EXHIBIT B
Subscription Agreement
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December 3, 1997
Page 1
AGREEMENT, by and between Cardiac Science, Inc., a Delaware corporation
(the "Company"), and the investor listed on the signature page hereto (the
"Investor").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is seeking to raise $2,000,000 (the "Financing")
through the sale of shares of the Company's common stock. par value $.001 per
share ("Common Stock")
WHEREAS, the Company has retained Xxxxxx Asset Strategies, S.A., a Swiss
corporation (the "Advisor"), to assist the Company in finding qualified
investors to purchase shares of Common Stock:
WHEREAS, the Company may contract for the sale of shares of Common Stock
with (a) non-U.S. Persons (as defined below) in reliance upon an exemption from
registration provided for under Regulation S ("Regulation S") of the Securities
Act of 1933, as amended (the "Act"), pursuant to investor agreements identical
to this Agreement (collectively, the "Investor Agreements"), and (b) U.S.
Persons (as defined in Regulation S) in reliance upon an exemption from
registration provided for under Regulation D of the Act, pursuant to
subscription agreements similar to this Agreement (but identical as to purchase
price per Share)(collectively, the "Subscription Agreement"):
WHEREAS, as a condition to the consummation of the Financing, the Company,
among other things, is to effectuate an 11,42857143 for one reverse stock split
("Reverse Stock Split") of its Common Stock; and
WHEREAS, the Company desires to issue and sell to the Investor, and the
Investor desires to purchase from the Company, the number of post-Reverse Stock
Split shares of Common Stock (the "Shares") set forth opposite the name of the
Investor on the signature page hereto at a price of $2.00 per Share, on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agrees as follows:
1ARTICLE
ISSUANCE AND SALE OF THE SHARES
1.1 Section ISSUANCE AND SALE OF THE SHARES. The Company hereby agrees to
sell to the Investor, and the Investor hereby agrees to purchase from the
Company, the number of Shares set forth on the signature page hereto, at the
aggregate purchase price also set forth on the signature page hereto.
1.2
1.3 Section PAYMENT FOR SHARES. Concurrently with the execution of this
Agreement the Investor shall deliver to Xxxxx, Day, Xxxxxx & Xxxxx, counsel for
the Advisor ("JDRP"). A check made payable to "Xxxxx, Day, Xxxxxx & Xxxxx for
Cardiac Science, Inc." in an amount
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December 3, 1997
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equal to the aggregate purchase price set forth on the signature page hereto,
or shall transfer such sum to JDRP by wire transfer.
1.4
1.5 Section CLOSING; CONDITIONS TO CLOSING.
1.6
(a) Subject to Section 1.3(b) hereof, within seven business days after the
receipt by the Company of Investor Agreements and/or Subscription Agreements
aggregating at least $2,000,000, the receipt of JDRP of at least $2,000,000 in
cleared funds for the account of the Company, and the satisfaction of waiver of
the conditions set forth in Section 1.3(a) hereof (or on such date as the
Company and the Advisor shall mutually agree), a closing (the "Closing") shall
be held. At the Closing, the proceeds from the sale of the Shares shall be
disbursed in accordance with joint instructions from the Company and the
Advisor. Within a reasonable period of time after the date of the Closing (the
"Closing Date"), certificates representing the Shares sold to U.S. Persons (if
any) pursuant to Regulation D, containing appropriate legends, shall be
delivered to the purchasers thereof, and within seven (7) business days after
the forty-first (41st) day after the Closing Date, certificates representing the
Shares sold to Non-U.S. Persons (if any) pursuant to Regulation S (the "Reg S
Shares") shall be delivered to the purchasers thereof. The Investor and all
other purchasers of the Shares pursuant to Investor Agreement and/or
Subscription Agreements collectively shall be referred to herein as the
"Investors". If the Company receives the Opinion (as defined below) on or after
the forty-first (41st) day after the Closing Date, then the Reg S Shares shall
bear no restrictive legend and shall be freely tradeable. Prior to delivery of
the Reg S shares, the Advisor shall deliver or cause to be delivered to Xxxxxx &
Xxxxxx LLP, counsel to the Company ("B&W"), an opinion of counsel (the
"Opinion") from Xxxxx Xxxxx, Esq. (or such other attorney as is acceptable to
counsel for the Company) that the Reg S Shares may be publicly sold inside the
United States without restriction under the Act and which sets forth the
exemption from registration upon which such opinion relies. The form of the
Opinion shall be agreed upon by the Company and the Advisor as a condition to
the Closing.
(b)
(c) Notwithstanding the foregoing, if on or before May 30, 1997 (or such
later date (which shall not be beyond June 15, 1997) as shall be agreed upon in
writing by the Company and the Advisor, the "Termination Date"), (i) the Company
has not received Subscription Agreements and/or Investor Agreement aggregating
at least $2,000,000, (ii) JDRP has not received at least $2,000,000 in cleared
funds for the account of the Company, (iii) the conditions set forth in Section
1.3(c) hereof have not been satisfied or waived by the Advisor, (iv) there shall
have been a material breach of any of the representations, warranties or
covenants contained in this Agreement on the part of the Company or the Investor
(which breach is not waived by the party not in breach), or (v) JDRP shall have
received a certificate signed by the Company and the Advisor stating that the
Financing is being terminated, then the Agreement shall be null and void and
monies remitted by the Investor hereunder shall be returned to the Investor by
JDRP, without interest thereon or deduction therefrom.
(d)
(e) The consummation of the transactions contemplated hereby shall be
subject to the satisfaction, or the waiver by the Advisor, or the following
conditions:
(f)
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(i) The Company shall have obtained the approval of its Board of
Directors and stockholders to amend the Company's Certificate of
Incorporation (1) to effectuate the Reverse Stock Split, and (2) to reduce
the number of authorized shares of Common Stock to 20,000,000 shares (the
"Stock Reduction").
(ii)
(iii) The Company shall have obtained (1) from each of J. Xxxxxx Xxxx,
Xxxx Xxxxxxx, B&W, Xxxx Xxxxxxx. Financial Sciences of America, Inc. ("FSA"),
Prabody Mathur, Xxxxxx Xxxxxx, Medstone, Inc. and Technology Funding, Inc., an
agreement to lock-up their shares of Common Stock an shares of Common Stock
issuable upon the exercise of their options and/or warrants for a period of one
year from the Closing Date. (2) from such of the investors that participated in
the private placement (the "Private Placement") of Common Stock through A.R.
Baron & Co., Inc. ("Baron") in September, 1994 (the "A.R. Baron Private
Investors") as the Advisor determines, an agreement either to lock-up their
shares of Common Stock for a period of one year from the Closing Date or to sell
their shares of Common Stock to the Advisor or its designee, and (3) from the
holders of the warrants that originally were issued to Baron in connection with
the Private Placement (the "A.R. Baron Warrantholders"), an agreement to lock-up
the shares of Common Stock issuable upon exercise of their warrants for a period
of two years from the Closing Date, or to sell the warrants and/or shares of
Common Stock to the Advisor or its designee.
(vi)
(v) The Company shall have entered into an agreement with B&W,
effective as of the Closing Date, to defer collection of $128,692.50 in fees due
and owing to B&W (consisting of $86,000 previously deferred in connection with a
prior offering of securities by the Company and $42,692.50 owed in connection
with an aborted bridge financing), until the earlier of 12 months from the
Closing or the completion of the next financing for the Company; provided,
however, there shall be paid immediately upon B&W ceasing to act as general
counsel to the Company (other than an account of its voluntary resignation as
such counsel), the deferred fees referred to above.
(vi)
(vii) The Company shall have entered into an agreement with FSA,
effective as of the Closing Date, to defer collection of (I) $10,000 of fees
currently due and owing to FSA, which fees were previously deferred in
connection with a prior offering of securities by the Company, and (2) $100,000
of fees which would otherwise be payable upon consummation of the Financing,
until the earlier of 12 months from the Closing or the completion of the next
financing by the Company; provided, however, there shall be paid immediately
upon the Company failing to honor the Investor Relations Services Agreement,
dated the St. day of October 1994, between the Company and FSA (except to the
extent that payments to FSA are deferred as provided above), the deferred fees
as provided above.
(viii)
(ix) The offer and sale of the Shares shall have been qualified in
such states and/or foreign jurisdictions as shall be required to effectively
offer and sell the Shares to the Investors.
(x)
(g) If, prior to the Termination Date, subscriptions are received
aggregating more than $2,000,000 then, upon written instructions from the
Advisor and the Company, JDRP shall remit to those subscribers whose
subscriptions are not being accepted, in whole or in part, an
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amount of money equal to the price of that number of Shares for which each
such subscription is not being accepted.
(h)
1.7 Section ADVISOR. The Investor hereby acknowledges that the Company has
retained the Advisor in connection with the sale and purchase of the Shares, and
that for its services in connection with locating Investors, the Advisor will
receive, at the Closing, a transaction fee (the "Transaction Fee") consisting of
(a) a cash payment (the "Cash Payment") of $100,000, (b) additional newly-issued
shares of Common Stock (the "Transaction Fee Shares") in an amount equal to five
percent (5%) of the aggregate number of Shares issued and sold by the Company to
the Investors, and (c) one or more warrants (the "Warrants") to purchase that
number of additional shares of Common Stock ("Warrant Shares") which, in the
aggregate, shall be equal to ten percent (10%) of the number of Shares sold to
the Investors, at a post-Reverse Split exercise price equal to $2.25 per Warrant
Share, and on such other mutually acceptable terms and conditions as are set
forth in the Warrant. The Transaction Fee shall be paid by delivery to the
Advisor (aa) of the Cash Payment on the Closing Date. (bb) within seven (7)
business days after the forty-first (41st) day after the Closing Date, of one or
more duly executed share certificates representing the Transaction Fee Shares,
which Transaction Fee Shares shall be in the name of the Advisor and/or one or
more persons designated by the Advisor by notice to the Company (the
"Designees"), and (cc) within seven (7) business days after the Closing Date, of
one or more duly executed warrant certificates representing the Warrants, which
Warrants shall be in the name of the Advisor and/or such Designees designated by
the Advisor by notice to the Company. Provided that the Company receives the
Additional Opinion (as defined below) on or after the 41st day after the Closing
Date, the Transaction Fee Shares and the Warrant Shares shall bear no
restrictive legend and shall be freely tradable. Prior to delivery of the
Transaction Fee Shares and the Warrant Shares, the Advisor shall deliver or
cause to be delivered to B&W an opinion of counsel (the "Additional Opinion")
from Xxxxx Xxxxx, Esq. (or such other attorney as is acceptable to counsel for
the Company that the Transaction Fee Shares and Warrant Shares may be publicly
sold, freely and without restrictions, inside the United States without
registration under the Act, and which sets forth the exemption from registration
upon which such opinion relies. The form of the Additional Opinion shall be
agreed upon by the Company and the Advisor as a condition to the Closing.
1.8
2ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor as follows:
1.1 Section BUSINESS OF THE COMPANY. The Company is a development stage
company engaged in the development of a line of non-invasive, automatic,
external cardioverter defibrillator devices (the "Products") to treat persons
suffering from, or at high risk of, life-threatening arrhythmias that lead to
cardiac arrest. The Company has delivered to the Investor an Offering
Memorandum ("Offering Memorandum"), including the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 (the "Form 10-K"), which documents contain a
complete description of
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the business of the Company, the management of the Company, including
compensation and the principal stockholders of the Company.
1.2
1.3 Section ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER. The
Company is duly incorporated, validly existing, and in good standing under
the laws of Delaware, and has all requisite corporate power and authority to
own, operate, and lease its properties and to carry on its business as the
same is now being conducted. The Company is duly qualified to do business as
a foreign corporation an is in good standing in each jurisdiction in which
the character of its properties or the nature of its activities make such
qualification necessary, except where the failure to be so qualified and in
good standing would not have a material adverse effect on its business,
operations, or financial condition. The Company has the requisite corporate
power and authority to execute, deliver and perform this Agreement and to
sell, issue, and deliver the Shares.
1.4
1.5 Section AUTHORIZATION OF AGREEMENT, ETC.
1.6
(a) The execution and delivery by the Company of this Agreement, the
performance of its obligations hereunder, and the sale, issuance, and delivery
of the Shares have been duly authorized or ratified by all requisite corporate
action of the Company and will not violate any provision of United States law,
any order of any court or other agency of government, the Company's Certificate
of Incorporation or By-laws, or any provision of any indenture, agreement, or
other instrument to which the Company or any of its properties or assets is
bound, or conflict with, result in a breach of, or constitute (with due notice
or lapse of time or both) a default under, any such indenture, agreement, or
other instrument, or result in the creation or imposition of any lien, charge,
restriction, claim, or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b)
(c) The Shares have been duly authorized and, when issued in accordance
with this Agreement, will be validly issued, fully paid and non-assessable
shares of Common Stock free and clear of all liens, charges, restrictions,
claims, and encumbrances imposed by or through the Company, and are not subject
to any preemptive right of stockholders of the Company or to any right in favor
of any person.
(d)
1.7 Section VALIDITY. This Agreement has been executed and delivered by the
Company and constitutes the legal, valid, and binding obligation of the Company,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting creditors' rights generally, and subject to general
principles of equity. No approval, consent, authorization, order of, or filing
with any court or governmental authority is required in connection with the sale
of the Shares to the Investors, except as may be required under the Act and the
jurisdictions in which the Shares are offered and sold.
1.8
1.9 Section CAPITALIZATION. Giving effect to the Reverse Stock Split and
the Stock Reduction, the authorized capital stock of the Company consists of
(a) 20,000,000 shares of Common Stock, par value $.01 per share, of which (i)
3,778,728 shares of Common Stock are issued and outstanding (including
500,000 shares of Common Stock into which the Series A
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Preferred Stock, as defined below, was converted upon the effectiveness of
the Reverse Stock Split), and (ii) there are subscriptions outstanding for
145,833 shares of Common Stock, and (b) 1,000,000 shares of Preferred Stock,
par value $.001 per share, of which 5,714,285 shares of Series A Convertible
Preferred Stock ("Series A Preferred Stock") were issued and outstanding
prior to the Reverse Stock Split and were automatically converted into
500,000 shares of Common Stock on the effectiveness of the Reverse Stock
Split. In addition, giving effect to the Reverse Stock Split, the Company
has outstanding (aa) warrants to purchase 1,175,642 shares of Common Stock,
1,050,000 of which are exercisable at a price of $.01 per share, and (bb)
options to purchase 36,750 shares of Common Stock pursuant to the Company's
stock option plans. Except for the Transaction Fee Shares, Warrants and
Warrant Shares payable to the Advisor as set forth in Section 1.4 hereof,
there are no other subscriptions, warrants, options, convertible debt or
other securities or any commitments, agreement or rights of any kind with
respect to securities of the Company outstanding, nor will any be outstanding
at the time of Closing. The Company has no obligation (contingent or other)
to purchase, redeem, or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof, except that if the Series A Preferred Stock has not been
converted into Common Stock (i.e. the Reverse Stock Split is not effectuated)
by April 9, 1999, then the holders of the Series A Preferred Stock shall have
the right to demand redemption thereof by the Company at a price of $175.00
per share of Preferred Stock (or an aggregate of $1,000,000).
1.10
1.11 Section FINANCIAL STATEMENTS. The Company's Form 10-K contains the
Company's audited financial statements for the years ended December 31, 1996 and
1995. Such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis and fairly present
the financial position of the Company on such dates and the results of
operations for the years then ended.
1.12
1.13 Section LITIGATION. There are no actions, suits, proceedings, claims,
hearings, or any investigations before or by any court, governmental authority,
or instrumentality (or any state of facts which would give rise thereto),
pending, threatened against, or involving the properties of the Company, which
might be materially adverse to the business, properties, financial position, or
results of operations of the Company or which might adversely affect the
transactions or other acts contemplated by this Agreement or the validity or
enforceability of this Agreement.
1.14
1.15 Section FINDERS. Except for the Advisor (which has been retained by and
whose fees will be paid by the Company), there are no finders in connection with
the sale of the Shares.
1.16
1.17 Section TITLE TO PROPERTIES. The Company has good and marketable
title to (or a valid leasehold interest in) its properties and assets, free
and clear of mortgages, pledges, security interests, liens, charges, claims,
restrictions and other encumbrances, except for minor imperfections of title,
if any, not material in nature or amount and not materially detracting from
the value or impairing the use of the property subject thereto or impairing
the operations or proposed operations of the Company.
1.18
1.19 Section OTHER AGREEMENTS. The Company is not a party to or otherwise
bound by any contracts, commitments, obligations or undertakings, written or
oral, which, to the best
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knowledge of the Company, would have a material adverse effect on the Company
or would prevent it from fulfilling its obligations hereunder.
1.20
1.21 Section PROPRIETARY TECHNOLOGY AND BUSINESS KNOW-HOW. Except as set
forth in Schedule 2.11 hereto, the Company owns or has the right to use all
of its proprietary technology and business know-how, without restrictions or
limitations, free and clear of all mortgages, covenants, leases, agreements,
royalty or other payment obligations, restrictions, security interests,
liens, encumbrances, attachments and claims of every kind whatsoever; the
Company has not received any notice of conflict with the asserted rights of
others with respect to any proprietary technology and business know-how, nor
does the Company have knowledge of any basis for any such claim (whether or
not pending or threatened); the Company has not granted or assigned to any
other person or entity any right to its proprietary technology and business
know-how, nor has it permitted any other person or entity to use its
proprietary technology and business know-how. To the best of the knowledge
of the Company, all proprietary technical information belonging to the
Company has either been kept confidential or is the subject of a patent
application.
1.22
2ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company that:
1.1 Section RISK FACTORS. The Shares offered hereby are highly
speculative and involve a high degree of risk. The Investor acknowledges
that it has carefully reviewed and considered, along with other matters
referred to herein, the risk factors set forth in the Offering Memorandum.
1.2
1.3 Section OFFSHORE TRANSACTION. The Investor represents and warrants
to the Company that (a) the Investor is not a U.S. Person as that term is
defined in Rule 902(o) of Regulation S; (b) the Shares were not offered to
the Investor in the United States; (c) at the time of execution of this
Agreement and the time of any offer to the Investor to purchase the Shares
hereunder, the Investor was physically outside the United States; (d) the
Investor is purchasing the Shares for its own account and not on behalf of or
for the benefit of any U.S. Person and the sale and resale of the Shares have
not been prearranged with any U.S. Person or buyer in the United States; an
(e) the Investor is not an underwriter, dealer, distributor or other person
who is participating, pursuant to a contractual arrangement, in the
distribution of the Shares offered or sold in reliance on Regulation S.
1.4
1.5 Section INDEPENDENT INVESTIGATION. The Investor, in subscribing for the
Shares hereunder, has relied solely upon an independent investigation made by
the Investor and its representatives, if any, and has, prior to the date hereof,
been given access to and the opportunity to examine all books and records of the
Company, and all material contracts and documents of the Company which have been
filed as exhibits to the Company's filings made under the Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In making its investment
decision to purchase the Shares, the Investor is not relying on any oral or
written
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representations or assurances from the Company or any other person other
than as set forth in this Agreement.
1.6
1.7 Section ECONOMIC RISK. The Investor understands and acknowledges
that an investment in the Shares involves a high degree of risk, including,
without limitation, limitations on the liquidity of the Shares, and the
Investor is willing to accept such investment risks. Ten Investor represents
that the Investor is able to bear the economic risk of an investment in the
Shares, including a possible total loss of investment. In making this
statement, the Investor hereby represents and warrants to the Company that
the Investor has adequate means of providing for the Investor's current needs
and contingencies, can afford to hold the Shares for an indefinite period,
and as of the date of signing this Agreement, has no present need for
liquidity of the Shares.
1.8
1.9 Section NO GOVERNMENT RECOMMENDATION OR APPROVAL. The Investor
understands that no United States federal or state agency, or similar agency of
any other country, has reviewed, approved, passed upon, or made any
recommendation or endorsement of the Company or the subscription for the Shares.
1.10
1.11 Section NO DIRECTED SELLING EFFORTS IN REGARD TO THIS TRANSACTION.
To the knowledge of the Investor, without any independent investigation,
neither the Company, nor any person acting for the Company, has conducted any
"directed selling efforts" in the United States as such term is defined in
Rule 902(b) of Regulation S, which in general, means any activity undertaken
for the purpose of, or that could reasonably be expected to have the effect
of conditioning the market in the United States for any of the Shares being
offered in reliance on Regulation S. Such activity includes, without
limitation, the mailing of printed material to investors residing in the
United States, the holding of promotional seminars in the United States and
the placement of advertisements with radio or television stations
broadcasting in the United States or in publications with a general
circulation in the United States, that refers to the offering of the Shares
in reliance on Regulation S.
1.12
1.13 Section COMPANY'S RELIANCE ON REPRESENTATIONS OF THE INVESTORS. The
Investor understands that the Shares being offered and sold to it in reliance on
specific exemptions from the registration requirements of U.S. securities laws
and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments, and understandings of
the Investor set forth herein in order to determine the applicability of such
exemptions and the suitability of the Investor to acquire the Shares.
1.14
1.15 Section SHARES NOT REGISTERED UNDER THE ACT OR ANY STATE ACT. The
Investor understands that (a) the Shares have not been registered under the Act
or any state securities laws ("State Acts") and are being offered and sold
pursuant to Regulation S based in part upon the representations of the Investor
contained herein, and (b) the Shares may not be offered or sold in the United
States unless such disposition is registered under the Act and any applicable
State Acts or such offer or sale is made pursuant to exemption from those
registration requirements.
1.16
1.17 Section NO PUBLIC SOLICITATION. The Investor knows of no public
solicitation or advertisement of an offer in connection with the proposed
issuance and sale of the Shares.
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1.18
1.19 Section INVESTMENT INTENT. The Investor is acquiring the Shares for
his, her, or its own account (or a trust account if such the Investor is a
trustee) for investment and not as a nominee or with a view to the resale or
distribution thereof. The Investor understands that the Investor must bear
the economic risk of this investment indefinitely unless such Shares are
registered pursuant to the Act and any applicable State Acts, or an exemption
from such registration is available, and that the Company has no present
intention of registering any such sale of the Shares. The Investor
represents and warrants to the Company, as of the date of this Agreement,
that the Investor has no present plan or intention to sell the Shares in the
United States at any predetermined time, and has made no predetermined
arrangements to sell the Shares.
1.20
1.21 Section INVESTOR NOT TO SELL OR TRANSFER SHARES IN VIOLATION OF THE
SECURITIES LAWS. The Investor covenants that he, she, or it will not knowingly
make any sale, transfer, or other disposition of the Shares in violation of the
Act (including Regulation S), the Exchange Act, any applicable State Acts, or
the rules and regulations of the Commission or of any state securities
commissions or similar state authorities promulgated under any of the foregoing.
1.22
1.23 Section INVESTOR'S POWER AND AUTHORITY. The Investor has the full
power and authority to execute, deliver, and perform this Agreement. This
Agreement, when executed and delivered by the Investor, will constitute a
valid and legally binding obligation of the Investor enforceable in
accordance with its terms.
1.24
1.25 Section NO TAX ADVICE FROM COMPANY OR ITS AGENTS. The Investor has
had an opportunity to review the foreign. U.S. federal, state, and local tax
consequences of this investment (and the transactions contemplated by this
Agreement) with his, her, or its own tax advisor. The Investor is relying
solely on such advisors and not on any statements or representations of the
Company or any of its agents, and understands that the Investor (and not the
Company) shall be responsible for the Investor's own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Agreement.
1.26
1.27 Section NO LEGAL ADVICE FROM COMPANY OR ITS AGENTS. The Investor
acknowledges that he, she, or it has had the opportunity to review this
Agreement (and the transactions contemplated by this Agreement) with his, her or
its own legal counsel. The Investor is relying solely on such counsel and not
on any statements or representations of the Company or any of its agents for
legal advice with respect to this investment or the transactions contemplated by
this Agreement, except for the representations, warranties, and covenants set
forth herein.
1.28
1.29 Section NO SCHEME TO EVADE REGISTRATION. The Investor's acquisition of
the Shares is not a transaction (or any element of a series of transactions)
that is part of a plan or scheme to evade the registration provisions of the
Act.
1.30
1.31 Section NO SHORT SALES. During the Restricted Period (as defined in
Regulation S, neither the Investor nor any of its affiliates will, directly or
indirectly, maintain any short position in the securities of the Company.
1.32
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2ARTICLE
COVENANTS OF THE INVESTOR
During the Restricted Period (as defined in Regulation S), the Investor
covenants not to offer or sell the Shares in the United States unless such
disposition is registered under the Act and any applicable State Acts or such
offer or sale is made pursuant to exemption from such registration
requirements. The Investor shall cause any transferee of the Shares during
the Restricted Period to execute an agreement substantially similar to this
Agreement.
1ARTICLE
POST-CLOSING COVENANTS OF THE COMPANY
The Company covenants and agrees with the Investor that:
(a) Within three (3) business days after the Closing Date, it will
file an amendment to the Company's Certificate of Incorporation to effectuate
the Reverse Stock Split and Stock's Reduction.
(b)
(c) The proceeds of the sale of the Shares (estimated to be $1.850.000
after deduction of the Cash Payment and legal fees in connection with the
Financing) shall be used as follows: approximately 45% will be used for
research and development expenses, including expenses associated with FDA
submissions, and various other expenses associated with advancing Phase II
clinical trials of the Company's Powerheart bedside model; approximately 20%
will be used for sales and marketing expenses, including literature and
materials, advertising, and trade shows; and approximately 35% will be used for
general corporate and working capital purpose, including, among other things,
salaries of executive and administrative expenses, legal and accounting costs,
and recruiting expenses; provided, however, the Company may make a bona fide
good faith change in the use of proceeds if, on the basis of changed
circumstances, the Company deems such change to be advisable.
(d)
1ARTICLE
INDEMNIFICATION
1.1 Section INDEMNITY OF THE COMPANY. The Company agrees to indemnify
and hold harmless the Investor and, if applicable, its officers and
directors, from and against, for and in respect of, and shall promptly
reimburse them for, any and all claims, losses, costs and expenses (including
the cost of any investigation and reasonable attorneys' fees), damages,
lawsuits, obligations, deficiencies, and liabilities (collectively "Losses")
which arise as a result of (a) the inaccuracy or breach in any material
respect of any representation or warranty made by the Company herein, or (b)
any breach or failure of the Company to perform any of the covenants or
agreements set forth herein.
1.1 Section INDEMNITY OF INVESTOR. The Investor agrees to indemnify and
hold harmless the Company and its officers and directors from any and all
Losses which arise as a result of (a) the
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December 3, 1997
Page 11
inaccuracy or breach of any representation or warranty made herein by such
Investor, or (b) any breach or failure of the Investor to perform any of the
covenants or agreements set forth herein.
1.2
1.3 Section INDEMNIFICATION PROCEDURE. An indemnifying party shall not be
liable under this indemnity agreement with respect to any claim made against an
indemnified party unless such indemnifying party shall be notified in writing of
the nature of the claim within a reasonable time after the assertion thereof,
but failure so to notify such indemnifying party shall not relieve it from any
liability which it may have otherwise than on account of this indemnity
agreement. An indemnifying party shall be entitled to participate at its own
expense in the defense of such claim or, if it so elects within a reasonable
time after receipt of such notice, to assume the defense of such claim, which
defense shall be conducted by counsel chosen by it and reasonably satisfactory
to the indemnified party defendant or defendants in any suit so brought,
provided however, the indemnifying party shall not be entitled to assume the
defense of such claim if such indemnified party reasonably objects to such
assumption on the ground that there may be legal defenses available to such
indemnified party different from or in addition to those available to such
indemnifying party. In the event that the indemnifying party elects to assume
the defense of any such suit and retains such counsel, the indemnified party
defendant as defendants in the suit shall bear the fees and expenses of any
additional counsel thereafter retained by such indemnified party. However, in
the event that the parties to any such action (including impleaded parties)
include the Company or controlling persons thereof and the Investor, and
representation of all parties would be inappropriate due to actual or potential
differing interests among them, then the Investor shall have the right to retain
separate counsel and the Company shall reimburse the Investor for the reasonable
fees and expenses of such counsel.
1.4
1ARTICLE
MISCELLANEOUS
1.1 Section SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations, and warranties made herein shall survive the execution and
delivery hereof.
1.1 Section PARTIES IN INTEREST. All representations, covenants, and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective heirs, executors,
administrators, successors, and assigns of the parties hereto. Except as
otherwise expressly provided herein, nothing in this Agreement is intended to
confer upon any other person any rights or remedies hereunder.
1.2
1.3 Section NOTICES. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or telexed or
faxed.
1.4
1.5 Section GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
1.6
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December 3, 1997
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1.7 Section ENTIRE AGREEMENT. This Agreement, including the Exhibits and
Schedules hereto, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof. All Exhibits and Schedules hereto are
hereby incorporated herein by reference.
1.8
1.9 Section COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but taken together shall constitute
one and the same instrument.
1.10
1.11 Section AMENDMENTS. This Agreement may be amended or modified, or any
provision hereof may be waived, only pursuant to a written instrument executed
by the parties hereto.
1.12
1.13 Section SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by a judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
1.14
1.15
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December 3, 1997
Page 13
1.16 IN WITNESS WHEREOF, the parties have executed this Agreement
this day of , 199 .
1.17
1.18Investor: (if an individual) Investor: (other than an individual
1.19 for his own account)
1.20
1.21(signature)
1.22 (printed name of Investor)
1.23 For and on behalf of
1.24(printed name) LAVA INVESTMENTS LIMITED
1.25 By Tengis International Limited, as
1.26 authorized signatory
1.27(signature of joint holder,
1.28 if applicable) By:
1.29 (signature of authorized officer or
Investor's Permanent Address: other representative)
W.K. Timso and X.X. Xxx,
(printed name and title of signatory)
Investor's country or jurisdiction of
citizenship:
CARDIAC SCIENCE, INC.
By:
Xxxxxxx X. Xxxxx, President
If this agreement is being executed other
than in the jurisdiction set forth above,
indicate such location:
Number of Purchased Shares:
Total Purchase Price:
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