<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended August 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Transition Period from ________ to _________
Commission File Number: 0-11868
Cardiodynamics International Corporation
(Exact name of registrant as specified in its charter)
California 95-3533362
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6175 Nancy Ridge Drive, Suite 300, San Diego, California 92121
(Address of principal executive offices) (Zip Code)
(619) 535-0202
(Registrant's telephone number)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X
----
No ____
As of October 8, 1999, 39,888,811 shares of common stock were outstanding.
Transitional Small Business Disclosure Format
(Check one):
Yes _____ No X
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Cardiodynamics International Corporation
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
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Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets at August 31, 1999 (unaudited) and
November 30, 1998 (audited). 3
Statements of Operations (unaudited) for the three and
nine months ended August 31, 1999 and August 31, 1998. 4
Statements of Cash Flows (unaudited) for the nine
months ended August 31, 1999 and August 31, 1998. 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
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<PAGE>
Cardiodynamics International Corporation
Balance Sheets
<TABLE>
<CAPTION>
August 31, November 30,
1999 1998
Assets (Unaudited) (Audited)
----------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,836,411 $ 2,633,086
Accounts receivable, net of allowance for doubtful accounts
and returns of $136,647 at August 31, 1999 and $32,728 at
November 30, 1998 3,262,568 632,190
Inventory, net 1,383,204 995,364
Other current assets 152,245 81,229
---------------- ----------------
Total current assets 7,634,428 4,341,869
---------------- ----------------
Property and equipment, net 294,012 266,917
Deposits 42,500 40,099
---------------- ----------------
Total assets $ 7,970,940 $ 4,648,885
================ ================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 897,099 $ 577,836
Accrued expenses 360,483 112,703
Accrued salaries, wages and benefits 330,396 276,179
Current maturities of note payable to bank 500,000 2,000,000
Current maturities of long-term debt 94,000 37,816
---------------- ----------------
Total current liabilities 2,181,978 3,004,534
Note payable - related parties 1,000,000 1,000,000
Note payable to bank, less current maturities 1,500,000 --
Long-term debt, less current maturities 85,653 112,215
---------------- ----------------
Total liabilities 4,767,631 4,116,749
Convertible preferred stock, no par value; 18,000,000 shares
authorized; no Series A shares issued and outstanding at
August 31, 1999 and 2,240 shares at November 30, 1998 -- 2,152,294
Shareholders' equity (deficit):
Common stock, no par value; 50,000,000 shares authorized;
issued and outstanding 39,888,811 shares at August 31, 1999
and 32,676,029 shares at November 30, 1998 24,073,245 15,598,274
Accumulated deficit (20,869,936) (17,218,432)
---------------- ----------------
Total shareholders' equity (deficit) 3,203,309 (1,620,158)
----------------- ----------------
Commitments and contingencies
Total liabilities and shareholders' equity (deficit) $ 7,970,940 $ 4,648,885
================ =================
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
CardioDynamics International Corporation
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
------------------------------------------------------------------------------------
1999 1998 1999 1998
------------------ ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 2,073,582 $ 670,723 $ 4,676,989 $ 1,295,961
Cost of sales 716,117 299,172 1,681,515 784,750
------------------ ----------------- ----------------- ----------------
Gross margin 1,357,465 371,551 2,995,474 511,211
Operating expenses:
Research and development 682,705 564,562 1,524,530 1,709,040
Selling, general, and
administrative 1,680,044 1,023,944 4,233,654 2,708,204
------------------ ----------------- ----------------- ----------------
Total operating expenses 2,362,749 1,588,506 5,758,184 4,417,244
------------------ ----------------- ----------------- ----------------
Loss from operations (1,005,284) (1,216,955) (2,762,710) (3,906,033)
Other income (expense):
Interest, net (32,683) (76,121) (166,680) (68,368)
Other, net (494,259) 901 (495,284) 3,901
------------------ ----------------- ----------------- ----------------
Total other income (expense) (526,942) (75,220) (661,964) (64,467)
Loss before income taxes (1,532,226) (1,292,175) (3,424,674) (3,970,500)
Income taxes -- -- (800) (800)
------------------ ----------------- ----------------- ----------------
Net loss (1,532,226) (1,292,175) (3,425,474) (3,971,300)
Preferred stock dividends (194,310) -- (226,030) --
------------------ ----------------- ----------------- ----------------
Net loss to common shareholders $ (1,726,536) $ (1,292,175) $ (3,651,504) $ (3,971,300)
================== ================= ================= ================
Net loss per common share, basic
and diluted $ (.04) $ (.04) $ (.10) $ (.12)
================== ================= ================= ================
Weighted-average number of common
shares outstanding 39,502,444 32,105,450 35,103,427 32,097,451
================== ================= ================= ================
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
CardioDynamics International Corporation
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
August 31,
----------------------------------------
1999 1998
----------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,425,474) $ (3,971,300)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 74,593 55,359
Gain on sale of fixed asset -- (3,000)
Provision for warranty repairs 91,743 19,500
Provision for (reduction of) inventory returns 49,667 (521,010)
Provision for (reduction of) doubtful receivables 103,919 (135,262)
Compensatory stock options granted -- 2,565
Warrants issued for access to technology 350,479 --
Non-cash expense for retirement of Series A preferred stock 483,333 --
Changes in operating assets and liabilities:
Accounts receivable (2,734,297) (358,015)
Inventory, net (387,840) (106,091)
Other current assets (65,817) 83,092
Deposits (3,346) (13,371)
Accounts payable 319,263 242,328
Accrued expenses 118,546 98,535
Accrued salaries, wages and benefits 54,217 126,592
----------------- ------------------
Net cash used in operating activities (4,971,014) (4,480,078)
----------------- ------------------
Cash flows from investing activities:
Proceeds from sale of fixed assets -- 53,000
Purchases of property and equipment (38,932) (43,608)
----------------- ------------------
Net cash provided by (used in) investing activities (38,932) 9,392
----------------- ------------------
Cash flows from financing activities:
Repayment of long-term debt (31,766) (8,460)
Repayment of note to bank (2,000,000) --
Proceeds from bank borrowing 2,000,000 3,000,000
Preferred stock issuance, net (7,070) 2,880,903
Increase in long-term debt -- 32,250
Issuance of common stock, net 5,252,107 29,700
----------------- ------------------
Net cash provided by financing activities 5,213,271 5,934,393
----------------- ------------------
Net increase in cash and cash equivalents 203,325 1,463,707
Cash and cash equivalents at beginning of period 2,633,086 2,655,349
----------------- ------------------
Cash and cash equivalents at end of period $ 2,836,411 $ 4,119,056
================= ==================
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
CardioDynamics International Corporation
Notes to Financial Statements
(Unaudited)
Description of Business
At CardioDynamics International Corporation, we develop, manufacture and market
heart-monitoring devices that provide physicians with continuous data on a wide
range of parameters relating to blood flow and heart function. Unlike other
cardiac function monitoring technologies, our monitors are non-invasive. Our
primary products, the BioZ(TM) System, the BioZ(TM) Portable, and the
BioZ.com(TM) use a technology called thoracic electrical bioimpedance (TEB) to
obtain data which is typically available only through a time-consuming, costly,
and potentially dangerous invasive procedure known as right heart
catheterization, or pulmonary artery catheterization.
Many patients who might otherwise benefit from cardiac function monitoring are
often not given such treatment because the risks and costs associated with
pulmonary artery catheterization often outweigh the potential benefits. The
BioZ(TM) Systems allow these patients to receive treatment in a safe, efficient,
and cost-effective manner. Since the BioZ(TM) Systems provide cardiac function
monitoring noninvasively, they have the potential to expand the number of
clinical applications well beyond cardiology, intensive care, and surgery.
These include applications for congestive heart failure, hypertensive,
emergency, dialysis, immune suppressed, high risk obstetric, and pacemaker
patients.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the
requirements for Form 10-QSB and, therefore, do not include all the information
and footnotes which would be presented if these financial statements had been
prepared in accordance with generally accepted accounting principles.
These statements should be read in conjunction with the Financial Statements and
Notes that go along with our audited financial statements, as well as the other
financial information for the fiscal year ended November 30, 1998 as presented
in our Annual Report on Form 10-KSB. Financial presentations for prior periods
have been reclassified to provide consistency in reporting.
In our opinion, the information contained in this report reflects all
adjustments necessary to make the results of operations for the interim periods
a fair statement of our operations. All such adjustments are of a normal
recurring nature. The results of operations for the three and nine months ended
August 31, 1999 are not necessarily indicative of the results that may be
expected for the full fiscal year ended November 30, 1999. Options and warrants
to purchase 6,646,550 shares of common stock were outstanding during the quarter
ended August 31, 1999 but were not included in the computation of loss per share
because the effect would be anti-dilutive.
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<PAGE>
CardioDynamics International Corporation
Notes to Financial Statements
(Unaudited)
Preferred Stock Retirement
To achieve an orderly conversion of the outstanding shares of our Series A
convertible preferred stock with a minimum impact on the market price of our
common stock, in June of 1999, we identified a group of strategic investors and
facilitated the private sale of the common shares issued upon conversion of the
remaining portion of the preferred stock by reducing the effective purchase
price to $1.25 per share by issuing an additional 305,772 shares of common stock
at the market price of $1.56 per share. As a result of the Series A Preferred
Stock retirement, we recorded a non-cash accounting charge of $491,954 as other
expense in our third quarter ended August 31, 1999. In addition, $192,000 was
recorded as a preferred stock dividend related to 375,000 premium priced
warrants issued to the Series A Preferred Stock investors in exchange for the
elimination of their right to buy an additional $3 million of convertible
preferred stock.
Common Stock Private Placement
On May 28, 1999 we completed a $5.2 million private placement of common stock to
institutional and other accredited investors who purchased unregistered shares
with a six-month holding restriction for $1.00 per share, representing a 27
percent discount from the closing bid price at the time of the transaction.
Debt
In January of 1999 we established a secured revolving credit line with a bank.
The credit line provides for borrowing of up to $3,000,000 at the bank's prime
rate. The credit line is collateralized by all the assets of our company. At
August 31, 1999, we had no borrowings under the credit line.
In February of 1999 we entered into a three-year unsecured term loan agreement
with a bank. Under the terms of the agreement we borrowed $2,000,000 with
monthly interest-only payments for the first 12 months at the bank's prime rate
and monthly principal installments of $83,333 each, plus interest at one percent
above the bank's prime rate beginning March 2000. In connection with the loan,
we issued to the bank 50,000 warrants to purchase our common stock at $2.20 per
share. The co-chairmen of our Board of Directors guaranteed the loan. At
August 31, 1999, $2,000,000 is outstanding under this agreement.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the Financial
Statements and Notes that accompany our audited financial statements, as well as
the other financial information for the fiscal year ended November 30, 1998.
Some of our discussion is forward-looking and involves risks and uncertainties.
For information regarding risk factors that could have a material adverse effect
on the Company's business, refer to our November 30, 1998 Form 10-KSB and page
15 of this report.
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<PAGE>
CardioDynamics International Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations (Quarters referred to herein are fiscal quarters ended
- ---------------------
August 31)
Net sales increased 209% from $670,723 in the third quarter of fiscal 1998 to
$2,073,582 in the third quarter of fiscal 1999. In the first nine months of
fiscal 1999, net sales grew to $4,676,989, an increase of 261% over the first
nine months of fiscal 1998 with sales of $1,295,961. The significant increase
in fiscal 1999's sales is due to expansion of both our domestic direct sales
force and our international distribution network. By targeting individual
physician offices as well as primary care facilities, our direct sales force
sold 56 systems during the third quarter of 1999. We believe these results
reflect growing recognition of the contribution our products are making in the
treatment of congestive heart failure patients.
In November of 1998, we received CE Mark approval for our BioZ.com(TM), which
opened the door for distribution in Europe. In August 1999, we entered into a
strategic alliance with GE Marquette for exclusive distribution of our BioZ.com
in Europe. A total of 30 systems were sold through our distribution network in
the third quarter, including nine systems shipped to the Government of Mexico.
As of August 31, 1999 we have agreements with 18 medical device distributors
representing 36 countries in Europe, Asia, Africa, the Middle East and South
America. The BioZ.com product line accounted for 93% of our sales in the third
quarter, with disposable sensors and BioZ systems accounting for the balance of
sales in the period.
As the higher priced BioZ.com(TM) product accounts for a greater portion of our
overall sales, our average unit sales price has increased while our
manufacturing cost has remained relatively constant. Additionally, as our
overall unit sale volumes increase, our manufacturing capacity is more fully
utilized, also contributing to improved gross margins. For the quarter ended
August 31, 1999 our gross margin was $1,357,465, or 66 percent of sales, up from
1998's third quarter margin of $371,551, or 55 percent of sales. Year to date
gross margin percentages for fiscal 1999 and 1998 were 64 percent and 39
percent, respectively.
We continue to invest a significant portion of our resources into sales and
marketing. At August 31, 1999, we had a total of 23 direct sales
representatives placed in strategic locations throughout the United States. In
the third fiscal quarter of 1999, sales and marketing related expenses totaled
$1,318,565, an 86 percent increase over the same period in fiscal 1998 of
$709,962. For the first nine months of fiscal 1999, sales and marketing related
expenses were $3,252,910, a 93 percent increase over the first nine months of
fiscal 1998. We intend to continue to expand of our direct sales force and
increase our investment in selling and marketing efforts focused on support of
our direct sales force in the outpatient markets.
As a result of ongoing cost containment efforts, general and administrative
expenses reflect a decline on a year to date basis over last year's spending
levels. We spent $980,744 in the first nine months of fiscal 1999 compared with
$1,019,864 in the same period last year, a four percent decrease over last years
nine-month run rate.
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<PAGE>
CardioDynamics International Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations (Continued)
- ---------------------
Research and development expenditures for the third quarter of fiscal 1999 were
$682,705 compared with 1998's spending level of $564,562, an increase of 21
percent. However, included in the third quarter 1999 amount was a non-cash
charge of $350,479 related to common stock warrants issued to GE Marquette in
conjunction with our strategic alliance for access to their technology.
Excluding the non-cash charge, research and development spending would have been
$332,226 in the third quarter. For the nine months ended August 31, 1999
research and development costs were down 11 percent from fiscal 1998 because the
fiscal 1998 amount includes the concentrated investment required to complete the
development of the BioZ.com in just 11 months. We expect to continue to devote
a significant portion of our resources to research, clinical studies, further
enhancements to the BioZ(TM) product line, and new product development.
We received $38,908 in interest income and incurred $71,591 of interest expense
in the third quarter of 1999 compared with interest income of $18,825 and
interest expense of $94,946 in the same period of fiscal 1998. For the nine-
month period ending August 31, 1999, interest income was $68,409 and interest
expense was $235,089 as compared with the same period last year, with interest
income of $59,066 and interest expense of $127,434. The higher interest expense
in fiscal 1999 is largely a result of increased borrowings under our various
financing agreements.
To achieve an orderly conversion of the outstanding shares of our Series A
convertible preferred stock with a minimum impact on the market price of our
common stock, in June of 1999, we identified a group of strategic investors and
facilitated the private sale of the common shares issued upon conversion of the
remaining portion of the preferred stock by reducing the effective purchase
price. As a result of the Series A preferred stock retirement, we recorded a
non-cash charge of $491,954 as other expense, in the third fiscal quarter which
is recorded in other, net.
Under the terms of the preferred stock agreement, the preferred shareholders
received $2,746 and $34,446 respectively in dividends in the third quarter and
first nine months of fiscal 1999 prior to elimination of the preferred stock
during the quarter. We recorded an additional $191,564 preferred stock dividend
related to premium-priced warrants issued to the Series A preferred stock
investors in exchange for the elimination of their contractual right to buy an
additional three million dollars of convertible preferred stock.
The net loss to common shareholders in the third quarter of 1999 was $1,726,536,
or $.04 per share, compared with $1,292,175, or $.04 per share for the same
quarter last year. Excluding non-cash charges, the loss for the quarter would
have been $692,539 or $.02 per share. Including non-cash charges, the year to
date net loss to common shareholders was $3,651,504 or $.10 per share, down from
$3,971,300 or $.12 per share in the same period in fiscal 1998. Excluding non-
cash charges, the loss would have been $2,391,477 or $.08 per share, a 40%
reduction over 1998's same period. Our weighted average number of common shares
outstanding increased by nine percent during the first three quarters of 1999,
primarily as a result of the May 28, 1999 common stock private placement and
Series A preferred stock conversions into common shares.
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<PAGE>
CardioDynamics International Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
- -------------------------------
At the end of the second fiscal quarter, we completed a $5.2 million private
placement of common stock, providing us with the capital to continue building
our domestic and international sales and marketing presence, funding our
research and product development, and support of additional clinical studies.
The common shares were sold to institutional and accredited investors including
Domain Associates, L.L.C., a Princeton, New Jersey-based venture capital group
and Veritas Societe Generale, our largest institutional shareholder at that
time.
To help provide the cash flow necessary to meet the increasing demand for the
Company's BioZ(TM) systems, in January 1999 we established a secured revolving
credit line with Imperial Bank. The credit line provides for borrowings of up
to $3,000,000 at the bank's prime rate. Under the terms of the agreement, we are
required to meet certain loan covenants, including maintenance of a minimum
quick ratio and maximum quarterly losses. The credit line is collateralized by
all the assets of our company. At August 31, 1999, there were no borrowings
outstanding under the credit line.
In February of 1999 we entered into a three-year unsecured term loan agreement
with City National Bank. Under the terms of the agreement we borrowed
$2,000,000 with monthly interest-only payments for the first 12 months at the
bank's prime rate and monthly principal installments of $83,333 each, plus
interest at one percent above the bank's prime rate, beginning March 2000. At
August 31, 1999 $2,000,000 is outstanding under this agreement.
In August of 1998, we raised $3,000,000 through the issuance of Series A
convertible preferred stock to a group of institutional investors. During the
third quarter of 1999, we facilitated conversion of the remaining shares of the
Series A preferred stock into shares of our common stock under the terms of the
preferred stock agreement. As a result of the additional common shares and
warrants issued to the investors, we recorded in other expense a non-cash charge
in the amount of $491,954.
In March 1998, we entered into an unsecured private line of credit agreement
with the co-chairmen of our Board of Directors. Under the terms of the
agreement we may borrow up to $3,000,000 on an as-needed basis with monthly
interest-only payments at an annual interest rate of 10.0%. In August of 1998
we borrowed $1,000,000 on this line of credit and used the proceeds to reduce
outstanding borrowings under a bank term loan. In February 1999, the line of
credit was extended to September 30, 2000. At August 31, 1999 we had $1,000,000
outstanding under this line.
We expect to generate an operating loss for our fiscal year ended November 30,
1999. Longer term, our liquidity will depend on our ability to successfully
commercialize the BioZ(TM) Systems and other diagnostic products and to raise
additional funds through public or private financing, bank loans, collaborative
relationships or other arrangements. We can give no assurance that such
additional funding will be available on terms attractive to us, or at all.
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<PAGE>
CardioDynamics International Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Other Matters
Year 2000 Compliance
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Many computer systems experience problems handling dates beyond the year 1999.
This issue will impact virtually any business that relies on computers. In
addition to our own potential problems, there are governmental agencies,
financial institutions, utilities and other basic service providers that may
encounter problems that are outside of our control. In order to correct this
issue, some computer hardware and software will need to be modified prior to the
year 2000 in order for it to remain functional. We have taken steps to assess
the internal readiness of our computer systems and the compatibility of our
products for handling the year 2000 issue. We have created a Year 2000 task
force which is assessing these issues. The project has been broken down into the
following phases.
. Awareness: To create awareness of the potential business implications of
the Year 2000 challenge within CardioDynamics. Our employees, when appropriate,
will be kept informed of the news and issues related to the Year 2000 issue. We
have focused on both our information technology systems as well as our products.
. Inventory and Assessment: We have inventoried all of our computer software
and hardware as well as facilities, telecommunications, and external interfaces.
Significant third party vendors will be contacted to determine their Year 2000
readiness.
. Renovation: As problems are discovered, strategies will be developed to
either correct the problem or determine if new equipment or software is
necessary.
. Testing: Testing of our systems will continue to occur to determine whether
they are performing reliably under Year 2000 conditions. All of our internal
systems and workstations have been successfully tested for Year 2000 compliance.
. Implementation: Upon successful completion of the testing process the
assets will be reintroduced into production in order to allow adequate time to
prevent any unforeseen circumstances.
. Contingency: In addition, we will develop a contingency plan in the event
that our internal systems, products or suppliers are not Year 2000 compliant.
As of August 31, 1999 we have completed the awareness, inventory and assessment,
and testing stages, and are making any necessary renovations as problems arise.
We have already determined that our internal information systems, including
individual workstations and our manufacturing requirements planning system, are
certified as Year 2000 compliant. Additionally, our newest products have been
specifically tested for Year 2000 performance and no significant problems have
been identified. We are approximately 90% complete in certifying key third party
vendors' Year 2000 compliance. In addition, we have, and continue to consider,
contingency plans in the event that our internal systems, products or suppliers
are not Year 2000 compliant.
-11-
<PAGE>
CardioDynamics International Corporation
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Other Matters
Year 2000 Compliance - (Continued)
- ---------------------
We plan to have all stages of the Year 2000 project completed no later than the
fall of 1999. Thus far, we have not had to spend significant amounts of money to
address the year 2000 issue. We currently believe that the aggregate cost will
be less than $50,000 and will not have a significant effect on our business,
results of operations, and financial condition. Based on our assessments, the
most likely worst case scenario could include vendors of the most important
goods and services, or suppliers of our necessary energy, telecommunications and
transportation needs, failing to provide us with the materials and services
which are necessary to produce and sell our products.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On February 8, 1999, the Official Post Confirmation Committee of Unsecured
Creditors of Helionetics, Inc. ("Plaintiff") filed a Complaint in United States
Bankruptcy Court for the Central District of California, Santa Ana Division,
naming CardioDynamics Holdings, LLC ("Holdings") and the Company as defendants.
The Complaint relates to an alleged fraudulent transfer of certain shares of the
Company's common stock from Helionetics, Inc. to Holdings in February 1995 and
sought various relief including return of the subject shares to Plaintiff and
compensatory and punitive damages. On August 10, 1999 the Company's motion to
dismiss the complaint was granted, although Plaintiff has the right to attempt
to file a new Complaint against the Company in the future.
Item 2. Changes in Securities
On May 28, 1999 we completed a $5.2 million private placement of approximately
5.2 million shares of our common stock to institutional and other accredited
investors including Domain Associates, L.L.C., a Princeton, N.J.-based venture
capital group and Veritas Societe Generale, the company's largest institutional
shareholder, along with several of our Board members, officers, and customers.
The financing was exempt from the registration requirement of the Securities Act
of 1933, as amended, in reliance upon Regulation D promulgated under the Act.
In connection with the private placement we incurred a finder's fee of $96,000
payable to EVEREN Securities, Inc.
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<PAGE>
CardioDynamics International Corporation
PART II - OTHER INFORMATION
Item 2. Changes in Securities (Continued)
During our third fiscal quarter, in order to achieve an orderly conversion of
all the outstanding shares of our Series A convertible preferred stock with a
minimum impact on the market price of our common stock, we identified a group of
strategic investors and facilitated the private sale of the common shares issued
upon conversion of the remaining portion of the Series A Preferred Stock by
reducing the effective purchase price to $1.25 per share. In addition, $192,000
was recorded as a preferred stock dividend related to 375,000 premium priced
warrants issued to the Series A preferred stock investors in exchange for the
elimination of their right to buy an additional $3 million in convertible
preferred stock.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On June 2, 1999 the holders of voting power over a majority of the outstanding
shares of our common stock acted by written consent to modify our Bylaws to
reduce the number of directors to a range of not fewer than five nor more than
nine. At the annual meeting of shareholders held on July 15, 1999, the
shareholders voted on the following proposals. Each such proposal was approved.
Proposal 1: Election of Directors for the coming year. The balloting for the
- -----------
directors was as follows:
<TABLE>
<CAPTION>
Against/ Abstained/
For Withheld Non-Votes
----------------------------------
<S> <C> <C> <C>
Louis P. Ferrero 29,157,854 16,236 0
Cam L. Garner 29,157,521 16,569 0
James C. Gilstrap 29,157,854 16,236 0
Richard O. Martin 29,157,521 16,569 0
Allen E. Paulson 29,157,854 16,236 0
Michael K. Perry 29,157,854 16,236 0
</TABLE>
Proposal 2: Ratify the Board's selection of KPMG LLP as the Company's
- -----------
independent accountants for the fiscal year ending November 30, 1999.
Of the shares voted, 29,161,782 shares were voted in favor of the
ratification, 3,855 shares were voted against ratification, 8,453 shares
were abstained from voting and there were no broker non-votes.
-13-
<PAGE>
CardioDynamics International Corporation
PART II - OTHER INFORMATION
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Amendment to Bylaws, dated June 2, 1999.
10.1 Purchase agreement between CardioDynamics International
Corporation and GE Marquette Medical Systems, Inc. dated August
25, 1999.
10.2 Warrants to purchase 2,000,000 shares of CardioDynamics
International Corporation common stock to GE Marquette Medical
Systems, Inc., Dated August 25, 1999.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
On June 4, 1999, the Company filed a report on Form 8-K with
regard to a May 28, 1999 event: the completion of a $5.2 million
common stock private placement with institutional and accredited
investors. The report included material under Item 5 and Item 7
of Form 8-K.
-14-
<PAGE>
CardioDynamics International Corporation
This document contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements include statements regarding plans, goals,
strategies, intent, beliefs or current expectations of the Company and its
management. These statements are expressed in good faith and are believed to
have a reasonable basis when expressed, but there can be no assurance that these
expectations will be achieved or accomplished. Sentences in this document
containing verbs such as "plan," "intend," "anticipate," "target," "estimate,"
"expect," etc., and/or future-tense or conditional constructions ("will," "may,"
"could," "should," etc.) constitute forward-looking statements that involve
risks and uncertainties. Items contemplating, or making assumptions about,
actual or potential future sales, market size, collaborations, trends or
operating results also constitute such forward-looking statements. Among the
factors that could cause the Company's actual results to differ materially from
those indicated in any such forward-looking statements are: (i) sole dependence
on the BioZ(TM) System, BioZ Portable(TM) and BioZ.com(TM) and related products,
(ii) general acceptance in the medical community of invasive procedures such as
PAC and lack of general acceptance in the medical community of TEB, (iii) its
ability to raise additional funds on terms attractive to the Company, or at all,
(iv) competition from Baxter Healthcare Corporation, the maker of the
Swan-Ganz(TM) PAC device, (v) expansion of its direct sales force, (vi)Year 2000
computer related issues, and (vii) various uncertainties characteristic of
companies just emerging from the development stage; as well as other risks
detailed in the Company's annual report on Form 10-KSB for the fiscal year ended
November 30, 1998 and any later-filed SEC reports. Any forward-looking statement
speaks only as of the date on which the statement is made, and the Company does
not undertake to update the disclosures contained in this document or reflect
events or circumstances that occur subsequently or to reflect the occurrence of
unanticipated events.
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: 10-14-99 By: /s/ Michael K. Perry
--------- --------------------------------
Michael K. Perry
Chief Executive Officer
Date: 10-14-99 By: /s/ Stephen P. Loomis
--------- --------------------------------
Stephen P. Loomis
Vice President, Finance
Chief Financial Officer and
Corporate Secretary
-15-
<PAGE>
Exhibit 3.1
AMENDMENT TO CARDIODYNAMICS INTERNATIONAL CORPORATION BYLAWS
ARTICLE III, SECTION 3.2 AS AMENDED
-----------------------------------
The number of directors of the Corporation shall be not less than
five (5) nor more than nine (9), with the exact number of
directors to be fixed within the limits specified, by approval of
the Board of Directors.
<PAGE>
Exhibit 10.1
CARDIODYNAMICS INTERNATIONAL CORPORATION
PURCHASE AGREEMENT
with
GE MARQUETTE MEDICAL SYSTEMS, INC.
(a Wisconsin corporation)
(hereinafter referred to as "Buyer")
This Agreement is entered into as of August 25, 1999, by and between
Buyer and CardioDynamics International Corporation ("CardioDynamics"), a
California Corporation, for the purchase of Products in accordance with the
terms and conditions set forth below:
1. ORDERS, DELIVERY SCHEDULES AND PRICES.
1.1 Orders. Buyer hereby orders and agrees to purchase from
------
CardioDynamics, and CardioDynamics agrees to sell and deliver to Buyer, during
the Agreement Period, the products specified in Schedule A (the "Products") at
the price specified in Schedule B. Buyer's commitment to purchase Products from
CardioDynamics consists only of any release by Buyer of a Purchase Order (as
defined below). Purchase orders released by Buyer for Products ("Purchase
Orders") may consist of hard copies of Buyer's purchase order set forth in
Exhibit I or other written communications from Buyer which state specific
delivery requirements. Purchase Orders released by Buyer shall identify the
delivery date or dates and identify the quantities to be released for delivery
within the lead times specified in Schedule B. REGARDLESS OF FORM, EVERY
PURCHASE ORDER IS DEEMED TO INCLUDE THE TERMS AND CONDITIONS HEREIN AND BUYER'S
STANDARD TERMS AND CONDITIONS SET FORTH IN EXHIBIT I. Unless otherwise agreed
in writing by the parties, prior to the first anniversary hereof, Buyer shall
not be responsible or in any way liable to CardioDynamics or any third party
with respect to any material commitments or production arrangements in excess of
the amounts or in advance of the times necessary to meet Buyer's delivery
schedules set forth in its released Purchase Orders. Seller may not reject any
Purchase Order of Buyer unless Buyer is in material breach and has received
notice of such breach.
1.2 Initial Purchase Order. Coincident with the execution of this
----------------------
Agreement, Buyer has submitted to CardioDynamics, a purchase order dated as of
the date hereof, committing to purchase twenty (20) units of the BIOZ.com
Hemodynamic Monitor (Model BZ 4110 X-xxx ("X" denotes English or Symbol Front
Panel, "xxx" denotes voltage and language requirement for back panel)) and one
additional patient cable and case of sensors (50 patient applications) per unit,
for shipment on or before
<PAGE>
2
August 27, 1999 and an additional twenty (20) BioZ.com Hemodynamic Monitor
(Model BZ 4110) with one additional patient cable and one case (50 patient
applications) per unit on or before November 15, 1999, at the price specified in
Schedule B, setting out the terms of delivery and other terms, which purchase
order has been accepted by CardioDynamics. Buyer will receive the maximum
distributor discount for CardioDynamics' Products, which, at the commencement of
this agreement, shall be no less than thirty-eight percent (38%) off of List
Price on the BioZ.com Hemodynamic Monitoring Systems and twenty-five (25%) off
of List Price for all CardioDynamics' disposable items, as shown on Schedule B
hereto. Scheduling of the Product delivery will be as provided in Section 1.3.
1.3 Delivery Schedule. The Products purchased under this Agreement
-----------------
shall be delivered to Buyer in accordance with the terms set forth in Buyer's
written sales releases. Sales releases must:
A. Request by product number the type and quantity of the
Products to be delivered in any specified month; and
B. With the exception of the initial purchase order of 20 units
to be shipped on or before August 27, 1999, be received by CardioDynamics at
least sixty (60) days prior to the requested date of delivery. CardioDynamics
will make every reasonable attempt to accommodate the delivery needs of the
Buyer.
In the event that Buyer incurs a penalty because of late delivery of
Products to the end user, and the late delivery is attributable to the fault of
CardioDynamics, CardioDynamics shall reimburse Buyer for the amount of such
penalty, it being agreed that time is of the essence. The penalty shall not
exceed the late delivery penalty which Buyer would incur by reason of late
delivery to the end user attributable to the fault of Buyer and the total amount
of the penalty will not exceed the price of the Product ordered. The foregoing
shall be in addition to all remedies available to Buyer.
1.4 Reschedule. The delivery schedule confirmed by CardioDynamics in
----------
compliance with Section 1.3 shall be binding upon both parties except that Buyer
may, upon written notice, reschedule delivery at least equal to the lead-time
for such Product as specified in Schedule B. Said reschedule must defer the
delivery of the Products to a reschedule date no later than October 15th of the
current year. No other changes, including changes to the mix or configuration of
the Products, may be made without CardioDynamics' prior written consent.
1.5 Prices. (a) The prices for the Products ordered and delivered
------
under this Agreement are set forth in Schedule B (the "Prices"). Buyer and
CardioDynamics agree to review the Prices after the Products have been
distributed by Buyer for a period of six (6) months and every six (6) months
thereafter; provided, however, that in no event shall any increase in Prices for
a particular Product be greater than the percent increase in CardioDynamics'
cost of goods for such Product.
<PAGE>
3
(b) CardioDynamics represents to Buyer that the Prices for the
Products are as low as the prices at which CardioDynamics is currently selling
(or currently intending to sell) items similar to the Products in the same or
similar quantities with similar terms and conditions. If during the term of
this Agreement CardioDynamics reduces the price of such similar items,
CardioDynamics shall: (i) promptly notify Buyer in writing of such reduction;
and (ii) apply an equivalent reduction in the Price to all Products ordered by
Buyer that have not been previously shipped and invoiced at the time of such
reduction. The Prices shall thereafter be adjusted to reflect such reduction
for the balance of the term hereof or until the Prices are further reduced
pursuant to this Agreement.
1.6 Forecasts. Buyer shall submit a six (6) month rolling forecast
---------
to CardioDynamics to cover the Products, by product model and month. Such
forecasts are agreed by the parties to be for planning purposes and, as such,
are not binding upon either party.
1.7 Software/Firmware. The Price includes a perpetual, paid-up,
-----------------
worldwide, irrevocable license to Buyer and its customers or users of Buyer's
products containing Products to use, in the operation, maintenance and repair of
the Products, any software and/or firmware supplied by CardioDynamics to Buyer.
2. CO-MARKETING AGREEMENT.
CardioDynamics agrees that during the Agreement Period it will not directly
or indirectly sell, market, or distribute any Products (including any product
functionally similar to a Product) to any party in the territory described on
Schedule C hereto (the "Territory"), other than to Buyer and the parties set
forth on Schedule D hereto in accordance with this Agreement.
3. OTHER OBLIGATIONS OF CARDIODYNAMICS.
3.1 Accessories. During the Agreement Period, CardioDynamics agrees
-----------
to sell to Buyer such accessories as Buyer may order from CardioDynamics'
current International Distributor Price List (designated as Schedule B in this
Agreement) during the Agreement Period at the prices specified in Schedule B.
Such orders must be placed at least sixty (60) days in advance of any delivery
date specified in such order.
3.2 Spares and Services. During the Agreement Period, and for seven
-------------------
(7) years thereafter, CardioDynamics agrees to sell to Buyer such spares,
maintenance tools, and maintenance manuals as Buyer may firmly order at the
prices and on the terms and conditions prevailing on the date of order or as
specified in a separate Service Agreement, which will supercede any service
obligations within this Agreement.
3.3 Discontinuance of Spare Parts. Notwithstanding any other
-----------------------------
provision of this Agreement, during the Agreement Period, and for seven (7)
years thereafter, CardioDynamics shall give Buyer one hundred eighty (180) days
written
<PAGE>
4
notice of any proposed discontinuance of specialized parts for any Product and
shall supply to Buyer at the then prevailing purchase prices such number of said
specialized parts as may be ordered by Buyer during that one hundred eighty
(180) day period. If prior to the end of such one hundred eighty (180) day
period, Buyer provides CardioDynamics with a forecast for orders for said
specialized parts during the succeeding one hundred eighty (180) day period,
CardioDynamics agrees to supply such parts to Buyer at prevailing prices if
Buyer agrees to purchase all parts and/or materials ordered by CardioDynamics to
meet such forecast. CardioDynamics will, upon request by Buyer, exercise its
reasonable efforts to assist Buyer in making arrangements with vendors for the
continuing supply to Buyer of such specialized parts or in developing
alternative sources of supply for such items. As used herein, the term
"specialized part" refers to any part or component in the prevailing list of
available spares which is not reasonably available in comparable quality from
CardioDynamics or another supplier.
3.4 Regulatory Compliance. CardioDynamics shall be responsible for
---------------------
identifying and obtaining, at it sole cost and expense, all regulatory approvals
which are required for the development, manufacture or sale of the Products in
the Territory. If CardioDynamics determines that it is not in its reasonable
best interest to obtain all regulatory approvals required in some portions of
the Territory, CardioDynamics shall promptly provide written notice of such
determination to Buyer. Within thirty (30) days receipt of such written notice,
Buyer may notify CardioDynamics of its intent to obtain such needed regulatory
approval. CardioDynamics shall provide a written response within fifteen (15)
days receipt of such notice indicating whether it approves of or reasonably
objects to Buyer's intent as stated in such notice and the reasons therefor;
provided that CardioDynamics' failure to respond to such notice within such
fifteen (15) day period shall be deemed an approval of such intent by
CardioDynamics. Following the later of such approval and the acquisition of all
necessary regulatory approvals (costs of such approval to be borne by Buyer),
Buyer shall have the sole and exclusive right to market, promote and sell
Products in such portion of the Territory. If Buyer fails to provide such
written notice within such thirty (30) day period or if CardioDynamics sends a
written notice of reasonable objection within such fifteen (15) day period, such
portion shall be excluded from the Territory and CardioDynamics shall not
market, promote, or sell Products in such portion of the Territory.
CardioDynamics will reasonably cooperate with Buyer by providing at no charge to
Buyer any data in its possession that is reasonably required to obtain the
regulatory approvals, including but not limited to CE Marking and clinical
testing material submitted by CardioDynamics for the Products.
3.5 Medical Device Laws. CardioDynamics warrants that the Products
-------------------
and their manufacture will comply with all applicable medical device laws and
regulations, including, without limitation, good manufacturing practices.
3.6 Fair Labor Standards Act. CardioDynamics warrants, and will
------------------------
certify, that the Products were produced in compliance with the Fair Labor
Standards Act of 1933 as amended, and any other laws or regulations dealing with
the wages, hours of
<PAGE>
5
working, conditions or employees engaged in the production of the articles
furnished under each of the purchase orders.
3.7 Environmental Safety. CardioDynamics warrants that each chemical
--------------------
substance listed or contained in the Products complies with applicable federal,
state and local environmental health and safety laws, including, without
limitation, the Toxic Substances Control Act, Occupational Safety and Health
Act, and Federal Hazardous Substances Act as amended.
3.8 Product Safety. CardioDynamics warrants that the Products comply
--------------
with any applicable sections of the Federal Food, Drug and Cosmetic Act, Federal
Consumer Product Safety Act, and Federal Communications Act as amended and any
other applicable product safety law.
3.9 Training. During the Agreement Period, CardioDynamics will
--------
provide training courses at in accordance with agreed Training plan.
A. Sales and Marketing. CardioDynamics will train the sales
-------------------
and marketing employees of Buyer in the use and operation of the Products set
forth in Schedule A. Such training shall be conducted once each year during the
Agreement Period at a mutually agreeable time and at such facility as Buyer may
reasonably specify.
B. Service. The parties agree to negotiate in good faith a
-------
definitive written agreement with respect to service and service training (the
"Service Agreement").
C. Quality Assurance. CardioDynamics shall train Buyer at a
-----------------
mutually agreeable time during the Agreement Period at CardioDynamic's offices
in San Diego, California in the procedures used by CardioDynamics to perform
quality assurance inspections of the Products.
D. Expenses. The training by CardioDynamics described in
--------
Sections 3.10A, 3.10B and 3.10C above will be provided without further charge by
CardioDynamics. At Buyer's option, CardioDynamics will make the training
described in Sections 3.10A, 3.10B and 3.10C available at other locations
reasonably acceptable to CardioDynamics, and CardioDynamics shall provide such
additional training as Buyer may reasonably request from time to time. All costs
and expenses incurred by Buyer employees in connection with their travel to or
attendance at such training (including but not limited to expenses for
transportation, lodging, and meals) shall be borne solely by Buyer.
3.10 Documentation. CardioDynamics agrees to provide Buyer with the
-------------
mutually agreeable Product documentation. CardioDynamics will provide
operator's manuals in English, German, French or Dutch language (as applicable
to the language of the Product to be delivered).
<PAGE>
6
3.11 Technical Support. CardioDynamics agrees to provide Buyer with
-----------------
technical support necessary to support the goals of this Agreement.
3.12 Import/Export. CardioDynamics shall comply with all applicable
-------------
U.S. import and export laws during the term of this Agreement.
3.13 Right of Exclusivity. The parties intend to enter into good faith
--------------------
negotiations with respect to a definitive written agreement pursuant to which,
among other things, Buyer shall distribute CardioDynamics's products in North
America (the "American Distribution Agreement"). CardioDynamics agrees that
neither it nor its affiliates or representatives will: (i) sell or transfer
their respective companies, any significant interest in their respective
companies or any significant assets of their respective companies to any third
party, or enter into any agreement to do the same; or (ii) make any offer to
any third party, or commence or entertain discussions with, or provide material
non-public information to any third party (other than with respect to the
ongoing activities of CardioDynamics's current distributors in North America)
regarding the distribution of its products in North America. CardioDynamics
further agrees to promptly inform Buyer of any proposal or other writing
CardioDynamics may receive relating to any of the foregoing. In order to
provide a reasonable period for the parties to complete the negotiation of the
American Distribution Agreement, this Section will automatically terminate on
September 30, 1999.
4. OBLIGATIONS OF BUYER.
4.1 Buyer Approval Process. Buyer agrees to invest the necessary
----------------------
resources to achieve internal product approval through normal Buyer development
process.
4.2 Europe/Middle East/Africa Distribution Team. Buyer agrees to sell
-------------------------------------------
the Products exclusively through Buyer's European/Middle Eastern/African
distribution team in the Territory. Buyer agrees that it will not sell the
Products, either directly, through one of Buyer's partners, or indirectly, by
selling to a party which Buyer knows, or should reasonably have known, has
intent to resell any of the Products outside the Territory. CardioDynamics
agrees that it will not private label the BIOZ.com Monitor to patient
physiological manufacturers for sale in the Territory during the Agreement
Period.
4.3 Purchaser Information. During the Agreement Period, Buyer agrees
---------------------
to provide CardioDynamics with such information as CardioDynamics shall
reasonably request about each purchaser of the Product from Buyer. Such
information shall include, without limitation, the name and address of the
purchaser, and the amounts and serial numbers of the Products purchased by such
purchaser.
<PAGE>
7
4.4 Train Customers. Buyer agrees to train and support any and all
---------------
customers who purchase the BIOZ.com Monitor. Details of the CardioDynamics
customer training and support programs are attached hereto as Schedule G.
4.5 Resources Dedicated. Buyer agrees to invest an amount pursuant
-------------------
to this Agreement determined according to its reasonable selling needs, in a
manner including, without limitation, demonstration units, internal resource
investment of product management, and sales/service training. In addition,
Buyer and CardioDynamics agree to establish a separate promotion budget for
Buyer to promote the Products in the Territory by means including, without
limitation, press releases, advertisements, sell sheets, Buyer's web site and
trade shows.
4.6. Import/Export. Notwithstanding anything to the contrary herein,
-------------
Buyer shall comply with all applicable U.S. import and export laws during the
term of this Agreement.
5. TERMS AND CONDITIONS.
5.1 Shipment. Delivery shall be within sixty (60) days of placement
--------
of a materially complete Purchase Order, except as otherwise stated in this
Agreement. Shipment of the first 20 units and accessories shall be on or before
August 27, 1999, and on or before November 15, 1999, for the second 20 units and
accessories.
5.2 Acceptance. Prior to delivery of each Product ordered by Buyer
----------
pursuant to this Agreement, CardioDynamics will perform its standard factory
acceptance test applicable to such Product and, where applicable, will record in
writing that the Product ordered has satisfied the requirements of the test.
Records of such tests shall remain available for review by Buyer for a period of
six (6) months or such longer period as is required by applicable law. Product
will be deemed accepted by Buyer if not rejected by written notice and returned
to CardioDynamics in accordance with the warranty return procedure (Section
5.6) within forty-five (45) days from date of shipment to Buyer. Otherwise
Buyer has no right of return.
5.3 Payment. Terms of payment will be net sixty (60) days from the
-------
date of receipt of invoice and payment shall be made in U.S. dollars by wire
transfer, check or other instrument reasonably acceptable to CardioDynamics.
5.4 Taxes, Insurance, and Shipping. Following delivery to the FOB
------------------------------
point (CardioDynamics shipping dock), Buyer shall bear all applicable charges,
including, without limitation, freight, shipping, customs charges and expenses,
special packaging or handling costs, insurance premiums. Buyer shall also bear
all applicable taxes incident to the sale of the Products hereunder (including
without limitation federal, state, municipal and other government taxes, such as
sales, value added, use and similar taxes, but excluding among other things any
taxes related to wages).
5.5 Design Modifications. CardioDynamics reserves the right to make
--------------------
design modifications to the Products at any time without incurring any
obligations to
<PAGE>
8
retrofit the Products delivered to Buyer prior to the effective date of any such
modification. As a result, the Products bearing the same model number may
differ; however, all Products bearing the same model number in like
configuration delivered pursuant to this Agreement will be interchangeable with
respect to form, fit and function. CardioDynamics shall give Buyer sixty (60)
days advanced written notice of any modifications affecting form, fit or
function.
5.6 Warranty. CardioDynamics warrants to Buyer for periods set forth
--------
in Schedule E that the Products delivered by CardioDynamics to Buyer pursuant to
this Agreement shall be free from defects in material and workmanship.
CardioDynamics' obligation under this warranty is limited to replacing or
repairing, at its option, at its designated site, any Products (except
expendable parts thereof) that within the warranty period are returned to
CardioDynamics in the original shipping carton (or a replacement shipping carton
provided by CardioDynamics at CardioDynamics' expense) under a Material Return
Authorization (MRA) number issued by CardioDynamics and that are found by
CardioDynamics to be defective in proper usage. CardioDynamics warrants that (a)
the Products will (i) conform materially to all specifications, drawings, plans,
instructions, samples or other descriptions furnished by Buyer, (ii) be fit and
sufficient for the purpose(s) for which they were manufactured and sold, (iii)
be new and merchantable, (iv) be of good material and workmanship and free from
defects, whether latent or otherwise and (v) be free from any claim of any
nature by any third person. CardioDynamics warrants that neither the
performance nor the functionality of any Product delivered to Buyer will be
affected in any material way by the advent of the year 2000 or otherwise by the
use of any date information. CardioDynamics warrants that any service
CardioDynamics provides will be performed in a competent manner and be fit for
any purpose for which CardioDynamics knows or has reason to know Buyer or
Buyer's customers intend to use such service.
Except as set forth in this Section 5.6 and in Sections 3.6, 3.7, 3.8
and 3.9, CardioDynamics makes no other warranties of any kind whatever, whether
express or implied, and all implied warranties of merchantability and fitness
for a particular purpose which exceed the scope of the foregoing warranties are
hereby disclaimed by CardioDynamics and excluded from this Agreement.
5.7 Limitation of Liability. Any provision herein to the contrary
-----------------------
notwithstanding, in no event shall either party be liable for indirect,
incidental or consequential damages. Except for the provisions of Article 9
below, in no event shall the liability of CardioDynamics arising in connection
with any Product sold hereunder (whether such liability arises from a claim
based on agreement, warranty, tort or otherwise) exceed the amount paid by Buyer
to CardioDynamics for such Product.
5.8 Assignment. Neither party may assign its rights under this
----------
Agreement in whole or in part by operation of law or otherwise without the prior
express written consent of the other party except to an affiliate of such party,
and any attempted assignment of any rights, duties or obligations hereunder
without such consent shall be void.
<PAGE>
9
5.9 Force Majeure. If the performance of this Agreement or of any
-------------
obligation hereunder (except payment of monies due) is prevented, restricted or
interfered with by reason of fire or other casualty or accident; strikes or
labor disputes; inability to procure raw material, power or supplies;
hurricanes, earthquakes, floods, or other Acts of God; war or other violence;
any law, order, proclamation, regulation, ordinance, demand or requirement of
any governmental agency or intergovernmental body; or any other act or condition
whatsoever beyond the reasonable control of the parties hereto, the party so
affected, upon giving notice to the other party, shall be excused from such
performance during and to the extent of such prevention, restrictions or
interference.
5.10 Recall. In the event Buyer or any of its distributors should be
------
required or should voluntarily decide to initiate a recall, product withdrawal,
or field correction of any products because products do not conform to the
warranty set forth hereinabove or because of any negligent or intentionally
wrongful act of CardioDynamics or its representatives, Buyer shall notify
CardioDynamics and provide a copy of its proposal, including the recall letter,
for CardioDynamics' approval prior to initiation of such action. In carrying out
such a recall, CardioDynamics shall lead in the investigation to determine the
cause and extent of the problem.
5.10.1 In the event that CardioDynamics independently believes
that a recall, product withdrawal, or field correction for products may be
necessary or appropriate, CardioDynamics shall notify Buyer through Buyer's
designee to be named, of CardioDynamics' belief, and the parties shall fully
cooperate with each other concerning the necessity and nature of such action.
5.10.2 All regulatory authority contacts, as applicable, and
coordination of any recall or field correction activities be handled by
CardioDynamics , with Buyer's assistance, whether or not such action was
initially requested by CardioDynamics.
5.10.3 In the event that any product is recalled as a result of
(1) the supply by CardioDynamics of product that does not conform to the
warranty set forth hereinabove including, without limitation, the specifications
or (2) the negligent or intentionally wrongful act of CardioDynamics or its
representatives, then CardioDynamics shall bear the following costs and expenses
of such recall: reasonable expenses related to communications and meetings with
all required regulatory agencies, reasonable expenses of replacement stock, the
reasonable cost of notifying customers and the reasonable costs associated with
shipment of recalled product from customers and shipment of an equal amount of
replacement product to those same customers. To the extent that the reason for
any recall of products hereunder is in part the responsibility of CardioDynamics
and in part the responsibility of Buyer then the expenses shall be allocated in
an equitable manner between the parties.
5.11 Product Complaints. CardioDynamics will be responsible for the
------------------
support and upkeep of this product unless specified in a separate Service
Agreement. However, if this product needs engineering evaluation, CardioDynamics
will evaluate at no charge and supply a written report summarizing the
evaluation within fourteen (14)
<PAGE>
10
days of product complaint receipt. Furthermore, it will be the responsibility of
CardioDynamics to resolve product-related complaints. All complaints submitted
through Buyer will be transferred in a timely manner to CardioDynamics for
investigation and resolution, with correspondence of this copied to Buyer for
customer complaint tracking.
5.12 Standard Terms and Conditions. A copy of Buyer's Standard Terms
-----------------------------
and Conditions are attached hereto as Exhibit I. In the event of any conflict
between the provisions of this Agreement and the Exhibit I, the provisions of
this Agreement shall be controlling.
6. CONFIDENTIALITY.
6.1 Each of the parties shall at all times during and subsequent to
the Agreement Period keep and cause to be kept confidential, any confidential
information received by it from the other party. Such confidential information
received from the other party shall not be disclosed in any manner to any third
party; provided, however, the parties may disclose any confidential information
contemplated hereunder to third parties as necessary to have the Products
designed, manufactured, modified, improved, serviced or repaired; confidential
information shall be disclosed by the receiving party only to those employees or
third party contractors who need to know the same; such employees and third
parties to whom such Confidential information is disclosed shall be advised of
the confidential nature of such information and shall maintain the same in
confidence as the confidential information of the other party.
6.2 Confidential information shall consist of all confidential
information maintained in secrecy or confidence by the disclosing party as a
valuable trade secret or business information; all confidential information
disclosed shall be marked "confidential" by the disclosing party if in writing
prior to disclosure.
6.3 Confidential information shall not include: (a) any information
which is generally available to the public through no breach of this Agreement;
(b) any information which is lawfully received from a third party having rights
to disclose the same to the receiving party and which third party is free from
similar non-disclosure obligations as are set forth herein; (c) any information
which is independently developed by the receiving party; (d) any information
which is already known to the receiving party or its subsidiaries or affiliates,
or in their possession prior to disclosure by the other party. The parties
further agree that the party asserting as a defense that confidential
information was obtained in a manner set forth in clause (a), (b), (c) or (d)
above shall bear the burden of proof in establishing such defense by a
preponderance of the evidence.
7. NON-COMPETITION.
7.1 In order to induce CardioDynamics to enter into the transactions
contemplated hereby, and in consideration thereof, Buyer agrees that it shall
not, directly or indirectly, engage, whether as principal, agent, investor,
distributor, representative, partner, stockholder, consultant or otherwise, in
any activity or business venture, anywhere in the Territory, which involves (a)
during the term of this Agreement, the
<PAGE>
11
development, manufacture, distribution or sale of non-invasive cardiac output
measurement devices using the Thoracic Bio-impedance method or (b) for a period
of one (1) year following expiration or termination of the Agreement Period, the
distribution or sale of noninvasive cardiac output measurement devices using the
Thoracic Bio-impedance method.
7.2 Buyer agrees with CardioDynamics that if, in any proceeding, a
court or other authority shall refuse to enforce any covenant herein set forth
because such covenant covers too extensive a geographic area or too long a
period of time, such covenant shall be deemed appropriately amended and modified
in keeping with the intention of the parties to the maximum extent permitted by
law.
8. INJUNCTIVE RELIEF.
In the event of a breach or threatened breach by Buyer of any of the
provisions of Section 7 of this Agreement, or by any party of Section 4.2 or
Section 6 of this Agreement, such party hereby consents and agrees that the
other party shall be entitled to an injunction or similar equitable relief from
any court of competent jurisdiction restraining such party from committing or
continuing any such breach or threatened breach or granting specific performance
of any act required to be performed by such party under any of such provisions,
without the necessity of showing any actual damage or that money damages would
not afford an adequate remedy and without the necessity of posting any bond or
other security. Nothing herein shall be construed as prohibiting any party from
pursuing any other remedies at law or in equity which it may have.
9. INDEMNITY.
9.1 CardioDynamics shall indemnify and hold Buyer harmless from and
against all loss, damage, or expense (including reasonable attorneys' fees)
arising out of any claim or suit for infringement of a patent, copyright or
trade secret brought against Buyer, based on use of the Products purchased under
this Agreement provided that (1) Buyer gives CardioDynamics prompt written
notice of such claim (provided, however, that any delay or failure to notify
CardioDynamics of any claim shall not relieve CardioDynamics of its
indemnification obligations under this Section 9.1 except to the extent that the
defense of such action is materially prejudiced or materially adversely affected
by such delay or failure to notify) (2) CardioDynamics maintains the right to
sole control of the defense and all negotiations for settlement of such claim or
suit and (3) Buyer agrees to cooperate with CardioDynamics in the defense and/or
settlement thereof (provided, however, that any failure to cooperate with
CardioDynamics shall not relieve CardioDynamics of its indemnification
obligations under this Section 9.1 except to the extent that the defense of such
action is materially prejudiced or materially adversely affected by such failure
to cooperate). In the event of any claim as described above which has been
finally adjudicated in favor of a third party, CardioDynamics will have the
option, at its own expense, either to procure for Buyer the right to continue
using said product or replace with a non-infringing product or modify same so it
becomes non-
<PAGE>
12
infringing, subject to reasonable approval of such replacement part or
modification by Buyer.
9.2 CardioDynamics shall indemnify, defend and hold Buyer harmless
from and against all loss, damage or expense (including reasonable attorneys'
fees) caused by a defect in the design or manufacture of any of the Products
purchased under this Agreement provided that Buyer gives CardioDynamics prompt
written notice of such claim or suit (provided, however, that any delay or
failure to notify CardioDynamics of any claim shall not relieve CardioDynamics
of its indemnification obligations under this Section 9.2 except to the extent
that the defense of such action is materially prejudiced or materially adversely
affected by such delay or failure to notify), the right to maintain sole control
of the defense and all negotiations for settlement of such claim or suit, and
cooperates with CardioDynamics in the defense and/or settlement thereof.
9.3 The foregoing covenants of indemnity by each party made to the
other shall survive the expiration or termination of the Agreement Period.
10. TERM AND TERMINATION.
10.1 Term. The term of this Agreement shall commence on the date
----
hereof and shall continue until terminated in accordance with the provisions
hereof (such period being the "Agreement Period"). Either party may terminate
this Agreement for cause immediately by giving written notice to the other party
in the event any of the following occurs:
A. except as otherwise provided in this Section 10.1 or in Section
10.2 below, the other party has materially breached this Agreement and failed to
cure such breach within sixty (60) days following delivery of written notice of
such breach;
B. the other party files for bankruptcy or similar debt relief or a
petition for its bankruptcy or similar creditors' actions is filed against it
and is not withdrawn within sixty (60) days;
C. the other party ceases to do business, or otherwise terminates
its business operations, provided that the parties acknowledge and agree that
the sale of all or substantially all of Buyer's assets to any of its affiliates
shall not be deemed a cessation of its business or termination of its business
operations
D. the other shall fail to secure or renew any license,
registration, permit, authorization or approval necessary for the conduct of its
business in the manner contemplated by this Agreement or if any such license,
registration, permit, authorization or approval is revoked or suspended and
failed to cure failure, revocation, or suspension within sixty (60) days
following written notice;.
E. that Buyer fails to pay any sums due hereunder within thirty (30)
days of the due date; or
<PAGE>
13
F. that Buyer fails to order a minimum number of mutually agreed
upon demonstration units for each country in the Territory (in no case will this
be less than one demonstration unit per country) to be delivered prior to
November 15, 1999. In the event Buyer fails to order the minimum number of the
mutually agreed upon demonstration units for any country in the Territory,
CardioDynamics may remove the specific country or countries from the Territory
listed in Schedule C and may, at its discretion, award exclusive distribution
rights to another company in the specified country or countries.
G. that the parties fail to execute a mutually acceptable Service
Agreement by October 31, 1999.
H. that the parties fail to agree upon the Minimum Yearly Volume
Commitment on that date that is 30 days prior to the anniversary date of this
Agreement (see Schedule F).
10.2 Minimum Quarterly Amount. Notwithstanding any other provision
------------------------
contained herein, in the event that prior to any of the dates set forth in
Schedule F (each such date referred to herein as the "Quarterly Date"), Buyer
shall not have forwarded orders to CardioDynamics for the Products for the
minimum amount set forth in Schedule F (the "Minimum Quarterly Amount"),
CardioDynamics shall have the right to terminate this Agreement upon thirty (30)
days' prior written notice to Buyer delivered within sixty (60) days following
such Quarterly targets referenced in Schedule F.
Notwithstanding any other provision contained herein, if, after
November 24, 2000 (such date being the "Assessment Date"), (a) Buyer fails for
two consecutive quarters to forward orders for Products to CardioDynamics for
the minimum amounts applicable to the quarterly periods set forth in Schedule F
(the "Minimum Quarterly Amounts") or (b) on any annual anniversary hereof Buyer
has failed to achieve the then applicable Minimum Yearly Amounts, then, within
sixty (60) days following such two consecutive quarter period or anniversary
period, as the case may be, CardioDynamics may terminate this Agreement on
thirty (30) days prior written notice to Buyer, provided that, in the event of
notice of termination pursuant to clause (a) hereof, as of the date of such
written notice Buyer has failed to achieve the then applicable Minimum Yearly
Amounts. In addition, if, as of November 15, 2000, Buyer has failed to forward
orders to CardioDynamics for the Minimum Quarterly Amounts for the quarter then
ending , then CardioDynamics may, prior to November 25, 2000, terminate this
Agreement on written notice to Buyer.
10.3 Renewal. Following the third anniversary hereof, either party may
-------
terminate this Agreement on ninety (90) days prior written notice.
10.4 Other Remedies. Termination under this Article 10 shall not
--------------
limit the terminating party's rights and remedies otherwise available in law or
in equity, including, but not limited to, the right to recover damages. Buyer
may terminate any open Purchase Order in whole or in part at any time upon
written notice to CardioDynamics. If such cancellation occurs, the parties shall
negotiate a settlement of reasonable costs
<PAGE>
14
incurred by CardioDynamics with respect to such terminated Purchase Order (e.g.,
purchased materials and labor costs incurred prior to receipt of the notice of
termination). Notwithstanding the foregoing, Buyer's maximum liability with
respect to the terminated Purchase Order in no event shall exceed the amount of
such Purchase Order. Buyer may terminate any open Purchase Order without
liability if Seller is in breach of this Agreement or if Seller's performance is
delayed for a cause beyond its reasonable control.
11. MISCELLANEOUS.
11.1 CardioDynamics and Buyer agree they will not attempt or engage
in any acts to impair, defeat or reduce the rights of either party.
11.2 All rights, duties and obligations of the parties with respect
to this Agreement shall be settled and determined according to the substantive
and procedural laws of Wisconsin.
11.3 Any dispute, controversy or claim arising under this Agreement
(a "Dispute") which does not exceed $100,000 shall be submitted for resolution
by binding arbitration pursuant to the Rules of the American Arbitration
Association ("AAA") as in effect at the time of the arbitration in Milwaukee,
Wisconsin, it being agreed that the AAA is designated as the neutral
organization for purposes of the AAA rules and that the costs of the arbitration
shall be shared equally by the parties. The parties agree that the decision of
such arbitrator or arbitrators shall be final and shall be enforceable in any
court of competent jurisdiction.
11.4 All notices, demands, or consents required or permitted to be
given hereunder shall be given and deemed to be received if addressed and
delivered as follows:
All notices shall be delivered personally, by facsimile, by recognized
overnight courier, or by certified mail, return receipt requested, addressed as
follows:
If to CardioDynamics:
CardioDynamics Intl. Corporation
6175 Nancy Ridge Drive, Suite 300
San Diego, California 92121
Attention: Chief Executive Officer
Telecopier No.: (619) 535-0055
If to Buyer:
GE Marquette Hellige
Munzinger Strasse 3,
D-79111 Freiburg, Germany
Attention: Managing Director
<PAGE>
15
Telecopier No.: +49 761 4543 549
with copies to:
GE Marquette Medical Systems, Inc.
8200 West Tower Avenue
Milwaukee, Wisconsin 53223
Attention: General Counsel
Telecopier No.: (414) 362-2420
GE Marquette Medical Systems, Inc.
8200 West Tower Avenue
Milwaukee, Wisconsin 53223
Attention: Vice President of Marketing
Telecopier No.: (414) 357-3456
11.5 This Agreement and the rights hereunder shall not be assignable
or transferable except as specifically provided elsewhere herein; it shall inure
to the benefit of and bind the permitted successors and assigns of the parties
hereto; provided, however, that Buyer may assign, sub-contract or delegate all
or any portion hereof to any of its affiliates.
11.6 This Agreement, together with each of the Exhibits and schedules
hereto, constitutes the entire agreement of the parties and all other prior
agreements, understandings or arrangements oral, written or otherwise, with
respect to the subject matter hereof, are superseded hereby.
11.7 To the extent that any provision of this Agreement or portion
hereof shall be determined by a legislature or court to be, in whole or in part,
invalid or unenforceable, such provision or portion thereof shall be deemed to
be inoperable and surplusage and to the extent this Agreement is not so
determined to be invalid and unenforceable, it shall remain in full force and
effect and binding upon the parties hereto.
11.8 No amendment hereunder shall be effective unless in writing
signed by the parties hereto and no waiver hereunder shall be effective unless
in writing signed by the party to be so charged.
11.9 No failure to exercise, no delay in exercising, and no single or
partial exercise on the part of Buyer or CardioDynamics of any right, remedy or
power hereunder, shall operate as a waiver thereof or preclude Buyer or
CardioDynamics from exercising any other right, remedy or power hereunder.
11.10 The representations, warranties, obligations and indemnities of
CardioDynamics and Buyer shall survive the termination of this Agreement to the
extent required for their full observance and performance.
<PAGE>
16
11.11 CardioDynamics and Buyer waive the right of jury trial in any
action or proceeding brought in any court by either party, or its assigns,
arising out of the subject matter of this Agreement.
11.12 (a) The Buyer shall not use CardioDynamics' name or any other
trademark or trade name used or claimed by CardioDynamics (all of which names or
marks shall hereinafter be referred to as the "Marks") in connection with any
business conducted by the Buyer other than dealing with the Products.
CardioDynamics hereby grants to the Buyer a royalty free non-exclusive license
to use the Marks, but only with respect to the sales of the Products. Buyer
shall include and shall not alter, obscure or remove any trademark or trade name
used or claimed by CardioDynamics, or any markings, colors or other insignia
which are contained on or in or affixed to Product at the time of shipment.
CardioDynamics must approve, in advance in writing, any advertising or
promotional literature or announcement to the press by Buyer regarding its
relationship with CardioDynamics or otherwise utilizing CardioDynamics' name or
trademarks in advance in writing.
(b) CardioDynamics shall not use Buyer's name for commercial or
marketing purposes or any other trademark or trade name used or claimed by Buyer
or any of Buyer's affiliates without the prior written consent of Buyer.11.13
Buyer agrees to use its commercially reasonable efforts to market, distribute
and support (including training and other support) the Products on a continuing
basis and to comply with good business practices and all laws and regulations
relevant to this Agreement.
11.14 Buyer agrees to keep CardioDynamics informed as to any problems
encountered with the Products and any resolutions arrived at for those problems.
Buyer will also timely notify CardioDynamics of any infringement of any of the
Marks.
11.15 The captions in this Agreement are for convenience only and
shall not define or limit any of the terms hereof.
* * *
<PAGE>
17
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, effective as of the date first above written.
CARDIODYNAMICS INTL. CORPORATION
By: /s/ Michael K. Perry
---------------------------------------
Name: Michael K. Perry
-------------------------------------
Title: Chief Executive Officer
------------------------------------
GE MARQUETTE MEDICAL SYSTEMS, INC.
By: /s/ Frederick A. Robertson
---------------------------------------
Name: Frederick A. Robertson
-------------------------------------
Title: Chief Executive Officer
------------------------------------
<PAGE>
SCHEDULE A
Products
--------
BIOZ.COM Non-Invasive Cardiac Output Monitor, Model Nos. BZ-4110,
BZ-4110 S, BZ-4100, BZ-4100 S, BZ-4010, BZ-4010 S, BZ-4000, and BZ-4000 S.
All of the accessories and parts listed on Schedule B.
<PAGE>
SCHEDULE B
See Attached Spreadsheet "CardioDynamics Distributor Price List"
All items on the Price List have a sixty (60) day lead time.
SCHEDULE C
Territory
---------
Europe, Middle East and Africa, except the following countries:
Austria, Czech Republic, Hungary, Slovakia, Slovenia, Poland, Denmark, Greece,
Ireland, United Kingdom, Italy, Norway, Spain, Sweden, Switzerland,
Liechtenstein, Israel, South Africa, Namibia, Zambia, Zimbabwe, Mozambique, and
the Mascarene Islands.
------------------
SCHEDULE D
Buyer's Partners
----------------
[to be provided]
------------------
SCHEDULE E
Warranty Periods
----------------
See Attached Z-Care Service Policy Document, which applies to initial end-user
only.
------------------
<PAGE>
SCHEDULE F
Annual Minimum Volume Commitment
Review Date Minimum 12 Month Amount
- ----------- -----------------------
Anniversary of the date of Within thirty (30) days prior to the
this Agreement anniversary of the date of this
Agreement*, the parties shall agree on
the Minimum Yearly Amount for the
following year of the Agreement Period,
using a formula to project sales of the
BIOZ.com Hemodynamic Monitor for the
following year of this Agreement based on
the rate of growth in aggregate European
sales by Buyer during the last six (6)
months of the previous year of this
Agreement. In no event shall the Minimum
Yearly Amount be less than the Buyer's
share of CardioDynamics' annual business
objectives. (The "annual business
objectives" means the average of the
annual business objectives of
CardioDynamics as determined by third-
party market analysts.)
*If the Buyer believes it has enough information to make a minimum
Yearly Amount commitment prior to thirty (30) days before the
anniversary hereof, Buyer will use its reasonable best efforts to do
so.
Delivery dates and percentages of the Minimum Yearly Amount will be:
November 15: at least 15% of the Minimum Yearly Amount;
-----------
February 15: at least 20% of the Minimum Yearly Amount (or a
-----------
cumulative of 35% of the Minimum Yearly Amount)
May 15: at least 25% of the Minimum Yearly Amount (or a cumulative of
------
60% of the Minimum Yearly Amount)
August 15: at least 40% of the Minimum Yearly Amount (or a cumulative
---------
of 100% of the Minimum Yearly Amount)
<PAGE>
SCHEDULE G
Customer Training and Support
-----------------------------
CardioDynamics will provide appropriate training so that Buyer and Buyer's
representatives can effectively promote, sell, inservice, and train end users on
the proper operation of the BioZ.com and accessories. The training sessions will
be conducted at mutually agreed upon sites, on mutually agreed upon dates. The
training will include: International Sales Training Manuals (English language
only manuals are provided by CardioDynamics) for Buyer's designated
representatives, Sales/Inservice Video Training Films (English language only),
class room instruction sessions, and when possible, in hospital
training/demonstrations.
------------
SCHEDULE H
Product Service
---------------
Details and prices of Technical Service Training and spare parts will be
provided in a separate Service Agreement, which will supercede all Service
commitments in this Agreement
------------
<PAGE>
EXHIBIT 10.2
WARRANT
-------
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION
UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION
RULE 144.
WARRANT TO PURCHASE COMMON STOCK OF
CARDIODYNAMICS INTERNATIONAL CORPORATION
(Subject to Adjustment)
NO. GE-1 August 25, 1999
THIS CERTIFIES THAT, for value received, GE Marquette Medical Systems Inc.,
A Wisconsin corporation (including its affiliates and permitted assigns, "GE" or
--
"Holder") and a subsidiary of General Electric Company, a New York corporation,
------
is entitled, subject to the terms and conditions of this Warrant, at any time or
from time to time after the date hereof (the "Effective Date"), and before 5:00
--------------
P.M. New York City time on the date that is five (5) years from the date hereof
(the "Expiration Date"), to purchase from CardioDynamics International
---------------
Corporation, a California corporation (the "Company"), two million (2,000,000)
-------
shares of Common Stock of the Company at a price per share equal to $4.10 (the
"Purchase Price"). Both the number of shares of Common Stock purchasable upon
--------------
exercise of this Warrant and the Purchase Price are subject to adjustment and
change as provided herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms
shall have the following respective meanings:
"Additional Shares of Common Stock" shall mean all shares of Common Stock
---------------------------------
issued or sold (or, pursuant to Section 4, deemed to be issued) by the Company
after the date hereof, whether or not subsequently reacquired or retired by the
Company, other than:
(a) (i) shares issued upon the exercise of this Warrant and (ii) such
number of additional shares as may become issuable upon the exercise of this
Warrant by reason of adjustments required pursuant to the anti-dilution
provisions applicable to such Warrants as in effect on the date hereof;
(b) (i) shares issued upon the exercise of any warrants, options, rights
to acquire securities, or other Convertible Securities of the Company
outstanding as of the date hereof and
<PAGE>
(ii) such number of additional shares as may become issuable upon the exercise
or conversion of any such warrants, options, rights or other Convertible
Securities currently outstanding by reason of adjustments required pursuant to
the anti-dilution provisions applicable to such securities as in effect on the
date hereof; and
(c) (i) shares issued under, or issuable upon the exercise of options
granted or to be granted under the Company's stock option plans as in effect on
the date hereof or under any other employee stock option or purchase plan or
plans adopted or assumed after such date by the Company's Board of Directors;
provided in each such case that the exercise or purchase price for any such
share shall not be less than 85% of the fair market value (determined in good
faith by the Company's Board of Directors) of the Common Stock on the date of
grant, and (ii) such additional number of shares as may become issuable pursuant
to the terms of any such plans by reason of adjustments required pursuant to
anti-dilution provisions applicable to such securities in order to reflect any
subdivision or combination of Common Stock, by reclassification or otherwise, or
any dividend on Common Stock payable in Common Stock.
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" shall mean the Common Stock of the Company, no par value,
------------
and any other securities at any time receivable or issuable upon exercise of
this Warrant.
"Convertible Securities" shall mean any evidences of indebtedness, shares
----------------------
of stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
"Fair Market Value" of a share of Common Stock as of a particular date
-----------------
shall mean:
(a) If traded on a securities exchange or the Nasdaq National Market or
Nasdaq Small Cap Market, the Fair Market Value shall be deemed to be the average
of the closing prices of the Common Stock of the Company on such exchange or
market over the 20 trading days ending immediately prior to the applicable date
of valuation;
(b) If actively traded over-the-counter, the Fair Market Value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
immediately prior to the applicable date of valuation; and
(c) If there is no active public market, the Fair Market Value shall be
the value thereof, as agreed upon by the Company and the Holder; provided,
however, that if the Company and the Holder cannot agree on such value, such
value shall be determined by an independent valuation firm experienced in
valuing businesses such as the Company and jointly selected in good faith by the
Company and the Holder. Fees and expenses of the valuation firm shall be paid
for by the Company.
"Fair Value" shall mean, on any date specified herein (i) in the case of
----------
cash, the dollar amount thereof, (ii) in the case of a security, the value of
such security as calculated in a similar
2
<PAGE>
manner as the Fair Market Value is calculated for the Company's Common Stock (as
set forth above), and (iii) in all other cases, determined in good faith jointly
by the Company and the Holder; provided, however, that if the Company and the
Holder cannot agree on such value, such value shall be determined by an
independent valuation firm experienced in valuing the applicable item to be
valued. Fees and expenses of the valuation firm shall be paid for by the
Company.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended from time to time.
"Options" shall mean any rights, options or warrants to subscribe for,
-------
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"Other Securities" shall mean any stock (other than Common Stock) and other
----------------
securities of the Company or any other Person (corporate or otherwise) which the
Holder at any time shall be entitled to receive, or shall have received, upon
the exercise of the Warrant, in lieu of or in addition to Common Stock, or which
at any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4.4 or
otherwise.
"Person" shall mean any individual, firm, partnership, corporation, trust,
------
joint venture, association, joint stock company, limited liability company,
unincorporated organization or any other entity or organization, including a
government or agency or political subdivision thereof, and shall include any
successor (by merger or otherwise) of such entity.
"Registered Holder" shall mean any Holder in whose name this Warrant is
-----------------
registered upon the books and records maintained by the Company.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Warrant" as used herein, shall include this Warrant and any warrant
-------
delivered in substitution or exchange therefor as provided herein.
2. EXERCISE OF WARRANT
2.1. Payment. Subject to compliance with the terms and conditions of this
-------
Warrant and applicable securities laws, this Warrant may be exercised, in whole
or in part (in blocks of no fewer than 100,000 shares, or, if fewer, the total
number of remaining vested shares hereunder) at any time or from time to time,
on or before the Expiration Date by the delivery (including, without limitation,
delivery by facsimile) of the form of Notice of Exercise attached hereto as
Exhibit 1 (the "Notice of Exercise"), duly executed by the Holder, at the
------------------
principal office of the Company, and as soon as practicable after such date, (a)
surrendering this Warrant at the principal office of the Company, and (b) making
payment (i) in cash (by check) or by wire transfer, (ii) by cancellation by the
Holder of indebtedness of the Company to the Holder; or (iii) by a combination
of (i) and (ii), of an amount equal to the product obtained by multiplying the
number of shares of Common Stock being purchased upon such exercise by the then
effective Purchase Price (the "Exercise Amount"), except that if Holder is
---------------
subject to HSR Act Restrictions
3
<PAGE>
(as defined in Section 2.3 below), the Exercise Amount shall be paid to the
Company within five (5) business days of the termination of all HSR Act
Restrictions.
2.2. Stock Certificates; Fractional Shares. As soon as practicable on or
-------------------------------------
after such date, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
whole shares of Common Stock issuable upon such exercise, together with cash in
lieu of any fraction of a share equal to such fraction of the current Fair
Market Value of one whole share of Common Stock as of the date of exercise of
this Warrant. No fractional shares or scrip representing fractional shares
shall be issued upon an exercise of this Warrant. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Common Stock as of the date of delivery of the Notice of Exercise.
2.3. HSR Act. If the filing by the Company under the HSR Act should be
-------
required at the time of any exercise of this Warrant by a Holder, in the
reasonable opinion of counsel for Holder, the Company will promptly make any
such filing with the appropriate government agency. The Company hereby
acknowledges that exercise of this Warrant by Holder may subject the Company
and/or the Holder to the filing requirements of the HSR Act and that Holder may
be prevented from exercising this Warrant until the expiration or early
termination of all waiting periods imposed by the HSR Act ("HSR Act
-------
Restrictions"). If on or before the Expiration Date Holder has sent the Notice
- -------------
of Exercise to Company and Holder has not been able to complete the exercise of
this Warrant prior to the Expiration Date because of HSR Act Restrictions, the
Holder shall be entitled to complete the process of exercising this Warrant in
accordance with the procedures contained herein notwithstanding the fact that
completion of the exercise of this Warrant would take place after the Expiration
Date.
2.4. Partial Exercise; Effective Date of Exercise. In case of any partial
--------------------------------------------
exercise of this Warrant, the Company shall cancel this Warrant upon surrender
hereof and shall execute and deliver a new Warrant of like tenor and date for
the balance of the shares of Common Stock purchasable hereunder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above. However,
if Holder is subject to HSR Act filing requirements this Warrant shall be deemed
to have been exercised on the date immediately following the date of the
expiration of all HSR Act Restrictions. The person entitled to receive the
shares of Common Stock issuable upon exercise of this Warrant shall be treated
for all purposes as the holder of record of such shares as of the close of
business on the date the Holder is deemed to have exercised this Warrant.
2.5. Net Issue Exercise. In lieu of the payment methods set forth in
------------------
Section 2.1 above, the Holder may elect to exchange all or some of the Warrant
for shares of Common Stock equal to the value of the amount of the Warrant being
exchanged on the date of exchange. If Holder elects to exchange this Warrant as
provided in this Section 2.5, Holder shall tender to the Company the Warrant for
the amount being exchanged, along with written notice of Holder's election to
exchange some or all of the Warrant, and the Company shall issue to Holder the
number of shares of the Common Stock computed using the following formula:
4
<PAGE>
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
Warrant being exchanged (as adjusted to the date of such
calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = the Purchase Price (as adjusted to the date of such
calculation).
2.6. "Easy Sale" Exercise. In lieu of the payment methods set forth in
-------------------
Section 2.1 and 2.5 above, when permitted by law and applicable regulations
(including Nasdaq and NASD rules), the Holder may pay the Purchase Price through
a "same day sale" commitment from the Holder (and if applicable a broker-dealer
that is a member of the National Association of Securities Dealers (a "NASD
Dealer")), whereby the Holder irrevocably elects to exercise this Warrant and to
sell a portion of the Shares so purchased to pay for the Purchase Price and the
Holder (or, if applicable, the NASD Dealer) commits upon sale (or, in the case
of the NASD Dealer, upon receipt) of such Shares to forward the Purchase Price
directly to the Company.
2.7 Vesting. This Warrant shall be vested and exercisable (a) with
-------
respect to 1,000,000 shares of Common Stock as of the date hereof in
consideration of access to certain technology owned by Holder and (b) with
respect to an additional 1,000,000 shares of Common Stock on the date that is
fifteen (15) months after the date hereof but only if Holder has not been given
valid notice of termination with respect to all distribution agreements between
Holder and the Company in accordance with the terms thereof. The Company
acknowledges that it has been given access to certain technology of Holder
sufficient to justify the vesting of 1,000,000 shares of Common Stock pursuant
to clause (a) above, that Holder is not obligated to provide any further access
to technology in order to vest in such shares, and that any further access to
Holder's technology shall be subject to mutual agreement of the Company and
Holder.
3. VALID ISSUANCE; TAXES. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid and non-assessable,
and the Company shall pay all taxes and other governmental charges that may be
imposed in respect of the issue or delivery thereof. The Company shall not be
required to pay any tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common Stock in any
name other than that of the Registered Holder of this Warrant, and in such case
the Company shall not be required to issue or deliver any stock certificate or
security until such tax or other charge has been paid, or it has been
established to the Company's reasonable satisfaction that no tax or other charge
is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of
shares of Common Stock issuable upon exercise of this Warrant (or any shares of
stock or other securities or property receivable or issuable upon exercise of
this Warrant) and the Purchase Price are subject to adjustment upon occurrence
of the following events:
5
<PAGE>
4.1. Adjustment for Stock Splits, Stock Subdivisions or Combinations of
------------------------------------------------------------------
Shares. The Purchase Price of this Warrant shall be proportionally decreased
- ------
and the number of shares of Common Stock issuable upon exercise of this Warrant
(or any shares of stock or other securities at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Common Stock. The Purchase Price of this Warrant
shall be proportionally increased and the number of shares of Common Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Common
Stock.
4.2. Adjustment for Dividends or Distributions of Stock or Other
-----------------------------------------------------------
Securities or Property. In case the Company shall make or issue, or shall fix a
- ----------------------
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with respect to the Common Stock (or any shares
of stock or other securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets (excluding cash dividends
paid or payable solely out of retained earnings), then, in each such case, the
Holder of this Warrant on exercise hereof at any time after the consummation,
effective date or record date of such dividend or other distribution, shall
receive, in addition to the shares of Common Stock (or such other stock or
securities) issuable on such exercise prior to such date, and without the
payment of additional consideration therefor, the securities or such other
assets of the Company to which such Holder would have been entitled upon such
date if such Holder had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all such additional securities or
other assets distributed with respect to such shares as aforesaid during such
period giving effect to all adjustments called for by this Section 4.
4.3. Reclassification. If the Company, by reclassification of securities
----------------
or otherwise, shall change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Purchase Price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 4. No adjustment
shall be made pursuant to this Section 4.3 upon any conversion or redemption of
the Common Stock which is the subject of Section 4.5.
4.4. Adjustment for Capital Reorganization, Merger or Consolidation. In
--------------------------------------------------------------
case of any capital reorganization of the capital stock of the Company (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the
assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares
6
<PAGE>
deliverable upon exercise of this Warrant would have been entitled to receive in
such reorganization, consolidation, merger, sale or transfer if this Warrant had
been exercised immediately before such reorganization, merger, consolidation,
sale or transfer, all subject to further adjustment as provided in this Section
4. The foregoing provisions of this Section 4.4 shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers and to
the stock or securities of any other corporation that are at the time receivable
upon the exercise of this Warrant. If the per-share consideration payable to the
Holder hereof for shares in connection with any such transaction is in a form
other than cash or marketable securities, then the value of such consideration
shall be determined in good faith by the Company's Board of Directors. In all
events, appropriate adjustment (as determined in good faith by the Company's
Board of Directors) shall be made in the application of the provisions of this
Warrant with respect to the rights and interests of the Holder after the
transaction, to the end that the provisions of this Warrant shall be applicable
after that event, as near as reasonably may be, in relation to any shares or
other property deliverable after that event upon exercise of this Warrant.
4.5. Conversion of Common Stock. In case all or any portion of the
--------------------------
authorized and outstanding shares of Common Stock of the Company are redeemed or
converted or reclassified into other securities or property pursuant to the
Company's Articles of Incorporation or otherwise, or the Common Stock otherwise
ceases to exist, then, in such case, the Holder of this Warrant, upon exercise
hereof at any time after the date on which the Common Stock is so redeemed or
converted, reclassified or ceases to exist (the "Termination Date"), shall
----------------
receive, in lieu of the number of shares of Common Stock that would have been
issuable upon such exercise immediately prior to the Termination Date, the
securities or property that would have been received if this Warrant had been
exercised in full and the Common Stock received thereupon had been
simultaneously converted immediately prior to the Termination Date, all subject
to further adjustment as provided in this Warrant. Additionally, the Purchase
Price shall be immediately adjusted to equal the quotient obtained by dividing
(x) the aggregate Purchase Price of the maximum number of shares of Common Stock
for which this Warrant was exercisable immediately prior to the Termination Date
by (y) the number of shares of Common Stock of the Company for which this
Warrant is exercisable immediately after the Termination Date, all subject to
further adjustment as provided herein.
4.6 Adjustment of Number of Shares. Upon each adjustment of the Purchase
------------------------------
Price as a result of the calculations made in this Section 4, this Warrant shall
thereafter evidence the right to receive, at the adjusted Purchase Price, that
number of shares of Common Stock (calculated to the nearest one-hundredth)
obtained by dividing (i) the product of the aggregate number of shares covered
by this Warrant immediately prior to such adjustment and the Purchase Price in
effect immediately prior to such adjustment of the Purchase Price by (ii) the
Purchase Price in effect immediately after such adjustment of the Purchase
Price.
4.7 Issuance of Additional Shares of Common Stock. In case the Company at
---------------------------------------------
any time or from time to time after the date hereof shall issue or sell
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to this Section 4 (including without limitation,
Section 4.8, but excluding Additional Shares of Common Stock purchasable upon
exercise of Rights referred to in Section 4.13), without consideration or for a
consideration per share less than the Purchase Price, as in effect
7
<PAGE>
immediately prior to such issue or sale, then, subject to Section 4.11, the
Purchase Price shall be reduced, concurrently with such issue or sale, to a
price (calculated to the nearest .001 of a dollar) determined by multiplying
such Purchase Price by a fraction:
(a) the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale and
(ii) the number of shares of Common Stock which the gross consideration received
by the Company for the total number of such Additional Shares of Common Stock so
issued or sold would purchase at the Purchase Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale, provided that, for the
purposes of this Section 4.7, immediately after any Additional Shares of Common
Stock are deemed to have been issued pursuant to this Section 4, such Additional
Shares shall be deemed to be outstanding.
4.8 Treatment of Options and Convertible Securities. In case the Company
-----------------------------------------------
at any time or from time to time after the date hereof shall issue, sell, grant
or assume, or shall fix a record date for the determination of holders of any
class of securities of the Company entitled to receive, any Options or
Convertible Securities (whether or not the rights thereunder are immediately
exercisable), then, and in each such case, the maximum number of Additional
Shares of Common Stock (calculated as if converted on the date of issuance,
sale, grant or assumption, as set forth in the instrument relating thereto,
without regard to any provisions contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue, sale, grant or assumption or, in case such
a record date shall have been fixed, as of the close of business on such record
date (or, if the Common Stock trades on an ex-dividend basis, on the date prior
to the commencement of ex-dividend trading), provided that such Additional
Shares of Common Stock shall not be deemed to have been issued unless (i) the
consideration per share (determined pursuant to Section 4.9) of such shares
would be less than the Purchase Price as in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be and (ii) such Additional Shares of Common Stock are
not purchasable pursuant to Rights referred to in Section 4.13, and provided,
further, that:
(a) whether or not the Additional Shares of Common Stock underlying
such Options or Convertible Securities are deemed to be issued, no further
adjustment of the Purchase Price shall be made upon the subsequent issue or sale
of Convertible Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of Additional
Shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof (by change of rate or otherwise), the Purchase Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence of the
record
8
<PAGE>
date, or date prior to the commencement of ex-dividend trading, as the case may
be, with respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options, or the rights of
conversion or exchange under such Convertible Securities, which are outstanding
at such time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or the
expiration of any rights of conversion or exchange under any such Convertible
Securities which (or purchase by the Company and cancellation or retirement of
any such Convertible Securities the rights of conversion or exchange under
which) shall not have been exercised, the Purchase Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence of the
record date, or date prior to the commencement of ex-dividend trading, as the
case may be, with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration (or such cancellation or retirement, as the
case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold were
the Additional Shares of Common Stock, if any, actually issued or sold upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor was the
consideration actually received by the Company for the issue, sale, grant
or assumption of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, or for
the issue or sale of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the exercise
of such Options were issued at the time of the issue or sale, grant or
assumption of such Options, and the consideration received by the Company
for the Additional Shares of Common Stock deemed to have then been issued
was the consideration actually received by the Company for the issue, sale,
grant or assumption of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Company (pursuant to
Section 4.9) upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Purchase Price by an amount in excess of the
amount of the adjustment thereof originally made in respect of the issue, sale,
grant or assumption of such Options or Convertible Securities; and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption thereof, no
adjustment of the Purchase Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in the manner
provided in subdivision (c) above.
9
<PAGE>
4.9 Computation of Consideration. For the purposes of this Section 4,
----------------------------
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the amount
of cash received by the Company, without deducting any expenses paid or
incurred by the Company or any commissions or compensations paid or
concessions or discounts allowed to underwriters, dealers or others
performing similar services in connection with such issue or sale,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the Fair Value thereof at the time of such
issue or sale, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the Company
for a consideration which covers both, be the portion of such consideration
so received, computed as provided in clauses (i) and (ii) above, allocable
to such Additional Shares of Common Stock, such allocation to be determined
in the same manner that the Fair Value of property not consisting of cash
or securities is to be determined as provided in the definition of "Fair
Value" herein;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 4.8, relating to Options and Convertible Securities, shall
be deemed to have been issued for a consideration per share determined by
dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of the
Options or Convertible Securities in question, plus the minimum aggregate
amount of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration to protect against dilution)
payable to the Company upon the exercise in full of such Options or the
conversion or exchange of such Convertible Securities or, in the case of
Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities, in each case computing such consideration as provided in the
foregoing subdivision (a), by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to protect
against dilution) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 4.1 or 4.2, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
10
<PAGE>
4.10 Dilution in Case of Other Securities. In case any Other Securities
------------------------------------
shall be issued or sold or shall become subject to issue or sale upon the
conversion or exchange of any stock (or Other Securities) of the Company (or any
issuer of Other Securities or any other Person referred to in Section 4) or to
subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Section 4, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this Section 4 with respect to the Purchase Price and the number
of shares purchasable upon Warrant exercise shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable upon the exercise of the Warrant, so as
to protect the Holder against the effect of such dilution.
4.11 De Minimis Adjustments. If the amount of any adjustment of the
----------------------
Purchase Price per share required pursuant to this Section 4 would be less than
$.01, such amount shall be carried forward and adjustment with respect thereto
made at the time of and together with any subsequent adjustment which, together
with such amount and any other amount or amounts so carried forward, shall
aggregate a change in the Purchase Price of at least $.01 per share. All
calculations under this Warrant shall be made to the nearest .001 of a dollar or
to the nearest one-hundredth of a share, as the case may be.
4.12 Abandoned Dividend or Distribution. If the Company shall take a
----------------------------------
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Purchase Price under the terms of this Warrant) and shall, thereafter, and
before such dividend or distribution is paid or delivered to shareholders
entitled thereto, legally abandon its plan to pay or deliver such dividend or
distribution, then any adjustment made to the Purchase Price and number of
shares of Common Stock purchasable upon Warrant exercise by reason of the taking
of such record shall be reversed, and any subsequent adjustments, based thereon,
shall be recomputed.
4.13 Shareholder Rights Plan. Notwithstanding the foregoing, in the event
-----------------------
that the Company shall distribute "poison pill" rights pursuant to a "poison
pill" shareholder rights plan (the "Rights"), the Company shall, in lieu of
------
making any adjustment pursuant to Section 4.1, 4.2 or 4.7 hereof, make proper
provision so that each Holder who exercises a Warrant after the record date for
such distribution and prior to the expiration or redemption of the Rights shall
be entitled to receive upon such exercise, in addition to the shares of Common
Stock issuable upon such exercise, a number of Rights to be determined as
follows: (i) if such exercise occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder of
-----------------
a number of shares of Common Stock equal to the number of shares of Common Stock
issuable upon such exercise at the time of such exercise would be entitled in
accordance with the terms and provisions of and applicable to the Rights; and
(ii) if such exercise occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares into which the Warrant so
exercised was exercisable immediately prior to the Distribution Date would have
been entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights, and in each case subject to the
terms and conditions of the Rights.
11
<PAGE>
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the
Purchase Price, number or type of shares issuable upon exercise of this Warrant
or otherwise pursuant to Section 4, the Chief Financial Officer or Controller of
the Company shall compute such adjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment and showing in
detail the facts upon which such adjustment is based, including a statement of
the adjusted Purchase Price. The Company shall promptly send (by facsimile and
by either first class mail, postage prepaid or overnight delivery) a copy of
each such certificate to the Holder; provided, however, that the Company shall
not be obligated to provide more than two such certificates per month to the
Holder, unless otherwise requested by the Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory
to the Company of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and of indemnity reasonably satisfactory to it, and
(in the case of mutilation) upon surrender and cancellation of this Warrant, the
Company will execute and deliver in lieu thereof a new Warrant of like tenor as
the lost, stolen, destroyed or mutilated Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant such number of shares of Common Stock or other shares of capital stock
of the Company as are from time to time issuable upon exercise of this Warrant
and, from time to time, will take all steps necessary to amend its Articles of
Incorporation or other similar organizational document to provide sufficient
reserves of shares of Common Stock issuable upon exercise of this Warrant. All
such shares shall be duly authorized, and when issued upon such exercise, shall
be validly issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale and
free and clear of all preemptive rights, except encumbrances or restrictions
arising under federal or state securities laws. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the exercise of this Warrant.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
Warrant and compliance with all applicable securities laws, this Warrant and all
rights hereunder may be transferred to Registered Holder's parent, subsidiary or
affiliate, in whole or in part, without the Company's consent, provided that the
transferee agrees in writing to comply with all of the terms and conditions of
this Warrant. Any such transfer shall be registered on the books of the Company
maintained for such purpose at the principal office of the Company referred to
above, and may be made by the Registered Holder hereof in person, or by duly
authorized attorney, upon surrender of this Warrant properly endorsed and upon
payment of any necessary transfer tax or other governmental charge imposed upon
such transfer. Upon any permitted partial transfer, the Company will issue and
deliver to the Registered Holder a new Warrant or Warrants with respect to the
shares of Common Stock not so transferred. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that when this
Warrant shall have been so endorsed, the person in possession of this Warrant
may be treated by the Company, and all other persons dealing with this Warrant,
as the absolute owner hereof for any purpose and as the person entitled to
exercise the rights represented hereby, any notice to the contrary
12
<PAGE>
notwithstanding; provided, however that until a transfer of this Warrant is duly
registered on the books of the Company, the Company may treat the Registered
Holder hereof as the owner for all purposes.
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees
that, absent an effective registration statement filed with the Securities and
Exchange Commission (the "SEC") under the Securities Act, covering the
---
disposition or sale of this Warrant or the Common Stock issued or issuable upon
exercise hereof, as the case may be, and registration or qualification under
applicable state securities laws, such Holder will not sell, transfer, pledge,
or hypothecate any or all such Warrants or Common Stock, as the case may be,
unless either (i) the Company has received an opinion of counsel, in form and
substance reasonably satisfactory to the Company, to the effect that such
registration is not required in connection with such disposition or (ii) the
sale of such securities is made pursuant to SEC Rule 144.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the
holder hereby represents, warrants and covenants that any shares of stock
purchased upon exercise of this Warrant shall be acquired for investment only
and not with a view to, or for sale in connection with, any distribution
thereof; that the Holder has had such opportunity as such Holder has deemed
adequate to obtain from representatives of the Company such information as is
necessary to permit the Holder to evaluate the merits and risks of its
investment in the Company; that the Holder is able to bear the economic risk of
holding such shares as may be acquired pursuant to the exercise of this Warrant
for an indefinite period; that the Holder understands that the shares of stock
acquired pursuant to the exercise of this Warrant or acquired upon conversion
thereof will not be registered under the Securities Act (unless otherwise
required pursuant to exercise by the Holder of the registration rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within the meaning of Rule 144 under the Securities Act and that the exemption
from registration under Rule 144 will not be available for at least one year
from the date of exercise of this Warrant, and even then will not be available
unless a public market then exists for the stock, adequate information
concerning the Company is then available to the public, and other terms and
conditions of Rule 144 are complied with; and that all stock certificates
representing shares of stock issued to the Holder upon exercise of this Warrant
or upon conversion of such shares may have affixed thereto a legend
substantially in the following form (which legend the Company agrees to remove
when such restrictions are no applicable):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE
13
<PAGE>
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
The Holder shall be entitled to the registration rights and other rights
set forth in that certain Rights Agreement, dated as of the date hereof, between
the Company and the Holder (the "Rights Agreement"), and the shares of Common
----------------
Stock issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall be deemed
Registrable Securities under the Rights Agreement.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Company. In the absence of affirmative action by such Holder to purchase Common
Stock by exercise of this Warrant, no provisions of this Warrant, and no
enumeration herein of the rights or privileges of the Holder hereof shall cause
such Holder hereof to be a stockholder of the Company for any purpose.
12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Holder that:
12.1. Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to own its properties and assets and to carry on its business as now conducted
and as presently proposed to be conducted. The Company is qualified to do
business as a foreign corporation in each jurisdiction where failure to be so
qualified would have a material adverse effect on its financial condition,
business, prospects or operations.
12.2. Capitalization. The authorized capital stock of the Company consists
--------------
of the following:
(a) Preferred Stock. 18,000,000 shares of Preferred Stock, no par value,
of which 3,000 shares have been designated as Series A Convertible Preferred
Stock, none of which are outstanding. The rights, privileges and preferences of
the Series A Convertible Preferred Stock are as stated in the Company's Articles
of Incorporation.
(b) Common Stock. 50,000,000 shares of common stock, no par value
("Common Stock"), of which 39,855,811 shares are issued and outstanding. An
additional 4,000,000 shares of Common Stock are reserved for issuance pursuant
to the 1995 Stock Option/Stock Issuance Plan (the "Option Plan"). The Company
has granted options under the Option Plan to acquire a total of 2,185,866 shares
of Common Stock.
(c) No Other Rights to Acquire. Except (i) as set forth in this Section
12.2, (ii) as set forth in the Company's filings under the Exchange Act and
(iii) for warrants to purchase 20,336 shares of Common Stock, there are not
outstanding any other options, warrants, convertible securities or other rights
to acquire any equity of the Company.
14
<PAGE>
12.3 Valid Issuance of Stock. The outstanding shares of the capital stock
-----------------------
of the Company are duly and validly issued, fully paid and non-assessable, and
such shares, and all outstanding options and other securities of the Company,
have been issued in full compliance with the registration and prospectus
delivery requirements of the Securities Act and the registration and
qualification requirements of all applicable state securities laws, or in
compliance with applicable exemptions therefrom, and all other provisions of
applicable federal and state securities laws, including without limitation,
anti-fraud provisions.
12.4 Due Authorization; Consents. All corporate action on the part of the
---------------------------
Company, its officers, directors and shareholders necessary for (a) the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and (b) the authorization, issuance,
reservation for issuance and delivery of all of the Common Stock issuable upon
exercise of this Warrant, has been duly taken. This Warrant constitutes a valid
and binding obligation of the Company enforceable in accordance with its terms,
subject, as to enforcement of remedies, to applicable bankruptcy, insolvency,
moratorium, reorganization and similar laws affecting creditors' rights
generally and to general equitable principles. All consents, approvals and
authorizations of, and registrations, qualifications and filings with, any
federal or state governmental agency, authority or body, or any third party,
required in connection with the execution, delivery and performance of this
Warrant and the consummation of the transactions contemplated hereby and thereby
have been obtained.
12.5 SEC Reports; Financial Statements.
---------------------------------
(a) The Company has duly filed with the SEC the Company's annual report
on Form 10-KSB for the year ended November 30, 1998 and its quarterly reports on
Form 10-QSB for the quarters ended February 28, 1999 and May 31, 1999
(collectively, the "CDIC SEC Reports"). As of their respective filing dates, the
----------------
CDIC SEC Reports complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended, and none of the CDIC SEC Reports
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by a subsequently filed document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the CDIC SEC Reports complied as to form
in all material respects with the applicable published rules and regulations of
the SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted for by Form 10-QSB) and
presented fairly, in all material respects, the consolidated financial position
of the Company and its subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements are subject to normal and
recurring year-end adjustments which are not expected to be material in amount.
12.6 Governmental Consents. All consents, approvals, orders,
---------------------
authorizations or registrations, qualifications, declarations or filings with
any federal or state governmental authority on the part of the Company required
in connection with the consummation of the
15
<PAGE>
transactions contemplated herein shall have been obtained prior to and be
effective as of the Effective Date.
13. NOTICES. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications made pursuant to this Agreement shall
be in writing and shall be conclusively deemed to have been duly given (a) when
hand delivered to the other party; (b) when received when sent by facsimile at
the address and number set forth below; (c) three business days after deposit in
the U.S. mail with first class or certified mail receipt requested postage
prepaid and addressed to the other party as set forth below; or (d) the next
business day after deposit with a national overnight delivery service, postage
prepaid, addressed to the parties as set forth below with next-business-day
delivery guaranteed, provided that the sending party receives a confirmation of
delivery from the delivery service provider.
GE MARQUETTE MEDICAL SYSTEMS INC. CARDIODYNAMICS INTERNATIONAL CORPORATION
8200 West Tower Avenue 6175 Nancy Ridge Drive, Suite 300
Milwaukee, Wisconsin 53223 San Diego, California 92121
Telephone: 414-355-5000 Telephone: (619) 535-0202
Fax: 414-355-3790 Fax: (619) 623-8415
Attention: Brian Gladden, CFO Attention: Steven P. Loomis, CFO
Each person making a communication hereunder by facsimile shall promptly
confirm by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication. A party
may change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section 13 by giving the other party written
notice of the new address in the manner set forth above.
14. HEADINGS. The headings in this Agreement are for purposes of
convenience in reference only and shall not be deemed to constitute a part
hereof.
15. LAW GOVERNING. This Agreement and each Warrant issued hereunder shall
be deemed to be a contract made under the laws of the State of New York and for
all purposes shall be construed in accordance with the internal laws of said
State.
16. NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Registered Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock issuable
upon the exercise of this Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and non-
assessable shares of Common Stock upon exercise of this Warrant.
17. NOTICES OF RECORD DATE. In case:
16
<PAGE>
17.1. the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
17.2. of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the Capital Stock of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; or
17.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4. of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to
the Registered Holder of this Warrant a notice specifying, as the case may be,
(i) the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock or (such stock or
securities as at the time are receivable upon the exercise of this Warrant),
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities), for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
thirty (30) days prior to the date therein specified.
18. SEVERABILITY. If application of any one or more of the provisions of
this Warrant shall be unlawful under applicable law, then the parties will
attempt in good faith to make such alternative arrangements as may be legally
permissible and which carry out as nearly as practicable the terms of this
Warrant. Should any portion of this Warrant be deemed unenforceable by a court
of competent jurisdiction, the remaining portion thereof shall remain unaffected
and be interpreted as if such unenforceable portions were initially deleted.
19. COUNTERPARTS. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date
of this Warrant enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holders of this Warrant or otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to holders of the Company's securities under any other
agreements, except rights that have been waived.
17
<PAGE>
21. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a
Saturday, Sunday or legal holiday, the Expiration Date shall automatically be
extended until 5:00 p.m. the next business day.
22. OBTAINING STOCK EXCHANGE LISTINGS. The Company will from time to time
take all commercially reasonable action which may be necessary so that the
shares of Common Stock issuable upon the exercise of this Warrant, immediately
upon their issuance, will be listed on the principal securities exchanges and
markets within the United States of America, if any, on which other shares of
Common Stock are then listed.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
Effective Date.
GE MARQUETTE MEDICAL SYSTEMS, INC. CARDIODYNAMICS INTERNATIONAL CORPORATION
By: /s/ Fred Robertson By: /s/ Michael K. Perry
------------------------------ -------------------------------------
Name: Fred Robertson Name: Michael K. Perry
---------------------------- -----------------------------------
Title: Chief Executive Officer Title: Chief Executive Officer
--------------------------- ----------------------------------
19
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
CARDIODYNAMICS INTERNATIONAL CORPORATION WARRANT NO. GE-1
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of CARDIODYNAMICS INTERNATIONAL CORPORATION, as provided for
therein, and (check the applicable box):
[_] Tenders herewith payment of the exercise price in full in the form of cash
or a certified or official bank check in same-day funds in the amount of
$____________ for _________ such securities.
[_] Cancels indebtedness owed to it by the Company in the amount of
$___________.
[_] Elects the Net Issue Exercise option pursuant to Section 2.2 of the
Warrant, and accordingly requests delivery of a net of ______________ of
such securities, according to the following calculation:
X = Y (A-B) ( ) = (____) [(_____) - (_____)]
------- --------------------------
A (_____)
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the
date of such calculation).
A = the Fair Market Value of one share of the Company's Common
Stock.
B = Purchase Price (as adjusted to the date
of such calculation).
[_] Elects the Easy Sale Exercise option pursuant to Section 2.3 of the
Warrant, and accordingly requests delivery of a net of ______________ of
such securities.
Please issue a certificate or certificates for such securities in the name
of, and pay any cash for any fractional share to (please print name, address and
social security number):
Name:
-------------------------------------
Address:
----------------------------------
Signature:
--------------------------------
Tax ID No.:
-------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
<PAGE>
EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of Warrant WARRANT NO.
Certificate)
For value received, the undersigned hereby sells, assigns and transfers
unto________________________ the within Warrant, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
___________________________ attorney, to transfer said Warrant Certificate on
the books of the within-named Company with respect to the number of Warrants set
forth below, with full power of substitution in the premises:
<TABLE>
<CAPTION>
NAME(S) OF ASSIGNEE(S) Address # OF WARRANTS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
And if said number of Warrants shall not be all the Warrants represented by
the Warrant Certificate, a new Warrant Certificate is to be issued in the name
of said undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.
Dated:
----------------------------
Signature:
------------------------
Notice: The signature to the foregoing Assignment must correspond to the
name as written upon the face of this security in every particular, without
alteration or any change whatsoever.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTER
ENDED AUGUST 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000719722
<NAME> CARDIODYNAMICS INTERNATIONAL CORP.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> JUN-01-1999
<PERIOD-END> AUG-31-1999
<CASH> 2,836,411
<SECURITIES> 0
<RECEIVABLES> 3,399,215
<ALLOWANCES> 136,647
<INVENTORY> 1,383,204
<CURRENT-ASSETS> 7,634,428
<PP&E> 541,523
<DEPRECIATION> 247,511
<TOTAL-ASSETS> 7,970,940
<CURRENT-LIABILITIES> 2,181,978
<BONDS> 0
0
0
<COMMON> 24,073,245
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,970,940
<SALES> 2,073,582
<TOTAL-REVENUES> 2,073,582
<CGS> 716,117
<TOTAL-COSTS> 2,362,749
<OTHER-EXPENSES> 494,259
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,683
<INCOME-PRETAX> (1,532,226)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,532,226)
<EPS-BASIC> (.04)
<EPS-DILUTED> 0
</TABLE>
