EXHIBIT 99.3
BRIDGE FINANCING AGREEMENT
This BRIDGE FINANCING AGREEMENT ("Agreement"), dated as of March 29,
2001 ("Effective Date") is entered into by and among INOVISE MEDICAL, INC., an
Oregon corporation (the "Company") and CARDIAC SCIENCE, INC., a Delaware
corporation (the "Lender"), with reference to the following:
WHEREAS, Lender desires to loan one million thirty thousand dollars
$1,030,000 (the "Bridge Financing") to the Company, and the Company desires to
accept the Bridge Financing pursuant to the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Amount and Term of the Loan; Issuance of Note.
(a) Loan. In reliance upon the representations, warranties and
covenants of the parties set forth herein and subject to and upon the terms and
conditions set forth herein, Lender agrees to loan one million thirty thousand
dollars ($1,030,000) to Company (the "Loan").
(b) Secured Convertible Promissory Note. The obligation of
Company to pay the principal of, and interest on, the Loan shall be evidenced by
a secured convertible promissory note, in the form of Exhibit B (the "Note")
convertible into shares of Series D Preferred Stock or, at the election of the
Company under certain circumstances described in the Note, Common Stock of the
Company (the "Shares"), as the case may be, duly executed and delivered by
Company. The Note shall mature and become due and payable six (6) months from
the Effective Date and shall bear interest as provided in Section 1(c) below.
(c) Interest. The unpaid principal amount of the Loan shall
bear simple interest at a rate equal to six percent (6 %). Such interest shall
be paid by the Company within 15 days of the Maturity Date (as defined in the
Note), unless earlier converted pursuant to the terms of the Note.
(d) Voluntary Prepayments. The Company may prepay the Note,
without premium or penalty, in whole or in part, at any time and from time to
time.
(e) Delivery. The Company will deliver to Lender the Note
described in Section 1(b).
2. Security Interest; Collateral
(a) Grant of Security Interest. The Company hereby grants to
Lender, a blanket security interest in all of the Company's right, title and
interest in and to the collateral described in Section 2(b) below (the
"Collateral") in order to secure the payment and performance of the obligations
of the Company to Lender described in Section 2(c) below. Such security interest
shall be evidenced by a UCC-1 Financing Statement naming Lender as a secured
party thereunder, and the terms and conditions of the Security Interest shall be
governed by the Security Agreement between the parties of even date herewith
(the "Security Agreement").
(b) Collateral. The Collateral under this Agreement consists
of all of the assets of the Company, except royalty payments to the Company in
connection with the Agreement dated December 16, 1997, between the Company and
▇▇▇▇▇ ▇▇▇▇▇, Inc. The security interest held by Lender in all Collateral will be
released by Lender as of the date upon which the Company has paid the full
amount of principal and interest due under the Note or the Note has been
converted pursuant to its terms. At such time, Lender will reassign to the
Company all of the Collateral which has not been sold, disposed of, retained or
applied by Lender. Lender will execute all appropriate instruments and other
documents (including, without limitation, UCC termination statements) to release
the security interest in the Collateral granted in this Agreement. The Company
will furnish to Lender from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Lender may reasonably request, all in reasonable detail.
(c) Secured Indebtedness. This Agreement and the Security
Agreement secure, and the Collateral is collateral security for, the prompt
payment in full when due of all obligations and liabilities of every nature of
the Company now or hereafter existing under or arising out of or in connection
with the Loan made by Lender pursuant to this Agreement and evidenced by the
Note, whether at stated maturity, by acceleration, demand or otherwise
(including the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.
362(a)). All payments and performance will be in accordance with the terms under
which such indebtedness, obligations and liabilities were or are hereafter
incurred or created. The Company will also promptly reimburse Lender for any and
all reasonable amounts expended by Lender in the enforcement (judicially or
otherwise) or exercise of its rights under the terms of this Agreement, which
amounts are included in the indebtedness secured under this Agreement and the
Security Agreement.
(d) Further Assurances. The Company agrees that from time to
time, at the expense of the Company, the Company will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that Lender may request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable Lender to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
(e) Rights of Lender with Respect to the Collateral. Lender
has the right at any time to make any payments and do any other acts as may be
reasonably necessary to protect its security interest in the Collateral,
including, without limitation, the right to make any applicable filings, to pay,
purchase, contest or compromise any encumbrance, charge or lien which reasonably
appears to be prior or superior to the security interest granted under this
Agreement, and to appear in and defend any action or proceeding purporting to
affect its security interest in and/or the value of the Collateral, and in
exercising any such powers or authority, Lender has the right (but not any
obligation) to pay all reasonable expenses incurred in connection therewith.
Lender will have no obligation to make any of the foregoing payments or perform
any of the foregoing acts.
(f) Power of Attorney. The Company hereby appoints and
constitutes Lender as the Company's attorney-in-fact for purposes of filing all
documents required to renew and maintain the security interests on the
Collateral. This power of attorney is coupled with an interest, is irrevocable
by the company, and shall terminate upon the termination of this Agreement.
3. Representations and Warranties of the Company. The Company
hereby represents and warrants to Lender as of the date of this Agreement as
follows:
(a) Organization and Standing: Charter and Bylaws. The Company
is a corporation duly organized and validly existing under the laws of the State
of Oregon and has all requisite corporate power and authority to own its
property and assets and to carry on its business as now conducted and proposed
to be conducted.
(b) Corporate Power. The Company has all requisite legal and
corporate power to enter into, execute and deliver this Agreement, the Note and
the Security Agreement. This Agreement is, and, upon issuance, the Note, and the
Shares issued upon conversion of the Note, will be valid and binding obligations
of the Company, enforceable in accordance with their terms, except (i) as the
same may be limited by bankruptcy, insolvency, moratorium, and other laws of
general application affecting the enforcement of creditors' rights, and (ii) to
the extent that the indemnification provisions contained herein may be limited
by applicable laws.
(c) Authorization.
(1) Corporate Action. All corporate and legal action on
the part of the Company, its officers, directors and shareholders necessary for
the execution and delivery of this Agreement, the Note and the Security
Agreement, the sale and issuance of the Note and the performance of the
Company's obligations hereunder, under the Note, and under the Security
Agreement has been taken.
(2) Valid Issuance. When issued in compliance with the
provisions of this Agreement, the Note, and any Shares issued upon conversion of
the Note, will be validly issued, provided, however, that the Note and/or Shares
may be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein, and as may be required by future changes in such laws.
(d) Capitalization. The Company is authorized to issue ten
million (10,000,000)] shares of Common Stock, and 170,000, 162,426 and 995,875
shares, respectively, of Class A, Class B and Class C Preferred Stock. As of the
date of this Agreement, there are One-Million Three Hundred Sixty Thousand
(1,360,000) outstanding shares of Common Stock, and 170,000, 81,213, and 853,245
shares, respectively, of Series A, Series B and Series C Preferred Stock
outstanding. In addition, as of the date of this Agreement, there are
outstanding (i) options entitling the holders thereof to purchase an aggregate
of Three Hundred Fifteen Thousand (315,500) shares of Common Stock., and (ii)
warrants entitling the holders thereof to purchase an aggregate of $875,000
worth of the Company's next series of Preferred Stock at a per share price to be
determined.
(e) Compliance with Other Instruments, None Burdensome, Etc.
The execution, delivery and performance of and compliance with this Agreement,
the Note, and the Security Agreement and the issuance and sale of the Note will
not result in nor constitute any breach, default or violation of (i) the
Company's Amended and Restated Certificate of Incorporation or Bylaws, any
material agreement, contract, lease, license, instrument or commitment (oral or
written) to which the Company is a party or is or (ii) any law, rule,
regulation, statute or order applicable to the Company, any of its subsidiaries
or their respective properties, nor result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company or its subsidiaries, which breach, default or violation would have a
material adverse effect on the financial condition, business, prospects or
operations of the Company.
(f) Government Consent, Etc. No consent, approval, order or
authorization of, or designation, registration, declaration or filing with, any
federal, state, local or provincial or other governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement, the Note, or the Security Agreement, or the offer, sale or
issuance of the Note, or the Shares to be issued upon conversion of the Note,
other than, if required, filings or qualifications under Oregon or California
securities law, or other applicable blue sky laws, which filings or
qualifications, if required, will be timely filed or obtained by the Company.
(g) Offering. In reliance on the representations and
warranties of the Lender in Section 3 hereof, the offer, sale and issuance of
the Note, and the Shares issuable upon conversion of the Note, in conformity
with the terms of this Agreement will not result in a violation of the
requirements of Section 5 of the Securities Act, of 1933, as amended (the
"Securities Act") or the qualification or registration requirements of Oregon or
California Law or other applicable blue sky laws as such laws exist on the date
hereof.
(h) Title to Property and Assets. The Company has good title
to, or a valid leasehold in, all of the Company's tangible and intangible assets
(including, but not limited to intellectual property) in each case free and
clear of all liens and encumbrances.
(i) Litigation. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, threatened against the
Company or any of its directors or the Lender that (i) challenges the validity
of this Agreement, the Note, the Security Agreement, or the transactions
contemplated hereby or thereby, (ii) is commenced by any shareholder of the
Company, or (iii) that could reasonably be expected to result, either
individually or in the aggregate, in any material adverse change in the assets,
business, properties, prospects or financial condition of the Company, its
properties or assets, or in any material impairment of the right or ability of
the Company to carry on its business as now conducted or proposed to be
conducted.
(j) Subsidiaries. The Company does not own or control,
directly or indirectly, any interest in any other corporation, partnership,
limited liability company, association, or other business entity. The Company is
not a participant in any joint venture, partnership, or similar arrangement.
(k) Related Party Transactions. Except as set forth on
Schedule 2(k), no employee, officer, shareholder or director of the Company or
member of his or her immediate family is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them, other than (i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of the Company, and
(iii) for other standard employee benefits made generally available to all
employees including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Company. To the best of the
Company's knowledge, none of such persons has any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation that
competes with the Company. To the best of the Company's knowledge, no officer,
director, or shareholder or any member of their immediate families is, directly
or indirectly, interested in any contract with the Company (other than such
contracts as relate to any such person's ownership of capital stock or other
securities of the Company).
(l) Licenses; Permits. The Company has all franchises,
permits, licenses, and any similar authority necessary for the conduct of its
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects, or financial condition of
the Company, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as presently planned to be
conducted. The Company is not in default in any material respect under any of
such franchises, permits, licenses or other similar authority.
4. Representations and Warranties by the Lender. The Lender
represents and warrants to the Company as of the date of this Agreement, as
follows:
(a) Investment Intent; Authority. This Agreement is made with
the Lender in reliance upon Lender's representation to the Company, evidenced by
Lender's execution of this Agreement, that the Lender will acquire the Note for
investment for its own account, not as a nominee or agent, for investment and
not with a view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act or applicable state
securities laws. The Lender has the full right, power, authority and capacity to
enter into and perform this Agreement and this Agreement will constitute a valid
and binding obligation upon the Lender, except as the same may be limited by
bankruptcy, insolvency, moratorium, and other laws of general application
affecting the enforcement of creditors' rights.
(b) Note Not Registered. The Lender understands and
acknowledges that the offering of the Note, and the Shares issuable upon
conversion of the Note, will not be registered under the Securities Act or
qualified under Oregon law on the grounds that the offering and sale of the Note
and Shares contemplated by this Agreement are exempt from registration under the
Securities Act and exempt from qualification pursuant to California law, and
that the Company's reliance upon such exemptions is predicated upon Lender's
representations set forth in this Agreement. The Lender acknowledges and
understands that resale of the Note and the Shares may be restricted
indefinitely unless the Note and/or Shares is subsequently registered under the
Securities Act and qualified under the Oregon Law or an exemption from such
registration and such qualification is available.
(c) No Transfer. Lender covenants that in no event will the
Lender dispose of the Note or Shares other than (i) in conjunction with an
effective registration statement for the Note and/or the Shares under the
Securities Act or pursuant to an exemption therefrom, or (ii) in compliance with
Rule 144 promulgated under the Securities Act, or (iii) to an entity affiliated
with Lender, and other than in compliance with the applicable securities
regulations or laws of any state.
(d) Knowledge and Experience. The Lender (i) has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of Lender' prospective investments in the Note
and Shares; (ii) has the ability to bear the economic risks of the Lender's
prospective investments; (iii) has been furnished with or has had access to such
information as the Lender has considered necessary to make a determination to
lend pursuant to the Note together with such additional information as is
necessary to verify the accuracy of the information supplied; (iv) has had all
questions which have been asked by the Lender satisfactorily answered by the
Company; and (v) has not been offered the Note or Shares by any form of
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any such media.
(e) Accredited Investor. Lender is an accredited investor as
that term is defined in Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act.
5. Conditions of Lender's Obligations. The obligations of the
Lender under Section 1 of this Agreement are subject to the fulfillment on or
before the date of the Loan of each of the following conditions:
(a) The representations and warranties of the Company
contained in Section 3 shall be true on and as of the date of this Agreement.
(b) The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Lender is
obligated to make a Loan pursuant to Section 1.
6. Miscellaneous.
(a) Waivers and Amendments. Any provision of this Agreement
may be amended, waived or modified upon the written consent of the Company and
the Lender.
(b) Governing Law. This Agreement and all actions arising out
of or in connection with this Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to the
conflicts of law provisions of the State of California or of any other state.
(c) Entire Agreement; Survival. This Agreement together with
the Note and the Security Agreement constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof. The representations and warranties set forth in Section 3 and 4 hereof,
and the provisions of this Section 6, shall survive the Closing.
(d) Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or mailed by registered or certified
mail, postage prepaid, or by recognized overnight courier or personal delivery,
to the following addresses:
(1) if to Lender:
Cardiac Science, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇,
Chief Financial Officer
(2) if to the Company:
Inovise Medical, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(e) Validity. If any provision of this Agreement, the Note, or
the Security Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
(f) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.
(g) Indemnification. The Company agrees to hold harmless and
indemnify the Lender and its respective current and former officers, directors,
employees, partners and affiliates from and against any and all losses, claims,
damages, expenses or liabilities (or any action in respect thereof) arising out
of, relating to or based upon the transactions contemplated by this Agreement or
arising out of, relating to or based upon the Lender's status as shareholder or
controlling shareholder of the Company; provided, however that in no event shall
the Company be obligated to indemnify the Lender or its respective current and
former officers, directors, employees, partners and affiliates from an against
any losses, claims, damages, expenses or liabilities (or any action in respect
thereof) which are determined by a court of competent jurisdiction in a final,
nonappealable judgment to have arisen primarily out of Lender's gross negligence
or willful misconduct. If a complaint, claim or other notice of any liability
giving rise to a claim for indemnification under this Section 6(g) is made by a
third party against the Lender, the Lender shall promptly notify the Company.
The Company shall have the right to investigate and defend any such loss, claim,
damage, expense, liability or action through counsel selected by the Company and
reasonably acceptable to the Lender. The Lender shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such separate counsel shall be borne by the Lender.
The Company further agrees to the reimbursement of expenses as incurred by the
Lender, provided the Lender give an undertaking to return such reimbursement if
it is ultimately determined that the Lender is not entitled to indemnification.
In no event shall the Company be obligated to indemnify the Lender for any
settlement of any claim or action effected without the Company's prior written
consent, which consent shall not be unreasonably withheld. In addition, in no
event shall the Company settle any claims it is defending without the written
consent of the Lender, which consent shall not be unreasonably withheld.
(signature page follows)
IN WITNESS WHEREOF, the parties have caused this Bridge Financing
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the Effective Date.
THE COMPANY:
INOVISE MEDICAL, INC.
By:
---------------------------------
LENDER:
CARDIAC SCIENCE, INC.
By:
---------------------------------
Its:
---------------------------------
EXHIBIT A
FORM OF SECURED CONVERTIBLE PROMISSORY NOTE
See Exhibit 99.4