EXHIBIT 10.2
CARDIMA, INC.
A minimum of 5,000,000 ($10,000,000) and
a maximum of 7,500,000 ($15,000,000)
Shares of Common Stock
SALES AGENCY AGREEMENT
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As of January 21, 1999
Sunrise Securities Corp.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Cardima, Inc., a Delaware corporation (the "Company"), proposes to
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offer for sale in a private offering (the "Offering"), pursuant to Rule 506 of
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Regulation D ("Regulation D") under the Securities Act of 1933, as amended (the
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"Act"), a minimum of 5,000,000 (including "Affiliate Shares," and "Insider
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Shares", each as hereinafter defined, if any) and a maximum of 7,500,000 shares
(the "Shares") of the Company's common stock, par value $0.001 per share (the
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"Common Stock"). This Offering is being made solely to "accredited investors"
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as defined in Regulation D. This is to confirm our agreement concerning your
acting as our exclusive placement agent (the "Placement Agent") in connection
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with the Offering.
The Company has prepared and has delivered to the Placement Agent
copies of a confidential executive summary, dated December 9, 1998, relating to,
among other things, the Company, its management, and the risks associated with
an investment in the Company's securities. Such confidential executive summary,
including all documents delivered therewith and incorporated by reference
therein, is referred to herein as the "Executive Summary" unless such
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confidential executive summary or any such accompanying documents shall be
supplemented or amended in accordance with this Agreement, in which event the
term "Executive Summary" shall refer to such confidential executive summary and
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such documents as so supplemented or amended from and after the time of delivery
to the Placement Agent of such supplement or amendment.
In addition, the Company has furnished or made available to the
Placement Agent the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, (the "Form 10-K"), quarterly report on Form 10-Q for
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the quarter ended March 31, 1998, quarterly report on Form 10-Q for the quarter
ended June 30, 1998, quarterly report on Form 10-Q for the quarter ended
September 30, 1998 (the "Most Recent 10-Q") and any other reports filed by the
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Company pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the rules and regulations promulgated thereunder, prior to
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Closing (collectively, the "SEC Filings"), in each case as filed with the
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Securities and Exchange Commission (the "Commission").
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1. Appointment of Placement Agent. On the basis of the
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representations and warranties contained herein, and subject to the terms and
conditions set forth herein, the Company hereby appoints you as its Placement
Agent and grants to you the exclusive right to offer, as its agent, the Shares
pursuant to the terms of this Agreement. On the basis of such representations
and warranties, and subject to such conditions, you hereby accept such
appointment and agree to use your best efforts to secure subscriptions to
purchase a minimum of 5,000,000 ($10,000,000) and a maximum of 7,500,000
($15,000,000) Shares pursuant to the terms of this Agreement. The agency
created hereby is not terminable by the Company except upon termination of the
Offering or upon expiration of the Offering Period (as hereinafter defined) in
accordance with the terms of this Agreement.
2. Terms of the Offering.
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(a) A minimum of 5,000,000 ($10,000,000) and a maximum of 7,500,000
($15,000,000) Shares shall be offered for sale to prospective investors in the
Offering ("Prospective Investors") at a purchase price equal to $2.00 per Share
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(the "Purchase Price"). Certain of the shares offered for sale may be sold to
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certain of the Company's current institutional investors (the "Insider Shares").
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In addition, officers, directors and employees of the Company and the Placement
Agent may purchase Shares for their own accounts on the same terms and
conditions as other investors (the "Affiliate Shares"). The Affiliate Shares
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and Insider Shares shall be included in determining whether the minimum and
maximum number of Shares have been subscribed for, and all references herein to
subscriptions from Prospective Investors shall be deemed to include the
Affiliate Shares and the Insider Shares.
(b) The Offering shall expire at 5:00 P.M., New York time, on February
15, 1999, unless extended from time to time for periods of up to an aggregate of
30 days by mutual agreement of the Company and the Placement Agent. Such
period, as the same may be so extended, shall hereinafter be referred to as the
"Offering Period."
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(c) Each Prospective Investor who desires to purchase Shares shall be
required to deliver to the Placement Agent one copy of a subscription agreement
in the form annexed hereto as Exhibit A, including the investor questionnaire
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(the "Subscription Agreement"), and payment in the amount necessary to purchase
the number of Shares such Prospective Investor
desires to purchase. The Placement Agent shall not have any obligation to
independently verify the accuracy or completeness of any information contained
in any Subscription Agreement or the authenticity, sufficiency or validity of
any check or other form of payment delivered by any Prospective Investor in
payment for Shares.
(d) Pursuant to an Escrow Agreement, dated as of January 21, 1999 (the
"Escrow Agreement"), the Placement Agent has established a special account with
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the United States Trust Company of New York (the "Escrow Agent") entitled
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"Cardima, Inc. - Escrow Account" (the "Escrow Account"). The Placement Agent
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shall deliver each check received from a Prospective Investor to the Escrow
Agent for deposit in the Escrow Account and shall deliver the executed copy of
the Subscription Agreement received from such Prospective Investor to the
Company. The Company shall notify the Placement Agent promptly of the
acceptance or rejection of any subscription. The Company and/or the Placement
Agent may reject any subscription.
(e) If subscriptions to purchase 5,000,000 Shares ($10,000,000) are
not received from Prospective Investors prior to the expiration of the Offering
Period and accepted by the Company, the Offering shall be canceled, all funds
received by the Escrow Agent on behalf of the Company shall be refunded in full
without interest, and this Agreement and the agency created hereby shall be
terminated without any further obligation on the part of either party, except as
provided in Section 10 hereof.
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(f) We agree that within 30 business days following completion of the
Offering (the "Final Closing"), the Company will file a registration statement
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(the "Registration Statement") under the Act covering the resale of the Shares.
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In the event the Registration Statement is not filed by the end of such 30
business-day period (the "Filing Deadline"), the Company agrees to issue to each
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purchaser of Shares an additional number of shares equal to 1.0% of the number
of Shares purchased for each 30 days or part thereof the filing is delayed until
60 days after the Filing Deadline, plus an additional 2% of the number of Shares
so purchased for each 30 days thereafter, until the Registration Statement is
filed; provided, however, that the Company shall not be required to issue such
additional shares of Common Stock if such failure has been caused by (a) the
failure of the holders of the Shares to be registered to provide information in
connection with the Registration Statement or (b) the occurrence of a material
event not in the ordinary course which may delay the filing of the Registration
Statement pending public disclosure, which disclosure shall be promptly made. We
further agree that the Company will use its reasonable best efforts to cause the
Registration Statement (A) to become effective under the Act as promptly as
practicable, and (B) to remain effective until such time as all Shares purchased
in the Offering become eligible for resale pursuant to Rule 144 under the Act.
(g) The Company may at any time refuse to permit holders of the Shares
to resell any Shares pursuant to the Registration Statement upon delivery to
such holders of a written certificate to the effect that withdrawal of the
Registration Statement is necessary because a sale thereunder in then current
form would constitute a violation of federal securities laws. In
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the event of a withdrawal, the Company shall use its best efforts to amend the
Registration Statement and/or take all other necessary actions to again permit
sales in compliance with the federal securities laws.
3. Closing.
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(a) Subject to the conditions set forth in Section 8 hereof, if
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subscriptions to purchase at least 5,000,000 Shares (including Insider Shares
and Affiliate Shares) have been received prior to the expiration of the Offering
Period and accepted by the Company, the initial closing under this Agreement
(the "Closing") shall be held at the offices of ▇▇▇▇▇▇ ▇▇▇▇ & Priest LLP, 40
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West 57th Street, New York, New York, at 10:00 A.M., New York time, on the third
business day following the date upon which the Placement Agent receives notice
from the Company that subscriptions to purchase at least 5,000,000 Shares
(including Insider Shares and Affiliate Shares) have been so accepted or at such
other place, time and/or date as the Company and the Placement Agent shall agree
upon. The Company shall provide the notice required by the preceding sentence
as promptly as practicable. The date upon which the Closing is held shall
hereinafter be referred to as the "Closing Date."
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(b) Subject to the conditions set forth in Section 8 hereof, if,
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subsequent to the date the subscriptions referred to in Section 3(a) hereof are
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received and accepted and prior to the expiration of the Offering Period,
additional subscriptions to purchase Shares are received from Prospective
Investors, which subscriptions are accepted by the Company, one or more
additional closings under this Agreement (each, an "Additional Closing") shall
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be held at the offices of ▇▇▇▇▇▇ ▇▇▇▇ & Priest LLP, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ at 10:00
A.M., New York time, on the third business day following the date upon which the
Placement Agent receives notice from the Company that additional subscriptions
have been so accepted, or at such other place, time or date as the Company and
the Placement Agent shall agree upon. The Company shall notify the Placement
Agent as promptly as practicable whether any additional subscriptions so
received have been accepted. The date upon which any Additional Closing is held
shall hereinafter be referred to as an "Additional Closing Date."
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Notwithstanding anything contained herein to the contrary, in no event
shall the Company accept subscriptions to purchase in excess of 7,500,000 Shares
(including Insider Shares and Affiliate Shares).
(c) At the Closing or an Additional Closing, as the case may be, the
Company shall instruct the Escrow Agent to pay to the Placement Agent at the
Closing or an Additional Closing, from the funds deposited in the applicable
Escrow Account in payment for the Shares, the cash amounts payable to the
Placement Agent pursuant to Section 4 of this Agreement. Promptly after the
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Closing Date or an Additional Closing Date, as the case may be, the Company
shall deliver to the purchasers of Shares certificates representing the Shares
to which they are entitled.
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4. Compensation.
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(a) If subscriptions to purchase 5,000,000 Shares (including Insider
Shares and Affiliate Shares) are received from Prospective Investors prior to
the expiration of the Offering Period and accepted by the Company, you shall be
entitled to receive from the Company, as compensation for your services as
Placement Agent under this Agreement, an aggregate amount equal to 8.0% of the
gross proceeds received by the Company from the sales of the Shares (the
"Commission"), provided that no commission will be due to the Placement Agent
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with respect to the sale of the Insider Shares or the Compensatory Shares (as
defined below). At the sole option of the Placement Agent, some or all of the
Commission may be paid by the issuance of additional shares of the Company's
Common Stock (the "Compensatory Shares"), which Compensatory Shares will be
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valued at $2.00 per share. The Compensatory Shares will be entitled to the same
registration rights afforded the Shares as set forth in the Subscription
Agreement. All of the foregoing compensation is payable by the Company on the
Closing Date or Additional Closing Date, as the case may be, with respect to the
Shares sold on such date. The Company has previously paid $20,000 against the
aggregate Commission to be due the Placement Agent hereunder (the "Advance").
In the event subscriptions to purchase 5,000,000 Shares (including Insider
Shares and Affiliate Shares) are not received prior to the expiration of the
Offering Period and accepted by the Company (A) $10,000 of the Advance will be
refundable to the extent documented Offering- related expenses have not been
incurred by the Placement Agent, and (B) $10,000 of the Advance shall not be
refundable under any circumstances and will be retained by the Placement Agent.
(b) If subscriptions to purchase 5,000,000 Shares (including Insider
Shares and Affiliate Shares) are received from Prospective Investors prior to
the expiration of the Offering Period and accepted by the Company, the Company
shall sell to you or, at your discretion, your designees, in addition to the
amounts set forth in Section 4(a) above, and you (or your designees) may buy
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warrants (individually, a "Warrant" and collectively, the "Warrants") to
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purchase that number of shares of the Company's Common Stock (the "Warrant
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Shares") equal to 10% of the aggregate number of Shares issued in the Offering,
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provided that no Warrants will be due the Placement Agent with respect to the
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sale of the Insider Shares or the Compensatory Shares. The purchase price of
each Warrant shall equal $0.001. Each Warrant will entitle the holder thereof,
for a five year period from the later of the Closing Date or the last Additional
Closing Date (if any), to purchase one Warrant Share at an exercise price equal
to $2.20 per Warrant Share. The Warrant Shares will be entitled to the same
registration rights afforded the Shares as set forth in the Subscription
Agreement. The Warrants shall be purchasable pursuant to share purchase
agreements (the "Share Purchase Warrants") in the form attached hereto as
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Exhibit B.
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(c) If the Offering is terminated by the Company (i) during the
Offering Period (provided you are actively pursuing the Offering during such
period), (ii) during any 30 day extension period (provided you are actively
pursuing the Offering during such period), or (iii) at the completion of the
Offering (provided that you shall have obtained offers to purchase at least the
required minimum), and the Placement Agent is not then in default hereunder or
has not
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breached the terms herein, and within six months after termination the
Company completes the sale of any of its equity securities (including securities
convertible into equity securities) for cash to any person or entity who was
introduced to the Company by the Placement Agent, in connection with the
Offering or otherwise, then in any such case, the Company shall pay to you 8.0%
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of the gross sales price of such securities, and shall sell to you, on the terms
set forth in this Section 4, Warrants to purchase 10% of the securities so sold.
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5. Representations and Warranties.
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(a) Representations and Warranties of the Company. The Company
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represents and warrants to, and agrees with, the Placement that:
(i) The Executive Summary as of the date thereof did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. Each contract, agreement, instrument, lease, license or
other document, if any, described in the Executive Summary has been accurately
described therein in all material respects.
(ii) The Company has furnished, or made available through the
▇▇▇▇▇ Internet web site of the Commission, to the undersigned true and
complete copies of the SEC Filings. As of their respective filing dates, the
SEC Filings complied in all material respects with the applicable requirements
of the Exchange Act, and the Act and the rules and regulations promulgated
under the Exchange Act and the Act. The SEC Filings do not as of their
respective dates contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of circumstances under which
they were made, not misleading. Each contract, agreement, instrument, lease,
license or other document described in the SEC Filings has been accurately
described therein in all material respects.
(iii) No document provided by the Company to Prospective
Investors pursuant to Section 6(a)(vii) hereof, and no oral information
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provided by the Company to Prospective Investors, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading.
Contracts to which the Company is a party provided by the Company to
Prospective Investors shall not be deemed to contain any untrue statement of a
material fact or to omit to state any material fact if the contract so
provided is a true, correct and complete copy of such contract, as amended or
modified through the date it is so provided.
(iv) The Company has not solicited any offer to buy or offered
to sell any Shares or any other securities of the Company during the twelve-
month period ending on the date hereof, except as may be described in the SEC
Filings or which would not be integrated with the sale of the Shares in a
manner that would require the registration of the Offering pursuant to the
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Act; and the Company has no present intention to solicit any offer to buy or
offer to sell any Shares or any other securities of the Company other than
pursuant to this Agreement or pursuant to a registered public offering of the
Company's securities which may be commenced after the completion of the
Offering.
(v) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
full power and authority and all necessary consents, authorizations,
approvals, orders, licenses, certificates and permits of and from, and
declarations and filings with (collectively, "Consents") all federal, state,
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local, foreign and other governmental authorities and all courts and other
tribunals, to own, lease, license and use its properties and assets and to
carry on its business in the manner described in the Executive Summary, except
where the failure to have obtained such Consents would not have a material
adverse effect on the Company and except that the Company is not qualified in
Tennessee, Massachusetts, Virginia and Ohio; and the Company has not received
any notice of proceedings relating to the revocation or modification of any
such Consent which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding would result in a material adverse
change in the financial condition, results of operations, business,
properties, assets, liabilities or future prospects of the Company. The
Company is duly qualified to do business and is in good standing in every
jurisdiction in which its ownership, leasing, licensing or use of property and
assets or the conduct of its business makes such qualification necessary,
except where such failure to qualify would not have a material adverse effect
upon the business of the Company. The Company does not have any operating
subsidiaries.
(vi) The Company has, as of the date hereof and subject to the
exercise of any outstanding Common Stock purchase rights, an authorized and
outstanding capitalization as set forth in the Most Recent 10-Q. Each
outstanding share of capital stock of the Company is duly authorized, validly
issued, fully paid and nonassessable and has not been issued and is not owned or
held in violation of any preemptive rights set forth in the Company's
Certificate of Incorporation or By-Laws, each as amended to date, or any
agreement to which the Company is a party. There is no commitment, plan or
arrangement to issue, and no outstanding option, warrant or other right calling
for the issuance of, any share of capital stock of the Company or any security
or other instrument which by its terms is convertible into, exercisable for or
exchangeable for shares of capital stock of the Company, except as may be
described in the SEC Filings. There is outstanding no security or other
instrument which by its terms is convertible into or exchangeable for any class
of share of capital stock of the Company, except as may be described in the SEC
Filings. The capital stock of the Company conforms to the description thereof
contained in the SEC Filings.
(vii) The financial statements of the Company included in the
SEC Filings (by incorporation, by reference or otherwise) fairly present, in
all material respects, the financial position, the results of operations, cash
flows and the other information purported to be shown therein at the
respective dates and for the respective periods to which they apply. Such
financial statements have been prepared in accordance with generally accepted
accounting principles
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consistently applied throughout the periods involved, are correct and complete,
in all material respects, and are in accordance with the books and records of
the Company. Except as previously disclosed to the Placement Agent, there has
at no time been a material adverse change in the financial condition, results of
operations, business, properties, assets, liabilities or future prospects of the
Company from the latest information set forth in the SEC Filings, except as may
be described in the SEC Filings as having occurred.
(viii) Ernst & Young LLP, who have audited certain financial
statements of the Company and performed certain procedures relating to
financial statement schedules and other financial information concerning the
Company, included in the SEC Filings, are independent public accountants as
required by the Act and the applicable rules and regulations thereunder.
(ix) There is no litigation, arbitration, governmental or other
proceeding (formal or informal) or claim or investigation pending or, to the
knowledge of the Company, threatened with respect to the Company or any of its
operations, businesses, properties or assets, except as may be described in the
SEC Filings or such as individually or in the aggregate do not now have and will
not in the future have a material adverse effect upon the operations, business,
properties or assets of the Company. The Company is not in violation of, or in
default with respect to, any law, rule, regulation, order, judgment or decree,
except as may be described in the SEC Filings or such as in the aggregate do not
now have and will not in the future have a material adverse effect upon the
operations, business, properties, assets or future prospects of the Company.
(x) Except as described in the SEC Filings, any real property
and buildings held under lease by the Company are held by it under valid,
subsisting and enforceable leases with such exceptions as in the aggregate are
not material. Except as described in the SEC Filings, the Company enjoys
peaceful and undisturbed possession under all real property leases under which
it is operating.
(xi) Except as previously disclosed to the Placement Agent,
neither the Company, nor, to the knowledge of the Company, any other party, is
in violation or breach of or in default with respect to, complying with any
material provision of any contract, agreement, instrument, lease, license,
arrangement or understanding which is material to the Company, and each such
contract, agreement, instrument, lease, license, arrangement and understanding
is in full force and effect and is the legal, valid and binding obligation of
the parties thereto enforceable as to them in accordance with its terms
(subject to applicable bankruptcy, insolvency and other laws affecting the
enforceability of creditors' rights generally and to general equitable
principles). The Company is not in violation or breach of, or in default with
respect to, any term of its Certificate of Incorporation or By-Laws, each as
amended to date.
(xii) There is no right under any patent, patent application,
trademark, trademark application, trade name, service ▇▇▇▇, copyright, franchise
or other intangible
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property or asset (all of the foregoing being herein called "Intangibles")
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necessary to the business of the Company as presently conducted or as the
SEC Filings or the Executive Summary indicates it contemplates conducting,
except as may be so designated in the SEC Filings or the Executive Summary and
which the Company has the right or license to use as necessary. To the
Company's knowledge, except as described in the SEC Filings, the Company has
not infringed nor is it infringing with respect to Intangibles of others, and
the Company has not received notice of infringement with respect to asserted
Intangibles of others, which infringement may have a material adverse effect
on the Company's business. Except as described in the SEC Filings, to the
Company's knowledge there is no Intangible of others which has had or may in
the future have a materially adverse effect on the financial condition,
results of operations, business, properties, assets, liabilities or future
prospects of the Company.
(xiii) The Company has all requisite corporate power and
authority to execute, deliver and perform this Agreement, the Share Purchase
Warrants, the Subscription Agreement and the Escrow Agreement (collectively,
the "Operative Agreements") and to consummate the transactions contemplated
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by the Operative Agreements. All necessary corporate proceedings of the
Company have been duly taken to authorize the execution, delivery and
performance by the Company of the Operative Agreements. This Agreement and the
Escrow Agreement have been duly authorized, executed and delivered by the
Company, are the legal, valid and binding obligations of the Company and are
enforceable as to the Company in accordance with their terms (subject to
applicable bankruptcy, insolvency and other laws affecting the enforceability
of creditors' rights generally and to general equitable principles). The Share
Purchase Warrants and Subscription Agreements have been duly authorized by the
Company and, when executed and delivered by the Company, will be the legal,
valid and binding obligations of the Company enforceable against it in
accordance with their respective terms (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors' rights
generally and to general equitable principles). No consent, authorization,
approval, order, license, certificate or permit of or from, or registration,
qualification, declaration or filing with, any federal, state, local, foreign
or other governmental authority or any court or other tribunal is required by
the Company for the execution, delivery or performance by the Company of the
Operative Agreements or the consummation of the transactions contemplated by
the Operative Agreements, except (A) the filing of a Notice of Sales of
Securities on Form D pursuant to Regulation D, (B) such consents,
authorizations, approvals, registrations and qualifications as may be required
under securities or "blue sky" laws in connection with the issuance, sale and
delivery of the Shares, Compensatory Shares and Warrants pursuant to this
Agreement, and (C) the filing of the Registration Statement. No consent of any
party to any contract, agreement, instrument, lease, license, arrangement or
understanding to which the Company is a party or to which any of its
properties or assets are subject is required for the execution, delivery or
performance of the Operative Agreements or the consummation of the
transactions contemplated by the Operative Agreements, which has not been or
will not be obtained prior to the Closing or any Additional Closings; and the
execution, delivery and performance of the Operative Agreements, and the
consummation of the transactions contemplated by the Operative Agreements,
will not violate, result in a material breach of,
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conflict with or (with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement or understanding
(except for any such violation, breach or conflict which has been properly
waived thereunder), violate or result in a material breach of any term of the
Company's Certificate of Incorporation or By-Laws, each as amended to date, or
violate, result in a material breach of or conflict with any law, rule,
regulation, order, judgment or decree binding on the Company, or to which any
of its operations, businesses, properties or assets are subject.
(xiv) The Shares, when issued and delivered to the subscribers
therefor, pursuant to the terms of this Agreement and the Subscription
Agreements, the Warrant Shares, when issued and delivered pursuant to the terms
of the Warrants, and the Compensatory Shares shall be duly authorized, validly
issued, fully paid and nonassessable and shall not have been issued in violation
of any preemptive rights set forth in the Company's Certificate of Incorporation
or By-Laws, each as amended to date, or any agreement to which the Company is a
party.
(xv) Subsequent to the dates as of which information is given
in the SEC Filings, and except as may otherwise be described on
Schedule 5(a)(xv), (A) the Company has not, except in the ordinary course of
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business, incurred any liability or obligation, primary or contingent, for
borrowed money, (B) there has not been any material adverse change in the
capital stock, short-term debt or long-term debt of the Company, (C) the
Company has not entered into any transaction not in the ordinary course of
business, (D) the Company has not purchased any of its outstanding capital
stock nor declared or paid any dividend or distribution of any kind on its
capital stock, (E) the Company has not sustained any material loss or
interference with its businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or any legal or governmental proceeding, and (F) there has not
been any material adverse change or any development which the Company
reasonably believes could result in a prospective material adverse change, in
the financial condition results of operations, business, properties, assets,
liabilities or future prospects of the Company.
(xvi) Neither the Company nor, to the knowledge of the Company,
any of its affiliates has, directly or through any agent, sold, offered for
sale or solicited offers to buy, any security of the Company, as defined in
the Act, which is or will be integrated with the sale of the Shares, the
Warrants or the Warrant Shares in a manner that would require the
registration, pursuant to the Act, of the Offering.
(xvii) Except as described in or contemplated by the SEC Filings,
the Company has good and marketable title to all real and personal property
owned by it, in each case free and clear of any security interests, liens,
encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not
interfere with the use made or proposed to be made of such property by the
Company.
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(xviii) No labor dispute with the employees of the Company exists
or is threatened or imminent that could result in a material adverse change in
the financial condition, results of operations, business, properties, assets,
liabilities or future prospects of the Company, except as described in or
contemplated by the SEC Filings.
(xix) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which they are engaged; the Company has not
been refused any insurance coverage sought or applied for; and the Company has
no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
insurers of recognized financial responsibility as may be necessary to continue
its business at a cost that would not materially and adversely affect the
financial condition results of operations, business, properties, assets,
liabilities or future prospects of the Company, except as described in or
contemplated by the SEC Filings.
(xx) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested extensions
thereof (except in any case in which the failure so to file would not have a
material adverse effect on the Company), and has paid all taxes required to be
paid by it and any other assessment, fine or penalty levied against it to the
extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good faith or
as described in the SEC Filings.
(xxi) The Company is not in violation of any law or regulation
relating to occupational safety and health or to the storage, handling or
transportation of hazardous or toxic materials and the Company has received
all permits, licenses or other approvals required of it under applicable
occupational safety and health and environmental laws and regulations to
conduct its business, and the Company is in compliance with all terms and
conditions of any such permit, license or approval, except any such violation
of law or regulation, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals which would not, singly or in the aggregate, result in a
material adverse change in the financial condition, results of operations,
business, properties, assets, liabilities or future prospects of the Company,
except as described in or contemplated by the SEC Filings.
(xxii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
11
(xxiii) The Common Stock is registered pursuant to Section 12(g)
of the Exchange Act. The Company (a) has been subject to the requirements of
Section 12 or 15(d) of the Exchange Act and has filed all the material
required to be filed pursuant to Section 13, 14, or 15(d) for a period of at
least 12 months immediately preceding the date hereof; and (b) has filed in a
timely manner all reports required to be filed during 12 months and any
portion of a month immediately preceding the date hereof and, if the Company
has used (during the 12 months and any portion of a month immediately
preceding the date hereof) Rule 12b-25(b) under the Exchange Act with respect
to a report or a portion of a report, that report or portion thereof has
actually been filed within the time period prescribed by the rule.
(b) Representations and Warranties of the Placement Agent. The
-----------------------------------------------------
Placement Agent hereby represents and warrants to, and agrees with, the Company
and each other as to themselves only as follows:
(i) The Placement Agent will not offer or sell any Shares to
any investor which the Placement Agent does not have reasonable grounds to
believe is an "accredited investor."
(ii) The Placement Agent will not offer or sell any Shares by
means of any form of general solicitation or general advertising, including,
without limitation, the following:
(A) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar medium or
broadcast over television or radio; and
(B) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
(iii) The Placement Agent is a member in good standing of the
National Association of Securities Dealers, Inc. or a registered representative
thereof.
(iv) The Placement Agent will (A) offer and sell the Shares
only in jurisdictions in which the Shares have been registered or are exempt
from registration, and (B) not offer or sell Shares in any jurisdiction in
which the Placement Agent is not qualified to do so.
(v) This Agreement has been duly authorized by all necessary
action on the part of the Placement Agent and constitutes the legal, valid and
binding obligations of the Placement Agent, enforceable against it in
accordance with the terms hereof (subject to applicable bankruptcy, insolvency
and other laws affecting the enforceability of creditors' rights generally and
to general equitable principles). The execution, delivery and performance by
the Placement Agent of its obligations hereunder will not result in a
violation or material breach of any agreement to which the Placement Agent is
a party or any law, rule, regulation, order, judgment or decree binding on the
Placement Agent.
12
6. Covenants.
---------
(a) Covenants of the Company. The Company covenants to the
------------------------
Placement Agent that it will:
(i) Notify you immediately, and confirm such notice
promptly in writing, (A) when any event shall have occurred during the period
commencing on the date hereof and ending on the later of the Closing Date and
the last Additional Closing Date (if any) as a result of which the SEC Filings
or Executive Summary would include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (B) of the receipt of any
notification with respect to the modification, rescission, withdrawal or
suspension of the qualification or registration of the Shares or of an
exemption from such registration or qualification in any jurisdiction. The
Company will use its best efforts to prevent the issuance of any such
modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you so
request, to obtain the lifting thereof as promptly as possible.
(ii) Not supplement or amend the Executive Summary
unless you shall have approved of such supplement or amendment in writing,
which such approval shall not be unreasonably withheld. If, at any time during
the period commencing on the date hereof and ending on the later of the
Closing Date and the last Additional Closing Date (if any), any event shall
have occurred as a result of which the SEC Filings or Executive Summary
contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, or if, in the opinion of counsel to the
Company or counsel to the Placement Agent, it is necessary at any time to
supplement or amend the SEC Filings or Executive Summary to comply with the
Act, Regulation D or any applicable securities or "blue sky" laws, the Company
will promptly prepare an appropriate supplement or amendment which will
correct such statement or omission or which will effect such compliance.
(iii) Deliver without charge to the Placement Agent
such number of copies of the Executive Summary and any supplement or amendment
thereto as may reasonably be requested by the Placement Agent.
(iv) In this Offering, not, directly or indirectly,
solicit any offer to buy from, or offer to sell to, any person any Shares
except through the Placement Agent.
(v) Not solicit any offer to buy or offer to sell
Shares by any form of general solicitation or advertising, including, without
limitation, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar medium or broadcast over
television or radio or any seminar or meeting whose attendees have been
invited by any general solicitation or advertising.
13
(vi) Use its best efforts to qualify or register the
Shares for offering and sale under, or establish an exemption from such
qualification or registration under, the securities or "blue sky" laws of such
jurisdictions as you may reasonably request. The Company will not consummate
any sale of Shares in any jurisdiction or in any manner in which such sale may
not be lawfully made.
(vii) At all times during the period commencing on the
date hereof and ending on the later of the Closing Date and the last
Additional Closing Date (if any), provide to each Prospective Investor or his
purchaser representative, if any, on request, such information (in addition to
that contained in the Executive Summary) concerning the Offering, the Company
and any other relevant matters as it possesses or can acquire without
unreasonable effort or expense and extend to each Prospective Investor the
opportunity to ask questions of, and receive answers from, the Company
concerning the terms and conditions of the Offering and the business of the
Company and to obtain any other additional information, to the extent it
possesses the same or can acquire it without unreasonable effort or expense,
as such Prospective Investor may consider necessary in making an informed
investment decision or in order to verify the accuracy of the information
furnished to such Prospective Investor or purchaser representative, as the
case may be.
(viii) Before accepting any subscription to purchase
Shares from, or making any sale to, any Prospective Investor, have reasonable
grounds to believe and actually believe that such Prospective Investor (A)
meets the suitability requirements for investing in the Shares set forth in
the Subscription Agreement, and (B) is an accredited investor; provided,
--------
however, that the Company shall not be required to confirm the accuracy
-------
of any subscription and may rely upon the information provided by each
Prospective Investor in the relevant subscription.
(ix) Notify you promptly of the acceptance or
rejection of any subscription.
(x) File five (5) copies of a Notice of Sales of
Securities on Form D with the Securities and Exchange Commission (the
"Commission") no later than 15 days after the first sale of the Shares. The
----------
Company shall file promptly such amendments to such Notices on Form D as shall
become necessary and shall also comply with any filing requirement imposed by
the laws of any state or jurisdiction in which offers and sales are made. The
Company shall furnish you with copies of all such filings.
(xi) Place the following legend on all certificates
representing the Shares, the Compensatory Shares and the Warrants:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
14
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH
LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS
CORPORATION, IS AVAILABLE."
(xii) Not, directly or indirectly, engage in any act
or activity which may jeopardize the status of the offering and sale of the
Shares as exempt transactions under the Act or under the securities or "blue
sky" laws of any jurisdiction in which the Offering may be made. Without
limiting the generality of the foregoing, and notwithstanding anything
contained herein to the contrary, the Company shall not, during the six (6)
months following completion of the Offering, (A) directly or indirectly,
engage in any offering of securities which, if integrated with the Offering in
the manner prescribed by Rule 502(a) of Regulation D and applicable releases
of the Commission, may jeopardize the status of the Offering and sale of the
Shares as exempt transactions under Regulation D, or (B) engage in any
offering of securities, without the opinion of counsel reasonably satisfactory
to the Placement Agent, to the effect that such offering would not result in
integration with this Offering, or if integration would so result, that such
integration would not jeopardize the status of this Offering as an exempt
transaction under Regulation D.
(xiii) [Intentionally omitted].
(xiv) Not, during the period commencing on the date
hereof and ending on the later of the Closing Date and the last Additional
Closing Date (if any), issue any press release or other communication or hold
any press conference with respect to the Offering, without your prior written
consent, which consent will not be unreasonably withheld.
(xv) Provided that at least 5,000,000 Shares are sold
in the Offering, not, for a period of 12 months after the date of the Final
Closing, without your prior written consent, offer, issue, sell, contract to
sell, grant any option for the sale of or otherwise dispose of, directly or
indirectly, any shares of Common Stock (or any security or other instrument
which by its terms is convertible into, exercisable for, or exchangeable for
shares of Common Stock), without first obtaining the written consent of the
Placement Agent. Notwithstanding the foregoing, the Company may sell, transfer
or dispose of securities in accordance with the terms of the Company's stock
option plan and other similar plans disclosed in the SEC Filings, provided
that, with respect to options granted to the persons described in Section 8(b)
------------
below, the underlying shares are subject to a similar lock-up arrangement as
set forth in Section 8(b) below.
------------
15
(xvi) For a period of five years after the date
hereof, furnish you, without charge, the following:
(A) as soon as practicable after they are filed
with the Commission, three (3) copies of financial statements certified by
independent certified public accountants, including a balance sheet, statement
of income and statement of cash flows of the Company and its then existing
subsidiaries, with supporting schedules, prepared in accordance with generally
accepted accounting principles, as at the end of such fiscal year and for the
12 months then ended, which may be on a consolidated basis, and three (3)
copies of unaudited interim financial statements, as at the end of each fiscal
quarter and for the three (3) months then ended, copies of all of which
financial statements shall also be furnished to the purchasers in this
Offering;
(B) as soon as practicable after they have been
sent to stockholders of the Company or filed with the Commission, three (3)
copies of each annual and interim financial and other report or communication
sent by the Company to its stockholders or filed with the Commission; and
(C) as soon as practicable, two copies of every
press release and every material news item and article in respect of the
Company or its affairs which was released by the Company.
(xvii) Comply in all respects with its obligations
under the Operative Agreements.
(xviii) Not, prior to the completion of the Offering,
bid for, purchase, attempt to induce others to purchase, or sell, directly or
indirectly, any Shares or any other securities of the Company of the same
class and series as the Shares in violation of the provisions of Regulation M
under the Exchange Act.
(b) Covenants of the Placement Agent.
--------------------------------
(i) The Placement Agent will not accept the subscription of
any person unless immediately before accepting such subscription the Placement
Agent has reasonable grounds to believe that (A) such person is an "accredited
investor," and (B) all representations made and information furnished by such
person in the Subscription Agreement and related documents are true and
correct in all material respects. The Placement Agent agrees to notify the
Company promptly if the Placement Agent shall, at any time during the period
after delivery of the documents furnished by such person to the Company in
connection with subscription for Shares and immediately before the sale of
Shares to such person, no longer reasonably believes one or more of the
foregoing matters with respect to such person.
16
(ii) The Placement Agent will not solicit purchasers of
Shares other than in the jurisdictions in which such solicitation may, upon
the advice of counsel, be made under applicable securities or "blue sky" laws
and in which the Placement Agent is qualified so to act.
(iii) The Placement Agent will not sell any Shares to any
investor unless a Subscription Agreement is furnished to such investor within
a reasonable time prior thereto.
(iv) Upon notice from the Company that the SEC Filings or
Executive Summary is to be amended or supplemented (which the Company will
promptly give upon becoming aware of any untrue statement of a material fact
stated in the SEC Filings or Executive Summary or omission to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading), the Placement Agent
will immediately cease use of the SEC Filings or Executive Summary until the
Placement Agent has received such amendment or supplement and thereafter will
make use of the Executive Summary only as so amended or supplemented, and the
Placement Agent will deliver a copy of such amendment or supplement to each
Prospective Investor to whom a copy of the SEC Filings or Executive Summary
had previously been delivered (and who had not returned such copy) and whose
subscription had not been rejected.
(v) The Placement Agent will not make any representations or
other statements concerning the Company or the Offering that are not contained
in the SEC Filings or Executive Summary.
(vi) The Placement Agent will not offer or sell any Shares by
means of any form of general solicitation or general advertising, including,
without limitation, (A) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar medium, or
broadcast over television or radio; or (B) any seminar or meeting whose
attendees have been invited by general solicitation or general advertising.
7. Payment of Expenses.
-------------------
The Company hereby agrees to pay all fees, charges and expenses
incident to the performance by each of the Company and the Placement Agent of
its respective obligations hereunder (other than the fees and expenses of
counsel to the Placement Agent), including, without limitation, all fees,
charges, and expenses in connection with (i) the preparation, printing,
reproduction, filing, distribution and mailing of the Executive Summary, the
Subscription Agreement and related documents (including, to the extent requested
by a Prospective Investor, copies of the SEC Filings), the Operative Agreements
and all other documents relating to the offering, purchase, sale and delivery of
the Shares, and any supplements or amendments thereto, including the fees and
expenses of counsel to the Company, and the cost of all copies thereof, (ii) the
issuance, sale, transfer and delivery of the Shares, the Warrant Shares, the
Compensatory Shares and the Warrants, including any transfer or other taxes
payable thereon and the fees of any Transfer Agent, Warrant Agent or Registrar,
(iii) the registration or qualification of the Shares
17
or the securing of an exemption therefrom under state or foreign "blue sky" or
securities laws, including, without limitation, filing fees payable in the
jurisdictions in which such registration or qualification or exemption
therefrom is sought, the costs of preparing preliminary, supplemental and
final "Blue Sky Surveys" relating to the offer and sale of the Shares and the
fees and disbursements of counsel to the Placement Agent in connection with
such "blue sky" matters, (iv) the filing fees, if any, payable to the
Commission, and (v) the retention of the Escrow Agent, including the fees and
expenses of the Escrow Agent for serving as such and the fees and expenses of
its counsel.
8. Conditions of Placement Agent's Obligations. The obligations of
-------------------------------------------
the Placement Agent pursuant to this Agreement shall be subject, in its
discretion, to the continuing accuracy of the representations and warranties of
the Company contained herein and in each certificate and document contemplated
under this Agreement to be delivered to the Placement Agent, as of the date
hereof and as of the Closing Date (and, if applicable, each Additional Closing
Date), to the performance by the Company of its obligations hereunder, and to
the following conditions:
(a) At the Closing and each Additional Closing, as the case may be,
the Placement Agent shall have received the favorable opinions of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for the Company, in substantially the form of Exhibit
-------
C hereto, and ▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇, patent counsel for the Company,
-
substantially in the form of Exhibit D hereto.
---------
(b) On or prior to the Closing, the Placement Agent shall have
received agreements from each of the Company's officers, directors and holders
of 5% or more of the Company's Common Stock, pursuant to which such persons (or
entities) and their respective affiliates shall have agreed not to offer, issue,
sell, contract to sell, grant any option for the sale of or otherwise dispose of
any securities of the Company for a period of 6 months from the effective date
of the Final Closing without the Placement Agent's prior written consent.
(c) On or prior to the Closing Date and each Additional Closing Date,
as the case may be, the Placement Agent shall have been furnished such
information, documents and certificates as it may reasonably require for the
purpose of enabling it to review the matters referred to in this Section 8 and
---------
in order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties, covenants, agreements or conditions herein
contained, or as it may otherwise reasonably request.
(d) At the Closing and each Additional Closing, as the case may be,
the Placement Agent shall have received a certificate of the chief executive
officer of the Company, dated the Closing Date or such Additional Closing Date,
as the case may be, to the effect that, as of the date of this Agreement and as
of the Closing Date or such Additional Closing Date, as the case may be, the
representations and warranties of the Company contained herein were and are
accurate, and that as of the Closing Date or such Additional Closing Date, as
the case may be, the
18
obligations to be performed by the Company hereunder on or prior thereto have
been fully performed.
(e) All proceedings taken in connection with the issuance, sale and
delivery of the Shares shall be reasonably satisfactory in form and substance to
you and your counsel.
(f) There shall not have occurred, at any time prior to the Closing
or, if applicable, an Additional Closing, as the case may be, (i) any domestic
or international event, act or occurrence which has materially disrupted, or in
your reasonable opinion will in the immediate future materially disrupt, the
securities markets; (ii) a general suspension of, or a general limitation on
prices for, trading in securities on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market; (iii) any outbreak of major
hostilities or other national or international calamity affecting securities
markets in the United States; (iv) any banking moratorium declared by a state or
federal authority; (v) any moratorium declared in foreign exchange trading by
major international banks or other persons; (vi) any material interruption in
the mail service or other means of communication within the United States; (vii)
any material adverse change in the business, properties, assets, results of
operations or financial condition of the Company; or (viii) any change in the
market for securities in general or in political, financial or economic
conditions which, in your reasonable business judgment, makes it inadvisable to
proceed with the offering, sale and delivery of the Shares.
Any certificate or other document signed by any officer of the Company
and delivered to you or to your counsel as required hereunder shall be deemed a
representation and warranty by the Company hereunder as to the statements made
therein. If any condition to your obligations hereunder has not been fulfilled
as and when required to be so fulfilled, you may terminate this Agreement or, if
you so elect, in writing waive any such conditions which have not been fulfilled
or extend the time for their fulfillment. In the event that you elect to
terminate this Agreement, you shall notify the Company of such election in
writing. Upon such termination, neither party shall have any further liability
or obligation to the other except as provided in Section 10 hereof.
----------
9. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless the Placement
Agent, its respective officers, directors, stockholders, employees, agents,
advisors, consultants and counsel, and each person, if any, who controls the
Placement Agent within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, against any and all loss, liability, claim, damage and expense
(which shall include, for all purposes of this Section 9, without limitation,
---------
reasonable attorneys' fees and any and all expenses incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim and any and all amounts paid in settlement of any claim or litigation) as
and when incurred arising out of, based upon or in connection with (i) any
untrue statement or alleged untrue statement of a material fact contained in (A)
the SEC Filings, the Executive Summary or in any document delivered or
19
statement made pursuant to Section 6(a)(vii), (B) the Registration Statement
-----------------
or any amendment or supplement thereto, or (C) in any application or other
document or communication (in this Section 9 collectively called an
---------
"application") executed by or on behalf of the Company or based upon written
-----------
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify the Shares or the Compensatory Shares under
the "blue sky" or securities laws thereof or in order to secure an exemption
from such registration or qualification or filed with the Commission, or any
omission or alleged omission to state a material fact required to be stated in
the items listed in clauses (A), (B) or (C) or necessary to make the
statements therein, in light of the circumstances in which made, not
misleading (unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of the Placement Agent with respect to the Compensatory Shares); or (ii) any
breach of any representation, warranty, covenant or agreement of the Company
contained in the Operative Agreements. The foregoing agreement to indemnify
shall be in addition to any liability the Company may otherwise have,
including liabilities arising under this Agreement.
If any action is brought against the Placement Agent or any of its
officers, directors, stockholders, employees, agents, advisors, consultants and
counsel, or any controlling persons of the Placement Agent (an "indemnified
-----------
party"), in respect of which indemnity may be sought against the Company
-----
pursuant to the foregoing paragraph, such indemnified party or parties shall
promptly notify the Company (the "indemnifying party") in writing of the
------------------
institution of such action (but the failure so to notify shall not relieve the
indemnifying party from any liability it may have other than pursuant to this
Section 9(a) unless such failure materially prejudices the indemnifying party),
------------
and the indemnifying party shall promptly assume the defense of such action,
including the employment of counsel (reasonably satisfactory to such indemnified
party or parties) and payment of expenses. Such indemnified party shall have
the right to employ its own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action or the
indemnifying party shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it or them
or to other indemnified parties which are different from or additional to those
available to one or more of the indemnifying parties and it would be
inappropriate for the same counsel to represent both parties due to actual or
potential differing interests between them, in any of which events such
reasonable fees and expenses shall be borne by the indemnifying party and the
indemnifying party shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties. Anything in this paragraph to
the contrary notwithstanding, the indemnifying party shall not be liable for any
settlement of any such claim or action effected without its written consent.
The Company agrees promptly to notify the Placement Agent of the commencement of
any litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of the Shares, the Executive Summary or
any application.
20
(b) The Placement Agent agrees to indemnify and hold harmless the
Company, its officers, directors, employees, agents and counsel, and each other
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to the Placement Agent in Section 9(a), with respect
------------
to (i) any untrue statement or alleged untrue statement of a material fact, or
any omission or alleged omission to state a material fact required to be stated
or necessary to make the statements, in light of the circumstances in which they
were made, not misleading, but only with respect to statements or omissions in
the Registration Statement or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of the Placement Agent with respect to the Compensatory Shares; or
(ii) any breach of any representation, warranty, covenant or agreement of the
Placement Agency in the Operative Agreements. If any action shall be brought
against the Company or any other person so indemnified in respect of which
indemnity may be sought against the Placement Agent pursuant to this Section
-------
9(b), the Placement Agent shall have the rights and duties given to the
----
indemnifying party, and the Company and each other person so indemnified shall
have the rights and duties given to the indemnified parties, by the provisions
of Section 9(a). The foregoing agreement to indemnify shall be in addition to
------------
any liability the Placement Agent may otherwise have, including liabilities
arising under this Agreement.
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 9(a) or
------------
9(b) but it is found in a final judicial determination, not subject to further
----
appeal, that such indemnification may not be enforced in such case, even though
this Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then the Company (including for this purpose any contribution
made by or on behalf of any officer, director, employee, agent or counsel of the
Company or any controlling person of the Company), on the one hand, and the
Placement Agent (including for this purpose any contribution by or on behalf of
an indemnified party), on the other hand, shall contribute to the losses,
liabilities, claims, damages and expenses whatsoever to which any of them may be
subject, in such proportions as are appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Placement Agent, on the other
hand; provided, however, that if applicable law does not permit such allocation,
then other relevant equitable considerations such as the relative fault of the
Company and the Placement Agent in connection with the facts which resulted in
such losses, liabilities, claims, damages and expenses shall also be considered.
The relative benefits received by the Company, on the one hand, and the
Placement Agent, on the other hand, shall be deemed to be in the same proportion
as (x) the total proceeds from the Offering (net of compensation payable to the
Placement Agent pursuant to Section 4 hereof but before deducting expenses)
---------
received by the Company, bears to (y) the compensation received by the Placement
Agent pursuant to Section 4 hereof.
---------
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission or alleged omission
relates to information supplied by the
21
Company or by the Placement Agent and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement,
alleged statement, omission or alleged omission. The Company and the Placement
Agent agree that it would be unjust and inequitable if the respective
obligations of the Company and the Placement Agent for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses or by any other method of allocation
that does not reflect the equitable considerations referred to in this
Section 9(c). In no case shall the Placement Agent be responsible
------------
for a portion of the contribution obligation in excess of the compensation
received by it pursuant to Section 4 hereof less the aggregate amount of any
---------
damages that the Placement Agent has otherwise been required to pay in respect
of the same or any substantially similar claim. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 9(c), each person,
------------
if any, who controls the Placement Agent within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and each officer, director,
stockholder, employee, agent and counsel of the Placement Agent shall have the
same rights to contribution as the Placement Agent, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and each officer, director, employee, agent and
counsel of the Company shall have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 9(c). Anything
------------
in this Section 9(c) to the contrary notwithstanding, no party shall be liable
------------
for contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 9(c) is intended to supersede any
------------
right to contribution under the Act, the Exchange Act or otherwise.
10. Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the Closing Date and, if applicable, each Additional Closing Date,
and such representations, warranties, covenants and agreements, including the
indemnity and contribution agreements contained in Section 9, shall remain
---------
operative and in full force and effect regardless of any investigation made by
or on behalf of the Placement Agent or any indemnified person, or by or on
behalf of the Company or any person or entity which is entitled to be
indemnified under Section 9(b), and shall survive termination of this Agreement
------------
or the issuance, sale and delivery of the Shares. In addition, notwithstanding
any election hereunder or any termination of this Agreement, and whether or not
the terms of this Agreement are otherwise carried out, the provisions of
Sections 6(a)(x), 6(a)(xvii), 7, 9, 10 and 12 shall survive termination of this
---------------- ---------- - - -- --
Agreement and shall not be affected in any way by such election or termination
or failure to carry out the terms of this Agreement or any part thereof.
11. Notices. All communications hereunder, except as may be
-------
otherwise specifically provided herein, shall be in writing and, if sent to the
Placement Agent, shall be mailed, delivered or telexed or telegraphed and
confirmed by letter, to the address set forth above, or if sent to the Company,
shall be mailed, delivered or telexed or telegraphed and confirmed by
22
letter, to Cardima, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: President. All notices hereunder shall be effective upon receipt by
the party to which it is addressed.
12. Assignment. This Agreement shall not be assigned by any party
----------
hereto without the prior written consent of the other parties hereto.
13. Parties. This Agreement shall inure solely to the benefit of,
-------
and shall be binding upon, the Placement Agent and the Company and the persons
and entities referred to in Section 9 who are entitled to indemnification or
---------
contribution and their respective successors, legal representatives and assigns
(which shall not include any purchaser, as such, of Shares), and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained.
14. Construction. This Agreement shall be construed in accordance
------------
with the laws of the State of New York, without giving effect to conflict of
laws.
[INTENTIONALLY LEFT BLANK]
23
15. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement among us.
Very truly yours,
CARDIMA, INC.
By:
----------------------------------------
Name:
Title:
Accepted as of the date first above written.
New York, New York
SUNRISE SECURITIES CORP.
By:
-----------------------------------
Name:
Title:
24
EXHIBIT A
---------
Subscription Agreement
25
EXHIBIT B
---------
Placement Agent Share Purchase Warrant
26
EXHIBIT C
---------
Opinion of Counsel to the Company
27
EXHIBIT D
---------
Opinion of Patent Counsel to the Company
28
SCHEDULE 5(a)(xv)
-----------------
None
29