November 15, 1996
CardioDynamics International Corporation
0000 Xxxxxxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
President/CEO
Gentlemen:
We are pleased to set forth the terms of the retention of EVEREN
Securities, Inc. ("EVEREN") by CardioDynamics International Corporation (the
"Company") in connection with the private placement of equity securities of the
Company. This letter agreement (the "Agreement") will confirm XXXXXX's
engagement by the Company on the following terms and conditions:
1. DESCRIPTION OF ENGAGEMENT. XXXXXX will assist the Company as its exclusive
financial advisor and placement agent in connection with the Financing (as such
term is defined below). XXXXXX has been advised by the Company that the Company
will require an aggregate of approximately $7.0 million to finance initial
production, inventory buildup, marketing and launch of the BioZ System
hemodynamic monitor. XXXXXX has been further advised that such amount is
anticipated to be obtained from the proceeds of a single offering of privately
placed common equity securities of the Company (such securities being
hereinafter referred to as the "Securities" and such offering being hereinafter
referred to as the "Financing"). Subject to the approval of XXXXXX's Private
Placement Review Committee, XXXXXX agrees to assist the Company in the Company's
efforts to structure and obtain the Financing, solely from institutional
investors. XXXXXX makes no representations, express or implied, that it will
succeed in its efforts to assist the Company in securing the Financing.
2. AUTHORITY. XXXXXX shall have no authority to bind the Company to any
person in any way, and shall not purport to do so.
3. INFORMATION. In connection with XXXXXX's activities on the Company's
behalf, the Company will cooperate with XXXXXX and will furnish EVEREN with all
information and data concerning the Company, the Financing and such other
information which XXXXXX xxxxx appropriate (the "Information") and will provide
EVEREN and any prospective Financing sources with access to the Company's
officers, directors, employees, agents, representatives, independent accountants
and legal counsel. The Company warrants and represents that, to its knowledge,
all Information, as such may be amended or supplemented, provided or otherwise
made available to EVEREN by or on behalf of the
Xx. Xxxxxxx X. Xxxx
Xxxx 2
November 15, 1996
Company will, at all times during the period of the engagement of XXXXXX
xxxxxxxxx, be complete and correct in all material respects and will not
knowingly contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading
in the light of the circumstances under which such statements are made. The
Company warrants and represents that all Information, as such may be amended or
supplemented, contained in any private placement memorandum prepared by the
Company and EVEREN with respect to the Financing (the "Memorandum") will, at all
times during the period of the engagement of EVEREN hereunder, be complete and
correct in all material respects and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances under which
such statements are made. The Company further warrants and represents that any
projections provided by it to EVEREN or contained in the Memorandum will have
been prepared in good faith and will be based upon assumptions which, in light
of the circumstances under which they are made, are reasonable. The Company
acknowledges and agrees that, in rendering its services hereunder, XXXXXX will
be using and relying upon the Information (and information available from public
sources and other sources deemed reliable by EVEREN) without independent
verification thereof by XXXXXX or independent appraisal by XXXXXX of any of the
Company's assets. XXXXXX assumes no responsibility for the accuracy or
completeness of the Information or any other information regarding the Company
or the Financing, to the extent that the Information or such other information
is provided by the Company or on the Company's behalf. XXXXXX agrees not to use
the Information except in connection with the Financing, agrees that the
Information will be disclosed to outside parties only in connection with their
prospective interest in the Financing, and further agrees not to use in
marketing the Financing any written materials (including the Memorandum), broker
sales memoranda or other oral scripted materials that have not previously been
expressly approved by the Company. Any advice rendered by XXXXXX pursuant to
this Agreement may not be publicly disclosed without the express prior written
consent of EVEREN.
4. FURTHER AGREEMENTS AND REPRESENTATIONS OF THE COMPANY. The Company further
agrees to the undertakings and representations set forth in Appendix A hereto
and made a part hereof.
5. AGREEMENTS AND REPRESENTATIONS OF EVEREN. EVEREN represents and warrants
to the Company that, assuming compliance by the Company with all relevant
provisions of the Securities Act of 1933, as amended (the "Act") in connection
with the registration statement filed with respect to the Securities (the
"Registration Statement"), XXXXXX will conduct all offers and sales of the
Securities in compliance with the relevant provisions of the Act and the rules
and regulations promulgated under the Act (the "Rules and Regulations") and
various state securities laws and regulations.
6. COMPENSATION. In consideration of the services to be rendered by XXXXXX to
the Company pursuant to this Agreement, EVEREN shall be entitled to receive, and
the Company shall pay to EVEREN, the following compensation:
(a) Upon execution of this Agreement, the Company shall pay to EVEREN an
initial cash fee in the amount of $25,000, which amount shall be non-
refundable so long as
Xx. Xxxxxxx X. Xxxx
Page 3
November 15, 1996
XXXXXX does not terminate this Agreement prior to marketing the
Securities to investors (in which case it shall be refundable net of
XXXXXX's out-of-pocket costs);
(b) As of the closing date of the consummation of the sale of the
Securities (the "Closing Date"), the Company shall pay to EVEREN an
additional cash fee (against which shall be credited any fee paid to
EVEREN pursuant to subparagraph 6(a) above) equal to $500,000 (or
7.14% of any amount raised less than $7 million);
(c) In addition, on the Closing Date, the Company shall grant to EVEREN
300,000 warrants (or 0.043 warrants per dollar raised for any amount
raised less than $7 million) for common stock of the Company,
exercisable at 125% of the price per share applicable to the
Financing. Such warrants shall be exercisable at any time during the
five years following the closing of the Financing;
7. OTHER FEES. The fees set forth in "Compensation" shall be in addition to
other fees, if any, that the Company may be required to pay directly to any
Financing source to secure its financing commitment. This Agreement does not
constitute a commitment or undertaking on the part of EVEREN or any of its
affiliates to provide any part of the Financing and does not ensure the
successful arrangement or completion of the Financing or any portion thereof.
8. EXPENSES. In addition to the fees described in "Compensation" above, the
Company agrees to promptly reimburse EVEREN, upon request from time to time, for
all reasonable out-of-pocket expenses incurred by XXXXXX (including, without
limitation, fees and disbursements of counsel, and of other consultants and
advisors retained by XXXXXX) in connection with the matters contemplated by this
Agreement, which expenses shall not exceed $75,000 without the prior written
consent of the Company, with such consent not to be unreasonably withheld. In
addition, should the Company be requested to pay fees and expenses of the
Financing sources' legal counsel, the Company acknowledges that such expense is
not the obligation of EVEREN.
9. SUBSEQUENT FINANCING. Assuming that XXXXXX succeeds in obtaining the
Financing from one or more institutional investors ("Investors"), and such
Investors provide additional capital (debt or equity) to the Company during the
two-year period next following the closing of the Financing ("Subsequent
Financing"), then the Company shall pay to EVEREN an additional fee equal to
one-half of the percentage specified in subparagraph (b) of "Compensation"
above relating to such Subsequent Financing.
10. RIGHT OF FIRST REFUSAL. If at any time during the two-year period next
following the Closing Date, the Company determines to retain a financial
adviser, investment banker or other similar agent in connection with any
financial advisory, investment banking or related service engagement on behalf
of the Company, the Company shall first offer to retain EVEREN as its financial
adviser, investment banker or agent, as the case may be, for the provision of
such services on the basis of EVEREN's usual and customary terms, conditions and
fees; provided such terms, conditions and fees are not less favorable than those
generally available to the Company from another comparable financial adviser,
investment banker or similar agent.
Xx. Xxxxxxx X. Xxxx
Page 4
November 15, 1996
11. INDEMNIFICATION. The Company hereby agrees to indemnify EVEREN in
accordance with the indemnification provisions (the "Indemnification
Provisions") attached as Appendix B to this Agreement, which Indemnification
Provisions are incorporated herein and made a part hereof.
12. TERMINATION; SURVIVAL. The duration of this Agreement shall be the earlier
of six months from the date of acceptance by the Company or until the Closing
Date. Either party hereto may terminate this Agreement at any time after 30
days following the date of acceptance of this Agreement, upon written notice,
without liability or continuing obligation except as set forth in this
paragraph. EVEREN may terminate this Agreement, at or prior to the Closing
Date, if it determines in its sole discretion (which determination shall be
conclusive absent manifest error) that: (a) trading in the Company's common
stock or securities generally shall have been suspended by the Securities and
Exchange Commission (the "Commission") or on the over-the-counter market; (b) a
banking moratorium shall have been declared by New York or United States
authorities; or (c) there shall have been (I) an outbreak or escalation of
hostilities between the United States and any foreign power, (II) an outbreak or
escalation of any other insurrection or armed conflict involving the United
States, or (III) any other calamity or crisis having an effect on the financial
markets that makes it impracticable or inadvisable to proceed with the placement
contemplated hereby or the delivery of the Securities as contemplated hereby.
Neither the termination, for whatever reason, of this Agreement nor the
completion of the engagement contemplated hereby shall affect: (i) any
compensation earned by EVEREN up to the date of termination or completion, or
after termination, as the case may be, pursuant to the paragraph herein entitled
"Compensation"; (ii) any compensation to be earned by XXXXXX after termination
pursuant to the paragraphs herein entitled "Subsequent Financing" and "Right of
First Refusal" or the obligations of the Company thereunder; (iii) the
reimbursement of expenses incurred by XXXXXX up to the date of termination or
completion, as the case may be, pursuant to paragraph herein entitled
"Expenses"; and (iv) the provisions of the paragraphs herein entitled
"Information," "Indemnification", "Governing Law; Jurisdiction" and "Successors
and Assigns", all of which shall remain operative, and in full force and effect.
13. GOVERNING LAW; JURISDICTION. The validity and interpretation of this
Agreement shall be governed by and construed in accordance with the laws of the
State of Illinois, applicable to agreements made and to be fully performed
therein.
14. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of the
respective successors and assigns of the parties hereto and of the indemnified
parties hereunder and their successors and assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns.
15. ADVERTISEMENT. EVEREN may publish, at its own expense, an advertisement
announcing the successful completion of a Financing and XXXXXX's role therein.
XXXXXX hereby agrees that any such advertisement shall be submitted to the
Company for prior approval, which shall not be unreasonably withheld.
Xx. Xxxxxxx X. Xxxx
Page 5
November 15, 1996
16. COUNTERPARTS; AMENDMENT. For the convenience of the parties, any number of
counterparts of this Agreement may be executed by the parties hereto. Each such
counterpart shall be, and shall be deemed to be, an original instrument, but
all such counterparts taken together shall constitute one and the same
Agreement. This Agreement may not be modified or amended except in writing
signed by the parties hereto.
If the foregoing correctly sets forth our mutual understanding and
agreement, please indicate your acceptance hereof by dating and signing the
enclosed copy of this letter in the space provided and returning it, together
with a check in the amount of $25,000, payable to EVEREN Securities, Inc., to
the undersigned.
Very truly yours,
EVEREN SECURITIES, INC.
By:
-------------------------------------
Xxxxxxxxx X. Xxxxx
Managing Director
Accepted and Agreed to this
day of , 1996
------ -------------------
CARDIODYNAMICS INTERNATIONAL CORPORATION
By:
----------------------------
Title:
--------------------------
APPENDIX A
FURTHER UNDERTAKINGS AND REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
1. The Company will:
(a) Cause the Company's independent public accountants to address and deliver
to the Company and XXXXXX a letter or letters (which letters are frequently
referred to as "comfort letters") dated as of the effective date of the
Registration Statement, and a "bring-down" letter as of the Closing Date, both
of which letters will at all times be in form and substance reasonably
satisfactory to the Company and EVEREN.
(b) On the Closing Date, cause outside general counsel to the Company, to
deliver an opinion to XXXXXX to the following effect and regarding such
additional matters as EVEREN shall reasonably request:
The Registration Statement of the Company and the Prospectus as amended and
supplemented to date (other than the financial statements and related schedules,
and other financial and statistical data therein, as to which it need express no
opinion) comply as to form in all material respects with the requirements of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder; and it has no reason to believe that either the
Registration Statement or the Prospectus which forms a part thereof, as amended
and supplemented, contains any untrue statement of any material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that counsel need express
no opinion with respect to patents or the financial statements, related
schedules, and other financial and statistical data therein).
2. The Company represents and warrants to EVEREN as of the date hereof (except
as to matters that are to occur subsequent to the date hereof and prior to the
Closing Date) and as of the Closing Date as follows:
(a) At such time as the Registration Statement becomes effective, when any
supplement to the prospectus contained therein (the "Prospectus") is filed with
the Commission and at the Closing Date referred to in paragraph 1, (i) the
Registration Statement and the Prospectus complied, complies and will comply in
all material respects with the requirements of the Act and the regulations
promulgated under the Act; (ii) the Registration Statement, as amended or
supplemented as of any such time, did not, does not and will not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
(iii) the Prospectus, as amended or supplemented as of any such time, did not,
does not and will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that the representations and warranted in this subsection shall not
apply to statements in or omissions from
A-1
the Registration Statement or Prospectus made in reliance upon and in conformity
with information furnished to the Company in writing by or on behalf of EVEREN
expressly for use in the Registration Statement or Prospectus. There are not
contracts or other documents required to be filed as exhibits to the
Registration Statement by the Act or the Rules and Regulations that have not
been so filed.
(b) There has been no (i) issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or institution or, to
the knowledge of the Company, threat of any proceeding for that purpose or (ii)
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or initiation or, to the knowledge of
the Company, threat of any proceeding for such purpose.
(c) The accountants who certified the financial statements and supporting
schedules included in the Registration Statement are independent public
accountants as required by the Act and the Rules and Regulations.
(d) The financial statements and supporting schedules included in the
Registration Statement and the Prospectus present fairly the financial position
of the Company and its consolidated subsidiaries as at the dates indicated and
the results of their operations for the periods specified; except as otherwise
stated in the Registration Statement, said financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein.
(e) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated therein,
(A) there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the Company and
its subsidiaries considered as one enterprise, and (C) except for regular
quarterly dividends, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(f) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of California with
corporate power an authority to own and lease its properties and to conduct its
business as described in the Registration Statement; and the Company is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except where
the failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise.
(g) The authorized, issued and outstanding capital stock of the Company is as
set forth in the Registration Statement under "Capitalization" (except for
subsequent issuances, if any, pursuant
A-2
to reservations, agreements, employee benefit plans or the exercise of
convertible securities referred to in the Registration Statement); the shares of
issued and outstanding common stock have been duly authorized and validly issued
and are fully paid and non-assessable; the Securities have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and delivered
by the Company pursuant to this Agreement against payment therefor, will be
validly issued and fully paid and non-assessable; the common stock conforms to
all statements relating thereto contained in the Registration Statement; and the
issuance of the Securities is not subject to preemptive or other similar rights.
(h) Neither the Company nor any of its subsidiaries is in violation of its
charter or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument or
agreement to which the Company or any of its subsidiaries is a party or by which
it or any of them may be bound, or to which any subsidiaries is subject; and
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and therein have been duly authorized by all
necessary corporate action and will not conflict with or constitute a breach of,
or default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other instrument or agreement to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the provisions of the
charter or by-laws of the Company or any applicable law, administrative
regulation or administrative or court decree.
(i) The Company is not required to be registered under the Investment Company
Act of 1940, as amended.
(j) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or any of
its subsidiaries, which is required to be disclosed to the purchasers of the
Securities (other than as disclosed in the offering documents delivered to such
Purchasers), or which might result in any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, or which might materially and adversely affect their respective
property or assets or which might materially and adversely affect the
consummation of this Agreement; all pending legal or governmental proceedings to
which the Company or any of its subsidiaries is a party or of which any of their
respective property or assets is the subject which are not described in such
offering documents, including ordinary routine litigation incidental to the
business of the Company, are, considered in the aggregate, not material; and
there are not contracts or documents of the Company or any of its subsidiaries
which are required to be filed as exhibits to the Registration Statement by the
Act or by the Rules and Regulations which have not been so filed.
A-3
(k) No authorization, approval or consent of any court or governmental
authority or agency is necessary in connection with the sale of the Securities
hereunder, except such as may be required under the Act or the Rules and
Regulations or state securities laws or real estate syndication laws.
(l) The Company and its subsidiaries possess such certificates, authorities or
permits issued by the appropriate state, federal or foreign regulatory agencies
or bodies necessary to conduct the business now conducted by them, and neither
the Company nor any of its subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such certificate, authority or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise.
(m) The Company and its subsidiaries have good and indefeasible title in fee
simple to all real property and interest in real property owned by each of them
and marketable title to all items of personal property owned by each of them, in
each case free and clear of any and all security interest, liens, encumbrances,
equities, claims and other defects, except such as have been disclosed in the
Registration Statement and except such as do not materially and adversely affect
the value of such property or interests by the Company.
(n) The Company has full right, power and authority to enter into this
Agreement and this Agreement has been duly authorized, executed and delivered by
the Company.
(o) Any certificate signed by an officer of the Company and delivered to EVEREN
in connection with the closing shall be deemed a representation and warranty by
the Company to EVEREN as to the matters covered thereby.
A-4
APPENDIX B
INDEMNIFICATION PROVISIONS
The Company (as such term is defined in the attached Agreement (the
"Agreement") agrees to indemnify and hold harmless EVEREN Securities, Inc.
("EVEREN") from and against any and all losses, claims, damages, obligations,
penalties, judgments, awards, liabilities, costs, expenses and disbursements
(including without limitation fees and disbursements of counsel), and any and
all actions, suits, proceedings and investigations in respect thereof and any
and all legal and other costs, expenses and disbursements, whether in giving
testimony, furnishing documents in response to a subpoena or otherwise,
including, without limitation, the costs, expenses and disbursements, as and
when incurred, of investigating, preparing or defending any such action, suit,
proceeding or investigation (whether or not in connection with litigation to
which XXXXXX is a party), directly or indirectly caused by, relating to, based
upon, arising out of, or in connection with any transactions or services
contemplated by, referred to in or in any manner otherwise arising out of the
Agreement and/or any act or omission of EVEREN under or pursuant to the
Agreement; PROVIDED, HOWEVER, such indemnity agreement shall not apply to any
portion of any such loss, claim, damage, obligation, penalty, judgment, award,
liability, cost, expense or disbursement to the extent it is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal) to
have resulted from the gross negligence or willful misconduct of EVEREN. The
Company also agrees that EVEREN shall not have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Company or to any person
(including, with limitation, Company shareholders) claiming by or through the
Company for or in connection with the engagement of EVEREN pursuant to the
Agreement, except to the extent that any such liability is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal) to
have resulted from the gross negligence or willful misconduct of EVEREN.
This indemnification shall be in addition to any liability which the
Company may otherwise have to EVEREN or the persons indemnified below in this
sentence and shall extend to the following: EVEREN Capital Corporation, EVEREN
Securities, Inc., their respective affiliated entities, directors, officers,
employees, legal counsel, agents and any other person that directly or
indirectly controls or is controlled by or is under common control with any
person referred to above (within the meaning of the federal securities laws).
All references to EVEREN in these Indemnification Provisions shall be understood
to include any and all of the foregoing.
If any action, suit, proceeding or investigation is commenced, as to which
XXXXXX proposes to demand indemnification, it shall notify the Company with
reasonable promptness; PROVIDED, HOWEVER, that any failure by XXXXXX to notify
the Company shall not relieve the Company from its obligations hereunder except
to the extent the Company is prejudiced by such failure or delay. Subject to
XXXXXX's approval which shall not be unreasonably withheld, the Company shall
have the right to retain counsel of its own choice to represent EVEREN, and the
Company shall pay the fees, expenses and disbursements of such counsel; and such
counsel shall, to the extent consistent with its professional responsibilities,
cooperate with the Company and any counsel designated by the Company. The
Company shall be liable for any settlement of any claim against EVEREN made with
the Company's written consent, which consent shall not be unreasonably withheld.
The Company shall have the right to settle any claim against XXXXXX; provided
that the Company shall not, without the prior written
B-1
consent of XXXXXX, settle or compromise any claim, or permit a default or
consent to the entry of any judgment in respect thereof, unless such settlement,
compromise or consent includes, as an unconditional term thereof, the giving by
the claimant to EVEREN of an unconditional release from any and all liability in
respect of such claim.
XXXXXX shall reimburse the Company for any monies paid by the Company
pursuant to these Indemnification Provisions with respect to all fees, costs,
expenses and disbursements if liability is found in a final judgment by a court
of competent jurisdiction (not subject to further appeal) to have resulted from
the gross negligence or willful misconduct of EVEREN.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to this Indemnification Agreement is made but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Company, on the one hand, and XXXXXX, on the other hand, shall
contribute to the losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements to which the indemnified
persons may be subject in accordance with (i) the relative benefits received by
the Company, on the one hand, and XXXXXX, on the other hand; (ii) the relative
fault of the Company on the one hand and EVEREN on the other hand, in connection
with the statements, acts or omissions, as the case may be, which resulted in
such losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses or disbursements; and (iii) consideration of
relevant equitable principles. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
also found liable for such fraudulent misrepresentation. Notwithstanding the
foregoing, EVEREN shall not be obligated to contribute any amount hereunder that
exceeds the amount of fees previously received by EVEREN pursuant to the
Agreement unless EVEREN shall have been found liable in a final judgment by a
court of competent jurisdiction (not subject to further appeal) of gross
negligence or willful misconduct.
Neither the termination nor completion of the Agreement or of the engagement of
XXXXXX referred to therein shall affect the indemnification provided for
hereunder, which shall remain operative and in full force and effect.
B-2
SUMMARY OF PROPOSED TERMS
--------------------------------------------------------------------------------
CARDIODYNAMICS INTERNATIONAL CORP.
___,000 SHARES OF COMMON STOCK
AUTOMATIC REGISTRATION FORMAT
ISSUER: CardioDynamics International Corp. (the "Company"
or the "Issuer").
ISSUE: ___,000 newly-issued, restricted shares of Common
Stock (the "Shares"), no par, to be sold on a
private placement basis to U.S. and foreign
institutional investors. The Shares shall
represent approximately __% of the pro forma
primary number of shares of Common Stock of the
Company (__% fully diluted) outstanding at [date].
AMOUNT: $7,000,000.
PRICE PER SHARE: To be set at a 10% - 20% discount to the average
closing bid price for the Common Stock for the
[ten] consecutive trading days prior and including
the Pricing Date.
MINIMUM PURCHASE: 250,000 shares.
EXPECTED PRICING DATE: On or about [December 16], 1996.
EXPECTED CLOSING DATE: Three business days following the Pricing Date.
NOTIFICATION OF TERMS;
ACCEPTANCE BY PURCHASERS: Purchasers will be notified of the purchase price,
Closing Date and other terms on the Pricing Date
and will be required to fax their acceptance of
such terms and confirmation that they have
executed a Purchase Agreement or transmit by fax a
completed and executed copy of the signature page
of such Agreement within 24 hours of such
notification. See "Issuance of Shares" below.
DIVIDENDS: No dividends are currently being paid. Subject to
the prior rights of any preferred stock then
outstanding, the holders of Common Stock are
entitled to receive dividends when, as and if
declared by the Board of Directors.
VOTING RIGHTS: One vote per share held of record on all matters
submitted to a vote of holders of Common Stock.
REGISTRATION RIGHTS: The Company shall make every effort to effect the
registration of the Shares on Form S-3 under the
Securities Act of 1933, as amended (the
1
"Act") on or before 100 days following the Closing
Date, giving notice to all holders of the Shares
who may include all or any portion of their Shares
in such registration. Such registration shall be
kept effective until the earlier of the date that
(i) such Shares are sold pursuant to the
registration statement, or (ii) the required
holding period imposed on such Shares by SEC Rule
144 has expired. The registration will be subject
to the provision that the Company shall have the
right to postpone registration or require the
Investors not to sell pursuant to the Registration
Statement for up to [60] days at any time if the
Company is actively contemplating or is involved
in any extraordinary transaction (merger,
takeover, unusual commercial negotiation, etc.),
and may postpone registration for up to [____]
days if the Company is not eligible to use Form S-
3 for resales but reasonably expects to become
eligible within such period.
RANKING: The Common Stock shall rank junior to any
preferred stock of the Company and to any other
class or series of capital stock of the Company
with respect to dividends and liquidating
distributions, unless the terms of such class or
series specifically provide that such class or
series shall rank on a parity with the Common
Stock.
LIQUIDATION: In a liquidation, the Common Stock shall be
entitled to the assets legally available for
distribution to holders of Common Stock, on a pro
rata basis, subject to the rights, if any, of
holders of any preferred stock or other class or
series of capital stock senior to the Common
Stock.
ISSUANCE OF SHARES: Each purchaser of Shares will be required to
execute a Purchase Agreement and return same to
the Placement Agent at or before the close of
business on the second business day following the
Pricing Date. The Purchase Agreement will confirm
that the Shares have been sold on a private
placement basis and that the Shares may not be
sold, transferred or otherwise disposed of by an
investor except pursuant to a registration
statement or an exemption from the registration
requirements of the Act.
INVESTOR SUITABILITY: Each purchaser of the Shares will be required to
represent in writing to the Company and the
Placement Agent, among other things, that it is an
"accredited investor" as such term is defined in
Regulation D promulgated under the Act.
ANTI-DILUTION PROVISIONS: None.
BOARD OBSERVATION RIGHTS: Any holder of Shares equal to or greater than a 5%
ownership interest in the Company shall be
entitled to observation rights at meetings of the
Board of Directors.
PLACEMENT AGENT: EVEREN Securities, Inc.
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