<PAGE>
As filed with the Securities and Exchange Commission on October 1, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CARDIODYNAMICS INTERNATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3533362
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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6175 Nancy Ridge Drive, Suite 300, San Diego, California 92121
(619) 535-0202
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
---------------
Michael K. Perry
Chief Executive Officer
CardioDynamics International Corporation
6175 Nancy Ridge Drive, Suite 300, San Diego, California 92121
(619) 535-0202
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copy to:
David R. Snyder, Esq.
Pillsbury Madison & Sutro LLP
101 West Broadway, Suite 1800
San Diego, California 92101
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Each
Class of Securities Amount To Be Proposed Maximum Offering Proposed Maximum Aggregate Amount of
To Be Registered Registered Price Per Share(2) Offering Price(2) Registration Fee
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<S> <C> <C> <C> <C>
Common stock, no par
value per share 375,000 shares(1) $3.54 1,327,500 $369.05
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Total 375,000 shares(1) 1,327,500 $369.05
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</TABLE>
(1) Includes (i) up to 375,000 shares of common stock to be issued upon the
exercise of Warrants to Purchase Common Stock and (ii) an indeterminate
number of additional shares of common stock as may from time to time become
issuable upon exercise of the Warrants to Purchase Common Stock by reason
of stock splits, stock dividends and similar transactions, which shares are
registered hereunder pursuant to Rule 416 under the Securities Act.
(2) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933, as amended, based upon the average of the high and low prices of the
common stock on September 26, 1999, as reported on the Nasdaq SmallCap
Market.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
PROSPECTUS
375,000 SHARES
CARDIODYNAMICS INTERNATIONAL CORPORATION
COMMON STOCK
Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"CDIC." On September 30, 1999, the closing sale price of CardioDynamics common
stock as reported on the Nasdaq SmallCap Market was $[____] per share.
These shares of common stock are being sold by AGR Halifax Fund, Ltd.;
Raphael, L.P.; Ramius Fund, Ltd.; AG Super Fund International Partners, L.P.;
GAM Arbitrage Investments, Inc.; AFO Capital, LLC and Leonardo, L.P., as the
selling shareholders. The shares are issuable upon exercise of warrants at
$3.54 per share. We issued the warrants to the selling shareholders in exchange
for cancellation of the selling shareholders' rights to cause us to issue shares
of Series B preferred stock to them. The warrants expire on August 25, 2004.
We will not receive any part of the proceeds from the sale.
See "Risk Factors" on Page 3.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of the prospectus. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is October [__], 1999.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, and Chicago. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them which means that we can disclose important information to you by
referring you to those documents instead of having to repeat the information in
this prospectus. The information incorporated by reference is considered to be
part of this prospectus, and later information that we file with the SEC will
automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until the selling shareholders sells all the shares.
-- Annual Report on Form 10-KSB for the year ended November 30, 1998;
-- Quarterly Reports on Form 10-QSB for the quarters ended February 28,
1999 and May 31, 1999;
-- Current Report on Form 8-K dated June 5, 1999 for an event on May 28,
1999; and
-- Registration Statement on Form 8-A filed with the SEC on April 19,
1984. This filing describes the terms, rights and provisions applicable
to our common stock.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Shareholder Services
6175 Nancy Ridge Drive, Suite 300
San Diego, CA 92121
(619) 535-0202
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The selling shareholders will
not make an offer of these shares in any state where the offer is not permitted.
You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of those documents.
This prospectus is part of a registration statement we filed with the SEC
(Registration No. 333-[------------]).
ABOUT CARDIODYNAMICS INTERNATIONAL CORPORATION
At CardioDynamics International Corporation, we develop, manufacture and
market heart monitoring devices which 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(R) System, the BioZ(TM) Portable, and the
BioZ.com(TM) use a technology called thoracic electrical bioimpedance to obtain
data which is typically available only through a time-consuming, costly, and
potentially dangerous invasive procedure known as right-heart catheterization,
or as pulmonary artery catheterization.
Our principal executive offices are located at 6175 Nancy Ridge Drive,
Suite 300, San Diego, California 92121, and our telephone number is (619) 535-
0202. Our common stock trades on the Nasdaq Stock Market(SM), under the symbol
CDIC.
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RISK FACTORS
This offering involves a high degree of risk. You should carefully
consider the risks described below and the other information contained in this
prospectus before deciding to invest in shares of our common stock.
DEPENDENCE ON BIOZ(R) PRODUCT LINE WHOSE MARKET ACCEPTANCE IS UNCLEAR
Our future is dependent upon the success of the BioZ product line and
similar products that are based on the same technology. The market for thoracic
electrical bioimpedance products is in a relatively early stage of development,
and it is possible that this market will never fully develop. The long-term
commercial success of the BioZ(R) product line and any follow-on products
requires widespread acceptance of our thoracic electrical bioimpedance products
as safe, efficient, and cost-effective. Widespread acceptance would represent a
significant change in medical practice patterns. Historically, some medical
professionals have indicated hesitancy in using thoracic electrical bioimpedance
products such as analog-based monitors previously manufactured by us. Invasive
procedures, such as pulmonary artery catheterization, are generally accepted in
the medical community and have a long history of use.
We have limited clinical data with which to demonstrate the clinical
benefits of our products. However, we have sponsored and plan to continue to
sponsor and/or conduct clinical trials that we hope will demonstrate consistent
clinical benefits resulting from the use of our products. We cannot be certain
that these clinical trials will be completed or if they will have a positive
outcome or if a positive outcome in these trials would be sufficient to enable
acceptance of the BioZ(R) product line by the medical community. We are unable
to predict whether, if at all, our products will be widely accepted by members
of the medical community.
The following conditions may limit the accuracy of our products, such as:
. Severe shock;
. Aortic valve insufficiency;
. Very high blood pressure;
. Abnormal heart rhythms;
. Heart rates greater than 180 beats per minute;
. Patients who are shorter than 47";
. Patients who weigh less than 66 lbs.;
. Extreme patient movement.
Failure of the BioZ product line to gain widespread acceptance in the
medical community, and to maintain such acceptance, would negatively impact our
ability to stay in business.
HISTORY OF LOSSES AND EXPECTED CONTINUED LOSSES
Since our emergence from bankruptcy proceedings in 1993, we have had large
annual losses in the course of researching, developing and enhancing our
technology and products and establishing our sales, marketing, and
administrative organizations. We anticipate that our operating expenses will
increase substantially in the foreseeable future as we increase our sales and
marketing activities, expand our operations and continue the development of our
technology. Accordingly, we expect to incur additional losses in the future and
it is possible that we will never achieve or sustain revenue growth or
profitability.
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FUTURE ADDITIONAL CAPITAL REQUIREMENTS; NO ASSURANCE FUTURE CAPITAL WILL BE
AVAILABLE
Commercialization of the BioZ(R) product line and the development and
commercialization of any additional products will require substantial
expenditures. Our capital requirements will depend on numerous factors,
including:
. Our rate of sales growth--fast growth could actually increase our need
for additional capital to hire additional staff, purchase additional
component supplies, and supply additional support services;
. Our progress in marketing-related clinical evaluations and product
development programs--these programs represent potential avenues for
growth, but will require additional capital;
. Our receipt of, and the time required to obtain, regulatory clearances
and approvals--the longer regulatory approval takes, the more working
capital we need to support our regulatory and development efforts in
advance of sales;
. Resources we devote to the development, manufacture and marketing of
our products--any decision we make to improve, expand or simply change
our process, products or technology will require increased funds;
. Resources required to hire and develop medical sales representatives
and independent distributors and to develop internal manufacturing
capacity--requires substantial working capital;
. Facilities requirements--as we grow we may need additional
manufacturing, warehousing and administration facilities and the costs
of the facilities would be borne long before any increased revenue
from growth would occur;
. Market acceptance and demand for our products--although growth could
increase our capital needs, the lack of growth and continued losses
would also increase our need for capital; and
. Our ability to speed up hospitals' otherwise lengthy purchasing
processes by offering leasing programs as an alternative to outright
purchasing.
The timing and amount of such capital requirements cannot be accurately
predicted. We may be required to raise additional funds through public or
private financing, bank loans, collaborative relationships or other arrangements
earlier than expected. It is possible that banks, venture capitalists and other
investors may perceive our current debt load, our history of losses or our
technology's lack of acceptance as too great a risk to bear and, as a result,
such additional funding may not be available on attractive terms, or at all. If
we cannot obtain additional capital when needed we might be forced to agree to
unattractive finance terms, or to finance internally by discontinuing certain
operations, such as research and development, which we view as not essential to
day-to-day operations. Such decisions could impair our ability to go forward
with our current plans, or at all.
COMPETITION FROM OTHER PRODUCERS; AND TECHNOLOGICAL CHANGE WHICH MAY BENEFIT OUR
COMPETITORS
We compete with other companies that are developing and marketing non-
invasive hemodynamic monitors. We are also subject to competition from
invasive-technology companies, including Baxter Healthcare Corporation, which
have more established and larger marketing and sales organizations,
significantly greater financial and technical resources and a larger installed
base of customers than we do. Such competitors may be able to devote greater
resources to the development, promotion and sales of their products.
The current widespread acceptance of pulmonary artery catheterization, and
lack of widespread acceptance of thoracic electrical bioimpedance, is an
important competitive disadvantage that we must overcome. In addition, our
current and potential competitors may establish cooperative relationships with
large medical equipment companies to gain access to greater research and
development or marketing resources. Competition may result in price reductions,
reduced gross margins and loss of market share. Any of these could hurt our
business, results of operations and financial condition. It is possible that we
will not be able to compete successfully.
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<PAGE>
The introduction by others of products embodying new technologies and the
emergence of new industry standards could render our products obsolete and
unmarketable. Other companies may develop and introduce products and processes
competitive with or superior to ours. In addition, other technologies or
products may be developed that have an entirely different approach or means of
accomplishing the intended purposes of our products. Accordingly, our products'
life cycles are difficult to estimate. To compete successfully, we must
continually develop and introduce new products that keep pace with technological
advancements, respond to evolving consumer requirements and achieve market
acceptance.
We may not succeed in satisfactorily and timely developing and introducing
additional products. Even if we succeed in developing and marketing products
that achieve market acceptance, our competitors may develop and market products
that will replace ours.
TECHNOLOGICAL CHANGE IS DIFFICULT TO PREDICT AND TO MANAGE
Although not in fact a new company, we currently face many of the
challenges that are typically faced by new companies just emerging from the
development phase. The BioZ(R) product line has required, and any future
products will require, substantial development efforts and compliance with all
governmental clearance/approval requirements. We have to continue to build up
our sales and marketing functions. We may encounter unforeseen technological or
scientific problems that may force abandonment or substantial change in the
development of a specific product or process. Technological change or product
developments by others may also have a significant negative effect on us.
ABILITY TO MANAGE GROWTH
If successful, we will experience a period of growth that could place a
significant strain upon our managerial, financial and operational resources.
Our infrastructure, procedures and controls may not be adequate to support our
operations and to achieve the rapid execution necessary to fully exploit any
future market opportunity for our products. Our future operating results will
also depend on our ability to complete our geographic network of direct sales
persons and distributors, expand our sales and marketing organizations, and fill
out our support staff organization. If we are unable to manage expansion
effectively, our business, results of operations and financial condition will
suffer. However, we are not promising you that such expansion or growth will
occur.
CONTROL BY OUR CO-CHAIRMEN
Allen E. Paulson and James C. Gilstrap, the co-chairmen of CardioDynamics,
beneficially own, directly or through CardioDynamics Holdings, LLC, which they
control, approximately 45% of the outstanding shares of our common stock
(including shares owned by others which CardioDynamics Holdings, LLC has the
right to vote). In addition, Mr. Paulson's sons beneficially own another 7% of
the outstanding shares of common stock. Accordingly, Messrs. Paulson and
Gilstrap, as a group, are able to control CardioDynamics and direct our affairs
and business, including any future issuances of common stock or other
securities, merger and acquisition decisions, declaration of dividends and the
election of directors. Further, in their position as holders of our stock, they
have no duty to act in the best interests of CardioDynamics. Our stock price
and our ability to raise capital could be injured if they were to sell even a
portion of their holdings on the open market.
WE MAY NOT CONTINUE TO RECEIVE NECESSARY APPROVALS FROM THE FOOD AND DRUG
ADMINISTRATION
Our products and activities are subject to extensive regulation by the FDA
and other governmental authorities. Delays in receipt of, or failure to obtain,
regulatory clearances and approvals, or any failure to comply with regulatory
requirements, could have a very negative effect on our business.
Our thoracic electrical bioimpedance products are subject to extensive and
rigorous regulation by the FDA and, to varying degrees, by state and foreign
regulatory agencies. Under the federal Food, Drug, and Cosmetic Act (the "FDC
Act"), the FDA regulates the clinical testing, manufacture, labeling, packaging,
marketing, distribution and record keeping for medical devices, in order to
ensure that medical devices distributed in the United States are safe and
effective for their intended use.
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<PAGE>
Before a new device can be introduced into the market, the manufacturer
generally must obtain either FDA 510(k) clearance or approval of a pre-market
approval application. Following submission of a 510(k) or PMA application, the
manufacturer may not market the new device until an order is issued by the FDA
granting clearance or approval, which can entail an expensive, lengthy and
uncertain process. We have received a marketing clearance for the BioZ(R)
System, the BioZ(TM) Portable and the BioZ.com(TM). However, such clearances are
subject to continued FDA audits and can be rescinded. Further, we plan to submit
additional new products for FDA approval in the future. It is possible that our
future products might not gain FDA approval in a timely fashion, or at all. It
is also possible that our current products may someday lose their FDA approval.
We are also subject to routine inspection by the FDA and state agencies,
such as the California Department of Health Services, for compliance with Good
Manufacturing Practice (GMP) requirements, Medical Device Reporting requirements
and other applicable regulations. Although we work hard at attempting to comply
with all governmental regulations, it is possible that an inspector could
someday find a violation. Such a violation could result in government action
ranging from warning letters to fines to criminal prosecution. Should we ever
incur a significant penalty it is possible it would be detrimental to us. The
FDC Act requires that medical devices be manufactured in accordance with Good
Manufacturing Practice requirements.
Good Manufacturing Practice requirements specify, among other things, that:
. the manufacturing process be regulated and controlled by the use of
written procedures;
. the ability to produce devices which meet the manufacturer's
specifications be validated by the extensive and detailed testing of
every aspect of the process; and
. any deficiencies in the manufacturing process or in the products
produced be investigated and detailed records kept.
Manufacturing facilities are subject to FDA inspection on a periodic basis
to monitor compliance with current GMP requirements. Labeling and promotional
activities are regulated by the FDA and, in certain circumstances, by the
Federal Trade Commission. Current FDA enforcement policy prohibits the
marketing of approved medical devices for unapproved uses. For any medical
device cleared through the 510(k) process, modifications or enhancements that
could significantly affect the safety or effectiveness of the device or that
constitute a major change to the intended use of the device require a new 510(k)
submission. If the FDA requires us to submit a new 510(k) notice for any
product modification, we may be prohibited from marketing the modified product
until the 510(k) notice is cleared by the FDA.
The FDA regulates computer software that performs the function of a
regulated device or that is intimately associated with a given device, such as
control software for diagnostic devices like our products. The FDA is
reevaluating its regulation of such software, and if the FDA undertakes
increased or more rigorous regulation of such software, the BioZ(R) product line
and related products may become subject to further regulatory processes and
clearance requirements.
Laws and regulations regarding the manufacture, sale and use of medical
devices are subject to change and depend heavily on administrative
interpretations. Future changes in the regulations or interpretations made by
the FDA or other regulatory bodies, with possible retroactive effect, may
adversely affect us.
WE MAY NOT RECEIVE APPROVALS BY FOREIGN REGULATORS WHICH ARE NECESSARY FOR
FOREIGN SALES
Sales of medical devices outside of the United States are subject to
foreign regulatory requirements that vary from country to country. If we or our
international distributors fail to obtain or maintain required pre-market
approvals or fail to comply with foreign regulations, foreign regulatory
authorities may require us to file revised governmental notifications, cease
commercial sales of our products in the applicable countries, or otherwise cure
the problem Such enforcement action by regulatory authorities could be costly.
In order to sell our products within the European Economic Area, we have to
comply with the European Commission's Medical Device Directive and to affix a
"CE" marking on our products to attest such compliance. In November 1998 we
received authorization from TUV Rhineland of North America to place the CE Mark
on our BioZ.com(TM). However, future regulatory changes could limit our ability
to use the CE mark and any new products
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<PAGE>
we develop may not qualify for the CE mark. Failure to obtain authorization to
use the CE mark or loss of such authorization would render us unable to sell our
products in the European Economic Area and this would limit our potential.
THIRD-PARTY REIMBURSEMENT; PRICING PRESSURES
Our commercial success will depend in part on the availability of adequate
reimbursement from third-party healthcare payers, such as government and private
health insurers and managed care organizations. Third-party payers are
increasingly challenging the pricing of medical products and services. Even
with an FDA approved device, third-party payers may not cover the device and
related services, or they may place significant restrictions on the
circumstances in which coverage will be available. Medicare reimbursement for
use of the BioZ(R) product line is now available under the heading of
plethysmography, but private third-party payers are not required to follow
Medicare's lead. We may not be able to obtain a specific code for reimbursement
of thoracic electrical bioimpedance tests in a reasonable time frame, or at all,
from either Medicare or private third-party payers. In addition, reimbursement
may not be at or stay at price levels sufficient to allow medical professionals
to realize an appropriate return on an investment in our products. Downward
pricing pressure in the industry could hurt our operations.
Our business plan contemplates an income stream from sales of disposable
sensors which are compatible with an installed base of our monitors. We may be
subject to price competition from other sensor manufacturers.
DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL
We are dependent upon a limited number of key management and technical
personnel and we do not have insurance on these people. The loss of the
services of one or more of such key employees could hurt our business. In
addition, our success depends upon our ability to attract and retain additional
highly qualified sales, management, manufacturing and research and development
personnel. We face intense competition in our recruiting activities and we may
not be able to attract and/or retain qualified personnel.
DEPENDENCE ON RIVERTEK MEDICAL SYSTEMS FOR DEVELOPMENT SERVICES AND OTHER THIRD
PARTIES FOR DEVELOPMENT AND MANUFACTURING SERVICES
Our strategy for development and commercialization of certain of our
products depends upon entering into various arrangements with third parties and
upon the subsequent success of these parties in performing their obligations.
It is possible that we will not be able to negotiate acceptable arrangements in
the future or that our existing arrangements will not be successful. We rely
heavily on contracted development services, particularly from Rivertek Medical
Systems, Inc. Also, we currently assemble our BioZ(R) product line from
components manufactured by others. Therefore, we are dependent on contract
manufacturers.
SMALL MARKET FLOAT CAN PRODUCE BOTH STOCK PRICE VOLATILITY AND A POTENTIAL LACK
OF LIQUIDITY
Market float is the aggregate value of all of a company's publicly traded
stock. Our market float is smaller than that of many other publicly traded
companies. Because our market float is smaller, changes in the opinion of one
investor or one analyst can have a significant effect on our stock price. As a
result, the market price of our common stock is likely to be highly volatile and
could be subject to wide fluctuations in response to various factors beyond our
control, including:
. Quarterly variations in operating results;
. Announcements of technological innovations, new products or pricing by
our competitors;
. Changes in, or failure to meet, financial estimates of securities
analysts;
. The rate of adoption by physicians of thoracic electrical bioimpedance
technology in targeted markets;
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. Timing of patent and regulatory approvals;
. Timing and extent of technological advancements;
. Results of clinical studies;
. The sales, by the Selling Shareholders or other persons, of derivative
securities relating to CardioDynamics stock such as entering into
short sales contracts which obligate the party to sell their shares
for less than current market value in the future;
. General market conditions.
In addition, the stock market has experienced significant price and volume
fluctuations that have affected the market prices of the stock of many medical
device companies and that often have been unrelated to the operating performance
of such companies. These broad market fluctuations may directly influence the
market price of our common stock. Our somewhat small market float may not be
entirely adequate to provide market liquidity and mitigate stock price
volatility.
RELIANCE ON PATENTS AND PROPRIETARY TECHNOLOGY
Although we believe that we have effective patent protection, our patents
and proprietary technology may not be able to prevent effective competition by
others and our products could possibly be found to infringe the rights of
others. Intellectual property litigation, whether defensive or offensive, would
have no certain outcome other than to drain our resources.
The validity and breadth of claims in medical technology patents involve
complex legal and factual questions. Future patent applications may not be
issued, the scope of any patent protection may not exclude competitors and it
may not provide competitive advantages to us. Further, our patents may be found
to be invalid, and other companies may claim rights in or ownership of the
patents and other proprietary rights held or licensed by us. Also, our existing
patents might not cover products we want to bring out in the future. Moreover,
when our key patents expire, the inventions will enter the public domain.
Since patent applications in the United States are maintained in secrecy
until patents issue, our patent applications may infringe patents that may be
issued to others. In the event our products are found to infringe patents held
by competitors, we may have to modify our product to avoid infringement, and it
is possible that our modified products would not be commercially successful.
WE COULD BE REQUIRED TO ISSUE ADDITIONAL SHARES OF COMMON STOCK
The holders of warrants to purchase our common stock and certain purchasers
of our common stock in our May 1999 private placement could require us to issue
additional shares of common stock to them pursuant to anti-dilution rights we
have provided them. These rights would cause us to issue additional common
stock upon exercise of their warrants if we sell common stock at a price less
than the exercise price of their warrants or issue additional common stock to
the purchasers in the private placement if the market price falls below certain
target levels. If we need to sell common stock at a time when the market price
for our shares is depressed, these anti-dilution rights could further depress
the market price and could, in turn, impair our ability to raise needed capital.
ANTICIPATED RESALES OF COMMON STOCK
We have filed or will file registration statements with the SEC covering
the potential resale by certain shareholders of up to 9,750,000 shares of common
stock (including the shares subject to this prospectus). The existence of a
substantial number of shares of common stock subject to immediate resale could
depress the market price for the common stock and, in turn, impair our ability
to raise needed capital.
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LOW STOCK PRICE COULD RESULT IN OUR BEING DE-LISTED FROM NASDAQ AND SUBJECT US
TO REGULATIONS WHICH COULD REDUCE OUR ABILITY TO RAISE FUNDS
If our stock price were to drop below $1.00 per share and remain below
$1.00 per share for an extended period of time, certain NASDAQ regulations would
require the de-listing of our shares and then our shares could no longer be
traded on NASDAQ. In such an event, our shares could only be traded on over-
the-counter bulletin board systems. This method of trading could significantly
impair or completely remove our ability to raise new capital.
In the event that we were de-listed from NASDAQ due to low stock price, we
might be subject to certain rules, called penny stock rules, that impose
additional sales practice requirements on broker-dealers who sell such
securities. For any transaction involving a penny stock the rules require,
among other things, the delivery, prior to the transaction, of a disclosure
schedule required by the SEC relating to the market for penny stocks. The
broker-dealer also must disclose the commissions payable both to the broker-
dealer and the registered representative and current quotations for the
securities, and monthly statements must be sent disclosing recent price
information.
In the event our common stock becomes characterized as a penny stock, our
market liquidity could be severely affected. In such event, the regulations
relating to penny stocks could limit the ability of broker-dealers to sell our
common stock and thus, the ability of purchasers in this offering to sell their
common stock in the secondary market.
RISKS ASSOCIATED WITH INTERNATIONAL ACTIVITIES
We believe it is possible that international sales will represent a
meaningful portion of revenue in the future (in fiscal 1998 international sales
accounted for approximately 15% of our revenue). This would require significant
management attention and financial resources and subject us to the risks of
selling internationally. These risks include unexpected changes in regulatory
requirements, tariffs and other barriers and restrictions, and an adverse effect
from reduced protection for intellectual property rights. We would have to
comply with a variety of foreign laws. In addition, fluctuations in the rates
of exchange could increase the price in local currencies of our products in
foreign markets and make our products relatively more expensive than
competitors' products that are denominated in local currencies.
PRODUCT LIABILITY RISK AND PRODUCT RECALL; LIMITED INSURANCE COVERAGE
The nature of our business exposes it to risks of product liability or
product recalls that are typical in the medical devices industry. Medical
devices as complex as ours frequently contain errors or failures, especially
when first introduced or when new versions are released. Our products are
designed to be used in certain procedures where there is a high risk of serious
injury or death. Such risks will exist even with respect to those products that
have received, or may in the future receive, regulatory clearance for commercial
sale.
We did not carry product liability insurance during certain periods before
May 15, 1995. So far, this has not hurt us. Since then, we have maintained
product liability insurance at levels that we believe are sufficient and
consistent with industry standards for companies with our current sales levels.
We intend to increase our product liability insurance policy limits as sales
grow. Currently, our product liability insurance policy limits are $5,000,000
per occurrence and $5,000,000 in the aggregate. Our product liability insurance
may not be adequate and it is possible that such insurance coverage may not
continue to be available on commercially reasonable terms or at all. In
addition, product liability claims or recalls could hurt us in various ways even
if we have adequate insurance coverage.
UNCERTAINTY AND POTENTIAL NEGATIVE EFFECTS OF HEALTHCARE REFORM
The healthcare industry is undergoing fundamental changes resulting from
political, economic and regulatory influences. In the United States,
comprehensive programs have been proposed that seek to:
. Increase access to health care for the uninsured;
. Control the escalation of healthcare expenditures within the economy;
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. Use of health care reimbursement policies to help balance the federal
budget.
We anticipate that Congress and state legislatures will continue to review and
assess such proposals, and public debate of these issues will likely continue.
We cannot predict which, if any, of such reform proposals will be adopted and
when they might be adopted. Other countries also are considering healthcare
reform. Significant changes in healthcare systems could have a substantial
impact on the manner in which we conduct our business and could disrupt our
strategies.
NO DIVIDENDS
We do not intend to pay any cash dividends on the common stock any time
soon. Payment of such cash dividends would, in any event, be prohibited or
limited under the terms of our bank loans.
YEAR 2000 RISKS
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 addressing 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.
As of August 31, 1999 we have completed the awareness and inventory and
assessment stages and anticipate completing any necessary renovation, testing
and implementation within the next two months. We have already determined that
our internal information systems, including individual workstations and our
manufacturing requirements planning system, are certified as Year 2000
complaint. Additionally, our newest products have been specifically tested for
Year 2000 performance and no significant Year 2000 problems have been
identified. We are still in the process of certifying key third party vendors'
Year 2000 compliance. Renovation and testing has begun as problems are
identified. 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.
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
through this stage of the process. We currently believe that the cost of
addressing this issue will be less than $50,000 and will not have a significant
effect on us. Based on our assessments, the most likely worst case scenario
could include: vendors of our most important goods and services, or suppliers
of our necessary energy, telecommunications and transportation
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needs, failing to provide us with the materials and services which are necessary
to produce and sell our products.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this
prospectus contain forward-looking statements that are based on current
expectations, estimates and projections about our industry, management's
beliefs, and assumptions made by management. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," and variations
of such words and similar expressions are intended to identify such forward-
looking statements. These statements are not guarantees of future performance
and are subject to certain risks, uncertainties and assumptions that are
difficult to predict; therefore, actual results may differ materially from those
expressed or forecasted in any forward-looking statements. Such risks and
uncertainties include those noted in "Risk Factors" above and in the documents
incorporated by reference. We undertake no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our
common stock by the selling shareholders.
SELLING SHAREHOLDERS
On August 25, 1999, AGR Halifax Fund, Ltd., Raphael, L.P., Ramius Fund,
Ltd., AG Super Fund International Partners, L.P., GAM Arbitrage Investments,
Inc.; AFO Capital, LLC and Leonardo, L.P., former holders of our Series A
preferred stock and the selling shareholders, agreed to release certain rights
they held to cause us to issue shares of Series B preferred stock to them in
exchange for issuance of warrants to purchase up to 375,000 shares of our common
stock at an exercise price of $3.54 per share. The warrants expire on August
25, 2004.
Except as otherwise indicated in this prospectus, the selling shareholders
have not had a material relationship with us within the past three years other
than as a result of ownership of our securities. The numbers set forth in the
column "Number of Shares Being Offered" below constitute all of the shares that
AGR Halifax Fund, Ltd., Raphael, L.P., Ramius Fund, Ltd., AG Super Fund
International Partners, L.P., GAM Arbitrage Investments, Inc.; and AFO Capital,
LLC and Leonardo, L.P., as the selling shareholders, may distribute in this
offering; however, there are currently no agreements, arrangements or
understandings with respect to the sale of any of the shares and the table below
assumes the sale of all shares. The shares are being registered to permit
public secondary trading of the shares, and the selling shareholders may offer
the shares for resale from time to time after the shares are issued upon
exercise.
In connection with the receipt of the warrants, each selling shareholder
represented that it was acquiring the warrants, and would acquire our common
stock, for investment and not with a view to distributing our common stock, and
that the selling shareholder was an accredited investor, as defined in Rule
501(a) under the Securities Act. We agreed in connection with issuance of the
warrants that the shares issuable upon exercise of the warrants by the selling
shareholders would be registered for resale in a Registration Statement on Form
S-3. The registration rights provisions of the warrants require us to bear all
registration expenses other than fees and expenses of counsel for the selling
shareholders and underwriting discounts and commissions and brokerage
commissions and fees. Accordingly, we filed with the Commission a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the shares from time to time. We also agreed to prepare and file
such amendments and supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective until all of our common
stock offered hereby has been sold or until the shares are no longer, by reason
of Rule 144 under the Securities Act, required to be registered for resale.
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The following table sets forth the name of the selling shareholders and the
number of shares which may be offered pursuant to this Prospectus.
Number of
Shares Being
Selling Shareholders Offered
---------------------------------------------- -------------
AGR Halifax Fund, Ltd.* 150,000
Raphael, L.P.** 15,000
Ramius Fund, Ltd.* 30,000
AG Super Fund International Partners, L.P.** 10,000
GAM Arbitrage Investments, Inc.** 10,000
Leonardo, L.P.** 85,000
AFO Capital, LLC 75,000
TOTAL 375,000
=======
* This selling shareholder is controlled by AG Ramius Partners, L.L.C.
** This selling shareholder is controlled by Angelo, Gordon & Co., L.P.; Angelo,
Gordon & Co., L.P. has a sole general partner, AG Partners, L.P.
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling shareholders and any
donees and pledgees who may sell shares received from the named selling
shareholders after the date of this Prospectus. All costs, expenses and fees in
connection with the registration of the shares offered hereby (other than
certain fees and expenses of the selling shareholders' counsel) will be borne by
us. Brokerage commissions and similar selling expenses, if any, attributable to
the sale of shares will be borne by the selling shareholders. Sales of shares
may be effected by the selling shareholders from time to time in one or more
types of transactions (which may include block transactions) on the Nasdaq
SmallCap Market, in the over-the-counter market, in negotiated transactions,
through put or call transactions relating to the shares, through short sales of
shares, or a combination of such methods of sale, at market prices prevailing at
the time of sale, or at negotiated prices. Such transactions may or may not
involve brokers or dealers. Each selling shareholder has advised us that it has
not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of its securities, nor is
there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling shareholders.
The selling shareholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the selling shareholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions).
The selling shareholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The selling shareholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares against certain liabilities, including liabilities arising under
the Securities Act.
Because the selling shareholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Act, the selling shareholders will be
subject to the prospectus delivery requirements of the Securities Act. We
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have informed the selling shareholders that the anti-manipulative provisions of
Regulation M promulgated under the Exchange Act may apply to its sales in the
market.
The selling shareholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided it meets the criteria and conforms to the requirements of such Rule.
When any selling shareholder notifies us that a material arrangement has
been entered into with a broker-dealer for the sale of shares through a block
trade, special offering, exchange distribution or secondary distribution or a
purchase by a broker or dealer, a supplement to this Prospectus will be filed,
if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i)
the name of the selling shareholder and of the participating broker-dealer(s),
(ii) the number of shares involved, (iii) the price at which such shares were
sold, (iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this Prospectus and (vi) other facts material to the transaction.
In addition, when any selling shareholder notifies us that a donee or pledgee
intends to sell more than 500 shares, we will file a supplement to this
Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the shares may
not be sold unless they have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.
LEGAL MATTERS
Our outside law firm, Pillsbury Madison & Sutro LLP, San Diego, California
will issue an opinion about the legality of the shares.
EXPERTS
The financial statements of CardioDynamics International Corporation as of
November 30, 1998 and 1997, and for the years then ended, have been incorporated
by reference herein and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
INDEMNIFICATION
Section 317 of the California General Corporation Law allows companies to
indemnify their officers and directors against expenses, judgments, fines and
amounts paid in settlement under certain conditions and subject to certain
limitations.
Article Three of our Bylaws provides that we shall indemnify any person who
is or was a director, officer, employee or agent of ours, or any person who is
or was serving at our request as a director, officer, employee or agent of
another corporation, subject to certain limitations. In addition, expenses
incurred by a director, officer, employee or agent in defending a lawsuit by
reason of that person's relationship with us, may be paid by us in advance of
the final disposition of such lawsuit after we receive an undertaking by or on
behalf of such person to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by us.
Our Articles of Incorporation, as amended, provide that none of our
directors shall be liable for monetary damages in an action by or in
CardioDynamics' right for breach of a director's duties to us and our
shareholders, as set forth in Section 309 of the California Corporations Code.
However, such provision does not eliminate or limit the liability of a director:
(i) for acts or omissions that involve intentional misconduct or knowing
or culpable violation of law;
(ii) for acts or omissions that a director believes to be contrary to our
best interests or those of our shareholders or that involve the
absence of good faith on the part of a director;
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(iii) for any transaction from which a director derives an improper
personal benefit;
(iv) or acts or omissions that show a reckless disregard of the director's
duty in circumstances in which the director was aware, or should have
been aware in the ordinary course of performing the director's
duties, of a risk of serious injury to us or to our shareholders;
(v) for acts or omissions that constitute an unexecuted pattern of
inattention that amounts to an abdication of the director's duty to
us;
(vi) under Section 310 of the California Corporations Code; or
(vii) under Section 316 of the California Corporations Code.
Such provision eliminating liability does not eliminate or limit the liability
of an officer for any act or omission as an officer notwithstanding that the
officer is also a director or that his or her actions, if negligent or improper,
have been ratified by the directors.
We are authorized to provide indemnification of our agents (as defined in
Section 317 of the California Corporations Code) for breach of duty to us and
our shareholders through bylaw provisions or through agreements with the agents,
or both, in excess of the indemnification otherwise permitted by Section 317 of
the California Corporations Code, subject to the limits on such excess
indemnification set forth in Section 204 of the California Corporations Code.
We have entered into such indemnification agreements with each of our directors
and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
CardioDynamics pursuant to these provisions, or otherwise, we have been advised
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
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CARDIODYNAMICS INTERNATIONAL CORPORATION
TABLE OF CONTENTS
Page
----
WHERE YOU CAN FIND MORE INFORMATION.................................. 2
ABOUT CARDIODYNAMICS INTERNATIONAL CORPORATION....................... 2
RISK FACTORS......................................................... 3
FORWARD-LOOKING STATEMENTS........................................... 11
USE OF PROCEEDS...................................................... 11
SELLING SHAREHOLDERS................................................. 11
PLAN OF DISTRIBUTION................................................. 12
LEGAL MATTERS........................................................ 13
EXPERTS.............................................................. 13
INDEMNIFICATION...................................................... 13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various costs and expenses we are paying
with respect to the sale and distribution of the securities being registered.
All of the amounts shown are estimates except the SEC registration fee.
SEC Registration Fee.................................... $ 369.05
Printing Expenses *..................................... $ 500.00
Expenses associated with complying with various states'
registrations*......................................... $ 3,000.00
Legal Fees and Expenses*................................ $ 3,000.00
Nasdaq SmallCap Market Listing Fee*..................... $ 3,750.00
Accounting Fees and Expenses*........................... $ 2,000.00
Miscellaneous*.......................................... $ 1,380.95
----------
Total................................................... $14,000.00
==========
- ---------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California General Corporation Law allows companies to
indemnify their officers and directors against expenses, judgments, fines and
amounts paid in settlement under certain conditions and subject to certain
limitations.
Article Three of our Bylaws provides that we shall indemnify any person who
is or was a director, officer, employee or agent of ours, or any person who is
or was serving at our request as a director, officer, employee or agent of
another corporation, subject to certain limitations. In addition, expenses
incurred by a director, officer, employee or agent in defending a lawsuit by
reason of that person's relationship with us, may be paid by us in advance of
the final disposition of such lawsuit after we receive an undertaking by or on
behalf of such person to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by us.
Our Articles of Incorporation, as amended, provide that none of our
directors shall be liable for monetary damages in an action by or in
CardioDynamics' right for breach of a director's duties to us and our
shareholders, as set forth in Section 309 of the California Corporations Code.
However, such provision does not eliminate or limit the liability of a director:
(i) for acts or omissions that involve intentional misconduct or knowing
or culpable violation of law;
(ii) for acts or omissions that a director believes to be contrary to our
best interests or those of our shareholders or that involve the
absence of good faith on the part of a director;
(iii) for any transaction from which a director derives an improper
personal benefit;
(iv) for acts or omissions that show a reckless disregard of the
director's duty in circumstances in which the director was aware, or
should have been aware in the ordinary course of performing the
director's duties, of a risk of serious injury to us or to our
shareholders;
II-1
<PAGE>
(v) for acts or omissions that constitute an unexecuted pattern of
inattention that amounts to an abdication of the director's duty to
us;
(vi) under Section 310 of the California Corporations Code; or
(vii) under Section 316 of the California Corporations Code;
Such provision eliminating liability does not eliminate or limit the liability
of an officer for any act or omission as an officer notwithstanding that the
officer is also a director or that his or her actions, if negligent or improper,
have been ratified by the directors.
We are authorized to provide indemnification of our agents (as defined in
Section 317 of the California Corporations Code) for breach of duty to us and
our shareholders through bylaw provisions or through agreements with the agents,
or both, in excess of the indemnification otherwise permitted by Section 317 of
the California Corporations Code, subject to the limits on such excess
indemnification set forth in Section 204 of the California Corporations Code.
We have entered into such indemnification agreements with each of our directors
and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
CardioDynamics pursuant to these provisions, or otherwise, we have been advised
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 16. EXHIBITS
EXHIBIT NUMBER
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1).
99.1 Form of Warrant to Purchase shares of common stock dated August 25,
1999.
99.2 Letter agreement dated August 25, 1999 with respect to the release of
rights to purchase Series B preferred stock in exchange for issuance
of warrants.
ITEM 17. UNDERTAKINGS
We hereby undertake:
(1) To file, during any period in which we offer or sell securities, a
post-effective amendment to this registration statement to include any
additional or changed material information on the plan of distribution;
(2) That, for determining liability under the Securities Act, each such
post-effective amendment shall be treated as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
treated as the initial bona fide offering; and
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by our director, officer, or
controlling person in the successful defense
II-2
<PAGE>
of any action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the question has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we certify that
we have reasonable grounds to believe that we meet all of the requirements for
filing on Form S-3 and have duly caused this Registration Statement to be signed
on our behalf by the undersigned, thereunto duly authorized, in the City of San
Diego, State of California, on the 1st day of October, 1999.
CARDIODYNAMICS INTERNATIONAL CORPORATION
By /s/ Michael K. Perry
-----------------------------------------
Michael K. Perry, Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Michael
K. Perry and Stephen P. Loomis, and each of them, as attorneys-in-fact, with the
power of substitution, for him in any and all capacities, to sign any amendment
to this Registration Statement and to file the same, with exhibits thereto and
other documents in connection therewith, with the SEC, granting to said
attorneys-in-fact full power and authority to do and perform each and every act
and thing requisite and necessary to be done in connection therewith, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ------ ----
<S> <C> <C>
/s/ Michael K. Perry Director and Chief Executive Officer September 26, 1999
- ------------------------------------------ (Principal Executive Officer)
Michael K. Perry
/s/ Stephen P. Loomis Vice President, Finance and Chief Financial September 26, 1999
- ------------------------------------------ Officer (Principal Financial Officer and
Stephen P. Loomis Principal Accounting Officer)
/s/ Louis P. Ferrero Director September 26, 1999
- ------------------------------------------
Louis P. Ferrero
/s/ Cam L. Garner Director September 26, 1999
- ------------------------------------------
Cam L. Garner
/s/ James C. Gilstrap Director September 26, 1999
- ------------------------------------------
James C. Gilstrap
/s/ Richard O. Martin Director September 26, 1999
- ------------------------------------------
Richard O. Martin
/s/ Allen E. Paulson Director September 26, 1999
- ------------------------------------------
Allen E. Paulson
</TABLE>
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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-3
UNDER
SECURITIES ACT OF 1933
CARDIODYNAMICS INTERNATIONAL CORPORATION
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<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit
- ------- -------
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1).
99.1 Form of Warrant to Purchase shares of common stock dated
August 25, 1999.
99.2 Letter agreement dated August 25, 1999 with respect to the release
of rights to purchase Series B preferred stock in exchange for
issuance of warrants.
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<PAGE>
EXHIBIT 5.1
OPINION OF PILLSBURY MADISON & SUTRO LLP
October 1, 1999
CardioDynamics International Corporation
6175 Nancy Ridge Drive
Suite 300
San Diego, California 92121
Re: CardioDynamics International Corporation Registration Statement on
Form S-3 for Resale of 375,000 Shares of common stock
Ladies and Gentlemen:
We have acted as counsel to CardioDynamics International Corporation, a
California corporation (the "Company"), in connection with the registration for
resale of 375,000 shares of common stock (the "Shares"). The Shares are
issuable upon exercise of those certain Warrants to Purchase Common Stock dated
August 25, 1999 (the "Warrants"), as described in the Company's Registration
Statement on Form S-3 ("Registration Statement") filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act").
This opinion is being furnished in accordance with the requirements of Item
16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-B.
We have reviewed the Company's charter documents, the corporate proceedings
taken by the Company in connection with the original issuance of the Warrants,
and a certificate of a Company officer regarding (among other things) the
Company's receipt of consideration upon the original issuance of the Warrants.
Based on such review, we are of the opinion that the Shares, if, as and when
issued upon exercise of the Warrants in accordance with the terms of the
Warrants (including the payment of the indicated purchase price), will be duly
authorized, validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the prospectus which is part of the Registration Statement. In giving this
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act, the rules and regulations
of the Securities and Exchange Commission promulgated thereunder, or Item 509 of
Regulation S-B.
This opinion letter is rendered as of the date first written above and we
disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
/s/ Pillsbury Madison & Sutro LLP
EXHIBIT 5.1
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
CardioDynamics International Corporation:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
San Diego, California
September 30, 1999
<PAGE>
EXHIBIT 99.1
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT.
CARDIODYNAMICS INTERNATIONAL CORPORATION
COMMON STOCK PURCHASE WARRANT
No. W-__ August 25, 1999
Warrant to Purchase_______
Shares of Common Stock
CARDIODYNAMICS INTERNATIONAL CORPORATION, a California corporation (the
"Company"), for value received, hereby certifies that _________________________,
or registered assigns (the "Holder"), is entitled to purchase from the Company
_____________________ duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, no par value per share, of the Company
(the "Common Stock"), at a purchase price equal to $3.54 per share, at any time
or from time to time prior to 5:00 P.M., New York City time, on August 25, 2004
(the "Expiration Date"), all subject to the terms, conditions and adjustments
set forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants (collectively,
the "Warrants", such term to include any such warrants issued in substitution
therefor) originally issued on August 25, 1999 by the Company to the Holder, AGR
Halifax Fund, Ltd., Leonardo, L.P., GAM Arbitrage Investments, Inc., Raphael,
L.P., Ramius Fund, Ltd. and AFO Capital, LLC (collectively, the "Warrant
Holders"). The Warrants originally so issued evidence rights to purchase an
aggregate of 375,000 shares of Common Stock subject to adjustment as provided
herein.
1. DEFINITIONS. As used herein, unless the context otherwise requires,
-----------
the following terms shall have the meanings indicated:
"Additional Shares of Common Stock" shall mean all shares of Common
---------------------------------
Stock issued or sold (or, pursuant to Section 3.3 or 3.4, 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 the Warrants and (ii) such
number of additional shares as may become issuable upon the exercise of the
Warrants by reason of adjustments required pursuant to the anti-dilution
provisions applicable to such Warrants as in effect on the date hereof; and
(b) (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
<PAGE>
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.
"Business Day" shall mean any day other than a Saturday or a Sunday or
------------
a day on which commercial banking institutions in the City of New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
"Closing Bid Prices" shall mean for any security as of any date, the
------------------
closing bid price of such security on the principal securities exchange or trade
market where such security is listed or trades as reported by Bloomberg, L.P.
("Bloomberg"), or if the foregoing does not apply, the closing bid price of such
security in the over the counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price is reported
for such security by Bloomberg, the average of the bid prices of any market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc.
"Common Stock" shall have the meaning assigned to it in the
------------
introduction to this Warrant, such term to include any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"Company" shall have the meaning assigned to it in the introduction to
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this Warrant, such term to include any corporation or other entity which shall
succeed to or assume the obligations of the Company hereunder in compliance with
Section 4.
"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.
"Current Market Price" shall mean, on any date specified herein, the
--------------------
average daily Closing Bid Prices during the 10 consecutive trading days before
such date, except that, if on any such date the shares of Common Stock are not
listed or admitted for trading on any national securities exchange or quoted in
the over-the-counter market, the Current Market Price shall be the Fair Value on
such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Expiration Date" shall have the meaning assigned to it in the
---------------
introduction to this Warrant.
"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 admitted for
trading on any national securities exchange or quoted in the over-the-counter
market, the Current Market Price, and (iii) in all other cases determined in
good faith jointly by the Company and the Holder; provided, however, that if
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such parties are unable to reach agreement within a reasonable period of time,
the Fair Value shall be determined in good faith by an independent investment
banking firm selected jointly by the Company and the Holder or, if that
selection cannot be made within ten days, by an independent investment banking
firm selected by the American Arbitration Association in accordance with its
rules, and provided further, that the Company shall pay all of the fees and
-------- -------
expenses of any third parties incurred in connection with determining the Fair
Value.
"Holder" shall have the meaning assigned to it in the introduction to
------
this Warrant.
"Options" shall mean any rights, options or warrants to subscribe for,
-------
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
<PAGE>
"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 holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, 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 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.
"Purchase Price" shall mean initially $3.54 per share, subject to
--------------
adjustment and readjustment from time to time as provided in Section 3, and, as
so adjusted or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by Section 3.
"Rights" shall have the meaning assigned to it in Section 3.10.
------
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time, and the rules and regulations thereunder, or any successor
statute.
"Warrants" shall have the meaning assigned to it in the introduction
--------
to this Warrant.
2. EXERCISE OF WARRANT.
--------------------
2.1 Manner of Exercise; Payment of the Purchase Price
-------------------------------------------------
(a) This Warrant may be exercised by the Holder hereof, in whole or
in part (but not for less than 5,000 shares of Common Stock), at any time or
from time to time prior to the Expiration Date, by surrendering to the Company
at its principal office this Warrant, with the form of Election to Purchase
Shares attached hereto as Exhibit A (or a reasonable facsimile thereof) duly
executed by the Holder and accompanied by payment of the Purchase Price for the
number of shares of Common Stock specified in such form.
(b) Payment of the Purchase Price shall be made in United States
currency by cash or delivery of a cashiers check payable to the order of the
Company or by wire transfer to the Company.
2.2 When Exercise Effective. Each exercise of this Warrant shall be
-----------------------
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to, and the
Purchase Price shall have been received by, the Company as provided in Section
2.1, and at such time the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock (or Other Securities)
shall be issuable upon such exercise as provided in Section 2.3 shall be deemed
to have become the holder or holders of record thereof for all purposes.
2.3 Delivery of Stock Certificates, etc.; Charges, Taxes and Expenses
-----------------------------------------------------------------
(a) As soon as practicable after each exercise of this Warrant, in
whole or in part, and in any event within three Business Days thereafter, the
Company shall cause to be issued in the name of and delivered to the Holder
hereof or as the Holder may direct,
(i) a certificate or certificates, or, if then permissible under
the Securities Act, at a Holder's request electronically issue such
shares (e.g., through DWAC or DTC), for the number of shares of Common
Stock (or Other Securities) to which the Holder shall be entitled upon
such exercise plus, in lieu of issuance of any fractional share to
which the Holder would otherwise be entitled, if any, a check for the
amount of cash equal to the same fraction multiplied by the Current
Market Price per share on the date of Warrant exercise, and
<PAGE>
(ii) in case such exercise is for less than all of the shares of
common stock purchasable under this warrant, a new warrant or warrants
of like tenor, for the balance of the shares of common stock
purchasable hereunder.
(b) Issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder hereof for
an issue or transfer tax or other incidental expense, in respect of the issuance
of such certificates, all of which such taxes and expenses shall be paid by the
Company.
2.4 Company to Reaffirm Obligations. The Company shall, at the time
-------------------------------
of each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to such Holder all
rights to which such Holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, provided that if the Holder of this
--------
Warrant shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to the Holder.
3. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE
-------------------------------------------------
3.1 Adjustment of Number of Shares. Upon each adjustment of the
------------------------------
Purchase Price as a result of the calculations made in this Section 3, 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.
3.2 Adjustment of Purchase Price
----------------------------
(a) 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 Section 3.3 or 3.4 but excluding
Additional Shares of Common Stock purchasable upon exercise of Rights referred
to in Section 3.10), without consideration or for a consideration per share less
than the Purchase Price, as in effect immediately prior to such issue or sale,
then, subject to Section 3.8, 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
(i) 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
(ii) 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 3.2.1, immediately
--------
after any Additional Shares of Common Stock are deemed to have been
issued pursuant to Section 3.3 or 3.4, such Additional Shares shall be
deemed to be outstanding.
(b) Extraordinary Dividends and Distributions. In case the Company
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, then, in each such case,
subject to Section 3.8, the Purchase Price in effect immediately prior to the
close of business on the record date fixed for the determination of holders of
any class of securities entitled to receive such dividend or distribution shall
be reduced, effective as of the close of business on such record date, to a
price determined by multiplying such Purchase Price by a fraction
<PAGE>
(x) the numerator of which shall be the Current Market Price in
effect 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, less the Fair Value of such dividend or distribution
applicable to one share of Common Stock, and
(y) the denominator of which shall be such Current Market Price.
3.3 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 (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 3.5) 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 3.10, 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 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,
<PAGE>
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 3.5) 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.
Nothing in this Section 3.3 shall cause an adjustment for issuances of
securities upon exercise or conversion of any currently outstanding securities
of the Company according to the respective terms of any such security.
3.4 Treatment of Stock Dividends, Stock Splits, etc. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
3.5 Computation of Consideration. For the purposes of this Section 3,
----------------------------
(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;
<PAGE>
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.3, 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 3.4, relating to stock dividends, stock splits, etc., shall
be deemed to have been issued for no consideration.
3.6 Adjustments for Combinations, etc. In case the outstanding
---------------------------------
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Purchase Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
3.7 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 3, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this Section 3 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 Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
3.8 De Minimis Adjustments. If the amount of any adjustment of the
----------------------
Purchase Price per share required pursuant to this Section 3 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.
3.9 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.
<PAGE>
3.10 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 3.2.1 or Section 3.2.2 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.
4. CONSOLIDATION, MERGER, ETC.
--------------------------
4.1 Adjustments for Consolidation, Merger, Sale of Assets,
------------------------------------------------------
Reorganization, etc. In case the Company after the date hereof (a) shall
- -------------------
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Purchase Price
is provided in Section 3.2.1 or 3.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the Holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction
shall be entitled to receive (at the aggregate Purchase Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such
consummation, the amount of securities, cash or other property to which such
Holder would actually have been entitled as a shareholder upon such consummation
if such Holder had exercised this Warrant immediately prior thereto, subject to
adjustments (subsequent to such consummation) as nearly equivalent as possible
to the adjustments provided for in Sections 3 through 5.
4.2 Assumption of Obligations. Notwithstanding anything contained in
-------------------------
the Warrants to the contrary, the Company shall not effect any of the
transactions described in clauses (a) through (d) of Section 4.1 unless, prior
to the consummation thereof, each Person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
this Warrant as provided herein shall assume, by written instrument delivered
to, and reasonably satisfactory to, the Holder of this Warrant, (a) the
obligations of the Company under this Warrant (and if the Company shall survive
the consummation of such transaction, such assumption shall be in addition to,
and shall not release the Company from, any continuing obligations of the
Company under this Warrant) and (b) the obligation to deliver to the Holder such
shares of stock, securities, cash or property as, in accordance with the
foregoing provisions of this Section 4, the Holder may be entitled to receive.
Nothing in this Section 4 shall be deemed to authorize the Company to enter into
any transaction not otherwise permitted by the Purchase Agreement.
5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the
---------------------
provisions of Section 3 or Section 4 hereof are not strictly applicable or if
strictly applicable would not fairly protect the purchase rights of the Holder
in accordance with the essential intent and principles of such Sections, then,
in each such case, the Board of Directors of the Company shall make an
adjustment in the application of such provisions, in accordance with such
essential intent and principles, so as to preserve, without dilution, the
purchase rights represented by this Warrant.
6. NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment of its
-------------------------
articles of incorporation or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of
<PAGE>
securities 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 Holder of this Warrant against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) shall take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of stock, free from all
taxes, liens, security interests, encumbrances, preemptive rights and charges on
the exercise of the Warrants from time to time outstanding, and (b) shall not
take any action which results in any adjustment of the Purchase Price if the
total number of shares of Common Stock (or Other Securities) issuable after the
action upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock (or Other Securities) then authorized by the Company's
articles of incorporation and available for the purpose of issue upon such
exercise.
7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
prepare a certificate, signed by the Chairman of the Board, Chief Executive
Officer, President or one of the Vice Presidents of the Company, and by the
Chief Financial Officer, the Treasurer or one of the Assistant Treasurers of the
Company, setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Purchase Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by Section 3) on account thereof. The
Company shall forthwith mail a copy of each such certificate to each holder of a
Warrant and shall, upon the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate. The Company shall also keep
copies of all such certificates at its principal office and shall cause the same
to be available for inspection at such office during normal business hours by
any holder of a Warrant or any prospective purchaser of a Warrant designated by
the holder thereof. The Company shall, upon the request in writing of the Holder
(at the Company's expense), retain independent public accountants of recognized
national standing selected by the Board of Directors of the Company to make any
computation required in connection with adjustments under this Warrant, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment, which shall be binding on the Holder and the Company.
8. NOTICES OF CORPORATE ACTION. In the event of:
---------------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, any consolidation or
merger involving the Company and any other Person, any transaction or series of
transactions in which more than 50% of the voting securities of the Company are
transferred to another Person, or any transfer, sale or other disposition of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
the Company shall mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, sale, disposition, dissolution, liquidation or winding-up is to take
place and the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 20 days prior to the date
therein specified.
<PAGE>
9. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required
----------------------------
to be reserved for purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any federal or state law
(other than the Securities Act) before such shares may be issued upon exercise,
the Company shall, at its expense and as expeditiously as possible, use its
reasonable best efforts to cause such shares to be duly registered or approved,
as the case may be. At any such time as Common Stock is listed on any national
securities exchange or trade market, the Company shall, at its expense, obtain
promptly and maintain the approval for listing on each such exchange or trade
market, upon official notice of issuance, the shares of Common Stock issuable
upon exercise of the then outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company shall also list on such national
securities exchange or trade market, shall register under the Exchange Act and
shall maintain such listing of, any Other Securities that at any time are
issuable upon exercise of the Warrants, if and at the time that any securities
of the same class shall be listed on such national securities exchange or trade
market by the Company.
10. REGISTRATION AND TRANSFER OF WARRANTS, ETC.
-------------------------------------------
10.1 Warrant Register; Ownership of Warrants. Each Warrant issued by
---------------------------------------
the Company shall be numbered and shall be registered in a warrant register (the
"Warrant Register") as it is issued and transferred, which Warrant Register
shall be maintained by the Company at its principal office or, at the Company's
election and expense, by a Warrant Agent or the Company's transfer agent. The
Company shall be entitled to treat the registered Holder of any Warrant on the
Warrant Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Warrant
on the part of any other Person, and shall not be affected by any notice to the
contrary. A Warrant, if properly assigned, may be exercised by a new holder
without a new Warrant first having been issued.
10.2 Transfer of Warrants. Subject to the legend on the first page
--------------------
hereof, this Warrant and all rights hereunder are transferable in whole or in
part, without charge to the Holder hereof, upon surrender of this Warrant with a
properly executed Form of Assignment attached hereto as Exhibit B at the
principal office of the Company. Upon any partial transfer, the Company shall at
its expense issue and deliver to the Holder a new Warrant of like tenor, in the
name of the Holder, which shall be exercisable for such number of shares of
Common Stock with respect to which rights under this Warrant were not so
transferred and to the transferee a new Warrant of like tenor, in the name of
the transferee, which shall be exercisable for such number of shares of Common
Stock with respect to which rights under this Warrant were so transferred.
10.3 Replacement of Warrants. On receipt by the Company of evidence
-----------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.
10.4 Adjustments To Purchase Price and Number of Shares.
--------------------------------------------------
Notwithstanding any adjustment in the Purchase Price or in the number or kind of
shares of Common Stock purchasable upon exercise of this Warrant, any Warrant
theretofore or thereafter issued may continue to express the same number and
kind of shares of Common Stock as are stated in this Warrant, as initially
issued.
10.5 Fractional Shares. Notwithstanding any adjustment pursuant to
-----------------
Section 3 in the number of shares of Common Stock covered by this Warrant or any
other provision of this Warrant, the Company shall not be required to issue
fractions of shares upon exercise of this Warrant or to distribute certificates
which evidence fractional shares. In lieu of fractional shares, the Company
shall make payment to the Holder, at the time of exercise of this Warrant as
herein provided, in an amount in cash equal to such fraction multiplied by the
Current Market Price of a share of Common Stock on the date of Warrant exercise.
------------------------
11. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that there
------------------------------
would be no adequate remedy at law to the Holder of this Warrant in the event of
any default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant and accordingly, the Company
agrees that, in addition to any other remedy to which the Holder may be entitled
at law or in equity, the Holder shall be entitled to
<PAGE>
seek to compel specific performance of the obligations of the Company under this
Warrant, without the posting of any bond, in accordance with the terms and
conditions of this Warrant in any court of the United States or any State
thereof having jurisdiction, and if any action should be brought in equity to
enforce any of the provisions of this Warrant, the Company shall not raise the
defense that there is an adequate remedy at law. Except as otherwise provided by
law, a delay or omission by the Holder hereto in exercising any right or remedy
accruing upon any such breach shall not impair the right or remedy or constitute
a waiver of or acquiescence in any such breach. No remedy shall be exclusive of
any other remedy. All available remedies shall be cumulative.
12. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in this
---------------------------------------
Warrant shall be construed as conferring upon the Holder hereof any rights as a
shareholder of the Company or as imposing any obligation on the Holder to
purchase any securities or as imposing any liabilities on the Holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
13. NOTICES. Any notices, consents, waivers or other communications
-------
required or permitted to be given hereunder must be in writing and will be
deemed to have been delivered (i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile, provided a copy is mailed by U.S.
certified mail, return receipt requested; (iii) three (3) business days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
CardioDynamics International Corporation
6175 Nancy Ridge Drive
Suite 300
San Diego, CA 92121
Telephone: (619) 535-0202
Facsimile: (619) 623-8414
Attention: Chief Financial Officer
With a copy to:
Pillsbury Madison & Sutro LLP
101 West Broadway
Suite 1800
San Diego, CA 92101-3369
Telephone: (619) 544-3369
Facsimile: (619) 236-1995
Attention: David R. Snyder, Esq.
If to a Holder, to its address and facsimile number on the register
maintained by the Company. Each party shall provide five (5) days' prior
written notice to the other party of any change in address or facsimile number.
Notwithstanding the foregoing, the exercise of any Warrant shall be effective in
the manner provided in Section 2.
14. AMENDMENTS. This Warrant and any term hereof may not be amended,
----------
modified, supplemented or terminated, and waivers or consents to departures from
the provisions hereof may not be given, except by written instrument duly
executed by the party against which enforcement of such amendment, modification,
supplement, termination or consent to departure is sought.
15. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for
-------------------------
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Warrant otherwise
requires: (1) words of any gender shall be deemed to include each other gender;
(2) words using the singular or plural number shall also include the plural or
singular number, respectively; (3) the words "hereof",
<PAGE>
"herein" and "hereunder" and words of similar import when used in this Warrant
shall refer to this Warrant as a whole and not to any particular provision of
this Warrant, and Section and paragraph references are to the Sections and
paragraphs of this Warrant unless otherwise specified; (4) the word "including"
and words of similar import when used in this Warrant shall mean "including,
without limitation," unless otherwise specified; (5) "or" is not exclusive; and
(6) provisions apply to successive events and transactions.
16. GOVERNING LAW. This Warrant shall be governed by, and construed in
-------------
accordance with, the laws of the State of New York (without giving effect to the
conflict of laws principles thereof).
17. JUDICIAL PROCEEDINGS; WAIVER OF JURY. Any legal action, suit or
------------------------------------
proceeding brought against the Company with respect to this Warrant may be
brought in any federal court of the Southern District of New York or any state
court located in New York County, State of New York, and by execution and
delivery of this Warrant, the Company hereby irrevocably and unconditionally
waives any claim (by way of motion, as a defense or otherwise) of improper
venue, that it is not subject personally to the jurisdiction of such court, that
such courts are an inconvenient forum or that this Warrant or the subject matter
may not be enforced in or by such court. The Company hereby irrevocably and
unconditionally consents to the service of process of any of the aforementioned
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, at its address set forth or
provided for in Section 14, such service to become effective 10 days after such
mailing. Nothing herein contained shall be deemed to affect the right of any
party to serve process in any manner permitted by law or commence legal
proceedings or otherwise proceed against any other party in any other
jurisdiction to enforce judgments obtained in any action, suit or proceeding
brought pursuant to this Section. The Company irrevocably submits to the
executive jurisdiction of the aforementioned courts in such action, suit or
proceeding. THE COMPANY HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING, WHETHER AT LAW OR EQUITY, BROUGHT BY IT OR THE HOLDER IN
CONNECTION WITH THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
18. RESERVATION OF STOCK, ETC. The Company shall at all times reserve and
-------------------------
keep available, solely for issuance and delivery upon exercise of the Warrants,
the number of shares of Common Stock (or Other Securities) from time to time
issuable upon exercise of all Warrants at the time outstanding. All shares of
Common Stock (or Other Securities) issuable upon exercise of any Warrants shall
be duly authorized and, when issued upon such exercise, shall be validly issued
and, in the case of shares, fully paid and nonassessable with no liability on
the part of the holders thereof, and, in the case of all securities, shall be
free from all taxes, liens, security interests, encumbrances, preemptive rights
and charges. The transfer agent for the Common Stock, which may be the Company
(the "Transfer Agent"), and every subsequent Transfer Agent for any shares of
the Company's capital stock issuable upon the exercise of any of the purchase
rights represented by this Warrant, are hereby irrevocably authorized and
directed at all times until the Expiration Date to reserve such number of
authorized and unissued shares as shall be requisite for such purpose. The
Company shall keep copies of this Warrant on file with the Transfer Agent for
the Common Stock and with every subsequent Transfer Agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by this Warrant. The Company shall supply such Transfer Agent with
duly executed stock certificates for such purpose. All Warrant Certificates
surrendered upon the exercise of the rights thereby evidenced shall be canceled,
and such canceled Warrants shall constitute sufficient evidence of the number of
shares of stock which have been issued upon the exercise of such Warrants.
Subsequent to the Expiration Date, no shares of stock need be reserved in
respect of any unexercised Warrant.
19. REGISTRATION RIGHTS. The Company hereby covenants and agrees that the
-------------------
shares of Common Stock (and Other Securities) issuable upon exercise of this
Warrant (or upon conversion of any Other Securities issued upon such exercise)
shall be covered by a shelf registration statement pursuant to Rule 415 under
the Securities Act that is declared effective by the Securities and Exchange
Commission within 180 days after the date of issuance of this Warrant. The
shares of Common Stock (and Other Securities) issuable upon exercise of this
Warrant shall be accorded treatment substantially similar to those securities
constituting Registrable Securities under the Registration Rights Agreement,
dated as of August 21, 1998, by and among the Company and the buyers signatory
thereto.
<PAGE>
20. EXPENSES. The Company shall reimburse the Warrant Holders for their
--------
documented attorneys' fees and expenses in connection with this Warrant and its
related documents.
CARDIODYNAMICS INTERNATIONAL
CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT A to
Common Stock Purchase Warrant
-----------------------------
[FORM OF]
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to exercise the Warrant to
purchase ____ shares of Common Stock, no par value per share ("Common Stock"),
of CARDIODYNAMICS INTERNATIONAL CORPORATION and hereby makes payment of
$________ therefor. The undersigned hereby requests that certificates for such
shares be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
---------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased hereby is less than
the number of shares of Common Stock covered by the Warrant, the undersigned
requests that a new Warrant representing the number of shares of Common Stock
not so purchased be issued and delivered as follows:
ISSUE TO:
----------------------------------------------------------------------
(NAME OF HOLDER)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:
---------------------------------------------------------------------
(NAME OF HOLDER)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Dated: [NAME OF HOLDER]
--------------------------
By:
------------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
EXHIBIT B to
Common Stock Purchase Warrant
-----------------------------
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, no par value per share ("Common Stock") of CARDIODYNAMICS
INTERNATIONAL CORPORATION represented by the Warrant, with respect to the number
of shares of Common Stock set forth below:
<TABLE>
<CAPTION>
Social Security Number or
Name of Assignee Address Tax Identification Number No. of Shares
- ---------------- ------- -------------------------- -------------
<S> <C> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint ________ Attorney to make
such transfer on the books of CARDIODYNAMICS INTERNATIONAL CORPORATION
maintained for that purpose, with full power of substitution in the premises.
Dated: [NAME OF HOLDER]
--------------------------------
By:
------------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
August 25, 1999
Cardiodynamics International Corp.
6175 Nancy Ridge Drive
San Diego, CA 92121
Attn: Mr. Michael Perry
Dear Mike:
The undersigned purchasers of preferred stock of Cardiodynamics
International Corp. (the "Company") hereby agree to waive their right to
purchase Additional Preferred Stock pursuant to the Securities Purchase
Agreement dated August 21, 1998. As consideration for the foregoing, the Company
agrees to issue to the undersigned warrants to purchase an aggregate amount of
375,000 shares of the Company's common stock at a strike price equal to the
average closing price of the Company's common stock for the ten trading days
immediately prior to August 20, 1999.
Yours truly,
AGR Halifax Fund, Ltd.
By: Ramius Capital Group, LLC
Its: Investment Advisor
/s/ Jeffrey M. Solomon
------------------------------
Jeffrey M. Solomon, Principal
Angelo, Gordon & Co., LP
(on behalf of the purchasers
which it represents)
/s/ Michael L. Gordon
------------------------------
By: Michael L. Gordon
Its: Chief Operating Officer
Agreed:
Cardiodynamics International Corp.
/s/ Michael K. Perry
- ---------------------------------
By: Michael K. Perry
Its: CEO
