and buildings held under lease by the Company are held by it under valid,
subsisting and enforceable leases with such exceptions as in the aggregate are
not material. Except as described in the SEC Filings, the Company enjoys
peaceful and undisturbed possession under all real property leases under which
it is operating.
(xi) Except as previously disclosed to the Placement Agent,
neither the Company, nor, to the knowledge of the Company, any other party, is
in violation or breach of or in default with respect to, complying with any
material provision of any contract, agreement, instrument, lease, license,
arrangement or understanding which is material to the Company, and each such
contract, agreement, instrument, lease, license, arrangement and understanding
is in full force and effect and is the legal, valid and binding obligation of
the parties thereto enforceable as to them in accordance with its terms
(subject to applicable bankruptcy, insolvency and other laws affecting the
enforceability of creditors' rights generally and to general equitable
principles). The Company is not in violation or breach of, or in default with
respect to, any term of its Certificate of Incorporation or By-Laws, each as
amended to date.
(xii) There is no right under any patent, patent application,
trademark, trademark application, trade name, service mark, copyright, franchise
or other intangible
8
<PAGE>
property or asset (all of the foregoing being herein called "Intangibles")
-----------
necessary to the business of the Company as presently conducted or as the
SEC Filings or the Executive Summary indicates it contemplates conducting,
except as may be so designated in the SEC Filings or the Executive Summary and
which the Company has the right or license to use as necessary. To the
Company's knowledge, except as described in the SEC Filings, the Company has
not infringed nor is it infringing with respect to Intangibles of others, and
the Company has not received notice of infringement with respect to asserted
Intangibles of others, which infringement may have a material adverse effect
on the Company's business. Except as described in the SEC Filings, to the
Company's knowledge there is no Intangible of others which has had or may in
the future have a materially adverse effect on the financial condition,
results of operations, business, properties, assets, liabilities or future
prospects of the Company.
(xiii) The Company has all requisite corporate power and
authority to execute, deliver and perform this Agreement, the Share Purchase
Warrants, the Subscription Agreement and the Escrow Agreement (collectively,
the "Operative Agreements") and to consummate the transactions contemplated
--------- ----------
by the Operative Agreements. All necessary corporate proceedings of the
Company have been duly taken to authorize the execution, delivery and
performance by the Company of the Operative Agreements. This Agreement and the
Escrow Agreement have been duly authorized, executed and delivered by the
Company, are the legal, valid and binding obligations of the Company and are
enforceable as to the Company in accordance with their terms (subject to
applicable bankruptcy, insolvency and other laws affecting the enforceability
of creditors' rights generally and to general equitable principles). The Share
Purchase Warrants and Subscription Agreements have been duly authorized by the
Company and, when executed and delivered by the Company, will be the legal,
valid and binding obligations of the Company enforceable against it in
accordance with their respective terms (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors' rights
generally and to general equitable principles). No consent, authorization,
approval, order, license, certificate or permit of or from, or registration,
qualification, declaration or filing with, any federal, state, local, foreign
or other governmental authority or any court or other tribunal is required by
the Company for the execution, delivery or performance by the Company of the
Operative Agreements or the consummation of the transactions contemplated by
the Operative Agreements, except (A) the filing of a Notice of Sales of
Securities on Form D pursuant to Regulation D, (B) such consents,
authorizations, approvals, registrations and qualifications as may be required
under securities or "blue sky" laws in connection with the issuance, sale and
delivery of the Shares, Compensatory Shares and Warrants pursuant to this
Agreement, and (C) the filing of the Registration Statement. No consent of any
party to any contract, agreement, instrument, lease, license, arrangement or
understanding to which the Company is a party or to which any of its
properties or assets are subject is required for the execution, delivery or
performance of the Operative Agreements or the consummation of the
transactions contemplated by the Operative Agreements, which has not been or
will not be obtained prior to the Closing or any Additional Closings; and the
execution, delivery and performance of the Operative Agreements, and the
consummation of the transactions contemplated by the Operative Agreements,
will not violate, result in a material breach of,
9
<PAGE>
conflict with or (with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement or understanding
(except for any such violation, breach or conflict which has been properly
waived thereunder), violate or result in a material breach of any term of the
Company's Certificate of Incorporation or By-Laws, each as amended to date, or
violate, result in a material breach of or conflict with any law, rule,
regulation, order, judgment or decree binding on the Company, or to which any
of its operations, businesses, properties or assets are subject.
(xiv) The Shares, when issued and delivered to the subscribers
therefor, pursuant to the terms of this Agreement and the Subscription
Agreements, the Warrant Shares, when issued and delivered pursuant to the terms
of the Warrants, and the Compensatory Shares shall be duly authorized, validly
issued, fully paid and nonassessable and shall not have been issued in violation
of any preemptive rights set forth in the Company's Certificate of Incorporation
or By-Laws, each as amended to date, or any agreement to which the Company is a
party.
(xv) Subsequent to the dates as of which information is given
in the SEC Filings, and except as may otherwise be described on
Schedule 5(a)(xv), (A) the Company has not, except in the ordinary course of
- -----------------
business, incurred any liability or obligation, primary or contingent, for
borrowed money, (B) there has not been any material adverse change in the
capital stock, short-term debt or long-term debt of the Company, (C) the
Company has not entered into any transaction not in the ordinary course of
business, (D) the Company has not purchased any of its outstanding capital
stock nor declared or paid any dividend or distribution of any kind on its
capital stock, (E) the Company has not sustained any material loss or
interference with its businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or any legal or governmental proceeding, and (F) there has not
been any material adverse change or any development which the Company
reasonably believes could result in a prospective material adverse change, in
the financial condition results of operations, business, properties, assets,
liabilities or future prospects of the Company.
(xvi) Neither the Company nor, to the knowledge of the Company,
any of its affiliates has, directly or through any agent, sold, offered for
sale or solicited offers to buy, any security of the Company, as defined in
the Act, which is or will be integrated with the sale of the Shares, the
Warrants or the Warrant Shares in a manner that would require the
registration, pursuant to the Act, of the Offering.
(xvii) Except as described in or contemplated by the SEC Filings,
the Company has good and marketable title to all real and personal property
owned by it, in each case free and clear of any security interests, liens,
encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not
interfere with the use made or proposed to be made of such property by the
Company.
10
<PAGE>
(xviii) No labor dispute with the employees of the Company exists
or is threatened or imminent that could result in a material adverse change in
the financial condition, results of operations, business, properties, assets,
liabilities or future prospects of the Company, except as described in or
contemplated by the SEC Filings.
(xix) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which they are engaged; the Company has not
been refused any insurance coverage sought or applied for; and the Company has
no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
insurers of recognized financial responsibility as may be necessary to continue
its business at a cost that would not materially and adversely affect the
financial condition results of operations, business, properties, assets,
liabilities or future prospects of the Company, except as described in or
contemplated by the SEC Filings.
(xx) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested extensions
thereof (except in any case in which the failure so to file would not have a
material adverse effect on the Company), and has paid all taxes required to be
paid by it and any other assessment, fine or penalty levied against it to the
extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good faith or
as described in the SEC Filings.
(xxi) The Company is not in violation of any law or regulation
relating to occupational safety and health or to the storage, handling or
transportation of hazardous or toxic materials and the Company has received
all permits, licenses or other approvals required of it under applicable
occupational safety and health and environmental laws and regulations to
conduct its business, and the Company is in compliance with all terms and
conditions of any such permit, license or approval, except any such violation
of law or regulation, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals which would not, singly or in the aggregate, result in a
material adverse change in the financial condition, results of operations,
business, properties, assets, liabilities or future prospects of the Company,
except as described in or contemplated by the SEC Filings.
(xxii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
11
<PAGE>
(xxiii) The Common Stock is registered pursuant to Section 12(g)
of the Exchange Act. The Company (a) has been subject to the requirements of
Section 12 or 15(d) of the Exchange Act and has filed all the material
required to be filed pursuant to Section 13, 14, or 15(d) for a period of at
least 12 months immediately preceding the date hereof; and (b) has filed in a
timely manner all reports required to be filed during 12 months and any
portion of a month immediately preceding the date hereof and, if the Company
has used (during the 12 months and any portion of a month immediately
preceding the date hereof) Rule 12b-25(b) under the Exchange Act with respect
to a report or a portion of a report, that report or portion thereof has
actually been filed within the time period prescribed by the rule.
(b) Representations and Warranties of the Placement Agent. The
-----------------------------------------------------
Placement Agent hereby represents and warrants to, and agrees with, the Company
and each other as to themselves only as follows:
(i) The Placement Agent will not offer or sell any Shares to
any investor which the Placement Agent does not have reasonable grounds to
believe is an "accredited investor."
(ii) The Placement Agent will not offer or sell any Shares by
means of any form of general solicitation or general advertising, including,
without limitation, the following:
(A) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar medium or
broadcast over television or radio; and
(B) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
(iii) The Placement Agent is a member in good standing of the
National Association of Securities Dealers, Inc. or a registered representative
thereof.
(iv) The Placement Agent will (A) offer and sell the Shares
only in jurisdictions in which the Shares have been registered or are exempt
from registration, and (B) not offer or sell Shares in any jurisdiction in
which the Placement Agent is not qualified to do so.
(v) This Agreement has been duly authorized by all necessary
action on the part of the Placement Agent and constitutes the legal, valid and
binding obligations of the Placement Agent, enforceable against it in
accordance with the terms hereof (subject to applicable bankruptcy, insolvency
and other laws affecting the enforceability of creditors' rights generally and
to general equitable principles). The execution, delivery and performance by
the Placement Agent of its obligations hereunder will not result in a
violation or material breach of any agreement to which the Placement Agent is
a party or any law, rule, regulation, order, judgment or decree binding on the
Placement Agent.
12
<PAGE>
6. Covenants.
---------
(a) Covenants of the Company. The Company covenants to the
------------------------
Placement Agent that it will:
(i) Notify you immediately, and confirm such notice
promptly in writing, (A) when any event shall have occurred during the period
commencing on the date hereof and ending on the later of the Closing Date and
the last Additional Closing Date (if any) as a result of which the SEC Filings
or Executive Summary would include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (B) of the receipt of any
notification with respect to the modification, rescission, withdrawal or
suspension of the qualification or registration of the Shares or of an
exemption from such registration or qualification in any jurisdiction. The
Company will use its best efforts to prevent the issuance of any such
modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you so
request, to obtain the lifting thereof as promptly as possible.
(ii) Not supplement or amend the Executive Summary
unless you shall have approved of such supplement or amendment in writing,
which such approval shall not be unreasonably withheld. If, at any time during
the period commencing on the date hereof and ending on the later of the
Closing Date and the last Additional Closing Date (if any), any event shall
have occurred as a result of which the SEC Filings or Executive Summary
contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, or if, in the opinion of counsel to the
Company or counsel to the Placement Agent, it is necessary at any time to
supplement or amend the SEC Filings or Executive Summary to comply with the
Act, Regulation D or any applicable securities or "blue sky" laws, the Company
will promptly prepare an appropriate supplement or amendment which will
correct such statement or omission or which will effect such compliance.
(iii) Deliver without charge to the Placement Agent
such number of copies of the Executive Summary and any supplement or amendment
thereto as may reasonably be requested by the Placement Agent.
(iv) In this Offering, not, directly or indirectly,
solicit any offer to buy from, or offer to sell to, any person any Shares
except through the Placement Agent.
(v) Not solicit any offer to buy or offer to sell
Shares by any form of general solicitation or advertising, including, without
limitation, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar medium or broadcast over
television or radio or any seminar or meeting whose attendees have been
invited by any general solicitation or advertising.
13
<PAGE>
(vi) Use its best efforts to qualify or register the
Shares for offering and sale under, or establish an exemption from such
qualification or registration under, the securities or "blue sky" laws of such
jurisdictions as you may reasonably request. The Company will not consummate
any sale of Shares in any jurisdiction or in any manner in which such sale may
not be lawfully made.
(vii) At all times during the period commencing on the
date hereof and ending on the later of the Closing Date and the last
Additional Closing Date (if any), provide to each Prospective Investor or his
purchaser representative, if any, on request, such information (in addition to
that contained in the Executive Summary) concerning the Offering, the Company
and any other relevant matters as it possesses or can acquire without
unreasonable effort or expense and extend to each Prospective Investor the
opportunity to ask questions of, and receive answers from, the Company
concerning the terms and conditions of the Offering and the business of the
Company and to obtain any other additional information, to the extent it
possesses the same or can acquire it without unreasonable effort or expense,
as such Prospective Investor may consider necessary in making an informed
investment decision or in order to verify the accuracy of the information
furnished to such Prospective Investor or purchaser representative, as the
case may be.
(viii) Before accepting any subscription to purchase
Shares from, or making any sale to, any Prospective Investor, have reasonable
grounds to believe and actually believe that such Prospective Investor (A)
meets the suitability requirements for investing in the Shares set forth in
the Subscription Agreement, and (B) is an accredited investor; provided,
--------
however, that the Company shall not be required to confirm the accuracy
- -------
of any subscription and may rely upon the information provided by each
Prospective Investor in the relevant subscription.
(ix) Notify you promptly of the acceptance or
rejection of any subscription.
(x) File five (5) copies of a Notice of Sales of
Securities on Form D with the Securities and Exchange Commission (the
"Commission") no later than 15 days after the first sale of the Shares. The
- ----------
Company shall file promptly such amendments to such Notices on Form D as shall
become necessary and shall also comply with any filing requirement imposed by
the laws of any state or jurisdiction in which offers and sales are made. The
Company shall furnish you with copies of all such filings.
(xi) Place the following legend on all certificates
representing the Shares, the Compensatory Shares and the Warrants:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
14
<PAGE>
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH
LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS
CORPORATION, IS AVAILABLE."
(xii) Not, directly or indirectly, engage in any act
or activity which may jeopardize the status of the offering and sale of the
Shares as exempt transactions under the Act or under the securities or "blue
sky" laws of any jurisdiction in which the Offering may be made. Without
limiting the generality of the foregoing, and notwithstanding anything
contained herein to the contrary, the Company shall not, during the six (6)
months following completion of the Offering, (A) directly or indirectly,
engage in any offering of securities which, if integrated with the Offering in
the manner prescribed by Rule 502(a) of Regulation D and applicable releases
of the Commission, may jeopardize the status of the Offering and sale of the
Shares as exempt transactions under Regulation D, or (B) engage in any
offering of securities, without the opinion of counsel reasonably satisfactory
to the Placement Agent, to the effect that such offering would not result in
integration with this Offering, or if integration would so result, that such
integration would not jeopardize the status of this Offering as an exempt
transaction under Regulation D.
(xiii) [Intentionally omitted].
(xiv) Not, during the period commencing on the date
hereof and ending on the later of the Closing Date and the last Additional
Closing Date (if any), issue any press release or other communication or hold
any press conference with respect to the Offering, without your prior written
consent, which consent will not be unreasonably withheld.
(xv) Provided that at least 5,000,000 Shares are sold
in the Offering, not, for a period of 12 months after the date of the Final
Closing, without your prior written consent, offer, issue, sell, contract to
sell, grant any option for the sale of or otherwise dispose of, directly or
indirectly, any shares of Common Stock (or any security or other instrument
which by its terms is convertible into, exercisable for, or exchangeable for
shares of Common Stock), without first obtaining the written consent of the
Placement Agent. Notwithstanding the foregoing, the Company may sell, transfer
or dispose of securities in accordance with the terms of the Company's stock
option plan and other similar plans disclosed in the SEC Filings, provided
that, with respect to options granted to the persons described in Section 8(b)
------------
below, the underlying shares are subject to a similar lock-up arrangement as
set forth in Section 8(b) below.
------------
15
<PAGE>
(xvi) For a period of five years after the date
hereof, furnish you, without charge, the following:
(A) as soon as practicable after they are filed
with the Commission, three (3) copies of financial statements certified by
independent certified public accountants, including a balance sheet, statement
of income and statement of cash flows of the Company and its then existing
subsidiaries, with supporting schedules, prepared in accordance with generally
accepted accounting principles, as at the end of such fiscal year and for the
12 months then ended, which may be on a consolidated basis, and three (3)
copies of unaudited interim financial statements, as at the end of each fiscal
quarter and for the three (3) months then ended, copies of all of which
financial statements shall also be furnished to the purchasers in this
Offering;
(B) as soon as practicable after they have been
sent to stockholders of the Company or filed with the Commission, three (3)
copies of each annual and interim financial and other report or communication
sent by the Company to its stockholders or filed with the Commission; and
(C) as soon as practicable, two copies of every
press release and every material news item and article in respect of the
Company or its affairs which was released by the Company.
(xvii) Comply in all respects with its obligations
under the Operative Agreements.
(xviii) Not, prior to the completion of the Offering,
bid for, purchase, attempt to induce others to purchase, or sell, directly or
indirectly, any Shares or any other securities of the Company of the same
class and series as the Shares in violation of the provisions of Regulation M
under the Exchange Act.
(b) Covenants of the Placement Agent.
--------------------------------
(i) The Placement Agent will not accept the subscription of
any person unless immediately before accepting such subscription the Placement
Agent has reasonable grounds to believe that (A) such person is an "accredited
investor," and (B) all representations made and information furnished by such
person in the Subscription Agreement and related documents are true and
correct in all material respects. The Placement Agent agrees to notify the
Company promptly if the Placement Agent shall, at any time during the period
after delivery of the documents furnished by such person to the Company in
connection with subscription for Shares and immediately before the sale of
Shares to such person, no longer reasonably believes one or more of the
foregoing matters with respect to such person.
16
<PAGE>
(ii) The Placement Agent will not solicit purchasers of
Shares other than in the jurisdictions in which such solicitation may, upon
the advice of counsel, be made under applicable securities or "blue sky" laws
and in which the Placement Agent is qualified so to act.
(iii) The Placement Agent will not sell any Shares to any
investor unless a Subscription Agreement is furnished to such investor within
a reasonable time prior thereto.
(iv) Upon notice from the Company that the SEC Filings or
Executive Summary is to be amended or supplemented (which the Company will
promptly give upon becoming aware of any untrue statement of a material fact
stated in the SEC Filings or Executive Summary or omission to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading), the Placement Agent
will immediately cease use of the SEC Filings or Executive Summary until the
Placement Agent has received such amendment or supplement and thereafter will
make use of the Executive Summary only as so amended or supplemented, and the
Placement Agent will deliver a copy of such amendment or supplement to each
Prospective Investor to whom a copy of the SEC Filings or Executive Summary
had previously been delivered (and who had not returned such copy) and whose
subscription had not been rejected.
(v) The Placement Agent will not make any representations or
other statements concerning the Company or the Offering that are not contained
in the SEC Filings or Executive Summary.
(vi) The Placement Agent will not offer or sell any Shares by
means of any form of general solicitation or general advertising, including,
without limitation, (A) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar medium, or
broadcast over television or radio; or (B) any seminar or meeting whose
attendees have been invited by general solicitation or general advertising.
7. Payment of Expenses.
-------------------
The Company hereby agrees to pay all fees, charges and expenses
incident to the performance by each of the Company and the Placement Agent of
its respective obligations hereunder (other than the fees and expenses of
counsel to the Placement Agent), including, without limitation, all fees,
charges, and expenses in connection with (i) the preparation, printing,
reproduction, filing, distribution and mailing of the Executive Summary, the
Subscription Agreement and related documents (including, to the extent requested
by a Prospective Investor, copies of the SEC Filings), the Operative Agreements
and all other documents relating to the offering, purchase, sale and delivery of
the Shares, and any supplements or amendments thereto, including the fees and
expenses of counsel to the Company, and the cost of all copies thereof, (ii) the
issuance, sale, transfer and delivery of the Shares, the Warrant Shares, the
Compensatory Shares and the Warrants, including any transfer or other taxes
payable thereon and the fees of any Transfer Agent, Warrant Agent or Registrar,
(iii) the registration or qualification of the Shares
17
<PAGE>
or the securing of an exemption therefrom under state or foreign "blue sky" or
securities laws, including, without limitation, filing fees payable in the
jurisdictions in which such registration or qualification or exemption
therefrom is sought, the costs of preparing preliminary, supplemental and
final "Blue Sky Surveys" relating to the offer and sale of the Shares and the
fees and disbursements of counsel to the Placement Agent in connection with
such "blue sky" matters, (iv) the filing fees, if any, payable to the
Commission, and (v) the retention of the Escrow Agent, including the fees and
expenses of the Escrow Agent for serving as such and the fees and expenses of
its counsel.
8. Conditions of Placement Agent's Obligations. The obligations of
-------------------------------------------
the Placement Agent pursuant to this Agreement shall be subject, in its
discretion, to the continuing accuracy of the representations and warranties of
the Company contained herein and in each certificate and document contemplated
under this Agreement to be delivered to the Placement Agent, as of the date
hereof and as of the Closing Date (and, if applicable, each Additional Closing
Date), to the performance by the Company of its obligations hereunder, and to
the following conditions:
(a) At the Closing and each Additional Closing, as the case may be,
the Placement Agent shall have received the favorable opinions of Wilson Sonsini
Goodrich & Rosati, counsel for the Company, in substantially the form of Exhibit
-------
C hereto, and Heller Ehrman White & McAuliffe, patent counsel for the Company,
- -
substantially in the form of Exhibit D hereto.
---------
(b) On or prior to the Closing, the Placement Agent shall have
received agreements from each of the Company's officers, directors and holders
of 5% or more of the Company's Common Stock, pursuant to which such persons (or
entities) and their respective affiliates shall have agreed not to offer, issue,
sell, contract to sell, grant any option for the sale of or otherwise dispose of
any securities of the Company for a period of 6 months from the effective date
of the Final Closing without the Placement Agent's prior written consent.
(c) On or prior to the Closing Date and each Additional Closing Date,
as the case may be, the Placement Agent shall have been furnished such
information, documents and certificates as it may reasonably require for the
purpose of enabling it to review the matters referred to in this Section 8 and
---------
in order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties, covenants, agreements or conditions herein
contained, or as it may otherwise reasonably request.
(d) At the Closing and each Additional Closing, as the case may be,
the Placement Agent shall have received a certificate of the chief executive
officer of the Company, dated the Closing Date or such Additional Closing Date,
as the case may be, to the effect that, as of the date of this Agreement and as
of the Closing Date or such Additional Closing Date, as the case may be, the
representations and warranties of the Company contained herein were and are
accurate, and that as of the Closing Date or such Additional Closing Date, as
the case may be, the
18
<PAGE>
obligations to be performed by the Company hereunder on or prior thereto have
been fully performed.
(e) All proceedings taken in connection with the issuance, sale and
delivery of the Shares shall be reasonably satisfactory in form and substance to
you and your counsel.
(f) There shall not have occurred, at any time prior to the Closing
or, if applicable, an Additional Closing, as the case may be, (i) any domestic
or international event, act or occurrence which has materially disrupted, or in
your reasonable opinion will in the immediate future materially disrupt, the
securities markets; (ii) a general suspension of, or a general limitation on
prices for, trading in securities on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market; (iii) any outbreak of major
hostilities or other national or international calamity affecting securities
markets in the United States; (iv) any banking moratorium declared by a state or
federal authority; (v) any moratorium declared in foreign exchange trading by
major international banks or other persons; (vi) any material interruption in
the mail service or other means of communication within the United States; (vii)
any material adverse change in the business, properties, assets, results of
operations or financial condition of the Company; or (viii) any change in the
market for securities in general or in political, financial or economic
conditions which, in your reasonable business judgment, makes it inadvisable to
proceed with the offering, sale and delivery of the Shares.
Any certificate or other document signed by any officer of the Company
and delivered to you or to your counsel as required hereunder shall be deemed a
representation and warranty by the Company hereunder as to the statements made
therein. If any condition to your obligations hereunder has not been fulfilled
as and when required to be so fulfilled, you may terminate this Agreement or, if
you so elect, in writing waive any such conditions which have not been fulfilled
or extend the time for their fulfillment. In the event that you elect to
terminate this Agreement, you shall notify the Company of such election in
writing. Upon such termination, neither party shall have any further liability
or obligation to the other except as provided in Section 10 hereof.
----------
9. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless the Placement
Agent, its respective officers, directors, stockholders, employees, agents,
advisors, consultants and counsel, and each person, if any, who controls the
Placement Agent within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, against any and all loss, liability, claim, damage and expense
(which shall include, for all purposes of this Section 9, without limitation,
---------
reasonable attorneys' fees and any and all expenses incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim and any and all amounts paid in settlement of any claim or litigation) as
and when incurred arising out of, based upon or in connection with (i) any
untrue statement or alleged untrue statement of a material fact contained in (A)
the SEC Filings, the Executive Summary or in any document delivered or
19
<PAGE>
statement made pursuant to Section 6(a)(vii), (B) the Registration Statement
-----------------
or any amendment or supplement thereto, or (C) in any application or other
document or communication (in this Section 9 collectively called an
---------
"application") executed by or on behalf of the Company or based upon written
-----------
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify the Shares or the Compensatory Shares under
the "blue sky" or securities laws thereof or in order to secure an exemption
from such registration or qualification or filed with the Commission, or any
omission or alleged omission to state a material fact required to be stated in
the items listed in clauses (A), (B) or (C) or necessary to make the
statements therein, in light of the circumstances in which made, not
misleading (unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of the Placement Agent with respect to the Compensatory Shares); or (ii) any
breach of any representation, warranty, covenant or agreement of the Company
contained in the Operative Agreements. The foregoing agreement to indemnify
shall be in addition to any liability the Company may otherwise have,
including liabilities arising under this Agreement.
If any action is brought against the Placement Agent or any of its
officers, directors, stockholders, employees, agents, advisors, consultants and
counsel, or any controlling persons of the Placement Agent (an "indemnified
-----------
party"), in respect of which indemnity may be sought against the Company
- -----
pursuant to the foregoing paragraph, such indemnified party or parties shall
promptly notify the Company (the "indemnifying party") in writing of the
------------------
institution of such action (but the failure so to notify shall not relieve the
indemnifying party from any liability it may have other than pursuant to this
Section 9(a) unless such failure materially prejudices the indemnifying party),
- ------------
and the indemnifying party shall promptly assume the defense of such action,
including the employment of counsel (reasonably satisfactory to such indemnified
party or parties) and payment of expenses. Such indemnified party shall have
the right to employ its own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action or the
indemnifying party shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it or them
or to other indemnified parties which are different from or additional to those
available to one or more of the indemnifying parties and it would be
inappropriate for the same counsel to represent both parties due to actual or
potential differing interests between them, in any of which events such
reasonable fees and expenses shall be borne by the indemnifying party and the
indemnifying party shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties. Anything in this paragraph to
the contrary notwithstanding, the indemnifying party shall not be liable for any
settlement of any such claim or action effected without its written consent.
The Company agrees promptly to notify the Placement Agent of the commencement of
any litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of the Shares, the Executive Summary or
any application.
20
<PAGE>
(b) The Placement Agent agrees to indemnify and hold harmless the
Company, its officers, directors, employees, agents and counsel, and each other
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to the Placement Agent in Section 9(a), with respect
------------
to (i) any untrue statement or alleged untrue statement of a material fact, or
any omission or alleged omission to state a material fact required to be stated
or necessary to make the statements, in light of the circumstances in which they
were made, not misleading, but only with respect to statements or omissions in
the Registration Statement or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of the Placement Agent with respect to the Compensatory Shares; or
(ii) any breach of any representation, warranty, covenant or agreement of the
Placement Agency in the Operative Agreements. If any action shall be brought
against the Company or any other person so indemnified in respect of which
indemnity may be sought against the Placement Agent pursuant to this Section
-------
9(b), the Placement Agent shall have the rights and duties given to the
- ----
indemnifying party, and the Company and each other person so indemnified shall
have the rights and duties given to the indemnified parties, by the provisions
of Section 9(a). The foregoing agreement to indemnify shall be in addition to
------------
any liability the Placement Agent may otherwise have, including liabilities
arising under this Agreement.
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 9(a) or
------------
9(b) but it is found in a final judicial determination, not subject to further
- ----
appeal, that such indemnification may not be enforced in such case, even though
this Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then the Company (including for this purpose any contribution
made by or on behalf of any officer, director, employee, agent or counsel of the
Company or any controlling person of the Company), on the one hand, and the
Placement Agent (including for this purpose any contribution by or on behalf of
an indemnified party), on the other hand, shall contribute to the losses,
liabilities, claims, damages and expenses whatsoever to which any of them may be
subject, in such proportions as are appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Placement Agent, on the other
hand; provided, however, that if applicable law does not permit such allocation,
then other relevant equitable considerations such as the relative fault of the
Company and the Placement Agent in connection with the facts which resulted in
such losses, liabilities, claims, damages and expenses shall also be considered.
The relative benefits received by the Company, on the one hand, and the
Placement Agent, on the other hand, shall be deemed to be in the same proportion
as (x) the total proceeds from the Offering (net of compensation payable to the
Placement Agent pursuant to Section 4 hereof but before deducting expenses)
---------
received by the Company, bears to (y) the compensation received by the Placement
Agent pursuant to Section 4 hereof.
---------
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission or alleged omission
relates to information supplied by the
21
<PAGE>
Company or by the Placement Agent and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement,
alleged statement, omission or alleged omission. The Company and the Placement
Agent agree that it would be unjust and inequitable if the respective
obligations of the Company and the Placement Agent for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses or by any other method of allocation
that does not reflect the equitable considerations referred to in this
Section 9(c). In no case shall the Placement Agent be responsible
- ------------
for a portion of the contribution obligation in excess of the compensation
received by it pursuant to Section 4 hereof less the aggregate amount of any
---------
damages that the Placement Agent has otherwise been required to pay in respect
of the same or any substantially similar claim. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 9(c), each person,
------------
if any, who controls the Placement Agent within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and each officer, director,
stockholder, employee, agent and counsel of the Placement Agent shall have the
same rights to contribution as the Placement Agent, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and each officer, director, employee, agent and
counsel of the Company shall have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 9(c). Anything
------------
in this Section 9(c) to the contrary notwithstanding, no party shall be liable
------------
for contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 9(c) is intended to supersede any
------------
right to contribution under the Act, the Exchange Act or otherwise.
10. Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the Closing Date and, if applicable, each Additional Closing Date,
and such representations, warranties, covenants and agreements, including the
indemnity and contribution agreements contained in Section 9, shall remain
---------
operative and in full force and effect regardless of any investigation made by
or on behalf of the Placement Agent or any indemnified person, or by or on
behalf of the Company or any person or entity which is entitled to be
indemnified under Section 9(b), and shall survive termination of this Agreement
------------
or the issuance, sale and delivery of the Shares. In addition, notwithstanding
any election hereunder or any termination of this Agreement, and whether or not
the terms of this Agreement are otherwise carried out, the provisions of
Sections 6(a)(x), 6(a)(xvii), 7, 9, 10 and 12 shall survive termination of this
- ---------------- ---------- - - -- --
Agreement and shall not be affected in any way by such election or termination
or failure to carry out the terms of this Agreement or any part thereof.
11. Notices. All communications hereunder, except as may be
-------
otherwise specifically provided herein, shall be in writing and, if sent to the
Placement Agent, shall be mailed, delivered or telexed or telegraphed and
confirmed by letter, to the address set forth above, or if sent to the Company,
shall be mailed, delivered or telexed or telegraphed and confirmed by
22
<PAGE>
letter, to Cardima, Inc., 47266 Benicia Street, Fremont, California 94538,
Attention: President. All notices hereunder shall be effective upon receipt by
the party to which it is addressed.
12. Assignment. This Agreement shall not be assigned by any party
----------
hereto without the prior written consent of the other parties hereto.
13. Parties. This Agreement shall inure solely to the benefit of,
-------
and shall be binding upon, the Placement Agent and the Company and the persons
and entities referred to in Section 9 who are entitled to indemnification or
---------
contribution and their respective successors, legal representatives and assigns
(which shall not include any purchaser, as such, of Shares), and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained.
14. Construction. This Agreement shall be construed in accordance
------------
with the laws of the State of New York, without giving effect to conflict of
laws.
[INTENTIONALLY LEFT BLANK]
23
<PAGE>
15. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement among us.
Very truly yours,
CARDIMA, INC.
By:
----------------------------------------
Name:
Title:
Accepted as of the date first above written.
New York, New York
SUNRISE SECURITIES CORP.
By:
-----------------------------------
Name:
Title:
24
<PAGE>
EXHIBIT A
---------
Subscription Agreement
25
<PAGE>
EXHIBIT B
---------
Placement Agent Share Purchase Warrant
26
<PAGE>
EXHIBIT C
---------
Opinion of Counsel to the Company
27
<PAGE>
EXHIBIT D
---------
Opinion of Patent Counsel to the Company
28
<PAGE>
SCHEDULE 5(a)(xv)
-----------------
None
29
<PAGE>
Exhibit 99
Company Press Release
Cardima Issues Shares in Private
Placement
FREMONT, Calif.--(BW HealthWire)--Jan. 25, 1999--Cardima, Inc. (Nasdaq:CRDM -
news) announced it had issued, with the assistance of a placement agent,
5,803,500 shares of common stock to certain accredited investors in a private
placement at a purchase price of $2.00 per share.
In addition, the Company issued 354,806 shares of Common Stock to the placement
agent in lieu of commissions payable to the placement agent. The placement agent
also received a warrant to purchase 580,350 shares of the Company's common stock
with an exercise price of $2.20 per share. The Company has agreed to register
the purchased shares for resale by the investors as well as the shares issued to
the placement agent, including the shares of common stock underlying the
warrant.
Additionally, Cardima announced that it had reduced its full-time work force by
approximately 30%. The reductions were Company-wide and were made to align the
Company's available cash and spending plans going forward.
Phillip Radlick, Ph.D., President and Chief Executive Officer of Cardima, said,
``We want to achieve several key milestones with these new funds. We plan to
continue to roll out the Revelation and Revelation Tx microcatheters, both of
which are approved for therapeutic treatment of atrial fibrillation (AF) in the
European Union, and the only microcatheters to have such approvals. We will
expand the AF clinical trial in the United States, permission for which has been
granted by the U.S. Food and Drug Administration (FDA). We will continue to work
with opinion leaders in the electrophysiology community to develop leading-edge
products to diagnose and treat AF and ventricular tachycardia (VT).''
Cardima, Inc. designs, develops, manufactures and markets minimally invasive,
single-use microcatheter-based systems for the dual purpose of finding and
treating the two most common forms of cardiac arrhythmias: atrial fibrillation,
a condition of the heart characterized by the irregular and very rapid beating
of the heart's atrial chambers, and ventricular tachycardia, a life-threatening
condition in which heartbeats are improperly initiated from within the
ventricular walls, bypassing the heart's normal conduction system. Cardima is
the only company developing unique microcatheter systems to be used in both
diagnosing and treating AF and VT. For further information about atrial
fibrillation and ventricular tachycardia, contact Cardima's website at
www.cardima.com.
Statements included in this press release that are not historical or current
facts and which relate to the continued roll out of the Revelation and
Revelation Tx microcatheters, expansion of the AF clinical trial and the
development of leading-edge products are ``forward-looking statements'' made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and are subject to certain
<PAGE>
risks and uncertainties that could cause actual results to differ materially
from those anticipated. These risks and uncertainties include, but are not
limited to, the Company's failure to continue the roll out of the Revelation and
Revelation Tx microcatheters, expand the AF clinical trial, develop new products
to diagnose and treat AF and VT and those risks discussed in the Company's
periodic reports filed with the Securities and Exchange Commission.
Contact:
Cardima, Inc.
Ronald E. Bourquin, 510/354-0162
www.cardima.com
2
