ECHOCATH, INC.
SUBSCRIPTION AGREEMENT
EchoCath, Inc.
P.O. Box 7224
Princeton, New Jersey 08543
Attention: Frank DeBernardis, President
Gentlemen:
I. Subscription. The undersigned, intending to be legally bound, hereby
irrevocably agrees to purchase from EchoCath, Inc., a New Jersey corporation
(the "Company"), the number of shares (the "Shares") of the Company's Class A
Common Stock, no par value (the "Common Stock"), set forth on the signature page
hereof, at a purchase price of $2.75 per Share.
II. Payment. The undersigned will pay for the subscription on the date hereof by
check payable in U.S. dollars or by wire transfer in U.S. dollars to an account
designated by the Company. The Company will issue certificates representing the
Shares within 30 days of the date hereof.
III. Acceptance of Subscription. The undersigned understands and agrees that the
Company in its sole discretion reserve the right to accept or reject this or any
other subscription for Shares, in whole or in part, notwithstanding prior
receipt by the undersigned of notice of acceptance of this subscription. The
Company shall have no obligation hereunder until the Company shall accept and
agree to the terms of this Subscription Agreement, as evidenced by the execution
and delivery to the undersigned of an executed copy of this Subscription
Agreement. If this subscription is rejected in whole, this Subscription
Agreement and all funds received from the undersigned will be returned without
interest or deduction, and this Subscription Agreement shall thereafter be of no
further force or effect. If this subscription is rejected in part, the funds for
such rejected portion of this subscription will be returned without interest or
deduction, and this Subscription Agreement shall continue in force and effect to
the extent this subscription was accepted.
IV. Representations and Warranties. The undersigned hereby acknowledges,
represents, warrants to and agrees with the Company as follows:
(a) None of the Shares are registered under the Securities Act of 1933, as
amended (the "Securities Act") or any state securities laws. The
undersigned understands that the offering and sale of the Shares is
intended to be exempt from registration under the Securities Act, by virtue
of Section 4(2) and the rules and regulations promulgated thereunder,
based, in part, upon the representations, warranties and agreements
contained in this Subscription Agreement;
(b) The undersigned represents that it is an "accredited investor" as such
term is defined in Rule 501 of Regulation D promulgated under the
Securities Act;
(c) Neither the Securities and Exchange Commission (the "Commission") nor
any state securities commission has approved the Shares offered or passed
upon or endorsed the merits of the offering, and the offering of the Shares
has not been reviewed by any federal, state or other regulatory authority;
(d) The undersigned acknowledges that prior to the date hereof it has
received and reviewed a copy of the Company's annual report on Form 10-KSB
for the year ended August 31, 1996 (the "10-KSB"), all of the Company's
Quarterly Reports on Form 10-QSB since August 31, 1996, and all other
public filings of the Company since the filing of the 10-KSB (referred to
herein as the "SEC Filings");
(e) The undersigned acknowledges that all documents, records, and books
pertaining to the investment in the Shares have been made available for
inspection by it, its attorney, accountant, purchaser representative or tax
advisor (collectively, the "Advisors");
(f) The undersigned and the Advisors have had a reasonable opportunity to
ask questions of and receive answers from a person or persons acting on
behalf of the Company concerning the offering of the Shares and all such
questions have been answered to the full satisfaction of the undersigned
and its Advisors;
(g) In evaluating the suitability of an investment in the Company, the
undersigned has not relied upon any representation or other information
(oral or written) other than as contained in documents or answers to
questions so furnished to the undersigned or its Advisors by the Company;
(h) The undersigned is unaware of, and in no way relying on, any form of
general solicitation or general advertising in connection with the offer
and sale of the Shares;
(i) The undersigned has such knowledge and experience in financial, tax,
and business matters so as to enable it to utilize the information made
available to it in connection with the offering of the Shares to evaluate
the merits and risks of an investment in the Shares and to make an informed
investment decision with respect thereto;
(j) The undersigned is not relying on the Company respecting the tax
considerations of an investment in the Shares, and the undersigned has
relied on the advice of, or has consulted with, only its own Advisors;
(k) The undersigned is acquiring the Shares solely for its own account for
investment and not with a view to resale or distribution and the
undersigned will not sell or transfer the Shares until they are registered
for resale under the Securities Act or an exemption therefrom is available;
(l) The undersigned must bear the economic risk of the investment
indefinitely because none of the Shares may be sold, hypothecated or
otherwise disposed of unless subsequently registered under the Securities
Act and applicable state securities laws or an exemption from registration
is available. Legends shall be placed on the Shares to the effect that they
have not been registered under the Securities Act or applicable state
securities laws and appropriate notations thereof will be made in each of
the Company's stock books;
(m) The undersigned has adequate means of providing for the undersigned's
current needs and foreseeable personal contingencies and has no need for
the undersigned's investment in the Shares to be liquid;
(n) The undersigned is aware that an investment in the Shares involves a
number of very significant risks and is able to bear the loss of its entire
investment;
(o) The undersigned represents that it was not formed for the specific
purpose of acquiring the Shares, such entity is validly existing under the
laws of the state of its organization, the consummation of the
-2-
transactions contemplated hereby is authorized by, and will not result in a
violation of state law or its charter or other organizational documents,
such entity has full power and authority to execute and deliver this
Subscription Agreement and all other related agreements or certificates and
to carry out the provisions hereof and thereof, this Subscription Agreement
has been duly authorized by all necessary action, this Subscription
Agreement has been duly executed and delivered on behalf of such entity and
is a legal, valid and binding obligation of such entity; and
(p) The undersigned has been advised of an action commenced against the
Company by EP MedSystems, Inc. in the United States District Court for the
District of New Jersey, CA No. 2:97 CV 4926 (Lechner, J.) and has received
a copy of the complaint by EP MedSystems, Inc. from the Company.
V. Indemnification. The undersigned agrees to indemnify and hold harmless each
of the Company, their respective officers, directors, employees, agents, and
affiliates against all losses, liabilities, claims, damages, and expenses
(including, but not limited to, any and all expenses incurred in investigating,
preparing, or defending against any litigation commenced or threatened) arising
out of any false representation or warranty or breach by the undersigned of any
Agreement herein or in any other document delivered in connection with this
Subscription Agreement.
VI. Indemnification. The Company agrees to indemnify and hold harmless each of
the Undersigned and its respective officers, directors, employees, agents, and
affiliates against all losses, liabilities, claims, damages, and expenses
(including, but not limited to, any and all expenses incurred in investigating,
preparing, or defending against any litigation commenced or threatened) arising
out of any false representation or warranty or breach by the Company of any
Agreement herein or in any other document delivered in connection with this
Subscription Agreement.
VII. Registration of the Shares.
Piggyback Registration Rights.
(i) If, at any time commencing after the date of this Subscription
Agreement and expiring five (5) years thereafter, the Company proposes to file a
registration statement or statements under the Securities Act for the public
sale of the Common Stock for cash (other than in connection with a merger or
pursuant to Form S-4, Form S-8 or comparable registration statement), it will
give written notice, at least thirty (30) days prior to the filing of each such
registration statement, to the undersigned of its intention to do so. If the
undersigned notifies the Company in writing within ten (10) business days after
receipt of any such notice of its desire to include the Shares in such proposed
registration statement, the Company shall afford the undersigned the opportunity
to have the Shares registered under such registration statement; provided,
however, that in the case of an underwritten offering, if the Company notifies
the undersigned in writing that the managing underwriter of such offering has
notified the Company that the inclusion in the registration statement of any
portion of the Shares would have an adverse effect on such underwritten
offering, then the managing underwriter may limit the number of Shares to be
included in such registration statement only to the extent necessary to avoid
such adverse effect; provided, further, however, that in the event securities of
the Company held by any person or entity other than the Company or the
undersigned (the "Third Party Securities") are to be included in such
underwritten offering, and the managing underwriter shall have determined to
limit the number of shares of Common Stock or Third Party Securities to be so
included, then such limitation shall be applied to the Shares and the Third
Party Securities, based on the number of Shares and Third Party Securities
requested to be included in such underwritten offering so that the amount of
Third Party Securities are reduced by a percentage which is twice as great as
the percentage which the Shares are
-3-
reduced. Notwithstanding the provisions of this Section VII(i), the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section VII(i) (irrespective of whether a written request for
inclusion of any such securities shall have been made) to elect not to file any
such proposed registration statements or to withdraw the same after the filing
but prior to the effective date thereof.
(ii) Following the effective date of a registration statement filed
pursuant to Section VII(i), the Company shall, upon the written request of the
undersigned, forthwith supply such reasonable number of copies of the
registration statement, prospectus and other documents necessary or incidental
to the registration as shall be reasonably requested by the undersigned to
permit the undersigned to make a public distribution of the Shares. The Company
will use its reasonable efforts to qualify the Shares for sale in such states as
the undersigned shall reasonably request, provided that no such qualification
will be required in any jurisdiction where, solely as a result thereof, the
Company would be subject to general service of process or to taxation or
qualification as a foreign corporation doing business in such jurisdiction. The
obligations of the Company hereunder with respect to the Shares are expressly
conditioned on the undersigned furnishing to the Company such appropriate
information concerning the undersigned and the Shares as the Company may
reasonably request.
(iii)The Company shall bear the entire cost and expense of the
registration of the Shares pursuant to Section VII(i); provided, however, that
the undersigned shall be solely responsible for the fees of any counsel retained
by the undersigned in connection with such registration and any transfer taxes
or underwriting discounts, commissions or fees applicable to the Shares sold by
the undersigned pursuant thereto.
(iv) Neither the filing of a registration statement by the Company
pursuant to this Section VII nor the making of any request for prospectuses by
the undersigned shall impose upon the undersigned any obligation to sell the
Shares.
(v) The undersigned, upon receipt of notice from the Company that an
event has occurred which requires a post-effective amendment to a registration
statement or a supplement to a prospectus included therein, shall promptly
discontinue the sale of the Shares until the undersigned receives a copy of a
supplemented or amended prospectus from the Company, which the Company shall
provide as soon as practicable after such notice.
(vi) Notwithstanding anything else to the contrary contained in this
Subscription Agreement, if the undersigned requests to have any of the Shares
registered under the Securities Act pursuant to this Section VII, and if such
Shares are so registered, then this Section VII shall be of no further force or
effect.
VIII. Registration Indemnification.
(a) The Company shall indemnify and hold harmless the undersigned from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in any registration statement
covering the Shares filed by the Company under the Securities Act, any
post-effective amendment to such registration statement, or any prospectus
included therein required to be filed or furnished by reason of Section VII of
this Subscription Agreement or caused by any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except, insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission based upon
information furnished or required to be furnished in writing to the Company by
the undersigned expressly for use therein, which indemnification shall include
each person, if any, who controls the undersigned within the
-4-
meaning of the Securities Act; provided, however, that the indemnification in
this paragraph VIII(a) with respect to any prospectus shall not inure to the
benefit of the undersigned (or to the benefit of any person controlling the
undersigned) on account of any such loss, claim, damage or liability arising
from the sale of the Shares by the undersigned, if a copy of a subsequent
prospectus correcting the untrue statement or omission in such earlier
prospectus was provided to the undersigned by the Company prior to the subject
sale and the subsequent prospectus was not delivered or sent by the undersigned
to the purchaser prior to such sale; and provided further, that the Company
shall not be obligated to so indemnify the undersigned or other person referred
to above unless the undersigned or other person, as the case may be, shall at
the same time indemnify the Company, its directors, each officer signing such
registration statement and each person, if any, who controls the Company within
the meaning of the Securities Act, from and against any and all losses, claims,
damages and liabilities caused by any untrue statement of a material fact
contained in such registration statement, any registration statement or any
prospectus required to be filed or furnished by reason of this Subscription
Agreement or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission based upon information furnished in writing to the Company
by the undersigned expressly for use therein.
(b) If for any reason the indemnification provided for in the preceding
subparagraph is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, claim, damage, liability or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
IX. Representations and Warranties of the Company. The Company hereby represents
and warrants to the undersigned that:
(a) The Company is a corporation duly organized, existing and in good
standing under the laws of the State of New Jersey and has the corporate power
to conduct the business which it conducts and proposes to conduct.
(b) The execution, delivery and performance of this Subscription
Agreement by the Company will have been duly approved by the Board of Directors
of the Company and all other actions required to authorize and effect the offer
and sale of the Shares will have been duly taken and approved.
(c) The Shares have been duly and validly authorized and when issued and
paid for in accordance with the terms hereof, will be fully paid and
nonassessable.
(d) The capitalization of the Company (before giving effect to the sale
of the Shares) will be substantially as set forth in Exhibit A hereto (which
includes the Common Stock, the Class B Common Stock, the Series A Convertible
Preferred Stock, the Series B Cumulative Convertible Preferred Stock and all
options and warrants of the Company).
(e) The execution and delivery of this Subscription Agreement, the
issuance of the Shares and the incurrence of the obligations herein set forth
and the consummation of the transactions herein contemplated, will not result in
a violation of, or constitute a default under, the certificate of incorporation
or by-laws, in the performance or observance of any material obligations,
agreement, covenant or condition contained in
-5-
any bond, debenture, note or other evidence of indebtedness to which the Company
is a party or by which it or any of its properties may be bound or in violation
of any material order, rule, regulations writ, injunction, or decree of any
government, governmental instrumentality or court, domestic or foreign; and
(f) The SEC Filings, when filed, did not contain any untrue statement of
a material fact or, to the Company's knowledge, omit a material fact necessary
to make the statements contained in the SEC Filings, in light of the
circumstances under which they were made, not misleading.
X. Irrevocability; Binding Effect; Entirety. The undersigned hereby acknowledges
and agrees that the subscription hereunder is irrevocable by the undersigned,
except as required by applicable law, and that this Subscription Agreement shall
survive the death or disability of the undersigned and shall be binding upon and
inure to the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives, and permitted assigns. If the undersigned is
more than one person, the obligations of the undersigned hereunder shall be
joint and several and the agreements, representations, warranties, and
acknowledgments herein shall be deemed to be made by and be binding upon each
such person and his heirs, executors, administrators, successors, legal
representatives, and permitted assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof, and supersedes and replaces all prior agreements, understandings,
writings and discussions between the parties relating to said subject matter.
XI. Modification. This Subscription Agreement shall not be modified or waived
except by an instrument in writing signed by the party against whom any such
modification or waiver is sought.
XII. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given (a) if to either of the Company, at the address set forth above,
or (b) if to the undersigned, at the address set forth on the signature page
hereof (or, in either case, to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section XII). Any
notice or other communication given by certified mail shall be deemed given at
the time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
XIII. Assignability. To the extent permitted by law, the rights and obligations
hereunder are assignable by the undersigned; provided, however, that anyone to
whom this Subscription Agreement is assigned must agree in writing to be bound
by all of the terms and provisions hereof.
XIV. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the internal laws of the State of New Jersey
without regard to its conflicts of laws principles.
XV. Blue Sky Qualification. The Sale of the Shares is expressly conditioned upon
the exemption from qualification of the offer and sale of the Shares from
applicable federal and state securities laws. The Company shall not be required
to qualify this transaction under the securities laws of any jurisdiction and,
should qualification be necessary, the Company shall be released from any and
all obligations to maintain its offer, and may rescind any sale contracted, in
the jurisdiction.
XVI. Counterparts. This Subscription Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this subscription by
signing any of such counterpart and delivering the same by telex, telecopy,
telegraph, cable or otherwise in writing (each delivery by any of such means to
be deemed to be "in writing" for purposes of this Subscription Agreement).
-6-
XVII. Use of Pronouns. All pronouns and any variations thereof used herein shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 29th day of October, 1997.
Number of Shares Subscribed: 363,636 Shares of Class A Common Stock
Total Subscription Amount: $1,000,000
MEDTRONIC ASSET MANAGEMENT, INC.
By:
-------------------------------
Name:
Title:
Taxpayer Identification Number
----------------------------------
----------------------------------
Address
ACCEPTED AND AGREED
ECHOCATH, INC.
By:
-------------------------------
Name:
Title:
Date: October 29, 1997
-7-
Exhibit A
Page 2
EchoCath, Inc.
Warrants & Options
as of October 28, 1997
Warrants Issued
In connection with the Company's initial public offering, the Company
issued one Class A warrant and one Class B warrant. Each Class A warrant
entitles the holder to purchase, at an exercise price of $7.00 (subject to
adjustment) one share of Class A common stock and one Class B warrant. Each
Class B warrant entitles the holder to purchase, at an exercise price of $9.15
(subject to adjustment) one share of Class A common stock. The Class A warrants
and Class B warrants are exercisable through January 2001. 1,610,000 Class A
warrants and 1,610,000 Class B warrants were issued in connection with the
public offering.
In connection with the Company's initial public offering, the Company sold
to the Underwriter and its designees a unit purchase option to purchase up to
140,000 units. The securities underlying the unit purchase option are
substantially identical in all respects to the units (One share of Class A
common stock, one Class A warrant and one Class B warrant) sold in the Company's
initial public offering.
Warrants issued as a result of the September 1995 Bridge Financing total
500,000 warrants that are identical to the Class A and Class B warrants issued
in the initial public offering.
Warrants for 50,000 shares will be issued resulting form the release of the
$750,000 contingent liability. Additionally, 50,000 shares of Class A common
stock will be issued.
Options Granted
Under the terms of the 1995 Stock Option Plan, 150,000 share options have
been granted at an exercise price of $5.00 and 592,500 share options have been
granted at an exercise price of 3 1/8.
Under the terms of the employee investment plan, 552 share options are
currently reserved.