-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U7y1MkoJfWq13MSIH+qQxI7gk2ZKC54qQP/DuEd8XKma/1zyXydI2byoAyMGbmbN HYd6LmVF4G9XWGUhMvBDlQ== 0000898430-02-000167.txt : 20020413 0000898430-02-000167.hdr.sgml : 20020413 ACCESSION NUMBER: 0000898430-02-000167 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20020117 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PAULSON JOHN MICHAEL CENTRAL INDEX KEY: 0001125646 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 2250 EAST TROPICANA #19-121 CITY: LAS VEGAS STATE: NV ZIP: 89119 MAIL ADDRESS: STREET 1: 2250 EAST TROPICANA #19-121 CITY: LAS VEGAS STATE: NV ZIP: 89119 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CARDIODYNAMICS INTERNATIONAL CORP CENTRAL INDEX KEY: 0000719722 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 953533362 STATE OF INCORPORATION: CA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-37334 FILM NUMBER: 2511885 BUSINESS ADDRESS: STREET 1: 6175 NANCY RIDGE DRIVE STREET 2: SUITE 300 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6195350202 MAIL ADDRESS: STREET 1: 6175 NANCY RIDGE DRIVE STREET 2: STE 300 CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: BOMED MEDICAL MANUFACTURING LTD DATE OF NAME CHANGE: 19920703 SC 13D/A 1 dsc13da.txt SCHEDULE 13D/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D/A Under the Securities Exchange Act of 1934 (Amendment No. 1 )* ------- CARDIODYNAMICS INTERNATIONAL CORPORATION - ----------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK - ----------------------------------------------------------------------------- (Title of Class of Securities) 141597104 - ----------------------------------------------------------------------------- (CUSIP Number) John Michael Paulson 2250 East Tropicana #19-121, Las Vegas, NV 89119, (702) 429-0699 - ----------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) 7/19/01, 8/13/01, 8/21/01, 8/31/01, 11/5/01 - ----------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this schedule 13D, and is filing this schedule because of (S)(S) 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [_] Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See (S) 240.13d-7 for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. CUSIP NO. 141597104 ----------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSONS 1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only). JOHN MICHAEL PAULSON - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS (See Instructions) 4 PF-OO - ------------------------------------------------------------------------------ CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 USA - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF 834,000 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 OWNED BY 6,293,989 ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 937,364 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 6,190,225 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 7,127,989 - ------------------------------------------------------------------------------ CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 (See Instructions) - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 15.7% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON (See Instructions) 14 IN - ------------------------------------------------------------------------------ Item 1. Security and Issuer The class of securities to which this statement relates is the common stock (the "Common Stock") of CardioDynamics International Corporation (the "Issuer"), whose address is 6175 Nancy Ridge Drive, Suite 300, San Diego, California 92121. Item 2. Identity and Background This statement on Schedule 13D/A is filed on behalf of John Michael Paulson (the "Reporting Person"). The Reporting Person's principal occupation is real estate development. His address, and the address of Nevastar Investments Corp., the organization in which his real estate development business is conducted, is 2250 East Tropicana #19-121, Las Vegas, NV 89119. The Reporting Person was named a co-trustee of the Allen E. Paulson Living Trust (UDT dated 12/23/86) (the "Trust") along with Edward White. The Reporting Person was also named a co-executor of Allen E. Paulson's estate (the "Estate") along with Edward White. On October 8, 2001, Edward White resigned as the co-trustee of the Trust and co-executor of the Estate. On October 11, 2001, Nicholas Diaco stepped in as the successor co-trustee of the Trust. The Reporting Person is now the sole executor of the Estate. The Reporting Person does not affirm that he and Edward White or Nicholas Diaco comprise or have comprised a "group." The Reporting Person is a U.S. citizen. During the last five years, the Reporting Person has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) nor been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he was or is subject to a judgment mandating activities subject to federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration In 1996, the Reporting Person acquired 1,000,000 shares of Common Stock which are directly beneficially owned by him. He purchased these shares in a private transaction, at a per-share price of $0.25, using a promissory note payable to Allen E. Paulson, which was paid in full from the Reporting Person's personal funds in March 2000. Upon Allen Paulson's death on July 19, 2000, Allen Paulson's Issuer stock options for a total of 59,000 shares of Common Stock passed to the Estate; and Allen Paulson's majority ownership interest in CardioDynamics Holdings, LLC (the "LLC"), which owns 103,764 shares of Common Stock, passed to the Estate. As co-executor of the Estate, the Reporting Person had beneficial ownership (shared with Edward White, as co-executor) in these 162,764 shares. The voting power in the LLC's shares is also shared with the other members of the LLC. Before Allen Paulson's death, Mr. Paulson had transferred 10,418,634 shares (which included the 418,409 shares which were earlier sold and reported in the Schedule 13D filed on behalf of the Reporting Person on October 4, 2000) of the Common Stock of the Issuer to the Trust. Upon Allen Paulson's death, the Reporting Person and Edward White were named co- trustees of the Trust and beneficial ownership was passed to them. Edward White resigned as co-trustee of the trust and co-executor of the Estate on October 8, 2001. On October 11, 2001, Nicholas Diaco was appointed successor co-trustee of the Trust. The Reporting Person is now the sole executor of the Estate. Item 4. Purpose of Transaction The Reporting Person's/Trust's acquisition of securities was for investment purposes. The Reporting Person's beneficial ownership amount of Common Stock may be large enough to confer control of the Issuer. Although the Trust currently has no concrete plans or proposals with respect to consummating any further acquisitions or dispositions of the Common Stock of the Issuer, the Trust is currently predisposed towards conducting additional sales. Item 5. Interest in Securities of the Issuer See Item 3 and rows 7-10 on page 2 of this statement. The Reporting Person directly owns 775,000 shares of the Issuer Common Stock for his own account, after brokerage sales in 2001 of 120,300 shares. The Trust directly owns (after the sales of 3,810,000 shares reported below) 6,190,225 shares of Common Stock; the Reporting Person and Nicholas Diaco share voting power and dispositive power as to such shares. As sole executor of the Estate, the Reporting Person beneficially owns Allen Paulson's stock options to acquire 59,000 shares of Common Stock passed to the Estate, and Allen Paulson's majority interest in the LLC, which owns 103,764 shares of Common Stock. The Reporting Person, as the sole executor (after the resignation of Edward White, as co- executor), shares voting power over the LLC's Issuer stock with James Gilstrap, Nicholas Diaco and Joseph Diaco. Together, all this represents, for the Reporting Person, 15.7% of the Issuer's Common Stock under the Rule 13d-3(d) (1) calculation (with 45,656,022 shares outstanding at October 8, 2001). Edward White's principal occupation is accounting, and he is the senior partner of Edward White and Company, a certified public accounting firm. Edward White's address, and the address of Edward White and Company, the organization in which his business is conducted, is 21700 Oxnard Street, Suite 400, Woodland Hills, California 91367. He is a U.S. citizen. During the last five years, Edward White has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) nor been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Nicholas Diaco is a U.S. citizen. His principal occupation is physician at the Cardiology consultants of Santa Monica, which is located at 1301 20th St., Suite 400, Santa Monica, CA 90404. During the last five years, Nicholas Diaco has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) nor been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he is or was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding violations with respect to such laws. No Transactions in the Common Stock were effected by the Reporting Person since the last 13D filed on his behalf, except for the following: (1) In 2001, the Reporting Person sold 120,300 shares of Common Stock of the Issuer in brokerage sales. (2) On July 19, 2001, the Trust: (a) sold 500,000 shares of the Common Stock of the Issuer at $4.25 per share, for an aggregate purchase price of $2,125,000 to Pine Ridge Financial Inc., an international business company organized and existing in accordance with the laws of the British Virgin Islands ("Pine Ridge"), and (b) granted an option to purchase up to 1,000,000 shares of the Common Stock of the Issuer at $4.32 per share to Pine Ridge. Pine Ridge exercised its option on July 30, 2001, and purchased 500,000 shares of the Common Stock of the Issuer at $4.32 per share for an aggregate purchase price of $2,160,000. (3) On August 13, 2001, the Trust sold 510,000 shares of the Common Stock of the Issuer at $4.5207 per share to Joseph F. Diaco, Thomas Fogarty, Lester B. Knight, Jack L. McGinley and Todd E. Warnock in a series of transactions. (4) On August 21, 2001, the Trust sold an aggregate of 300,000 registered shares of the Common Stock of the Issuer at $4.50 per share, for an aggregate purchase price of $1,350,000 to Pine Ridge. (5) On August 31, 2001, the Trust sold 500,000 shares of the Common Stock of the Issuer at $5.40 per share, for an aggregate purchase price of $2,700,00 to Pine Ridge. (6) On November 5, 2001, the Trust sold an aggregate of 1,500,000 shares, at a purchase price of $4.35 per share, for an aggregate purchase price of $6,525,000 to Ascend Partners, LP, Ascend Partners Sapient, LP, Ascend Offshore Fund, Ltd., AIM Funds Group, Blue Coast Partners II, L.P., Citi Fort Point Ltd., Bramwell Capital Corp., The Children's Institute of Pittsburgh, William Blair Small Cap Growth Fund, Kentucky State District Council of Carpenters, Pensionskassee SBB, Rush Presbyterian St. Luke's Pension & Retirement, Rush Presbyterian St. Luke's Endowment, Children's Institute of Pittsburgh - Pension, MacNeal Health Foundation, CF Industries, Canton of Zurich, Goldman Sachs GDP 2000 Master Fund Ltd., Blue Coast Partners, L.P. and Green Coast Offshore Limited in a series of transactions. The total number of shares of Common Stock sold by the Trust was 3,810,000. In an earlier 13/D, the Reporting Person reported owning an aggregate of 11,058,589 shares of the Common Stock of the Issuer; after the above transactions, the Reporting Person now owns an aggregate of 7,127,989 shares the of the Common Stock of the Issuer. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer (a) Securities Purchase Agreement dated as of July 19, 2001, between the Trust and Pine Ridge. The Trust: (a) sold 500,000 shares of the Common Stock of the Issuer at $4.25 per share to Pine Ridge, and (b) granted an option to purchase up to 1,000,000 shares of the Common Stock of the Issuer at $4.32 per share to Pine Ridge (the option was exercised only as to 500,000 shares). See Item 7(a). (b) Securities Purchase Agreements, each dated as of August 13, 2001, between the Trust and each of: Joseph F. Diaco, Thomas Fogarty, Lester B. Knight, Jack L. McGinley and Todd E. Warnock. The Trust sold an aggregate of 510,000 shares of the Common Stock of the Issuer at $4.5207 per share in a series of transactions. See Item 7(b). (c) Letter Agreement entered into as of August 21, 2001, between the Trust and Pine Ridge, for the sale of 300,000 registered shares of the Common Stock of the Issuer at $4.50 per share. See Item 7(c). (d) Securities Purchase Agreement dated as of August 31, 2001, between the Trust and Pine Ridge. The Trust sold 500,000 shares of the Common Stock of the Issuer at $5.40 per share to Pine Ridge. See Item 7(d). (e) Letter Agreements in substantially similar form, each dated as of November 5, 2001, between Trust and each of: Ascend Partners, LP, Ascend Partners Sapient, LP, Ascend Offshore Fund, Ltd., AIM Funds Group, Blue Coast Partners II, L.P., Citi Fort Point Ltd., Bramwell Capital Corp., The Children's Institute of Pittsburgh, William Blair Small Cap Growth Fund, Kentucky State District Council of Carpenters, Pensionskassee SBB, Rush Presbyterian St. Luke's Pension & Retirement, Rush Presbyterian St. Luke's Endowment, Children's Institute of Pittsburgh - Pension, MacNeal Health Foundation, CF Industries, Canton of Zurich, Goldman Sachs GDP 2000 Master Fund Ltd., Blue Coast Partners, L.P. and Green Coast Offshore Limited. The Trust sold an aggregate of 1,500,000 shares of the Common Stock of the Issuer at $4.35 per share in a series of transactions. See Item 7(e). Item 7. Material to Be Filed as Exhibits (a) Securities Purchase Agreement, dated as of July 19, 2001, between the Trust and Pine Ridge. (b) Securities Purchase Agreements, each dated as of August 13, 2001, between the Trust and each of: Joseph F. Damico, Thomas Fogarty, Lester B. Knight, Jack McGinley and Todd E. Warnock. (c) Letter Agreement, dated as of August 21, 2001, between the Trust and Pine Ridge. (d) Securities Purchase Agreement, dated as of August 31, 2001, between the Trust and Pine Ridge. (e) Letter Agreements, each dated as of November 5, 2001, between the Trust and each of: Ascend Partners, LP, Ascend Partners Sapient, LP, Ascend Offshore Fund, Ltd., AIM Funds Group, Blue Coast Partners II, L.P., Citi Fort Point Ltd., Bramwell Capital Corp., The Children's Institute of Pittsburgh, William Blair Small Cap Growth Fund, Kentucky State District Council of Carpenters, Pensionskassee SBB, Rush Presbyterian St. Luke's Pension & Retirement, Rush Presbyterian St. Luke's Endowment, Children's Institute of Pittsburgh - Pension, MacNeal Health Foundation, CF Industries, Canton of Zurich, Goldman Sachs GDP 2000 Master Fund Ltd., Blue Coast Partners, L.P. and Green Coast Offshore Limited. Signature After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. ________________________________________________________________________________ Date 12/27/01 - -------------------------------------------------------------------------------- Signature /s/ John Michael Paulson - -------------------------------------------------------------------------------- Name/Title JOHN MICHAEL PAULSON/Co-Trustee and Executor Attention: Intentional misstatements or omissions of fact constitute Federal criminal violations (See 18 U.S.C. 1001) EX-99.(A) 3 dex99a.txt SECURITIES PURCHASE AGREEMENT (7/19/2001) Exhibit 7(a) ================================================================================ SECURITIES PURCHASE AGREEMENT among THE ALLEN E. PAULSON LIVING TRUST and PINE RIDGE FINANCIAL INC. Dated as of July 19, 200l ================================================================================ SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July 19, --------- 2001, between The Allen E. Paulson Living Trust, a California trust (the "Seller"), and Pine Ridge Financial Inc. an international business company duly ------ organized and existing in accordance with the laws of the British Virgin Islands (the "Purchaser"). --------- WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(1) of the Securities Act of 1933, as amended (the "Securities Act"), the Seller desires to sell to the Purchaser and the Purchaser -------------- desires to purchase from the Seller the shares of common stock (the "Common ------ Stock") of CardioDynamics International Corporation, a California corporation - ----- (the "Company"), no par value per share, as set forth herein; ------- WHEREAS, with regard to the shares of Common Stock to be sold by the Seller to the Purchaser hereunder, the Purchaser and the Company are entering into a Registration Rights Agreement, dated as of the date of this Agreement, in the form of Exhibit A (the "Registration Rights Agreement"); and --------- ----------------------------- NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties to the Agreement do hereby agree as follows: ARTICLE I PURCHASE AND SALE 1.1 Closing and Settlement Date. --------------------------- Subject to the terms and conditions set forth in this Agreement, the Seller shall sell to the Purchasers and the Purchasers shall purchase an aggregate of 500,000 shares of Common Stock ("Initial Shares") for an aggregate -------------- purchase price of $2,125,000 (the "Purchase Price"). The closing (the "Closing") -------------- ------- of the transactions contemplated herein shall occur at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP ("Robinson Silverman"), 1290 Avenue of ------------------ the Americas, New York, New York 10104, on the execution date of this Agreement with payment and delivery of the Initial Shares to occur on the Settlement Date (as defined below). The date of the Closing is hereinafter referred to as the "Closing Date." ------------ 1.2 The Closing Date. As a condition precedent to each of the parties' ---------------- obligations hereunder, on the Closing Date, the Company and the parties shall deliver or shall cause to be delivered the following: (A) the Company shall deliver to the Purchaser (i) a Registration Rights Agreement, in the form of Exhibit A, executed by the Company and dated as --------- of the date hereof, between the Company and the Purchaser and (ii) the Transfer Agent Instructions, in the form of Exhibit B, executed by the Company and --------- delivered to and acknowledged by the Company's transfer agent (the "Transfer -------- Agent Instructions"); - ------------------ (B) the Seller shall deliver to the Purchaser (i) this Agreement, executed by the Seller, (ii) the legal opinion of Gibson, Dunn & Crutcher LLP, outside counsel to the Seller, substantially in the form of Exhibit C and (iii) --------- the escrow agreement ("Escrow Agreement"), ---------------- dated as of the date hereof among the Seller, the Purchaser, California Bank & Trust and Bear, Stearns Securities Corp. (the "Escrow Agent") executed by the ------------ Seller; (C) the Purchaser shall deliver (i) to the Seller, this Agreement executed by the Purchaser, (ii) to the Company, a Registration Rights Agreement, executed by the Purchaser, (iii) to the Escrow Agent, the Purchase Price, in United States dollars in immediately available funds by wire transfer, provided -------- that, such funds shall only be disbursed in accordance with the terms of the - ---- Escrow Agreement; and (iv) to the Seller and the Escrow Agent, the Escrow Agreement executed by the Purchaser; (D) each of California Bank & Trust, the Company and the Escrow Agent shall deliver to Purchaser and Seller, the Escrow Agreement executed by such party; and (E) the Company shall deliver to the Purchaser the Registration Rights Agreement executed by the Company. 1.3 The Settlement Date. On or prior to the fourth Trading Day following ------------------- the delivery of the Purchase Price to the Escrow Agent (the "Settlement Date") --------------- (A) the Seller shall deliver to the Purchaser, a stock certificate, registered in the name of the Purchaser, representing the Initial Shares and (B) in accordance with the terms of the Escrow Agreement, the Escrow Agent shall disburse, the Purchase Price in United States dollars in immediately available funds by wire transfer. 1.4 Purchasers' Option To Purchase Additional Shares. During the period ------------------------------------------------ commencing on the Closing Date and terminating on the earlier of (i) the 30/th/ day after the Closing Date and (ii) the date the Shares are registered with the Commission pursuant to the Registration Rights Agreement ("Filing Date"), the ----------- Purchaser shall have an option to purchase an aggregate of up to 1,000,000 additional shares ("Additional Shares") of Common Stock from the Seller at a ----------------- purchase price per share of $4.32. The Purchaser may exercise this option at any time after the Closing Date until 5:00 p.m. (California time) on the day prior to the Filing Date, provided, however, that the Seller must notify the Purchaser of the date on which the Registration Statement is expected to be filed by the Company and such notice must be delivered to the Purchaser at least five (5) Business Days prior to such date. The Purchaser may exercise its option under this Section by providing the Seller with a written notice, via facsimile ("Option Exercise Notice"), specifying the number of Additional Shares to be ---------------------- purchased by the Purchaser at a purchase price per share of $4.32. The sale of such Additional Shares to the Purchaser shall be effected on the date of delivery of the Option Exercise Notice to the Seller (such date, the "Sale ---- Date"). Within four (4) Business Days of the delivery to the Escrow Agent by the - ---- Purchaser of the aggregate purchase price for the Additional Shares so purchased, the Seller shall deliver to the Purchaser at its address for notice set forth herein, a stock certificate, registered in the name of the Purchaser, representing such Additional Shares as set forth in the Option Exercise Notice. No later than the two days following the Sale Date, the Purchaser will deliver the aggregate purchase price for the Additional Shares to the Escrow Agent for disbursement in accordance with the Escrow Agreement. -2- 1.5 Certain Defined Terms. --------------------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day ------------ which shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" means the United States Securities and Exchange Commission. ---------- "Nasdaq" means the Nasdaq National Market. ------ "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "Registration Statement" shall mean the registration statement required to ---------------------- be filed by the Company pursuant to the Registration Rights Agreement, including the prospectus and any amendments and supplements to such registration statement or prospectus, including pre- and post- effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Shares" shall mean, collectively, the Initial Shares and the Additional ------ Shares, if any. "Subsequent Market" shall mean any of the New York Stock Exchange, American ----------------- Stock Exchange, Inc or Nasdaq Small Cap Market. "Trading Day" means a day on which the shares of Common Stock are traded on ----------- the Nasdaq or on such Subsequent Market on which the shares of Common Stock are then listed or quoted, or (b) if the shares of Common Stock are not listed on the Nasdaq or a Subsequent Market, a day on which the shares of Common Stock are traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC Bulletin Board, a day on which the shares of Common Stock are quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, -------- that in the event that the shares of Common Stock are not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business Day. 1.6 Representations and Warranties of the Purchaser. The Purchaser ----------------------------------------------- represents and warrants to the Seller as follows: -3- (a) Organization: Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement, the Registration Rights Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The purchase by the Purchaser of Shares hereunder has been duly authorized by all necessary action on the part of it. Each of this Agreement, the Registration Rights Agreement and the Escrow Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Investment Intent. The Purchaser is acquiring the Shares as ----------------- principal for its own account, for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof, without prejudice, however, to the Purchaser's right, subject to the provisions of this Agreement, the Registration Rights Agreement and the Escrow Agreement at all times to sell or otherwise dispose of all or any part of such Shares pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable Federal and state securities laws. Subject to compliance with Federal and state securities laws, nothing contained herein shall be deemed a representation or warranty by the Purchaser to hold the Shares for any period of time. The Purchaser is acquiring the Shares hereunder in the ordinary course of its business. The Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute the Shares. (c) Purchaser Status. At the time the Purchaser was offered the ---------------- Shares, it was, at the date hereof it is and on the date on which it exercises its option pursuant to Section 1.4 it shall be, an "accredited investor" as defined in Rule 501(a) under the Securities Act. The Purchaser was not formed for the purpose of acquiring the Shares. (d) Experience of the Purchaser. The Purchaser, either alone or --------------------------- together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. (e) Ability of such Purchaser to Bear Risk of Investment. The ---------------------------------------------------- Purchaser is able to bear the economic risk of its investment in the Shares and, at the present time, is able to afford a complete loss of such investment. (f) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. -4- (g) General Solicitation. The Purchaser is not purchasing the Shares -------------------- as a result of or subsequent to any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (h) Reliance. The Purchaser understands and acknowledges that (i) -------- Shares are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption, depends in part on, and the Seller will rely upon the accuracy and truthfulness of, the foregoing representations and the Purchaser hereby consents to and acknowledges such reliance. The Seller acknowledges and agrees that other than the representations and warranties contained herein, the Purchaser does not make or has not made any representations or warranties to the Seller with respect to the transactions contemplated hereby. 1.7 Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite -------------------------- corporate power and authority to enter into and to consummate the transactions contemplated by each of this Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The execution and delivery of this Agreement and the Escrow Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement and the Escrow Agreement have been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transaction contemplated in this Agreement and the Escrow Agreement. (b) No liens on Sellers Shares. As of the Settlement Date and the -------------------------- date on which any Shares are delivered to the Purchaser pursuant to Section 1.4, the Seller will be the sole beneficial owner of the Shares and the Shares delivered to the Purchaser on such date will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement and the Escrow Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which -5- the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement and the Escrow Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Private Offering. Assuming the accuracy of the representations ---------------- and warranties of the Purchaser set forth in Sections 1.6, the offer and sale of the Shares to the Purchasers as contemplated hereby are exempt from the registration requirements of the Securities Act. Neither the Seller nor any Person acting on its behalf has taken or is, to the knowledge of the Seller, contemplating taking any action which could subject the offering or sale of the Shares to the registration requirements of the Securities Act including soliciting any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (f) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule A hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement or the Escrow Agreement. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement or the Escrow Agreement as a result of any action taken by the Seller. The Seller shall indemnify and hold harmless the Purchaser, its employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect of any such claimed or existing fees, as such fees and expenses are incurred. (g) Solicitation Materials. Neither the Seller nor any Person acting ---------------------- on the Seller's behalf has solicited any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (h) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided any of the Purchasers or its agents or counsel with any information that constitutes or might constitute material non- public information. The Seller understands and confirms that the Purchasers shall be relying on the foregoing representations in effecting transactions with respect to the Shares. -6- ARTICLE II OTHER AGREEMENTS OF THE PARTIES 2.1 Transfer Restrictions: Legend. ----------------------------- (a) The Purchaser acknowledges that Shares may only be disposed of pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with any applicable Federal and state securities laws. In connection with any transfer of Shares other than pursuant to an effective registration statement, except as otherwise set forth herein, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a "Purchaser" under this Agreement, the Registration Rights Agreement and the Escrow Agreement. (b) The Purchaser acknowledges that until the Shares are registered pursuant to an effective registration statement or may otherwise be disposed of pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act, the following or similar legend shall appear on the stock certificates representing the Shares: THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 2.2 Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement or the Escrow Agreement. -7- (b) The Purchaser, agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchasers in this Agreement or the Escrow Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such person (the "indemnified party shall ----------------- promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any person to deliver the notice required by this Section 2.2 shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. 2.3 Material Inducement. The Seller agrees and acknowledges that the ------------------- Company's commitment and obligation to file a Registration Statement with respect to the Shares to be sold under this Agreement is a material inducement to the Purchasers' execution of this Agreement. In the event that the Registration Rights Agreement is not declared effective by the Commission prior to the 90/th/ day after the Closing Date, the Purchaser shall have the right, exercisable in writing by the Purchaser within the succeeding 10 business days following the 90/th/ day after the Closing Date to require the Seller to repurchase the Shares acquired by the Purchaser pursuant to this Agreement at the per share purchase price equal to the price per share paid by the Purchaser for such Shares as set forth in Sections 1.1 and 1.4 hereof. The closing for the purchase and sale of the Shares shall occur at the office of the Purchaser no later than 10 Business Days following the giving of the notice by the Purchaser to the Seller. 2.4 Right of First Refusal From the date of this Agreement until the date ---------------------- on which the Registration Statement is declared effective by the Commission (provided that in no event shall -8- such time period exceed 90 days after the Closing Date), other than to the Purchaser or an Affiliate thereof, the Seller shall not directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant of any option to purchase or other disposition) any of its shares of Common Stock of the Company or any securities that are exchangeable or convertible (directly or indirectly) for shares of its Common Stock, (collectively, a "Subsequent Placement"), unless: (A) the Seller delivers -------------------- to the Purchaser a written notice (the "Subsequent Placement Notice") of its --------------------------- intention to effect such Subsequent Placement, which Subsequent Placement Notice shall describe in reasonable detail the proposed terms of such Subsequent Placement, the amount of proceeds intended to be raised thereunder, and subject to the terms of any applicable confidentiality agreement, the Person with whom such Subsequent Placement shall be effected, and attached to which shall be a term sheet or similar document relating thereto and (B) the Purchaser shall not have notified the Seller by 6:30 p.m. (New York City time) on the third Business Day after its receipt of the Subsequent Placement Notice of its willingness to purchase (or to cause its sole designee to purchase), subject to completion of mutually acceptable documentation, the shares of Common Stock referenced in the Subsequent Placement Notice on the same terms and conditions set forth in such notice (such notice to purchase the shares is referred to as the "Purchase -------- Notice"). If the Purchaser shall fail to deliver a Purchase Notice to the Seller - ------ regarding its intention to enter into such negotiations within three Business Days after receipt of a Subsequent Placement Notice, or upon delivery of a Purchase Notice the Purchaser fails to consummate the purchase of the shares in accordance with such Purchase Notice within ten Business Days of delivery of the Purchase Notice (the "Expiration Date"), then the Seller may effect the --------------- Subsequent Placement substantially upon the terms and to the Persons (or Affiliates of such Persons) set forth in the Subsequent Placement Notice; provided, that the Seller shall provide the Purchaser with a second Subsequent - -------- Placement Notice and the Purchaser shall again have the right of first refusal set forth above in this paragraph (b), if the Subsequent Placement subject to the initial Subsequent Placement Notice shall not have been consummated for any reason on the terms set forth in such Subsequent Placement Notice within 20 calendar days after the Expiration Date of the Purchase Notice. ARTICLE III MISCELLANEOUS 3.1 Fees and Expenses. On the Settlement Date, the Seller shall reimburse ----------------- the Purchaser for its legal fees and expenses incurred in connection with the preparation and negotiation of the documents executed in connection with this transaction by paying to Robinson Silverman $25,000. The amount contemplated by the immediately preceding sentence shall be deducted from the aggregate purchase price due to the Seller with respect to the Shares delivered to Purchaser on the Settlement Date in accordance with the Escrow Agreement. Other than the amount contemplated in this Agreement, each party hereto shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. 3.2 Entire Agreement: Amendments. This Agreement and the Escrow Agreement, ---------------------------- together with any Exhibits or Schedules thereto contain the entire understanding of the parties -9- with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 3.3 Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (New York City time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller: The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto or such other address as may be designated in writing hereafter, in the same manner, by such Person. 3.4 Amendments: Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. -10- 3.5 Headings. The headings herein are for convenience only, do not --------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 3.6 Successors and Assigns. This Agreement shall be binding upon and inure ---------------------- to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. This provision shall not limit the Purchaser's right to transfer the Shares in accordance with Section 2.1 (a). 3.7 No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 3.8 Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the "New York -------- Courts"). Each party hereto hereby irrevocably submits to the jurisdiction of - ------ the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of the any of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such New York Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto (including its affiliates, agents, officers, directors and employees) hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto (including its affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 3.9 Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the Closing Date until the earlier to occur of(i) two years after the Closing -11- Date or (ii) the date on which all the Shares shall have been resold in accordance with Section 2.1. 3.10 Execution. This Agreement may be executed in two or more counterparts, --------- all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 3.11 Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unreasonable or unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. 3.12 Remedies. In addition to being entitled to exercise all rights -------- provided herein or granted by law, including recovery of damages, each of the parties will be entitled to specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOWS] -12- IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Edward White ------------------------------- Name: Edward White Title: Co-Trustee PINE RIDGE FINANCIAL INC. By: _______________________________ Name: Title: Purchase Price for Shares: $2,125,000 Number of Shares to be acquired: 500,000 Address for Notice: Pine Ridge Financial Inc. c/o Cavallo Capital Corp. 660 Madison Avenue, 18th Floor New York, NY 10021 Tel.: (212) 651-9000 Fax: (212) 651-9010 Attn: Avi Vigder With a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, NY 10104 Facsimile No.: (212) 541-4630 and (212) 541-1432 Attn: Kenneth L. Henderson and Eric L. Cohen, Esq. IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: _______________________________ Name: John Michael Paulson Title: Co-Trustee By: _______________________________ Name: Edward White Title: Co-Trustee PINE RIDGE FINANCIAL INC. By: /s/ Kenneth L. Henderson ------------------------------- Name: Kenneth L. Henderson Title: Attorney-in-fact Purchase Price for Shares: $2,125,000 Number of Shares to be acquired: 500,000 Address for Notice: Pine Ridge Financial Inc. c/o Cavallo Capital Corp. 660 Madison Avenue, 18th Floor New York, NY 10021 Tel.: (212) 651-9000 Fax: (212) 651-9010 Attn: Avi Vigder With a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, NY 10104 Facsimile No.: (212) 541-4630 and (212) 541-1432 Attn: Kenneth L. Henderson and Eric L. Cohen, Esq. Schedule A ---------- Schedule of Fees Payable by Seller ---------------------------------- 1. The Seller shall pay a total of $99,375 to the Company. 2. The Seller shall pay $74,375 to S.R. West Corp. as commission for its services in connection with the transaction consummated on the Settlement Date and in connection with the purchase of any Additional Shares under Section 1.4, the Seller shall also pay (i) to S.R. West Corp., a dollar amount equal to 3.5% of the gross purchase price paid by the Purchaser and (ii) to the Company, a dollar amount equal to 3.5% of the gross purchase price paid by the Purchaser. 3. The Seller shall also pay certain fees as set forth in Section 3.1 of the Agreement. 4. The Seller shall pay the fees of the Escrow Agent pursuant to the terms of the Escrow Agreement. -14- EX-99.(B) 4 dex99b.txt SECURITIES PURCHASE AGREEMENTS (8/13/2001) Exhibit 7(b)1 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT among THE ALLEN E. PAULSON LIVING TRUST and JOSEPH F. DAMICO Dated as of August 13, 2001 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of August 13, ----------- 2001, among The Allen E. Paulson Living Trust, a California trust (the "Seller"), and Joseph F. Damico (the "Purchaser"). --------- WHEREAS, subject to the terms and conditions set forth in this Agreement, the Seller desires to sell to the Purchaser and the Purchaser desires to purchase from the Seller 100,000 shares (the "Shares") of common stock (the ------ "Common Stock") of CardioDynamics International Corporation, a California - -------------- corporation (the "Company"), no par value per share (such shares being --------- collectively referred to herein as the "Shares") in accordance with the terms ------ and conditions set forth herein; and WHEREAS, with regard to the shares of Common Stock to be sold by the Seller to the Purchaser hereunder, the Purchaser, the Company and certain other parties who are also purchasing shares of Common Stock from Seller (the Purchaser and such other parties who are purchasing Common Stock from the Seller are collectively referred to herein as the "Purchasers") are entering into a ---------- Registration Rights Agreement, dated as of the date of this Agreement, in the form of Exhibit A (the "Registration Rights Agreement"). --------- ------------------------------ NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: ARTICLE I PURCHASE AND SALE 1.1 Closing and Settlement Date. Subject to the terms and conditions set --------------------------- forth in this Agreement, the Seller shall sell to the Purchaser and the Purchaser shall purchase the Shares in exchange for a purchase price equal to the product of (a) (i) the average closing price of the Common Stock on Nasdaq or, if not then traded on Nasdaq, on a Subsequent Market on which the Common Stock is then traded, for the twenty (20) Trading Days immediately preceding, but excluding, the Closing Date (as defined herein), multiplied by (ii) 0.90, multiplied by (b) the aggregate number of Shares (the "Purchase Price"). The -------------- closing (the "Closing") of the transactions contemplated herein shall occur at the offices of Gibson, Dunn & Crutcher LLP, 2029 Century Park East, Suite 4000, Los Angeles, California 90067, on the execution date of this Agreement, with payment and delivery of the Shares to occur on the Settlement Date (as defined below). The date of the Closing is hereinafter referred to as the "Closing ------- Date." 1.2 The Closing Date. As a condition precedent to each of the parties' ---------------- obligations hereunder, on the Closing Date, the Company and the parties shall deliver or shall cause to be delivered the following: (A) the Company shall deliver to the Purchaser (i) a Registration Rights Agreement, in the form of Exhibit A, executed by the Company and dated as --------- of the date hereof between the Company and the Purchasers and (ii) the Transfer Agent Instructions, in the form of Exhibit B, executed by the Company and --------- delivered to and acknowledged by the Company's transfer agent (the "Transfer -------- Agent Instructions"); - ------------------ 1 (B) the Seller shall deliver to the Purchaser (i) this Agreement, executed by the Seller (ii) the escrow agreement ("Escrow Agreement"), dated as ----------------- of the date hereof among the Seller, the Purchasers, California Bank & Trust and Clark & Trevithick (the "Escrow Agent"), executed by the Seller; ------------- (C) the Purchaser shall deliver (i) to the Seller, this Agreement executed by the Purchaser, (ii) to the Company, a Registration Rights Agreement, executed by the Purchaser, (iii) to the Escrow Agent, the Purchase Price, in United States dollars in immediately available funds by wire transfer; provided -------- that such funds shall be disbursed in accordance with the terms of the Escrow Agreement; and (iv) to the Seller and the Escrow Agent, the Escrow Agreement executed by the Purchaser; (D) each of California Bank & Trust, the Company and the Escrow Agent shall deliver to the Purchasers and Seller, the Escrow Agreement executed by such party; and (E) the Company shall deliver to the Purchasers the Registration Rights Agreement executed by the Company. 1.3 The Settlement Date. On or prior to the tenth Trading Day following ------------------- the delivery of the Purchase Price to the Escrow Agent (the "Settlement Date") ---------------- (A) the Seller shall cause to be delivered to the Purchaser a stock certificate, registered in the name of the Purchaser, representing the Shares and (B) in accordance with the terms of the Escrow Agreement, the Escrow Agent shall disburse the Purchase Price in United States dollars in immediately available funds by wire transfer. 1.4 [Intentionally omitted.] 1.5 Certain Defined Terms. --------------------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day ------------ which shall be a legal holiday or a day on which banking institutions in Chicago or California are authorized or required by law or other governmental action to close. "Commission" means the United States Securities and Exchange ---------- Commission. "Nasdaq" means the Nasdaq National Market. ------ "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. 2 "Subsequent Market" shall mean any of the New York Stock Exchange, ----------------- American Stock Exchange, Inc. or Nasdaq Small Cap Market. "Trading Day" means a day on which the shares of Common Stock are ----------- traded on the Nasdaq or on such Subsequent Market on which the shares of Common Stock are then listed or quoted, or (b) if the shares of Common Stock are not listed on the Nasdaq or a Subsequent Market, a day on which the shares of Common Stock are traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC Bulletin Board, a day on which the shares of Common Stock are quoted in the over-the- counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, that in the event that the shares of Common Stock are not listed or - -------- quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business Day. 1.6 Representations and Warranties of the Purchaser. The Purchaser ----------------------------------------------- represents and warrants to the Seller as follows: (a) Consents; Authority. No consents, waivers or approvals from, or ------------------- notification of or filings with, any governmental authority or other Person are required for the Purchaser to enter into this Agreement. All actions on the part of the Purchaser necessary for the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been taken. Each of this Agreement, the Registration Rights Agreement and the Escrow Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Investment Intent. The Purchaser is acquiring the Shares as ----------------- principal for its own account, for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof. The Purchaser is acquiring the Shares hereunder in the ordinary course of its business. The Purchaser does not have, or plan to enter into, any agreement, arrangement or understanding, directly or indirectly, with any Person to sell, transfer, grant participations in or distribute the Shares. (c) Purchaser Status. At the time the Purchaser was offered the ---------------- Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501 under the Securities Act of 1933, as amended (the "Securities Act"). - --------------- (d) Experience of the Purchaser. The Purchaser, either alone or --------------------------- together with its representatives, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. (e) Ability of the Purchaser to Bear Risk of Investment. The ---------------------------------------- ---------- Purchaser is able to bear the economic risk of its investment in the Shares and can afford the complete loss of such investment. 3 (f) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Company and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller and the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (g) General Solicitation. The Purchaser is not purchasing the Shares -------------------- as a result of or subsequent to any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (h) Reliance. The Purchaser understands and acknowledges that (i) -------- Shares are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption, depends in part on, and the Seller will rely upon the accuracy and truthfulness of, the foregoing representations and the Purchaser hereby consents to and acknowledges such reliance. (i) No Conflicts; Advice. The Purchaser's investment in the Shares -------------------- does not and will not conflict with or violate any term or provision of any instrument, agreement, law, regulation, order or decree to which the Purchaser or any of its properties is a party or is subject. The Purchaser acknowledges that it has not relied on the Seller or any of its officers, directors, affiliates, employees, representatives or agents for any tax, legal, financial, investment or other advice. In regard to such considerations, the Purchaser has relied on the advice of, or has consulted with, only its own tax, legal, financial, investment and other advisors. (j) Brokers, Etc. No finder, broker, agent, financial advisor or ------------ other intermediary acted on behalf of the Purchaser in connection with the offering of the Shares or the negotiation or consummation of this Agreement or any of the transactions contemplated hereby. (k) Compliance With Law. The Purchaser's trading and distribution ------------------- activities with respect to the Shares will be in compliance with all applicable state and federal securities laws, rules and regulations (including, without limitation, Regulation M) and the rules and regulations of the Nasdaq Stock Market. Neither the Purchaser nor any of its affiliates (as that term is defined in Rule 405 of the Securities Act) (i) has entered, nor will any of them enter, into any agreement or other arrangement to effect any short sale of any of the Shares, or (ii) take, directly or indirectly, any action designed to cause or that would result in, or which constitutes or that might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of any of the Shares. 1.7 Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: 4 (a) Authorization: Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by each of this Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The execution and delivery of this Agreement and the Escrow Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement and the Escrow Agreement have been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligations of the Seller enforceable against the Seller in accordance with their terms. (b) No Liens on Seller's Shares. As of the Settlement Date the Seller --------------------------- will be the sole beneficial owner of the Shares and the Seller will deliver to the Purchaser valid title to the Shares free and clear of all liens, pledges, encumbrances, security interests, and other restrictions. The Shares are not the subject of any shareholders' or similar agreement granting any right of first offer, right of first refusal or preemptive right or restricting in any way the right of Seller to transfer the Shares to the Purchaser hereunder. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement and the Escrow Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including, without limitation, federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement and the Escrow Agreement, other than reports of beneficial ownership to applicable governmental authorities. (e) Private Offering. Assuming the accuracy of the representations ---------------- and warranties of the Purchaser set forth in Section 1.6, the offer and sale of the Shares to the Purchaser as contemplated hereby are exempt from the registration requirements of the Securities Act. Neither the Seller nor any Person acting on its behalf has taken or is, to the knowledge of the Seller, contemplating taking any action which could subject the offering or sale of the Shares to the registration requirements of the Securities Act including, without limitation, soliciting any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (f ) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule 1 hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial 5 advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement or the Escrow Agreement. (g) Solicitation Materials. Neither the Seller nor any Person acting ---------------------- on the Seller's behalf has solicited any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (h) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Shares. ARTICLE II OTHER AGREEMENTS OF THE PARTIES 2.1 Transfer Restrictions: Legend. ----------------------------- (a) The Purchaser acknowledges that Shares may only be disposed of pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with any applicable federal and state securities laws. In connection with any transfer of Shares other than pursuant to an effective registration statement, except as otherwise set forth herein, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a "Purchaser" under this Agreement, the Registration Rights Agreement and the Escrow Agreement. (b) The Purchaser acknowledges that until the Shares are registered pursuant to an effective registration statement or may otherwise be disposed of pursuant to an available exemption from (including, without limitation, under Rule 144(k) promulgated under the Securities Act) or in a transaction not subject to the registration requirements of the Securities Act, the following or similar legend shall appear on the stock certificates representing the Shares: THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE "SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE 6 SECURITIES OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 2.2 Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser and its shareholders, officers, directors, employees, agents and representatives (each, a "Purchaser Indemnitee," and collectively, the "Purchaser Indemnitees") -------------------- --------------------- against any damages, claims, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and expenses) (collectively, "Purchaser's Losses") which may be suffered or incurred by any Purchaser - ------------------- Indemnitee as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement or the Escrow Agreement. (b) The Purchaser agrees to indemnify and hold harmless the Seller and its shareholders, officers, directors, employees, agents and representatives (each, a "Seller Indemnitee," and collectively, the "Seller Indemnitees") ----------------- ------------------ against any damages, claims, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and other expenses) (collectively, "Seller's Losses") which may be suffered or incurred by any Seller Indemnitee as - ---------------- a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement or the Escrow Agreement. (c) In case any proceeding (including, without limitation, any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "Indemnified Party") shall promptly notify the Person against whom such - ------------------ indemnity may be sought (the "Indemnifying Party") in writing of the occurrence ------------------ of the facts and circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section 2.2 shall not in any way affect the Indemnifying Party's indemnification obligation hereunder except and only to the extent that the Indemnifying Party is actually prejudiced thereby. In case any such proceeding shall be brought against any Indemnified Party and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other Indemnifying Party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the Indemnifying Party shall pay as incurred the fees and expenses of the counsel retained by the Indemnified Party in the event (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including, without limitation, any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from and against any loss or liability by reason of such settlement or judgment and the Indemnifying Party shall obtain a full release of the Indemnified Party. 7 ARTICLE III MISCELLANEOUS 3.1 Fees and Expenses. Each party hereto shall pay the fees and expenses ----------------- of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. 3.2 Entire Agreement: Amendments. This Agreement, together with any ---------------------------- Exhibits or Schedules hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 3.3 Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date and earlier than 11:59 p.m. (California time) on such date, (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller: If by U.S. Mail: The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White If by Courier: The Allen E. Paulson Living Trust c/o Del Mar Country Club, 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White 8 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto or such other address as may be designated in writing hereafter, in the same manner, by such Person. 3.4 Amendments: Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 3.5 Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 3.6 Successors and Assigns. This Agreement shall be binding upon and -------------- ------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. This provision shall not limit the Purchaser's right to transfer the Shares in accordance with Section 2.1(a). 3.7 No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 3.8 Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the courts of the State of California or in the federal courts of the United States for the Central District of California (the "California Courts"). Each party hereto hereby ----------------- irrevocably submits to the jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including, without limitation, with respect to the enforcement of any provision 9 of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto (on behalf of itself and its affiliates, agents, officers, directors and employees) hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto (on behalf of itself and its affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 3.9 Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the Closing Date until the earlier to occur of (i) one year after the Closing Date or (ii) the date on which all the Shares shall have been resold in accordance with Section 2.1. 3.10 Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other parties, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 3.11 Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unreasonable or unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 10 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------------ Name: John Michael Paulson Title: Co-Trustee By: /s/ Edward White ------------------------------------ Name: Edward White Title: Co-Trustee PURCHASER: /s/ Joseph F. Damico --------------------------------------- Joseph F. Damico Address for Notice: Joseph F. Damico 1388 W. Lake Street Libertyville, IL 60048 Facsimile No.: 847-482-9215 With a copy to: Tony Decello c/o McCormack Advisors International IMG Center, Suite 100, 1360 East 9th Cleveland, OH 44114 Facsimile No.: 216-436-3396 11 Schedule 1 ---------- Schedule of Fees Payable by Seller ---------------------------------- 1. The Seller shall pay to the Company a fee equal to 3.5% of the aggregate gross purchase price paid by all Purchasers to the Seller in accordance with this Agreement and the other agreements executed and delivered concurrently herewith between the Seller and the Purchasers not party to this Agreement in regard to the purchase and sale of shares of Common Stock. 12 EXHIBIT 7(b)2 ================================================================================ SECURITIES PURCHASE AGREEMENT among THE ALLEN E. PAULSON LIVING TRUST and THOMAS FOGARTY Dated as of August 13, 200l ================================================================================ SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of August 13, --------- 2001, among The Allen E. Paulson Living Trust, a California trust (the "Seller"), and Thomas Fogarty (the "Purchaser"). --------- WHEREAS, subject to the terms and conditions set forth in this Agreement, the Seller desires to sell to the Purchaser and the Purchaser desires to purchase from the Seller 35,000 shares (the "Shares") of common stock (the ------ "Common Stock") of CardioDynamics International Corporation, a California ------------ corporation (the "Company"), no par value per share (such shares being ------- collectively referred to herein as the "Shares") in accordance with the terms ------ and conditions set forth herein; and WHEREAS, with regard to the shares of Common Stock to be sold by the Seller to the Purchaser hereunder, the Purchaser, the Company and certain other parties who are also purchasing shares of Common Stock from Seller (the Purchaser and such other parties who are purchasing Common Stock from the Seller are collectively referred to herein as the "Purchasers") are entering into a ---------- Registration Rights Agreement, dated as of the date of this Agreement, in the form of Exhibit A (the "Registration Rights Agreement"). --------- ----------------------------- NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: ARTICLE I PURCHASE AND SALE 1.1 Closing and Settlement Date. Subject to the terms and conditions set forth in this Agreement, the Seller shall sell to the Purchaser and the Purchaser shall purchase the Shares in exchange for a purchase price equal to the product of (a) (i) the average closing price of the Common Stock on Nasdaq or, if not then traded on Nasdaq, on a Subsequent Market on which the Common Stock is then traded, for the twenty (20) Trading Days immediately preceding, but excluding, the Closing Date (as defined herein), multiplied by (ii) 0.90, multiplied by (b) the aggregate number of Shares (the "Purchase Price"). The closing (the "Closing") of the -------------- transactions contemplated herein shall occur at the offices of Gibson, Dunn & Crutcher LLP, 2029 Century Park East, Suite 4000, Los Angeles, California 90067, on the execution date of this Agreement, with payment and delivery of the Shares to occur on the Settlement Date (as defined below). The date of the Closing is hereinafter referred to as the "Closing Date." ------------ 1.2 The Closing Date. As a condition precedent to each of the parties' ---------------- obligations hereunder, on the Closing Date, the Company and the parties shall deliver or shall cause to be delivered the following: (A) the Company shall deliver to the Purchaser (i) a Registration Rights Agreement, in the form of Exhibit A, executed by the Company and dated as --------- of the date hereof between the Company and the Purchasers and (ii) the Transfer Agent Instructions, in the form of 1 Exhibit B, executed by the Company and delivered to and acknowledged by the - --------- Company's transfer agent (the "Transfer Agent Instructions"); --------------------------- (B) the Seller shall deliver to the Purchaser (i) this Agreement, executed by the Seller (ii) the escrow agreement ("Escrow Agreement"), dated as --------------- of the date hereof among the Seller, the Purchasers, California Bank & Trust and Clark & Trevithick (the "Escrow Agent"), executed by the Seller, ------------ (C) the Purchaser shall deliver (i) to the Seller, this Agreement executed by the Purchaser, (ii) to the Company, a Registration Rights Agreement, executed by the Purchaser, (iii) to the Escrow Agent, the Purchase Price, in United States dollars in immediately available funds by wire transfer, provided -------- that such funds shall be disbursed in accordance with the terms of the Escrow Agreement; and (iv) to the Seller and the Escrow Agent, the Escrow Agreement executed by the Purchaser, (D) each of California Bank & Trust, the Company and the Escrow Agent shall deliver to the Purchasers and Seller, the Escrow Agreement executed by such party; and (E) the Company shall deliver to the Purchasers the Registration Rights Agreement executed by the Company. 1.3 The Settlement Date. On or prior to the tenth Trading Day following ------------------- the delivery of the Purchase Price to the Escrow Agent (the "Settlement Date") --------------- (A) the Seller shall cause to be delivered to the Purchaser a stock certificate, registered in the name of the Purchaser, representing the Shares and (B) in accordance with the terms of the Escrow Agreement, the Escrow Agent shall disburse the Purchase Price in United States dollars in immediately available funds by wire transfer. 1.4 [Intentionally omitted.] 1.5 Certain Defined Terms. --------------------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in Chicago or California are authorized or required by law or other governmental action to close. "Commission" means the United States Securities and Exchange Commission. ---------- "Nasdaq" means the Nasdaq National Market. ------ 2 "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "Subsequent Market" shall mean any of the New York Stock Exchange, American ----------------- Stock Exchange, Inc. or Nasdaq Small Cap Market. "Trading Day" means a day on which the shares of Common Stock are traded on ----------- the Nasdaq or on such Subsequent Market on which the shares of Common Stock are then listed or quoted, or (b) if the shares of Common Stock are not listed on the Nasdaq or a Subsequent Market, a day on which the shares of Common Stock are traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC Bulletin Board, a day on which the shares of Common Stock are quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, -------- that in the event that the shares of Common Stock are not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business Day. 1.6 Representations and Warranties of the Purchaser. The Purchaser ----------------------------------------------- represents and warrants to the Seller as follows: (a) Consents; Authority. No consents, waivers or approvals from, or ------------------- notification of or filings with, any governmental authority or other Person are required for the Purchaser to enter into this Agreement. All actions on the part of the Purchaser necessary for the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been taken. Each of this Agreement, the Registration Rights Agreement and the Escrow Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Investment Intent. The Purchaser is acquiring the Shares as ----------------- principal for its own account, for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof. The Purchaser is acquiring the Shares hereunder in the ordinary course of its business. The Purchaser does not have, or plan to enter into, any agreement, arrangement or understanding, directly or indirectly, with any Person to sell, transfer, grant participations in or distribute the Shares. (c) Purchaser Status. At the time the Purchaser was offered the ---------------- Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501 under the Securities Act of 1933, as amended (the "Securities Act"). -------------- (d) Experience of the Purchaser. The Purchaser, either alone or --------------------------- together with its representatives, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. 3 (e) Ability of the Purchaser to Bear Risk of Investment. The --------------------------------------------------- Purchaser is able to bear the economic risk of its investment in the Shares and can afford the complete loss of such investment. (f) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Company and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller and the Company concerning the terms and conditions of the offering of the Shares, and the merits and risks of investing in the Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (g) General Solicitation. The Purchaser is not purchasing the Shares -------------------- as a result of or subsequent to any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement (h) Reliance. The Purchaser understands and acknowledges that (i) -------- Shares are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption, depends in part on, and the Seller will rely upon the accuracy and truthfulness of, the foregoing representations and the Purchaser hereby consents to and acknowledges such reliance. (i) No Conflicts; Advice. The Purchaser's investment in the Shares -------------------- does not and will not conflict with or violate any term or provision of any instrument, agreement, law, regulation, order or decree to which the Purchaser or any of its properties is a party or is subject. The Purchaser acknowledges that it has not relied on the Seller or any of its officers, directors, affiliates, employees, representatives or agents for any tax, legal, financial, investment or other advice. In regard to such considerations, the Purchaser has relied on the advice of, or has consulted with, only its own tax, legal, financial, investment and other advisors. (j) Brokers, Etc. No finder, broker, agent, financial advisor or ------------- other intermediary acted on behalf of the Purchaser in connection with the offering of the Shares or the negotiation or consummation of this Agreement or any of the transactions contemplated hereby. (k) Compliance With Law. The Purchaser's trading and distribution ------------------- activities with respect to the Shares will be in compliance with all applicable state and federal securities laws, rules and regulations (including, without limitation, Regulation M) and the rules and regulations of the Nasdaq Stock Market. Neither the Purchaser nor any of its affliates (as that term is defined in Rule 405 of the Securities Act) (i) has entered, nor will any of them enter, into any agreement or other arrangement to effect any short sale of any of the Shares, or (ii) take, directly or indirectly, any action designed to cause or that would result in, or which constitutes or that might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of any of the Shares. 4 1.7 Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization: Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by each of this Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The execution and delivery of this Agreement and the Escrow Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement and the Escrow Agreement have been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligations of the Seller enforceable against the Seller in accordance with their terms. (b) No Liens on Seller's Shares. As of the Settlement Date the Seller --------------------------- will be the sole beneficial owner of the Shares and the Seller will deliver to the Purchaser valid title to the Shares free and clear of all liens, pledges, encumbrances, security interests, and other restrictions. The Shares are not the subject of any shareholders' or similar agreement granting any right of first offer, right of first refusal or preemptive right or restricting in any way the right of Seller to transfer the Shares to the Purchaser hereunder. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement and the Escrow Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including, without limitation, federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement and the Escrow Agreement, other than reports of beneficial ownership to applicable governmental authorities. (e) Private Offering. Assuming the accuracy of the representations ---------------- and warranties of the Purchaser set forth in Section 1.6, the offer and sale of the Shares to the Purchaser as contemplated hereby are exempt from the registration requirements of the Securities Act. Neither the Seller nor any Person acting on its behalf has taken or is, to the knowledge of the Seller, contemplating taking any action which could subject the offering or sale of the Shares to the registration requirements of the Securities Act including, without limitation, soliciting any offer to buy or sell the Shares by means of any form of general solicitation or advertising. 5 (f) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule 1 hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement or the Escrow Agreement. (g) Solicitation Materials. Neither the Seller nor any Person acting ---------------------- on the Seller's behalf has solicited any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (h) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Shares. ARTICLE II OTHER AGREEMENTS OF THE PARTIES 2.1 Transfer Restrictions: Legend. ----------------------------- (a) The Purchaser acknowledges that Shares may only be disposed of pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with any applicable federal and state securities laws. In connection with any transfer of Shares other than pursuant to an effective registration statement, except as otherwise set forth herein, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a "Purchaser" under this Agreement, the Registration Rights, Agreement and the Escrow Agreement. (b) The Purchaser acknowledges that until the Shares are registered pursuant to an effective registration statement or may otherwise be disposed of pursuant to an available exemption from (including, without limitation, under Rule 144(k) promulgated under the Securities Act) or in a transaction not subject to the registration requirements of the Securities Act, the following or similar legend shall appear on the stock certificates representing the Shares: THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE "SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION 6 NOT SUBJECT TO, THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 2.2 Indemnification. ---------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser and its shareholders, officers, directors, employees, agents and representatives (each, a "Purchaser Indemnitee," and collectively, the "Purchaser Indemnitees") -------------------- --------------------- against any damages, claims, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and expenses) (collectively, "Purchaser's Losses") which may be suffered or incurred by any Purchaser ------------------ Indemnitee as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement or the Escrow Agreement. (b) The Purchaser agrees to indemnify and hold harmless the Seller and its shareholders, officers, directors, employees, agents and representatives (each, a "Seller Indemnitee," and collectively, the "Seller Indemnitees") ----------------- ------------------ against any damages, claims, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and other expenses) (collectively, "Seller's Losses") which may be suffered or incurred by any Seller Indemnitee as --------------- a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement or the Escrow Agreement. (c) In case any proceeding (including, without limitation, any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "Indemnified Party") shall promptly notify the Person against whom such ------------------ indemnity may be sought (the "Indemnifying Party") in writing of the occurrence ------------------ of the facts and circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section 2.2 shall not in any way affect the Indemnifying Party's indemnification obligation hereunder except and only to the extent that the Indemnifying Party is actually prejudiced thereby. In case any such proceeding shall be brought against any Indemnified Party and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other Indemnifying Party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the Indemnifying Party shall pay as incurred the fees and expenses of the counsel retained by the Indemnified Party in the event (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including, without limitation, any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified 7 Party from and against any loss or liability by reason of such settlement or judgment and the Indemnifying Party shall obtain a full release of the Indemnified Party. ARTICLE III MISCELLANEOUS 3.1 Fees and Expenses. Each party hereto shall pay the fees and expenses ----------------- of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. 3.2 Entire Agreement: Amendments. This Agreement, together with any ---------------------------- Exhibits or Schedules hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 3.3 Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of(i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date and earlier than 11:59 p.m. (California time) on such date, (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller If by U.S. Mail: The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White If by Courier: The Allen E. Paulson Living Trust c/o Del Mar Country Club, 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 8 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser To the address set forth under the Purchaser's name on the signature pages hereto or such other address as may be designated in writing hereafter, in the same manner, by such Person. 3.4 Amendments: Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 3.5 Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 3.6 Successors and Assigns. This Agreement shall be binding upon and inure ---------------------- to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. This provision shall not limit the Purchaser's right to transfer the Shares in accordance with Section 2.1(a). 3.7 No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 3.8 Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the courts of the State of California or in the federal courts of the United States for the Central District of California (the "California Courts"). Each party hereto hereby ----------------- irrevocably submits to the jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including, without limitation, with respect to the enforcement of any provision of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto (on behalf of itself and its 9 affiliates, agents, officers, directors and employees) hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto (on behalf of itself and its affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 3.9 Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the Closing Date until the earlier to occur of (i) one year after the Closing Date or (ii) the date on which all the Shares shall have been resold in accordance with Section 2.1. 3.10 Execution. This Agreement may be executed in two or more counterparts, --------- all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other parties, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 3.11 Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unreasonable or unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 10 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson -------------------------------- Name: John Michael Paulson Title: Co-Trustee By: -------------------------------- Name: Edward White Title: Co-Trustee PURCHASER: ____________________________________ Thomas Fogarty Address for Notice: Thomas Fogarty MD 3270 Alpine Road Portola Valley, CA 94028 Facsimile No.: _________________ 11 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By:______________________________ Name: John Michael Paulson Title: Co-Trustee By: /s/ Edward White ------------------------------ Name: Edward White Title: Co-Trustee PURCHASER: _________________________________ Thomas Fogarty Address for Notice: Thomas Fogarty MD 3270 Alpine Road Portola Valley, CA 94028 Facsimile No.: _______________ 11 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By:_______________________________ Name: John Michael Paulson Title: Co-Trustee By:_______________________________ Name: Edward White Title: Co-Trustee PURCHASER: THE FOGARTY FAMILY REVOCABLE TRUST /s/ Thomas J. Fogarty ---------------------------------- Thomas J. Fogarty, as Trustee Address for Notice: The Fogarty Family Revocable Trust c/o Thomas Fogarty MD, Trustee 3270 Alpine Road Portola Valley, CA 94028 Facsimile No.: 650-854-2778 11 Schedule 1 ---------- Schedule of Fees Payable by Seller ---------------------------------- 1. The Seller shall pay to the Company a fee equal to 3.5% of the aggregate gross purchase price paid by all Purchasers to the Seller in accordance with this Agreement and the other agreements executed and delivered concurrently herewith between the Seller and the Purchasers not party to this Agreement in regard to the purchase and sale of shares of Common Stock. 12 /s/ Thomas J. Fogarty ---------------------------------- Thomas Fogarty, MD Shares: 35,000 Address: 3270 Alpine Road Portola Valley, CA 94028 [Signature Page to Registration Rights Agreement] EXHIBIT 7(b)3 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT among THE ALLEN E. PAULSON LIVING TRUST and LESTER B. KNIGHT Dated as of August 13, 2001 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of August 13, --------- 2001, among The Allen E. Paulson Living Trust, a California trust (the "Seller"), and Lester B. Knight (the "Purchaser"). --------- WHEREAS, subject to the terms and conditions set forth in this Agreement, the Seller desires to sell to the Purchaser and the Purchaser desires to purchase from the Seller 250,000 shares (the "Shares") of common stock (the ------ "Common Stock") of CardioDynamics International Corporation, a California ------------ corporation (the "Company"), no par value per share (such shares being ------- collectively referred to herein as the "Shares") in accordance with the terms ------ and conditions set forth herein; and WHEREAS, with regard to the shares of Common Stock to be sold by the Seller to the Purchaser hereunder, the Purchaser, the Company and certain other parties who are also purchasing shares of Common Stock from Seller (the Purchaser and such other parties who are purchasing Common Stock from the Seller are collectively referred to herein as the "Purchasers") are entering into a ---------- Registration Rights Agreement, dated as of the date of this Agreement, in the form of Exhibit A (the "Registration Rights Agreement"). --------- ----------------------------- NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: ARTICLE I PURCHASE AND SALE 1.1 Closing and Settlement Date. Subject to the terms and conditions set --------------------------- forth in this Agreement, the Seller shall sell to the Purchaser and the Purchaser shall purchase the Shares in exchange for a purchase price equal to the product of (a) (i) the average closing price of the Common Stock on Nasdaq or, if not then traded on Nasdaq, on a Subsequent Market on which the Common Stock is then traded, for the twenty (20) Trading Days immediately preceding, but excluding, the Closing Date (as defined herein), multiplied by (ii) 0.90, multiplied by (b) the aggregate number of Shares (the "Purchase Price"). The -------------- closing (the "Closing") of the transactions contemplated herein shall occur at the offices of Gibson, Dunn & Crutcher LLP, 2029 Century Park East, Suite 4000, Los Angeles, California 90067, on the execution date of this Agreement, with payment and delivery of the Shares to occur on the Settlement Date (as defined below). The date of the Closing is hereinafter referred to as the "Closing ------- Date." - ---- 1.2 The Closing Date. As a condition precedent to each of the parties' ---------------- obligations hereunder, on the Closing Date, the Company and the parties shall deliver or shall cause to be delivered the following: (A) the Company shall deliver to the Purchaser (i) a Registration Rights Agreement, in the form of Exhibit A, executed by the Company and dated as --------- of the date hereof between the Company and the Purchasers and (ii) the Transfer Agent Instructions, in the form of Exhibit B, executed by the Company and --------- delivered to and acknowledged by the Company's transfer agent (the "Transfer -------- Agent Instructions"); - ------------------ 1 (B) the Seller shall deliver to the Purchaser (i) this Agreement, executed by the Seller (ii) the escrow agreement ("Escrow Agreement"), dated as ----------------- of the date hereof among the Seller, the Purchasers, California Bank & Trust and Clark & Trevithick (the "Escrow Agent"), executed by the Seller; ------------ (C) the Purchaser shall deliver (i) to the Seller, this Agreement executed by the Purchaser, (ii) to the Company, a Registration Rights Agreement, executed by the Purchaser, (iii) to the Escrow Agent, the Purchase Price, in United States dollars in immediately available funds by wire transfer; provided -------- that such funds shall be disbursed in accordance with the terms of the Escrow Agreement; and (iv) to the Seller and the Escrow Agent, the Escrow Agreement executed by the Purchaser; (D) each of California Bank & Trust, the Company and the Escrow Agent shall deliver to the Purchasers and Seller, the Escrow Agreement executed by such party; and (E) the Company shall deliver to the Purchasers the Registration Rights Agreement executed by the Company. 1.3 The Settlement Date. On or prior to the tenth Trading Day following ------------------- the delivery of the Purchase Price to the Escrow Agent (the "Settlement Date") --------------- (A) the Seller shall cause to be delivered to the Purchaser a stock certificate, registered in the name of the Purchaser, representing the Shares and (B) in accordance with the terms of the Escrow Agreement, the Escrow Agent shall disburse the Purchase Price in United States dollars in immediately available funds by wire transfer. 1.4 [Intentionally omitted.] 1.5 Certain Defined Terms. --------------------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day ------------ which shall be a legal holiday or a day on which banking institutions in Chicago or California are authorized or required by law or other governmental action to close. "Commission" means the United States Securities and Exchange ---------- Commission. "Nasdaq" means the Nasdaq National Market. ------ "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. 2 "Subsequent Market" shall mean any of the New York Stock Exchange, ----------------- American Stock Exchange, Inc. or Nasdaq Small Cap Market. "Trading Day" means a day on which the shares of Common Stock are ----------- traded on the Nasdaq or on such Subsequent Market on which the shares of Common Stock are then listed or quoted, or (b) if the shares of Common Stock are not listed on the Nasdaq or a Subsequent Market, a day on which the shares of Common Stock are traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC Bulletin Board, a day on which the shares of Common Stock are quoted in the over-the- counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, that in the event that the shares of Common Stock are not listed or - -------- quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business Day. 1.6 Representations and Warranties of the Purchaser. The Purchaser ----------------------------------------------- represents and warrants to the Seller as follows: (a) Consents; Authority. No consents, waivers or approvals from, or ------------------- notification of or filings with, any governmental authority or other Person are required for the Purchaser to enter into this Agreement. All actions on the part of the Purchaser necessary for the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been taken. Each of this Agreement, the Registration Rights Agreement and the Escrow Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Investment Intent. The Purchaser is acquiring the Shares as ----------------- principal for its own account, for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof. The Purchaser is acquiring the Shares hereunder in the ordinary course of its business. The Purchaser does not have, or plan to enter into, any agreement, arrangement or understanding, directly or indirectly, with any Person to sell, transfer, grant participations in or distribute the Shares. (c) Purchaser Status. At the time the Purchaser was offered the ---------------- Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501 under the Securities Act of 1933, as amended (the "Securities Act"). -------------- (d) Experience of the Purchaser. The Purchaser, either alone or --------------------------- together with its representatives, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. (e) Ability of the Purchaser to Bear Risk of Investment. The --------------------------------------------------- Purchaser is able to bear the economic risk of its investment in the Shares and can afford the complete loss of such investment. 3 (f) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Company and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller and the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (g) General Solicitation. The Purchaser is not purchasing the Shares -------------------- as a result of or subsequent to any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (h) Reliance. The Purchaser understands and acknowledges that (i) -------- Shares are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption, depends in part on, and the Seller will rely upon the accuracy and truthfulness of, the foregoing representations and the Purchaser hereby consents to and acknowledges such reliance. (i) No Conflicts; Advice. The Purchaser's investment in the Shares -------------------- does not and will not conflict with or violate any term or provision of any instrument, agreement, law, regulation, order or decree to which the Purchaser or any of its properties is a party or is subject. The Purchaser acknowledges that it has not relied on the Seller or any of its officers, directors, affiliates, employees, representatives or agents for any tax, legal, financial, investment or other advice. In regard to such considerations, the Purchaser has relied on the advice of, or has consulted with, only its own tax, legal, financial, investment and other advisors. (j) Brokers, Etc. No finder, broker, agent, financial advisor or ------------ other intermediary acted on behalf of the Purchaser in connection with the offering of the Shares or the negotiation or consummation of this Agreement or any of the transactions contemplated hereby. (k) Compliance With Law. The Purchaser's trading and distribution ------------------- activities with respect to the Shares will be in compliance with all applicable state and federal securities laws, rules and regulations (including, without limitation, Regulation M) and the rules and regulations of the Nasdaq Stock Market. Neither the Purchaser nor any of its affiliates (as that term is defined in Rule 405 of the Securities Act) (i) has entered, nor will any of them enter, into any agreement or other arrangement to effect any short sale of any of the Shares, or (ii) take, directly or indirectly, any action designed to cause or that would result in, or which constitutes or that might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of any of the Shares. 1.7 Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: 4 (a) Authorization: Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by each of this Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The execution and delivery of this Agreement and the Escrow Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement and the Escrow Agreement have been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligations of the Seller enforceable against the Seller in accordance with their terms. (b) No Liens on Seller's Shares. As of the Settlement Date the Seller --------------------------- will be the sole beneficial owner of the Shares and the Seller will deliver to the Purchaser valid title to the Shares free and clear of all liens, pledges, encumbrances, security interests, and other restrictions. The Shares are not the subject of any shareholders' or similar agreement granting any right of first offer, right of first refusal or preemptive right or restricting in any way the right of Seller to transfer the Shares to the Purchaser hereunder. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement and the Escrow Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including, without limitation, federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement and the Escrow Agreement, other than reports of beneficial ownership to applicable governmental authorities. (e) Private Offering. Assuming the accuracy of the representations ---------------- and warranties of the Purchaser set forth in Section 1.6, the offer and sale of the Shares to the Purchaser as contemplated hereby are exempt from the registration requirements of the Securities Act. Neither the Seller nor any Person acting on its behalf has taken or is, to the knowledge of the Seller, contemplating taking any action which could subject the offering or sale of the Shares to the registration requirements of the Securities Act including, without limitation, soliciting any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (f) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule 1 hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial 5 advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement or the Escrow Agreement. (g) Solicitation Materials. Neither the Seller nor any Person acting ---------------------- on the Seller's behalf has solicited any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (h) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Shares. ARTICLE II OTHER AGREEMENTS OF THE PARTIES 2.1 Transfer Restrictions: Legend. ----------------------------- (a) The Purchaser acknowledges that Shares may only be disposed of pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with any applicable federal and state securities laws. In connection with any transfer of Shares other than pursuant to an effective registration statement, except as otherwise set forth herein, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a "Purchaser" under this Agreement, the Registration Rights Agreement and the Escrow Agreement. (b) The Purchaser acknowledges that until the Shares are registered pursuant to an effective registration statement or may otherwise be disposed of pursuant to an available exemption from (including, without limitation, under Rule 144(k) promulgated under the Securities Act) or in a transaction not subject to the registration requirements of the Securities Act, the following or similar legend shall appear on the stock certificates representing the Shares: THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE "SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE 6 SECURITIES OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 2.2 Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser and its shareholders, officers, directors, employees, agents and representatives (each, a "Purchaser Indemnitee," and collectively, the "Purchaser Indemnitees") -------------------- --------------------- against any damages, claims, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and expenses) (collectively, "Purchaser's Losses") which may be suffered or incurred by any Purchaser ------------------ Indemnitee as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement or the Escrow Agreement. (b) The Purchaser agrees to indemnify and hold harmless the Seller and its shareholders, officers, directors, employees, agents and representatives (each, a "Seller Indemnitee," and collectively, the "Seller Indemnitees") ----------------- ------------------ against any damages, claims, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and other expenses) (collectively, "Seller's Losses") which may be suffered or incurred by any Seller Indemnitee as --------------- a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement or the Escrow Agreement. (c) In case any proceeding (including, without limitation, any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "Indemnified Party") shall promptly notify the Person against whom such ----------------- indemnity may be sought (the "Indemnifying Party") in writing of the occurrence ------------------ of the facts and circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section 2.2 shall not in any way affect the Indemnifying Party's indemnification obligation hereunder except and only to the extent that the Indemnifying Party is actually prejudiced thereby. In case any such proceeding shall be brought against any Indemnified Party and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other Indemnifying Party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the Indemnifying Party shall pay as incurred the fees and expenses of the counsel retained by the Indemnified Party in the event (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including, without limitation, any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from and against any loss or liability by reason of such settlement or judgment and the Indemnifying Party shall obtain a full release of the Indemnified Party. 7 ARTICLE III MISCELLANEOUS 3.1 Fees and Expenses. Each party hereto shall pay the fees and expenses ----------------- of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. 3.2 Entire Agreement: Amendments. This Agreement, together with any ---------------------------- Exhibits or Schedules hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 3.3 Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date and earlier than 11:59 p.m. (California time) on such date, (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller: If by U.S. Mail: The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White If by Courier: The Allen E. Paulson Living Trust c/o Del Mar Country Club, 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White 8 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto or such other address as may be designated in writing hereafter, in the same manner, by such Person. 3.4 Amendments: Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 3.5 Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 3.6 Successors and Assigns. This Agreement shall be binding upon and -------------- ------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. This provision shall not limit the Purchaser's right to transfer the Shares in accordance with Section 2.1(a). 3.7 No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 3.8 Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the courts of the State of California or in the federal courts of the United States for the Central District of California (the "California Courts"). Each party hereto hereby ----------------- irrevocably submits to the jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including, without limitation, with respect to the enforcement of any provision 9 of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto (on behalf of itself and its affiliates, agents, officers, directors and employees) hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto (on behalf of itself and its affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 3.9 Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the Closing Date until the earlier to occur of (i) one year after the Closing Date or (ii) the date on which all the Shares shall have been resold in accordance with Section 2.1. 3.10 Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other parties, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 3.11 Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unreasonable or unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 10 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson -------------------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Edward White -------------------------------------- Name: Edward White Title: Co-Trustee PURCHASER: /s/ Lester B. Knight ----------------------------------------- Lester B. Knight Address for Notice: Lester B. Knight c/o RoundTable Healthcare Partners 272 E. Deerpath Road, Suite 350 Lake Forest, IL 60045 Facsimile No.: 847-482-9215 With a copy to: Tony Decello c/o McCormack Advisors International IMG Center, Suite 100, 1360 East 9th Cleveland, OH 44114 Facsimile No.: 216-436-3396 Robyn Schneider c/o Prairie Capital Management 920 York Road, Suite 350 Hinsdale, IL 60521 Facsimile No.: 630-850-9951 11 Schedule 1 ---------- Schedule of Fees Payable by Seller ---------------------------------- 1. The Seller shall pay to the Company a fee equal to 3.5% of the aggregate gross purchase price paid by all Purchasers to the Seller in accordance with this Agreement and the other agreements executed and delivered concurrently herewith between the Seller and the Purchasers not party to this Agreement in regard to the purchase and sale of shares of Common Stock. 12 EXHIBIT 7(b)4 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT among THE ALLEN E. PAULSON LIVING TRUST and JACK L. McGINLEY Dated as of August 13, 2001 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of August 13, ----------- 2001, among The Allen E. Paulson Living Trust, a California trust (the "Seller"), and Jack L. McGinley (the "Purchaser"). --------- WHEREAS, subject to the terms and conditions set forth in this Agreement, the Seller desires to sell to the Purchaser and the Purchaser desires to purchase from the Seller 100,000 shares (the "Shares") of common stock (the ------ "Common Stock") of CardioDynamics International Corporation, a California - -------------- corporation (the "Company"), no par value per share (such shares being --------- collectively referred to herein as the "Shares") in accordance with the terms ------ and conditions set forth herein; and WHEREAS, with regard to the shares of Common Stock to be sold by the Seller to the Purchaser hereunder, the Purchaser, the Company and certain other parties who are also purchasing shares of Common Stock from Seller (the Purchaser and such other parties who are purchasing Common Stock from the Seller are collectively referred to herein as the "Purchasers") are entering into a ---------- Registration Rights Agreement, dated as of the date of this Agreement, in the form of Exhibit A (the "Registration Rights Agreement"). --------- ------------------------------ NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: ARTICLE I PURCHASE AND SALE 1.1 Closing and Settlement Date. Subject to the terms and conditions set --------------------------- forth in this Agreement, the Seller shall sell to the Purchaser and the Purchaser shall purchase the Shares in exchange for a purchase price equal to the product of (a) (i) the average closing price of the Common Stock on Nasdaq or, if not then traded on Nasdaq, on a Subsequent Market on which the Common Stock is then traded, for the twenty (20) Trading Days immediately preceding, but excluding, the Closing Date (as defined herein), multiplied by (ii) 0.90, multiplied by (b) the aggregate number of Shares (the "Purchase Price"). The -------------- closing (the "Closing") of the transactions contemplated herein shall occur at the offices of Gibson, Dunn & Crutcher LLP, 2029 Century Park East, Suite 4000, Los Angeles, California 90067, on the execution date of this Agreement, with payment and delivery of the Shares to occur on the Settlement Date (as defined below). The date of the Closing is hereinafter referred to as the "Closing ------- Date." - ---- 1.2 The Closing Date. As a condition precedent to each of the parties' ---------------- obligations hereunder, on the Closing Date, the Company and the parties shall deliver or shall cause to be delivered the following: (A) the Company shall deliver to the Purchaser (i) a Registration Rights Agreement, in the form of Exhibit A, executed by the Company and dated as --------- of the date hereof between the Company and the Purchasers and (ii) the Transfer Agent Instructions, in the form of Exhibit B, executed by the Company and --------- delivered to and acknowledged by the Company's transfer agent (the "Transfer -------- Agent Instructions"); - ------------------ 1 (B) the Seller shall deliver to the Purchaser (i) this Agreement, executed by the Seller (ii) the escrow agreement ("Escrow Agreement"), dated as ----------------- of the date hereof among the Seller, the Purchasers, California Bank & Trust and Clark & Trevithick (the "Escrow Agent"), executed by the Seller; ------------- (C) the Purchaser shall deliver (i) to the Seller, this Agreement executed by the Purchaser, (ii) to the Company, a Registration Rights Agreement, executed by the Purchaser, (iii) to the Escrow Agent, the Purchase Price, in United States dollars in immediately available funds by wire transfer; provided -------- that such funds shall be disbursed in accordance with the terms of the Escrow Agreement; and (iv) to the Seller and the Escrow Agent, the Escrow Agreement executed by the Purchaser; (D) each of California Bank & Trust, the Company and the Escrow Agent shall deliver to the Purchasers and Seller, the Escrow Agreement executed by such party; and (E) the Company shall deliver to the Purchasers the Registration Rights Agreement executed by the Company. 1.3 The Settlement Date. On or prior to the tenth Trading Day following ------------------- the delivery of the Purchase Price to the Escrow Agent (the "Settlement Date") ---------------- (A) the Seller shall cause to be delivered to the Purchaser a stock certificate, registered in the name of the Purchaser, representing the Shares and (B) in accordance with the terms of the Escrow Agreement, the Escrow Agent shall disburse the Purchase Price in United States dollars in immediately available funds by wire transfer. 1.4 [Intentionally omitted.] 1.5 Certain Defined Terms. --------------------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day ------------ which shall be a legal holiday or a day on which banking institutions in Chicago or California are authorized or required by law or other governmental action to close. "Commission" means the United States Securities and Exchange ---------- Commission. "Nasdaq" means the Nasdaq National Market. ------ "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. 2 "Subsequent Market" shall mean any of the New York Stock Exchange, ----------------- American Stock Exchange, Inc. or Nasdaq Small Cap Market. "Trading Day" means a day on which the shares of Common Stock are ----------- traded on the Nasdaq or on such Subsequent Market on which the shares of Common Stock are then listed or quoted, or (b) if the shares of Common Stock are not listed on the Nasdaq or a Subsequent Market, a day on which the shares of Common Stock are traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC Bulletin Board, a day on which the shares of Common Stock are quoted in the over-the- counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, that in the event that the shares of Common Stock are not listed or - -------- quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business Day. 1.6 Representations and Warranties of the Purchaser. The Purchaser ----------------------------------------------- represents and warrants to the Seller as follows: (a) Consents; Authority. No consents, waivers or approvals from, or ------------------- notification of or filings with, any governmental authority or other Person are required for the Purchaser to enter into this Agreement. All actions on the part of the Purchaser necessary for the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been taken. Each of this Agreement, the Registration Rights Agreement and the Escrow Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Investment Intent. The Purchaser is acquiring the Shares as ----------------- principal for its own account, for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof. The Purchaser is acquiring the Shares hereunder in the ordinary course of its business. The Purchaser does not have, or plan to enter into, any agreement, arrangement or understanding, directly or indirectly, with any Person to sell, transfer, grant participations in or distribute the Shares. (c) Purchaser Status. At the time the Purchaser was offered the ---------------- Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501 under the Securities Act of 1933, as amended (the "Securities Act"). -------------- (d) Experience of the Purchaser. The Purchaser, either alone or --------------------------- together with its representatives, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. (e) Ability of the Purchaser to Bear Risk of Investment. The ---------------------------------------- ---------- Purchaser is able to bear the economic risk of its investment in the Shares and can afford the complete loss of such investment. 3 (f) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Company and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller and the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (g) General Solicitation. The Purchaser is not purchasing the Shares -------------------- as a result of or subsequent to any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (h) Reliance. The Purchaser understands and acknowledges that (i) -------- Shares are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption, depends in part on, and the Seller will rely upon the accuracy and truthfulness of, the foregoing representations and the Purchaser hereby consents to and acknowledges such reliance. (i) No Conflicts; Advice. The Purchaser's investment in the Shares -------------------- does not and will not conflict with or violate any term or provision of any instrument, agreement, law, regulation, order or decree to which the Purchaser or any of its properties is a party or is subject. The Purchaser acknowledges that it has not relied on the Seller or any of its officers, directors, affiliates, employees, representatives or agents for any tax, legal, financial, investment or other advice. In regard to such considerations, the Purchaser has relied on the advice of, or has consulted with, only its own tax, legal, financial, investment and other advisors. (j) Brokers, Etc. No finder, broker, agent, financial advisor or ------------ other intermediary acted on behalf of the Purchaser in connection with the offering of the Shares or the negotiation or consummation of this Agreement or any of the transactions contemplated hereby. (k) Compliance With Law. The Purchaser's trading and distribution ------------------- activities with respect to the Shares will be in compliance with all applicable state and federal securities laws, rules and regulations (including, without limitation, Regulation M) and the rules and regulations of the Nasdaq Stock Market. Neither the Purchaser nor any of its affiliates (as that term is defined in Rule 405 of the Securities Act) (i) has entered, nor will any of them enter, into any agreement or other arrangement to effect any short sale of any of the Shares, or (ii) take, directly or indirectly, any action designed to cause or that would result in, or which constitutes or that might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of any of the Shares. 1.7 Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: 4 (a) Authorization: Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by each of this Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The execution and delivery of this Agreement and the Escrow Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement and the Escrow Agreement have been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligations of the Seller enforceable against the Seller in accordance with their terms. (b) No Liens on Seller's Shares. As of the Settlement Date the Seller --------------------------- will be the sole beneficial owner of the Shares and the Seller will deliver to the Purchaser valid title to the Shares free and clear of all liens, pledges, encumbrances, security interests, and other restrictions. The Shares are not the subject of any shareholders' or similar agreement granting any right of first offer, right of first refusal or preemptive right or restricting in any way the right of Seller to transfer the Shares to the Purchaser hereunder. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement and the Escrow Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including, without limitation, federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement and the Escrow Agreement, other than reports of beneficial ownership to applicable governmental authorities. (e) Private Offering. Assuming the accuracy of the representations ---------------- and warranties of the Purchaser set forth in Section 1.6, the offer and sale of the Shares to the Purchaser as contemplated hereby are exempt from the registration requirements of the Securities Act. Neither the Seller nor any Person acting on its behalf has taken or is, to the knowledge of the Seller, contemplating taking any action which could subject the offering or sale of the Shares to the registration requirements of the Securities Act including, without limitation, soliciting any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (f) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule 1 hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial 5 advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement or the Escrow Agreement. (g) Solicitation Materials. Neither the Seller nor any Person acting ---------------------- on the Seller's behalf has solicited any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (h) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Shares. ARTICLE II OTHER AGREEMENTS OF THE PARTIES 2.1 Transfer Restrictions: Legend. ----------------------------- (a) The Purchaser acknowledges that Shares may only be disposed of pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with any applicable federal and state securities laws. In connection with any transfer of Shares other than pursuant to an effective registration statement, except as otherwise set forth herein, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a "Purchaser" under this Agreement, the Registration Rights Agreement and the Escrow Agreement. (b) The Purchaser acknowledges that until the Shares are registered pursuant to an effective registration statement or may otherwise be disposed of pursuant to an available exemption from (including, without limitation, under Rule 144(k) promulgated under the Securities Act) or in a transaction not subject to the registration requirements of the Securities Act, the following or similar legend shall appear on the stock certificates representing the Shares: THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE "SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE 6 SECURITIES OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 2.2 Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser and its shareholders, officers, directors, employees, agents and representatives (each, a "Purchaser Indemnitee," and collectively, the "Purchaser Indemnitees") -------------------- --------------------- against any damages, claims, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and expenses) (collectively, "Purchaser's Losses") which may be suffered or incurred by any Purchaser ------------------ Indemnitee as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement or the Escrow Agreement. (b) The Purchaser agrees to indemnify and hold harmless the Seller and its shareholders, officers, directors, employees, agents and representatives (each, a "Seller Indemnitee," and collectively, the "Seller Indemnitees") ----------------- ------------------ against any damages, claims, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and other expenses) (collectively, "Seller's Losses") which may be suffered or incurred by any Seller Indemnitee as --------------- a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement or the Escrow Agreement. (c) In case any proceeding (including, without limitation, any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "Indemnified Party") shall promptly notify the Person against whom such ----------------- indemnity may be sought (the "Indemnifying Party") in writing of the occurrence ------------------ of the facts and circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section 2.2 shall not in any way affect the Indemnifying Party's indemnification obligation hereunder except and only to the extent that the Indemnifying Party is actually prejudiced thereby. In case any such proceeding shall be brought against any Indemnified Party and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other Indemnifying Party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the Indemnifying Party shall pay as incurred the fees and expenses of the counsel retained by the Indemnified Party in the event (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including, without limitation, any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from and against any loss or liability by reason of such settlement or judgment and the Indemnifying Party shall obtain a full release of the Indemnified Party. 7 ARTICLE III MISCELLANEOUS 3.1 Fees and Expenses. Each party hereto shall pay the fees and expenses ----------------- of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. 3.2 Entire Agreement: Amendments. This Agreement, together with any ---------------------------- Exhibits or Schedules hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 3.3 Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date and earlier than 11:59 p.m. (California time) on such date, (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller: If by U.S. Mail: The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White If by Courier: The Allen E. Paulson Living Trust Paulson Enterprises c/o Del Mar Country Club, 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White 8 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto or such other address as may be designated in writing hereafter, in the same manner, by such Person. 3.4 Amendments: Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 3.5 Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 3.6 Successors and Assigns. This Agreement shall be binding upon and -------------- ------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. This provision shall not limit the Purchaser's right to transfer the Shares in accordance with Section 2.1(a). 3.7 No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 3.8 Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the courts of the State of California or in the federal courts of the United States for the Central District of California (the "California Courts"). Each party hereto hereby ----------------- irrevocably submits to the jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including, without limitation, with respect to the enforcement of any provision 9 of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto (on behalf of itself and its affiliates, agents, officers, directors and employees) hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto (on behalf of itself and its affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 3.9 Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the Closing Date until the earlier to occur of (i) one year after the Closing Date or (ii) the date on which all the Shares shall have been resold in accordance with Section 2.1. 3.10 Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other parties, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 3.11 Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unreasonable or unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 10 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------ Name: John Michael Paulson Title: Co-Trustee By: /s/ Edward White ------------------------------ Name: Edward White Title: Co-Trustee PURCHASER: /s/ Jack L. McGinley --------------------------------- Jack L. McGinley Address for Notice: Jack L. McGinley c/o RoundTable Healthcare Partners 272 E. Deerpath Road, Suite 350 Lake Forest, IL 60045 Facsimile No.: 847-182 9215 With a copy to: Tom Zanecchia c/o Wealth Management Consultants 475 17th Street, Suite 570 Denver, CO 80202 Facsimile No.: 303-292-9226 Chuck Martin Benham, Ichen & Knox LLP 1117 South Milwaukee Ave., Suite C11 Libertyville, IL 60048-3763 Facsimile No.: 847-362-5016 11 Schedule 1 ---------- Schedule of Fees Payable by Seller ---------------------------------- 1. The Seller shall pay to the Company a fee equal to 3.5% of the aggregate gross purchase price paid by all Purchasers to the Seller in accordance with this Agreement and the other agreements executed and delivered concurrently herewith between the Seller and the Purchasers not party to this Agreement in regard to the purchase and sale of shares of Common Stock. 12 Exhibit 7(b)5 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT among THE ALLEN E. PAULSON LIVING TRUST and TODD E. WARNOCK Dated as of August 13, 2001 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of August 13, ----------- 2001, among The Allen E. Paulson Living Trust, a California trust (the "Seller"), and Todd E. Warnock (the "Purchaser"). --------- WHEREAS, subject to the terms and conditions set forth in this Agreement, the Seller desires to sell to the Purchaser and the Purchaser desires to purchase from the Seller 25,000 shares (the "Shares") of common stock (the ------ "Common Stock") of CardioDynamics International Corporation, a California ------------ corporation (the "Company"), no par value per share (such shares being --------- collectively referred to herein as the "Shares") in accordance with the terms ------ and conditions set forth herein; and WHEREAS, with regard to the shares of Common Stock to be sold by the Seller to the Purchaser hereunder, the Purchaser, the Company and certain other parties who are also purchasing shares of Common Stock from Seller (the Purchaser and such other parties who are purchasing Common Stock from the Seller are collectively referred to herein as the "Purchasers") are entering into a ---------- Registration Rights Agreement, dated as of the date of this Agreement, in the form of Exhibit A (the "Registration Rights Agreement"). --------- ------------------------------ NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: ARTICLE I PURCHASE AND SALE 1.1 Closing and Settlement Date. Subject to the terms and conditions set --------------------------- forth in this Agreement, the Seller shall sell to the Purchaser and the Purchaser shall purchase the Shares in exchange for a purchase price equal to the product of (a) (i) the average closing price of the Common Stock on Nasdaq or, if not then traded on Nasdaq, on a Subsequent Market on which the Common Stock is then traded, for the twenty (20) Trading Days immediately preceding, but excluding, the Closing Date (as defined herein), multiplied by (ii) 0.90, multiplied by (b) the aggregate number of Shares (the "Purchase Price"). The -------------- closing (the "Closing") of the transactions contemplated herein shall occur at the offices of Gibson, Dunn & Crutcher LLP, 2029 Century Park East, Suite 4000, Los Angeles, California 90067, on the execution date of this Agreement, with payment and delivery of the Shares to occur on the Settlement Date (as defined below). The date of the Closing is hereinafter referred to as the "Closing ------- Date." - ---- 1.2 The Closing Date. As a condition precedent to each of the parties' ---------------- obligations hereunder, on the Closing Date, the Company and the parties shall deliver or shall cause to be delivered the following: (A) the Company shall deliver to the Purchaser (i) a Registration Rights Agreement, in the form of Exhibit A, executed by the Company and dated as --------- of the date hereof between the Company and the Purchasers and (ii) the Transfer Agent Instructions, in the form of Exhibit B, executed by the Company and --------- delivered to and acknowledged by the Company's transfer agent (the "Transfer -------- Agent Instructions"); - ------------------ 1 (B) the Seller shall deliver to the Purchaser (i) this Agreement, executed by the Seller (ii) the escrow agreement ("Escrow Agreement"), dated as ----------------- of the date hereof among the Seller, the Purchasers, California Bank & Trust and Clark & Trevithick (the "Escrow Agent"), executed by the Seller; ------------- (C) the Purchaser shall deliver (i) to the Seller, this Agreement executed by the Purchaser, (ii) to the Company, a Registration Rights Agreement, executed by the Purchaser, (iii) to the Escrow Agent, the Purchase Price, in United States dollars in immediately available funds by wire transfer; provided -------- that such funds shall be disbursed in accordance with the terms of the Escrow Agreement; and (iv) to the Seller and the Escrow Agent, the Escrow Agreement executed by the Purchaser; (D) each of California Bank & Trust, the Company and the Escrow Agent shall deliver to the Purchasers and Seller, the Escrow Agreement executed by such party; and (E) the Company shall deliver to the Purchasers the Registration Rights Agreement executed by the Company. 1.3 The Settlement Date. On or prior to the tenth Trading Day following ------------------- the delivery of the Purchase Price to the Escrow Agent (the "Settlement Date") ---------------- (A) the Seller shall cause to be delivered to the Purchaser a stock certificate, registered in the name of the Purchaser, representing the Shares and (B) in accordance with the terms of the Escrow Agreement, the Escrow Agent shall disburse the Purchase Price in United States dollars in immediately available funds by wire transfer. 1.4 [Intentionally omitted.] 1.5 Certain Defined Terms. --------------------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day ------------ which shall be a legal holiday or a day on which banking institutions in Chicago or California are authorized or required by law or other governmental action to close. "Commission" means the United States Securities and Exchange ---------- Commission. "Nasdaq" means the Nasdaq National Market. ------ "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. 2 "Subsequent Market" shall mean any of the New York Stock Exchange, ----------------- American Stock Exchange, Inc. or Nasdaq Small Cap Market. "Trading Day" means a day on which the shares of Common Stock are ----------- traded on the Nasdaq or on such Subsequent Market on which the shares of Common Stock are then listed or quoted, or (b) if the shares of Common Stock are not listed on the Nasdaq or a Subsequent Market, a day on which the shares of Common Stock are traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC Bulletin Board, a day on which the shares of Common Stock are quoted in the over-the- counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, that in the event that the shares of Common Stock are not listed or - -------- quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business Day. 1.6 Representations and Warranties of the Purchaser. The Purchaser ----------------------------------------------- represents and warrants to the Seller as follows: (a) Consents; Authority. No consents, waivers or approvals from, or ------------------- notification of or filings with, any governmental authority or other Person are required for the Purchaser to enter into this Agreement. All actions on the part of the Purchaser necessary for the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been taken. Each of this Agreement, the Registration Rights Agreement and the Escrow Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Investment Intent. The Purchaser is acquiring the Shares as ----------------- principal for its own account, for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof. The Purchaser is acquiring the Shares hereunder in the ordinary course of its business. The Purchaser does not have, or plan to enter into, any agreement, arrangement or understanding, directly or indirectly, with any Person to sell, transfer, grant participations in or distribute the Shares. (c) Purchaser Status. At the time the Purchaser was offered the ---------------- Shares, it was, and at the date hereof it is, an "accredited investor" as defined in Rule 501 under the Securities Act of 1933, as amended (the "Securities Act"). -------------- (d) Experience of the Purchaser. The Purchaser, either alone or --------------------------- together with its representatives, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. (e) Ability of the Purchaser to Bear Risk of Investment. The --------------------------------------------------- Purchaser is able to bear the economic risk of its investment in the Shares and can afford the complete loss of such investment. 3 (f) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Company and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller and the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (g) General Solicitation. The Purchaser is not purchasing the Shares -------------------- as a result of or subsequent to any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (h) Reliance. The Purchaser understands and acknowledges that (i) -------- Shares are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption, depends in part on, and the Seller will rely upon the accuracy and truthfulness of, the foregoing representations and the Purchaser hereby consents to and acknowledges such reliance. (i) No Conflicts; Advice. The Purchaser's investment in the Shares -------------------- does not and will not conflict with or violate any term or provision of any instrument, agreement, law, regulation, order or decree to which the Purchaser or any of its properties is a party or is subject. The Purchaser acknowledges that it has not relied on the Seller or any of its officers, directors, affiliates, employees, representatives or agents for any tax, legal, financial, investment or other advice. In regard to such considerations, the Purchaser has relied on the advice of, or has consulted with, only its own tax, legal, financial, investment and other advisors. (j) Brokers, Etc. No finder, broker, agent, financial advisor or ------------ other intermediary acted on behalf of the Purchaser in connection with the offering of the Shares or the negotiation or consummation of this Agreement or any of the transactions contemplated hereby. (k) Compliance With Law. The Purchaser's trading and distribution ------------------- activities with respect to the Shares will be in compliance with all applicable state and federal securities laws, rules and regulations (including, without limitation, Regulation M) and the rules and regulations of the Nasdaq Stock Market. Neither the Purchaser nor any of its affiliates (as that term is defined in Rule 405 of the Securities Act) (i) has entered, nor will any of them enter, into any agreement or other arrangement to effect any short sale of any of the Shares, or (ii) take, directly or indirectly, any action designed to cause or that would result in, or which constitutes or that might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of any of the Shares. 1.7 Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: 4 (a) Authorization: Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by each of this Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The execution and delivery of this Agreement and the Escrow Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement and the Escrow Agreement have been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligations of the Seller enforceable against the Seller in accordance with their terms. (b) No Liens on Seller's Shares. As of the Settlement Date the Seller --------------------------- will be the sole beneficial owner of the Shares and the Seller will deliver to the Purchaser valid title to the Shares free and clear of all liens, pledges, encumbrances, security interests, and other restrictions. The Shares are not the subject of any shareholders' or similar agreement granting any right of first offer, right of first refusal or preemptive right or restricting in any way the right of Seller to transfer the Shares to the Purchaser hereunder. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement and the Escrow Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including, without limitation, federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement and the Escrow Agreement, other than reports of beneficial ownership to applicable governmental authorities. (e) Private Offering. Assuming the accuracy of the representations ---------------- and warranties of the Purchaser set forth in Section 1.6, the offer and sale of the Shares to the Purchaser as contemplated hereby are exempt from the registration requirements of the Securities Act. Neither the Seller nor any Person acting on its behalf has taken or is, to the knowledge of the Seller, contemplating taking any action which could subject the offering or sale of the Shares to the registration requirements of the Securities Act including, without limitation, soliciting any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (f) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule 1 hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial 5 advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement or the Escrow Agreement. (g) Solicitation Materials. Neither the Seller nor any Person acting ---------------------- on the Seller's behalf has solicited any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (h) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Shares. ARTICLE II OTHER AGREEMENTS OF THE PARTIES 2.1 Transfer Restrictions: Legend. ----------------------------- (a) The Purchaser acknowledges that Shares may only be disposed of pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with any applicable federal and state securities laws. In connection with any transfer of Shares other than pursuant to an effective registration statement, except as otherwise set forth herein, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a "Purchaser" under this Agreement, the Registration Rights Agreement and the Escrow Agreement. (b) The Purchaser acknowledges that until the Shares are registered pursuant to an effective registration statement or may otherwise be disposed of pursuant to an available exemption from (including, without limitation, under Rule 144(k) promulgated under the Securities Act) or in a transaction not subject to the registration requirements of the Securities Act, the following or similar legend shall appear on the stock certificates representing the Shares: THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE "SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE 6 SECURITIES OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 2.2 Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser and its shareholders, officers, directors, employees, agents and representatives (each, a "Purchaser Indemnitee," and collectively, the "Purchaser Indemnitees") -------------------- --------------------- against any damages, claims, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and expenses) (collectively, "Purchaser's Losses") which may be suffered or incurred by any Purchaser ------------------ Indemnitee as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement or the Escrow Agreement. (b) The Purchaser agrees to indemnify and hold harmless the Seller and its shareholders, officers, directors, employees, agents and representatives (each, a "Seller Indemnitee," and collectively, the "Seller Indemnitees") ----------------- ------------------ against any damages, claims, losses, liabilities and expenses (including, without limitation, reasonable counsel fees and other expenses) (collectively, "Seller's Losses") which may be suffered or incurred by any Seller Indemnitee as --------------- a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement or the Escrow Agreement. (c) In case any proceeding (including, without limitation, any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "Indemnified Party") shall promptly notify the Person against whom such ----------------- indemnity may be sought (the "Indemnifying Party") in writing of the occurrence ------------------ of the facts and circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section 2.2 shall not in any way affect the Indemnifying Party's indemnification obligation hereunder except and only to the extent that the Indemnifying Party is actually prejudiced thereby. In case any such proceeding shall be brought against any Indemnified Party and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other Indemnifying Party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the Indemnifying Party shall pay as incurred the fees and expenses of the counsel retained by the Indemnified Party in the event (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including, without limitation, any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from and against any loss or liability by reason of such settlement or judgment and the Indemnifying Party shall obtain a full release of the Indemnified Party. 7 ARTICLE III MISCELLANEOUS 3.1 Fees and Expenses. Each party hereto shall pay the fees and expenses ----------------- of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. 3.2 Entire Agreement: Amendments. This Agreement, together with any ---------------------------- Exhibits or Schedules hereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 3.3 Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date and earlier than 11:59 p.m. (California time) on such date, (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller: If by U.S. Mail: The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White If by Courier: The Allen E. Paulson Living Trust c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White 8 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto or such other address as may be designated in writing hereafter, in the same manner, by such Person. 3.4 Amendments: Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 3.5 Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 3.6 Successors and Assigns. This Agreement shall be binding upon and -------------- ------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. This provision shall not limit the Purchaser's right to transfer the Shares in accordance with Section 2.1(a). 3.7 No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 3.8 Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the courts of the State of California or in the federal courts of the United States for the Central District of California (the "California Courts"). Each party hereto hereby ----------------- irrevocably submits to the jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including, without limitation, with respect to the enforcement of any provision 9 of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto (on behalf of itself and its affiliates, agents, officers, directors and employees) hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto (on behalf of itself and its affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. 3.9 Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the Closing Date until the earlier to occur of (i) one year after the Closing Date or (ii) the date on which all the Shares shall have been resold in accordance with Section 2.1. 3.10 Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other parties, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. 3.11 Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unreasonable or unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 10 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ---------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Edward White ---------------------------- Name: Edward White Title: Co-Trustee PURCHASER: /s/ Todd E. Warnock ------------------------------- Todd E. Warnock Address for Notice: Todd E. Warnock 739 Lincoln Avenue Winnetka, IL 60093 Facsimile No.: 847-446-4339 11 Schedule 1 ---------- Schedule of Fees Payable by Seller ---------------------------------- 1. The Seller shall pay to the Company a fee equal to 3.5% of the aggregate gross purchase price paid by all Purchasers to the Seller in accordance with this Agreement and the other agreements executed and delivered concurrently herewith between the Seller and the Purchasers not party to this Agreement in regard to the purchase and sale of shares of Common Stock. 12 EX-99.(C) 5 dex99c.txt LETTER AGREEMENT (8/21/2001) Exhibit 7(c) Pine Ridge Financial Inc. c/o Cavallo Capital Corp. 660 Madison Avenue, 18/th/ Floor New York, NY 10021 August 21, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Edward White Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of August 21, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Pine Ridge Financial Inc. an international business company duly organized and existing in accordance with the laws of the British Virgin Islands (the "Purchaser"). Capitalized terms used in this Agreement shall have the meanings --------- set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, 500,000 registered shares of Common Stock ("Registered ---------- Shares") at a purchase price per share of Common Stock equal to 85% of the - ------ average closing bid prices for the Common Stock for the five Trading Days preceding and the five Trading Days subsequent to, but in each case excluding, the date (the "Effective Date") on which a registration statement with respect to such Registered Shares becomes effective (the "Registered Shares Purchase Price"); provided that (i) the Registered Shares Purchase Price shall in no event be less than $4.50 per share (the "Minimum Net Purchase Price"); and (ii) in the event that the average of the closing bid prices for the Common Stock for the five Trading Days preceding and the five Trading Days subsequent to, but in each case excluding, the Effective Date is equal to or less than $5.15 per share, the Purchaser shall have no obligation to purchase the Registered Shares, but shall instead have an option to purchase up to 500,000 Registered Shares at a price per share equal to the Minimum Net Purchase Price (the "Registered Shares Option"); provided that such option shall expire, and the Seller shall have no further obligation with respect thereto, upon the expiration of the second Business Day immediately following the fifth Trading Day after the Effective Date (excluding the Effective Date). Purchaser may exercise the Registered Shares Option by providing the Seller with a written notice, via facsimile at any time after the fifth Trading Day following the Effective Date (excluding the Effective Date) but in no event later than the second Business Day immediately following the fifth Trading Day after the Effective Date, specifying the number of Registered Shares to be purchased by the Purchaser at the Minimum Net Purchase Price. (b) The sale of Registered Shares to the Purchaser shall be effected on the second Business Day immediately following the fifth (5/th/) Trading Day after the Effective Date (such date, the "Registered Shares Sale Date"). No --------------------------- later than the two Trading Days following the Registered Shares Sale Date, the Purchaser will deliver the aggregate purchase price for the Registered Shares to the Escrow Agent (as defined in the Escrow Agreement defined below) for disbursement in accordance with the Escrow Agreement dated as of August 21, 2001, between the Purchaser, the Seller, California Bank & Trust, and Clark & Trevithick ("Escrow Agreement"). Within eight (8) Business Days of ---------------- the delivery to the Escrow Agent by the Purchaser of the aggregate purchase price for the Registered Shares so purchased, the Seller shall, pursuant to the account instructions on the attached Schedule C, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations and Warranties of the Purchaser. The Purchaser ----------------------------------------------- represents and warrants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. Each of this Agreement and the Escrow Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. The Seller acknowledges and agrees that other than the representations and warranties contained herein, the Purchaser does not make or has not made any representations or warranties to the Seller with respect to the transaction contemplated hereby. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power --------------------------- and authority to enter into and to consummate the transactions contemplated by each of this Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The execution and delivery of this Agreement and the Escrow Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement and the Escrow Agreement have been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transaction contemplated in this Agreement and the Escrow Agreement. (b) No liens on Registered Shares. As of the date on which ----------------------------- Registered Shares are delivered to the Purchaser pursuant to the terms hereof and the terms of the Escrow Agreement, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement and the Escrow Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement and the Escrow Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule A hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transaction contemplated by this Agreement or the Escrow Agreement. The Purchaser shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement or the Escrow Agreement as a result of any action taken by the Seller. The Seller shall indemnify and hold harmless the Purchaser, its employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect of any such claimed or existing fees, as such fees and expenses are incurred. (f) Disclosure. The Seller confirms that neither it nor any ---------- other Person acting on its behalf has provided any of the Purchasers or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchasers shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement or the Escrow Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement or the Escrow Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such person (the "indemnified party") shall ----------------- promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (New York City time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Edward White If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, ------------- validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the "New --- York Courts"). Each party hereto hereby irrevocably submits to the jurisdiction - ----------- of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of the any of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such New York Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto (including its Affiliates, agents, officers, directors and employees) hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto (including its Affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the earlier to occur of (a) the expiration of this Agreement and (b) the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unreasonable or unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. (15) Remedies. In addition to being entitled to exercise all rights -------- provided herein or granted by law, including recovery of damages, each of the parties will be entitled to specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson --------------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Edward White --------------------------------- Name: Edward White Title: Co-Trustee PINE RIDGE FINANCIAL INC. By:__________________________________ Name: Title: Address for Notice: Pine Ridge Financial Inc. c/o Cavallo Capital Corp. 660 Madison Avenue, 18th Floor New York, NY 10021 Tel.: (212) 651-9000 Fax: (212) 651-9010 Attn: Avi Vigder With a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, NY 10104 Facsimile No.: (212) 541-4630 and (212) 541-1432 Attn: Kenneth L. Henderson and Eric L. Cohen, Esq. Schedule A ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to S.R. West Corp., a dollar amount equal to 3.5% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 3.5% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule B. ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Nasdaq" means the Nasdaq National Market. ------ "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "Subsequent Market" shall mean any of the New York Stock Exchange, American ----------------- Stock Exchange, Inc or Nasdaq Small Cap Market. "Trading Day" means a day on which the shares of Common Stock are traded on ----------- the Nasdaq or on such Subsequent Market on which the shares of Common Stock are then listed or quoted, or (b) if the shares of Common Stock are not listed on the Nasdaq or a Subsequent Market, a day on which the shares of Common Stock are traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC Bulletin Board, a day on which the shares of Common Stock are quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, -------- that in the event that the shares of Common Stock are not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business Day. Schedule C ---------- Pine Ridge DTC Account Instructions ----------------------------------- Bear, Stearns & Co. DTC # 352 For the account of Pine Ridge Financial Inc. Account # 102-25686. EX-99.(D) 6 dex99d.txt SECURITIES PURCHASE AGREEMENT (8/31/2001) Exhibit 7(d) - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT among THE ALLEN E. PAULSON LIVING TRUST and PINE RIDGE FINANCIAL INC. Dated as of August 31, 2001 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of August 31, --------- 2001, between The Allen E. Paulson Living Trust, a California trust (the "Seller"), and Pine Ridge Financial Inc. an international business company duly ------ organized and existing in accordance with the laws of the British Virgin Islands (the "Purchaser"). -------- WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to the Securities Act of 1933, as amended (the "Securities Act"), -------------- the Seller desires to sell to the Purchaser and the Purchaser desires to purchase from the Seller the shares of common stock (the "Common Stock") of ------------ CardioDynamics International Corporation, a California corporation (the "Company"), no par value per share, as set forth herein; and ------- WHEREAS, with regard to the shares of Common Stock to be sold by the Seller to the Purchaser hereunder, the Purchaser and the Company are entering into a Registration Rights Agreement, dated as of the date of this Agreement, in the form of Exhibit A (the "Registration Rights Agreement"). --------- ----------------------------- NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties to the Agreement do hereby agree as follows: ARTICLE I PURCHASE SALE I.1 Closing and Settlement Date. --------------------------- Subject to the terms and conditions set forth in this Agreement, the Seller shall sell to the Purchaser and the Purchaser shall purchase from the Seller an aggregate of 500,000 shares of Common Stock ("Shares") for an ------ aggregate purchase price of $2,700,000 (the "Purchase Price"). The closing (the -------------- "Closing") of the transactions contemplated herein shall occur at the offices of ------- Robinson Silverman Pearce Aronsohn & Berman LLP ("Robinson Silverman"), 1290 ------------------ Avenue of the Americas, New York, New York 10104, on the execution date of this Agreement with payment and delivery of the Shares to occur on the Settlement Date (as defined below). The date of the Closing is hereinafter referred to as the "Closing Date." ------------ I.2 The Closing Date. As a condition precedent to each of the parties' ---------------- obligations hereunder, on the Closing Date, the Company and the parties shall deliver or shall cause to be delivered the following: (A) the Company shall deliver to the Purchaser (i) a Registration Rights Agreement, in the form of Exhibit A, executed by the Company and dated as --------- of the date hereof, between the Company and the Purchaser and (ii) the Transfer Agent Instructions, in the form of Exhibit B, executed by the Company and --------- delivered to and acknowledged by the Company's transfer agent (the "Transfer -------- Agent Instructions"); - ------------------ (B) the Seller shall deliver to the Purchaser (i) this Agreement, executed by the Seller, (ii) the legal opinion of Gibson, Dunn & Crutcher LLP, outside counsel to the Seller, substantially in the form of Exhibit C and (iii) --------- the escrow agreement ("Escrow Agreement"), dated as of the date hereof among the ---------------- Seller, the Purchaser, California Bank & Trust and Clark & Trevithick (the "Escrow Agent") executed by the Seller; - ------------- (C) the Purchaser shall deliver (i) to the Seller, this Agreement executed by the Purchaser, (ii) to the Company, a Registration Rights Agreement, executed by the Purchaser, (iii) to the Escrow Agent, the Purchase Price, in United States dollars in immediately available funds by wire transfer, provided -------- that, such funds shall only be disbursed in accordance with the terms of the - ----- Escrow Agreement; and (iv) to the Seller, California Bank & Trust and the Escrow Agent, the Escrow Agreement executed by the Purchaser; (D) each of California Bank & Trust, the Company and the Escrow Agent shall deliver to Purchaser and Seller, the Escrow Agreement executed by such party; and (E) the Company shall deliver to the Purchaser the Registration Rights Agreement executed by the Company. I.3 The Settlement Date. On or prior to the eighth Business Day following ------------------- the delivery of the Purchase Price to the Escrow Agent (the "Settlement Date") --------------- (A) the Seller shall deliver to the Purchaser, a stock certificate, registered in the name of the Purchaser, representing the Shares and (B) in accordance with the terms of the Escrow Agreement, the Escrow Agent shall disburse, the Purchase Price in United States dollars in immediately available funds by wire transfer. I.4 Certain Defined Terms. --------------------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" means the United States Securities and Exchange Commission. ---------- "Nasdaq" means the Nasdaq National Market. ------ -3- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "Registration Statement" shall mean the registration statement required to ---------------------- be filed by the Company pursuant to the Registration Rights Agreement, including the prospectus and any amendments and supplements to such registration statement or prospectus, including pre- and post- effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Subsequent Market" shall mean any of the New York Stock Exchange, American ----------------- Stock Exchange, Inc. or Nasdaq Small Cap Market. "Trading Day" means (a) day on which the shares of Common Stock are traded ----------- on the Nasdaq or on a Subsequent Market, or (b) if the shares of Common Stock are not listed on the Nasdaq or a Subsequent Market, a day on which the shares of Common Stock are traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC Bulletin Board, a day on which the shares of Common Stock are quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, that in the event that the shares of Common Stock -------- are not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business Day. I.5 Representations and Warranties of the Purchaser. The Purchaser ----------------------------------------------- represents and warrants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement, the Registration Rights Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The purchase by the Purchaser of Shares hereunder has been duly authorized by all necessary action on the part of it. Each of this Agreement, the Registration Rights Agreement and the Escrow Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Investment Intent. The Purchaser is acquiring the Shares as ----------------- principal for its own account, for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof, without prejudice, however, to the Purchaser's right, subject to the provisions of this Agreement, the Registration Rights Agreement and the Escrow Agreement at all times to sell or otherwise dispose of all or any part of such Shares pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable Federal and state securities laws. Subject to compliance with Federal and state securities laws, nothing contained herein shall be deemed a representation or warranty by the Purchaser to hold the Shares for any period of time. The -4- Purchaser is acquiring the Shares hereunder in the ordinary course of its business. The Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute the Shares. (c) Purchaser Status. At the time the Purchaser was offered the ---------------- Shares, it was, and at the date hereof it is an "accredited investor" as defined in Rule 501(a) under the Securities Act. The Purchaser was not formed for the purpose of acquiring the Shares. (d) Experience of the Purchaser. The Purchaser, either alone or ---------------------------- together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. (e) Ability of such Purchaser to Bear Risk of Investment. The ---------------------------------------------------- Purchaser is able to bear the economic risk of its investment in the Shares and, at the present time, is able to afford a complete loss of such investment. (f) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (g) General Solicitation. The Purchaser is not purchasing the Shares -------------------- as a result of or subsequent to any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (h) Reliance. The Purchaser understands and acknowledges that (i) -------- Shares are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption depends in part on, and the Seller will rely upon, the accuracy and truthfulness of, the foregoing representations and the Purchaser hereby consents to and acknowledges such reliance. The Seller acknowledges and agrees that other than the representations and warranties contained herein, the Purchaser does not make or has not made any representations or warranties to the Seller with respect to the transactions contemplated hereby. I.6 Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: -5- (a) Authorization; Enforcement. The Seller has the requisite -------------------------- corporate power and authority to enter into and to consummate the transactions contemplated by each of this Agreement and the Escrow Agreement and otherwise to carry out its obligations thereunder. The execution and delivery of this Agreement and the Escrow Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement and the Escrow Agreement have been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transaction contemplated in this Agreement and the Escrow Agreement. (b) No liens on Sellers Shares. As of the Settlement Date, the -------------------------- Seller will be the sole beneficial owner of the Shares and the Shares delivered to the Purchaser on such date will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement and the Escrow Agreement by the Seller and the consummation by the Seller of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement and the Escrow Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Private Offering. Assuming the accuracy of the representations ---------------- and warranties of the Purchaser set forth in Section 1.5, the offer and sale of the Shares to the Purchasers as contemplated hereby are exempt from the registration requirements of the Securities Act. Neither the Seller nor any Person acting on its behalf has taken or is, to the knowledge of the Seller, contemplating taking any action which could subject the offering or sale of the Shares to the registration requirements of the Securities Act including soliciting any offer to buy or sell the Shares by means of any form of general solicitation or advertising. -6- (f) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule A hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement or the Escrow Agreement. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement or the Escrow Agreement as a result of any action taken by the Seller. The Seller shall indemnify and hold harmless the Purchaser, its employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect of any such claimed or existing fees, as such fees and expenses are incurred. (g) Solicitation Materials. Neither the Seller nor any Person ---------------------- acting on the Seller's behalf has solicited any offer to buy or sell the Shares by means of any form of general solicitation or advertising. (h) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided any of the Purchasers or its agents or counsel with any information that constitutes or might constitute material non- public information. The Seller understands and confirms that the Purchasers shall be relying on the foregoing representations in effecting transactions with respect to the Shares. ARTICLE II OTHER AGREEMENTS OF THE PARTIES II.1 Transfer Restrictions; Legend. ----------------------------- (a) The Purchaser acknowledges that Shares may only be disposed of pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with any applicable Federal and state securities laws. In connection with any transfer of Shares other than pursuant to an effective registration statement, except as otherwise set forth herein, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a "Purchaser" under this Agreement, the Registration Rights Agreement and the Escrow Agreement. (b) The Purchaser acknowledges that until the Shares are registered pursuant to an effective registration statement or may otherwise be disposed of pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act, the following or similar legend shall appear on the stock certificates representing the Shares: -7- THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. II.2 Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement or the Escrow Agreement. (b) The Purchaser, agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement or the Escrow Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such person (the "indemnified party" shall ----------------- promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing of the occurrence of the facts and - ------------------- circumstances giving rise to such claim. The failure of any person to deliver the notice required by this Section 2.2 shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the -8- retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. II.3 Material Inducement. The Seller agrees and acknowledges that the ------------------- Company's commitment and obligation to file a Registration Statement with respect to the Shares to be sold under this Agreement is a material inducement to the Purchasers' execution of this Agreement. In the event that the Registration Rights Agreement is not declared effective by the Commission prior to the 90/th/ day after the Closing Date, the Purchaser shall have the right, exercisable in writing by the Purchaser within the succeeding 10 Business Days following the 90/th/ day after the Closing Date to require the Seller to repurchase the Shares acquired by the Purchaser pursuant to this Agreement at the per share purchase price equal to the price per share paid by the Purchaser for such Shares as set forth in Section 1.1. The closing for the purchase and sale of the Shares shall occur at the office of the Purchaser no later than 10 Business Days following the giving of the notice by the Purchaser to the Seller. ARTICLE III MISCELLANEOUS III.1 Fees and Expenses. Each party hereto shall pay the fees and ----------------- expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. III.2 Entire Agreement; Amendments. This Agreement and the Escrow ---------------------------- Agreement, together with any Exhibits or Schedules thereto contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. III.3 Notices. Any and all notices or other communications or ------- deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (New York City time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the Business Day following the date of mailing, if -9- sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller: The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile No.: 858-756-3194 Attn: J. Michael Paulson and Edward White With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Los Angeles, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto or such other address as may be designated in writing hereafter, in the same manner, by such Person. III.4 Amendments; Waivers. No provision of this Agreement may be waived ------------------- or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. III.5 Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. III.6 Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. This provision shall not limit the Purchaser's right to transfer the Shares in accordance with Section 2.1(a). -10- III.7 No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. III.8 Governing Law. All questions concerning the construction, ------------- validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the "New --- York Courts"). Each party hereto hereby irrevocably submits to the jurisdiction - ----------- of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of the any of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such New York Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto (including its affiliates, agents, officers, directors and employees) hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto (including its affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. III.9 Survival. The representations, warranties, agreements and -------- covenants contained herein shall survive the Closing Date until the earlier to occur of (i) two years after the Closing Date or (ii) the date on which all the Shares shall have been resold in accordance with Section 2.1. III.10 Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding -11- obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. III.11 Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unreasonable or unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. III.12 Remedies. In addition to being entitled to exercise all rights -------- provided herein or granted by law, including recovery of damages, each of the parties will be entitled to specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOWS] -12- IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Edward White ----------------------------- Name: Edward White Title: Co-Trustee PINE RIDGE FINANCIAL INC. By:_____________________________________ Name: Title: Address for Notice: Pine Ridge Financial Inc. c/o Cavallo Capital Corp. 660 Madison Avenue, 18th Floor New York, NY 10021 Tel.: (212) 651-9000 Fax: (212) 651-9010 Attn: Avi Vigder and Elder Gel With a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, NY 10104 Facsimile No.: (212) 541-4630 and (212) 541-1432 Attn: Kenneth L. Henderson, Esq. and Eric L. Cohen, Esq. EX-99.(E) 7 dex99e.txt LETTER AGREEMENTS (11/5/2001) EXHIBIT 7(e)1 Ascend Partners, LP c/o Ascend Capital LLC One Montgomery, Suite 330 San Francisco, CA 94104 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Ascend Partners, LP, a Delaware limited partnership (the "Purchaser"). --------- Capitalized terms used in this Agreement shall have the meanings set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified party") shall ----------------- promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing of the occurrence of the facts and - ------------------- circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be ------------------- waived or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, ------------- validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the - ------------------ jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------- Name: Nicholas Diaco Title: Co-Trustee ASCEND PARTNERS, LP By:________________________________ Name: Title: Address for Notice: Ascend Partners, LP c/o Ascend Capital LLC One Montgomery, Suite 330 San Francisco, CA 94104 Tel.: 415-217-7733 Fax: 415-217-7699 Attn: Chief Financial Officer Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Ascend Partners, LP 48,000 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- Ascend Partners, LP: DTC#: 773 Institutional ID: 94115 Agent Bank #: 94115 Tax ID #: 56-205-8405 Internal Account #: 37 Tax I.D. No. of Purchaser: 880431210 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)2 Ascend Partners Sapient, LP c/o Ascend Capital LLC One Montgomery, Suite 330 San Francisco, CA 94104 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Ascend Partners Sapient, LP, a Delaware limited partnership (the "Purchaser"). Capitalized terms used in this Agreement shall have the meanings --------- set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power --------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be ---------------- suffered or incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------ Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------- Name: Nicholas Diaco Title: Co-Trustee ASCEND PARTNERS SAPIENT, LP By:_____________________________________ Name: Title: Address for Notice: Ascend Partners Sapient, LP c/o Ascend Capital LLC One Montgomery, Suite 330 San Francisco, CA 94104 Tel.: 415-217-7733 Fax: 415-217-7699 Attn: Chief Financial Officer Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Ascend Partners Sapient, LP 48,000 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- Ascend Partners Sapient, LP: DTC#: 773 Institutional ID: 94115 Agent Bank #: 94115 Tax ID #: 56-205-8405 Internal Account #: 37 Tax I.D. No. of Purchaser: 94-3388960 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)3 Ascend Offshore Fund, Ltd. c/o Ascend Capital LLC One Montgomery, Suite 330 San Francisco, CA 94104 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Ascend Offshore Fund, Ltd., a company organized under the laws of the British Virgin Islands (the "Purchaser"). Capitalized terms used in this --------- Agreement shall have the meanings set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite -------------------------- power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which ----------------------------- Registered Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller ------------ as set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------ Name: Nicholas Diaco Title: Co-Trustee ASCEND OFFSHORE FUND, LTD. By:_____________________________________ Name: Title: Address for Notice: Ascend Offshore Fund, Ltd. c/o Ascend Capital LLC One Montgomery, Suite 330 San Francisco, CA 94104 Tel.: 415-217-7733 Fax: 415-217-7699 Attn: Chief Financial Officer Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Ascend Offshore Fund, Ltd. 204,000 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- Ascend Offshore Fund, Ltd.: DTC#: 773 Institutional ID: 94115 Agent Bank #: 94115 Tax ID #: 56-205-8405 Internal Account #: 37 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)4 AIM Funds Group 11 Greenway Plaza, Suite 100 Houston, TX 77046 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and AIM Funds Group, a Delaware business trust (the "Purchaser"). Capitalized -------- terms used in this Agreement shall have the meanings set forth in the attached Schedule B. - ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power --------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which ----------------------------- Registered Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its ---------------- shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified party") shall ----------------- promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing of the occurrence of the facts and - ------------------- circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be ------------------- waived or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, ------------- validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the - ------------------ jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and -------- covenants contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ----------------------------------- Name: Nicholas Diaco Title: Co-Trustee AIM FUNDS GROUP, ON BEHALF OF ITS PORTFOLIO, AIM SMALL CAP EQUITY FUND By:____________________________________ Name: Title: Address for Notice: AIM Funds Group 11 Greenway Plaza, Suite 100 Houston, TX 77046 Tel.: 713-214-1191 Fax: 713-993-9185 Attn: General Counsel Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- ---------------------------- AIM Funds Group 300,000 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- AIM Funds Group: Custodian Bank: State Street Bank and Trust Co. Agent ID Number: 20997 Agent's DTC Participation Number: 997 Agent's Internal Account Number: KG69 Institution Number: 57949 Tax ID Number: 76-0649197 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)5 Blue Coast Partners II, L.P. One Montgomery Street San Francisco, CA 94104 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Blue Coast Partners, L.P., a California limited partnership (the "Purchaser"). Capitalized terms used in this Agreement shall have the meanings --------- set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power --------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which ----------------------------- Registered Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be ------------------- waived or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, ------------- validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the - ------------------ jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and -------- covenants contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ----------------------------- Name: Nicholas Diaco Title: Co-Trustee BLUE COAST PARTNERS II, L.P. By:_____________________________________ Name: Title: Address for Notice: Blue Coast Partners II, L.P. c/o Fort Point Capital Management LLC One Montgomery Street San Francisco, CA 94104 Tel.: 415-394-0450 Fax: 415-394-0456 Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Blue Coast Partners II, L.P. 26,500 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- DTC #0773 Banc of America Securities LLC A/C#: 118-15601 A/C NAME: BLUE COAST PARTNERS II, L.P. ATTN: SAHLE DENEKE TaxID 94-3401865 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)6 Citi Fort Point Ltd. c/o CIBC Bankard Trust Company Edward Street Grand Cayman, Cayman Islands British West Indies November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Citi Fort Point Ltd., a company formed under the laws of the Cayman Islands (the "Purchaser"). Capitalized terms used in this Agreement shall have the --------- meanings set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ----------------------------- Name: Nicholas Diaco Title: Co-Trustee CITI FORT POINT LTD. By:_____________________________________ Name: Title: Address for Notice: Citi Fort Point Ltd. c/o CIBC Bankard Trust Company Edward Street Grand Cayman, Cayman Islands British West Indies Tel.: 415-394-0450 & 345-914-9452 Fax: 415-394-0456 With a copy to: Fort Point Capital Management LLC One Montgomery Street San Francisco, CA 94104 Tel.: 415-394-0450 Fax: 415-394-0456 Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Citi Fort Point Ltd. 12,390 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- DTC #0773 Banc of America Securities LLC A/C#: 313-15398 A/C NAME: CITI FORT POINT LTD. ATTN: SAHLE DENEKE Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)7 Bramwell Capital Corp. c/o Icaza, Gonzales-Ruiz & Aleman P.O. Box 873 Road Town, Tortola, British Virgin Islands November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Bramwell Capital Corp., a company organized under the laws of the British Virgin Islands (the "Purchaser"). Capitalized terms used in this Agreement shall --------- have the meanings set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or incurred by it as ---------------- a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified party") shall ----------------- promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------ Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------ Name: Nicholas Diaco Title: Co-Trustee BRAMWELL CAPITAL CORP. By:_____________________________________ Name: Title: Address for Notice: Bramwell Capital Corp. c/o Icaza, Gonzales-Ruiz & Aleman P.O. Box 873 Road Town, Tortola, British Virgin Islands Fax: 809-49-45880 If via Federal Express: Bramwell Capital Corp. c/o Icaza, Gonzales-Ruiz & Aleman Vanterpool Plaza Wickhams Cay I With a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, New York 10104 Attn: Kenneth L. Henderson Fax: 212-541-1357 Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Bramwell Capital Corp. 200,000 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- Bramwell Capital Corp. Bear, Stearns & Co. DTC # 352 For the account of Bramwell Capital Corp., Account # 102-26302. Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)8 The Children's Institute of Pittsburgh c/o William Blair & Company, L.L.C. 22 W. Adams Street Chicago, IL 60606 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and The Children's Institute of Pittsburgh, a Pennsylvania not-for-profit corporation (the "Purchaser"). Capitalized terms used in this Agreement shall --------- have the meanings set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, and, ---------- simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to be ---------- delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ----------------------------- Name: Nicholas Diaco Title: Co-Trustee THE CHILDREN'S INSTITUTE OF PITTSBURGH By:_____________________________________ Name: Title: Address for Notice: The Children's Institute of Pittsburgh c/o William Blair & Company, L.L.C. 222 W. Adams Street Chicago, Illinois 60606 Tel.: (312) 364-8262 Fax: (312) 551-4646 Attn: Gregory B. Campbell, Esq. Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- The Children's Institute of Pittsburgh 14,925 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- The Children's Institute of Pittsburgh: DTC # 2616 Agent Bank # 27817 Account # 010010596930 Tax ID # 25-0965405 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - Chase Manhattan Bank NYC - ABA# 021000021 - Pershing A/C# 930-1-032992 - Re: Cardio Dynamics - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)9 William Blair Small Cap Growth Fund c/o William Blair & Company, L.L.C. 22 W. Adams Street Chicago, IL 60606 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and William Blair Small Cap Growth Fund, a Massachusetts business trust registered under the Investment Act of 1940 (the "Purchaser"). Capitalized terms --------- used in this Agreement shall have the meanings set forth in the attached Schedule B. - ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1 (b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ----------------------------- Name: Nicholas Diaco Title: Co-Trustee WILLIAM BLAIR SMALL CAP GROWTH FUND By:_____________________________________ Name: Title: Address for Notice: William Blair Small Cap Growth Fund c/o William Blair & Company, L.L.C. 222 W. Adams Street Chicago, Illinois 60606 Tel.: (312) 364-8262 Fax: (312) 551-4646 Attn: Gregory B. Campbell, Esq. Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- William Blair Small Cap Growth Fund 112,580 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- William Blair Small Cap Growth Fund: DTC # 2212 Agent Bank # 26580 Account # 77303 Tax ID # 36-4325841 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - Chase Manhattan Bank NYC - ABA# 021000021 - Pershing A/C# 930-1-032992 - Re: Cardio Dynamics - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust EXHIBIT 7(e)10 Kentucky State District Council of Carpenters c/o William Blair & Company, L.L.C. 22 W. Adams Street Chicago, IL 60606 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Kentucky State District Council of Carpenters, an state employee pension plan organized under the laws of Kentucky (the "Purchaser"). Capitalized terms --------- used in this Agreement shall have the meanings set forth in the attached Schedule B. - ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ----------------------------- Name: Nicholas Diaco Title: Co-Trustee KENTUCKY STATE DISTRICT COUNCIL OF CARPENTERS By:_____________________________________ Name: Title: Address for Notice: Kentucky State Council District of Carpenters c/o William Blair & Company, L.L.C. 222 W. Adams Street Chicago, Illinois 60606 Tel.: (312) 364-8262 Fax: (312) 551-4646 Attn: Gregory B. Campbell, Esq. Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Kentucky State Council District of Carpenters 16,820 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- Kentucky State Council District of Carpenters: DTC # 2669 Agent Bank # 20290 Account # 1781063B Tax ID # 61-6040103 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)11 Pensionskasse SBB c/o William Blair & Company, L.L.C. 22 W. Adams Street Chicago, IL 60606 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Pensionskasse SBB, a railway employee pension plan organized under the laws of Switzerland (the "Purchaser"). Capitalized terms used in this Agreement shall --------- have the meanings set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be ------------------- waived or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ----------------------------- Name: Nicholas Diaco Title: Co-Trustee PENSIONSKASSE SBB By:_____________________________________ Name: Title: Address for Notice: Pensionskasse SBB c/o William Blair & Company, L.L.C. 222 W. Adams Street Chicago, Illinois 60606 Tel.: (312) 364-8262 Fax: (312) 551-4646 Attn: Gregory B. Campbell, Esq. Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Pensionskasse SBB 123,100 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- Pensionskasse SBB: DTC # 012 Agent Bank # 03798 Account # 95400141 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust EXHIBIT 7(e)12 Rush Presbyterian St. Luke's Pension & Retirement c/o William Blair & Company, L.L.C. 22 W. Adams Street Chicago, IL 60606 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Rush Presbyterian St. Luke's Pension & Retirement, an Illinois pension plan (the "Purchaser"). Capitalized terms used in this Agreement shall have the --------- meanings set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be ------------------- waived or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- covenants contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------------ Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------------ Name: Nicholas Diaco Title: Co-Trustee RUSH PRESBYTERIAN ST. LUKE'S PENSION & RETIREMENT By:_____________________________________ Name: Title: Address for Notice: Rush Presbyterian St. Luke's Pension & Retirement c/o William Blair & Company, L.L.C. 222 W. Adams Street Chicago, Illinois 60606 Tel.: (312) 364-8262 Fax: (312) 551-4646 Attn: Gregory B. Campbell, Esq. Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Rush Presbyterian St. Luke's Pension & Retirement 39,085 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- Rush Presbyterian St. Luke's Pension & Retirement: DTC # 2669 Agent Bank 20290 Account # 2282270 Tax ID # 36-2174823 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)13 Rush Presbyterian St. Luke's Endowment c/o William Blair & Company, L.L.C. 22 W. Adams Street Chicago, IL 60606 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Rush Presbyterian St. Luke's Endowment, an Illinois not-for-profit (the "Purchaser"). Capitalized terms used in this Agreement shall have the meanings --------- set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power --------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- covenants contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------------ Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------------ Name: Nicholas Diaco Title: Co-Trustee RUSH PRESBYTERIAN ST. LUKE'S ENDOWMENT By:_____________________________________ Name: Title: Address for Notice: Rush Presbyterian St. Luke's Endowment c/o William Blair & Company, L.L.C. 222 W. Adams Street Chicago, Illinois 60606 Tel.: (312) 364-8262 Fax: (312) 551-4646 Attn: Gregory B. Campbell, Esq. Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Rush Presbyterian St. Luke's Endoqment 42,500 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- Rush Presbyterian St. Luke's Endowment: DTC # 2669 Agent Bank # 20290 Account # 2682276 Tax ID # 36-2174823 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)14 Children's Institute of Pittsburgh -- Pension c/o William Blair & Company, L.L.C. 22 W. Adams Street Chicago, IL 60606 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Children's Institute of Pittsburgh -- Pension, a Pennsylvania pension plan (the "Purchaser"). Capitalized terms used in this Agreement shall have the --------- meanings set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or incurred by it as ---------------- a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified party") shall ----------------- promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing of the occurrence of the facts and - ------------------- circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ----------------------------- Name: Nicholas Diaco Title: Co-Trustee CHILDREN'S INSTITUTE OF PITTSBURGH -- PENSION By:_____________________________________ Name: Title: Address for Notice: Children's Institute of Pittsburgh -- Pension c/o William Blair & Company, L.L.C. 222 W. Adams Street Chicago, Illinois 60606 Tel.: (312) 364-8262 Fax: (312) 551-4646 Attn: Gregory B. Campbell, Esq. Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Children's Institute of Pittsburgh -- Pension 3,290 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- Children's Institute of Pittsburgh -- Pension: DTC # 2816 Agent Bank # 27817 Account # 100021043344 Tax ID # 25-0965405 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)15 MacNeal Health Foundation c/o William Blair & Company, L.L.C. 22 W. Adams Street Chicago, IL 60606 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and MacNeal Health Foundation, an Illinois not-for-profit corporation (the "Purchaser"). Capitalized terms used in this Agreement shall have the meanings --------- set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power --------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be ------------------- waived or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and -------- covenants contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ----------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ----------------------------- Name: Nicholas Diaco Title: Co-Trustee MACNEAL HEALTH FOUNDATION By:_____________________________________ Name: Title: Address for Notice: MacNeal Health Foundation c/o William Blair & Company, L.L.C. 222 W. Adams Street Chicago, Illinois 60606 Tel.: (312) 364-8262 Fax: (312) 551-4646 Attn: Gregory B. Campbell, Esq. Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- MacNeal Health Foundation 22,800 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- MacNeal Health Foundation: DTC # 2669 Agent Bank # 20290 Account # 2606949 Tax ID # 36-4324067 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust EXHIBIT 7(e)16 CF Industries c/o William Blair & Company, L.L.C. 22 W. Adams Street Chicago, IL 60606 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and CF Industries, an Illinois corporation (the "Purchaser"). Capitalized terms -------- used in this Agreement shall have the meanings set forth in the attached Schedule B. - ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power --------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be ------------------- waived or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, ------------- validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the - ------------------ jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------ Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------ Name: Nicholas Diaco Title: Co-Trustee CF INDUSTRIES By:_____________________________________ Name: Title: Address for Notice: CF Industries c/o William Blair & Company, L.L.C. 222 W. Adams Street Chicago, Illinois 60606 Tel.: (312) 364-8262 Fax: (312) 551-4646 Attn: Gregory B. Campbell, Esq. Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- CF Industries 13,300 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- CF Industries: DTC # 2669 Agent Bank # 20290 Account # 2638949 Tax ID # 13-3895900 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)17 Canton of Zurich c/o William Blair & Company, L.L.C. 22 W. Adams Street Chicago, IL 60606 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Canton of Zurich, a canton organized under the laws of Switzerland (the "Purchaser"). Capitalized terms used in this Agreement shall have the meanings --------- set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power --------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be ------------------- waived or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, ------------- validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the - ------------------ jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and -------- covenants contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------------- Name: Nicholas Diaco Title: Co-Trustee CANTON OF ZURICH By:_____________________________________ Name: Title: Address for Notice: Canton of Zurich c/o William Blair & Company, L.L.C. 222 W. Adams Street Chicago, Illinois 60606 Tel.: (312) 364-8262 Fax: (312) 551-4646 Attn: Gregory B. Campbell, Esq. Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Canton of Zurich 211,600 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- Canton of Zurich: DTC # 997 Agent Bank # 29796 Account # U9B0 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)18 Goldman Sachs GDP 2000 Master Fund Ltd. - Fort Point Capital Mgmt LLC c/o Maples & Calder P.. Box 309 Ugland House S. Church Street Georgetown, Grand Cayman British West Indies November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Goldman Sachs GDP 2000 Master Fund Ltd. - Fort Point Capital Mgmt LLC, a company organized under the laws of the Cayman Islands (the "Purchaser"). --------- Capitalized terms used in this Agreement shall have the meanings set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite -------------------------- power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which ----------------------------- Registered Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller ------------ as set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived ------------------- or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the ----------------- jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and -------- covenants contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------------- Name: Nicholas Diaco Title: Co-Trustee GOLDMAN SACHS GDP 2000 MASTER FUND LTD. - FORT POINT CAPITAL MGMT. LLC By:_____________________________________ Name: Title: Address for Notice: Goldman Sachs GDP 2000 Master Fund Ltd. - Fort Point Capital Mgmt LLC c/o Maples & Calder P.. Box 309 Ugland House S. Church Street Georgetown, Grand Cayman British West Indies Tel.: 415-394-0450 & 609-497-5500 Fax: 415-394-0456 With a copy to: Fort Point Capital Management LLC One Montgomery Street San Francisco, CA 94104 Tel.: 415-394-0450 Fax: 415-394-0456 Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Goldman Sachs GDP 2000 Master Fund Ltd. - Fort Point Mgmt LLC 7,070 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- DTC #0773 Banc of America Securities LLC A/C#: 313-15199 A/C NAME: GOLDMAN SACHS GDP 2000 MASTER FUND LTD. - FORT POINT CAPITAL MGMT LLC ATTN: SAHLE DENEKE Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)19 Blue Coast Partners, L.P. One Montgomery Street San Francisco, CA 94104 November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Blue Coast Partners, L.P., a California limited partnership (the "Purchaser"). Capitalized terms used in this Agreement shall have the meanings -------- set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ----------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to obtain ---------------------- any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all delivery --------------------- requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which Registered ----------------------------- Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be ------------------- waived or amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, ------------- validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the - ------------------ jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and -------- covenants contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent ------------ jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------------- Name: Nicholas Diaco Title: Co-Trustee BLUE COAST PARTNERS, L.P. By:_____________________________________ Name: Title: Address for Notice: Blue Coast Partners, L.P. c/o Fort Point Capital Management LLC One Montgomery Street San Francisco, CA 94104 Tel.: 415-394-0450 Fax: 415-394-0456 Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Blue Coast Partners, L.P. 16,380 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- DTC #0773 Banc of America Securities LLC A/C#: 118-14009 A/C NAME: BLUE COAST PARTNERS, L.P. ATTN: SAHLE DENEKE TaxID 94-3354853 Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust Exhibit 7(e)20 Green Coast Offshore Limited c/o Citco Fund Services (Curacao) N.V. P.O. Box 31106 SMB West Bay Road, Grand Cayman, Cayman Islands British West Indies November 5, 2001 The Allen E. Paulson Living Trust Paulson Enterprises P.O. Box 9660 Rancho Santa Fe, CA 92067 Attn: J. Michael Paulson and Nicholas Diaco Re: CardioDynamics International Corporation ---------------------------------------- Ladies and Gentlemen: This letter agreement (this "Agreement"), dated as of November 5, 2001, is --------- between The Allen E. Paulson Living Trust, a California trust (the "Seller"), ------ and Green Coast Offshore Limited, a mutual fund formed under the laws of the Cayman Islands (the "Purchaser"). Capitalized terms used in this Agreement shall --------- have the meanings set forth in the attached Schedule B. ---------- (1) Purchase and Sale of Registered Shares. -------------------------------------- (a) The Purchaser shall purchase from the Seller and the Seller shall sell to the Purchaser, the number of registered shares of Common Stock set forth on Schedule A hereto ("Registered Shares") for an aggregate purchase ---------- ----------------- price equal to the product of the number of Registered Shares multiplied by ------------- $4.35 (such product, the "Purchase Price"). -------------- (b) No later than ten (10) Business Days following the date on which the supplement to the prospectus and registration statement, dated September 26, 2001, shall become effective (the "Registered Shares Sale Date"): (i) the Purchaser shall, in accordance with and in the amounts set forth on Schedule E hereto (as the same may be amended from time to time ---------- with the mutual consent of the Purchaser and the Seller), pay the Purchase Price for the Registered Shares to the parties set forth on Schedule E, ---------- and, simultaneously therewith, (ii) the Seller shall, pursuant to the account instructions on Schedule C hereto, cause the Registered Shares to ---------- be delivered to the Purchaser's account through the Depository Trust Company DWAC system. (2) Representations, Warranties and Covenants of the Purchaser. The ---------------------------------------------------------- Purchaser represents, warrants and covenants to the Seller as follows: (a) Organization; Authority. The Purchaser is an entity duly ----------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The purchase by the Purchaser of Registered Shares hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms. (b) Access to Information. The Purchaser acknowledges that it has --------------------- reviewed all necessary information concerning the Seller (including, without limitation, the registration statement and prospectus, dated September 26, 2001, with respect to the Registered Shares, the supplement thereto and the most recent quarterly statement of the Company on Form 10-Q on file with the Commission), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Seller concerning the terms and conditions of the offering of the Registered Shares and the merits and risks of investing in the Registered Shares; and (ii) the opportunity to obtain such additional information which the Seller possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Purchaser and the consummation by the Purchaser of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Purchaser's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Purchaser is a party or by which any property or asset of the Purchaser is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Purchaser is subject (including federal and state securities laws and regulations), or by which any property or asset of the Purchaser is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Purchaser. (d) Consents and Approvals. The Purchaser is not required to ---------------------- obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Purchaser of this Agreement. (e) Delivery Requirements. The Purchaser shall satisfy all --------------------- delivery requirements under the Securities Act of 1933, as amended, with respect to any resales of the Registered Shares to subsequent purchasers. (3) Representations and Warranties of the Seller. The Seller hereby -------------------------------------------- represents and warrants to the Purchaser as follows: (a) Authorization; Enforcement. The Seller has the requisite power -------------------------- and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Seller and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Seller and no further action is required by the Seller. This Agreement has been duly executed by the Seller and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms. The Seller is not in violation of any of the provisions of its organizational or charter documents as a result of the transactions contemplated in this Agreement. (b) No liens on Registered Shares. As of the date on which ----------------------------- Registered Shares are delivered to the Purchaser pursuant to the terms hereof, the Seller will be the sole beneficial owner of the Registered Shares and at the time that Registered Shares are delivered to the Purchaser such Registered Shares will not be subject to any liens, pledges, encumbrances, security interests, or other restrictions. (c) No Conflicts. The execution, delivery and performance of this ------------ Agreement by the Seller and the consummation by the Seller of the transaction contemplated hereby do not and will not (i) conflict with or violate any provision of the Seller's organizational or charter documents (each as amended through the date hereof), or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement or other instrument or other understanding to which the Seller is a party or by which any property or asset of the Seller is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Seller is subject (including federal and state securities laws and regulations), or by which any property or asset of the Seller is bound or affected, except to the extent that any such violation would not have a material adverse effect on the Seller. (d) Consents and Approvals. The Seller is not required to obtain any ---------------------- consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Seller of this Agreement, other than reports of beneficial ownership to applicable governmental authorities, which the Seller agrees to promptly make. (e) Certain Fees. Except for certain fees payable by the Seller as ------------ set forth in Schedule D hereto, no fees or commissions will be payable by the ---------- Seller to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. (f) Disclosure. The Seller confirms that neither it nor any other ---------- Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material non-public information. The Seller understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions with respect to the Registered Shares. (4) Indemnification. --------------- (a) The Seller agrees to indemnify and hold harmless the Purchaser, its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation, warranty or covenant made by the Seller in this Agreement. (b) The Purchaser agrees to indemnify the Seller and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) ("Purchaser Losses") which may be suffered or ---------------- incurred by it as a result of any breach of any representation, warranty, or covenant made by the Purchaser in this Agreement. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section, such Person (the "indemnified ----------- party") shall promptly notify the Person against whom such indemnity may be - ----- sought (the "indemnifying party") in writing of the occurrence of the facts and ------------------ circumstances giving rise to such claim. The failure of any Person to deliver the notice required by this Section shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (which consent may not be unreasonably withheld) but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. (5) Entire Agreement. This Agreement contains the entire understanding of ---------------- the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect thereto. (6) Notices. Any and all notices or other communications or deliveries ------- required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (California time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (California time) on any date, and (iii) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Seller The Allen E. Paulson Living Trust by U.S. mail or Paulson Enterprises facsimile transmission: P.O. Box 9660 Rancho Santa Fe, CA 92067 Facsimile Numbers.: 858-756-3194 Attn: J. Michael Paulson and Nicholas Diaco If to the Seller The Allen E. Paulson Living Trust by courier service: c/o Del Mar Country Club 6001 Clubhouse Drive Rancho Santa Fe, CA 92067 With a copy to: Gibson, Dunn & Crutcher LLP 2029 Century Park East Century City, CA 90067-3026 Facsimile No.: 310-551-8741 Telephone No.: 310-552-8500 Attn: Shari Leinwand, Esq. If to the Purchaser: To the address set forth under the Purchaser's name on the signature pages hereto (7) Amendments; Waivers. No provision of this Agreement may be waived or ------------------- amended except in a written instrument signed, in the case of an amendment, by the parties or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (8) Headings. The headings herein are for convenience only, do not -------- constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (9) Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their successors and permitted assigns. Neither the Seller nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser or the Seller, respectively. (10) No Third-Party Beneficiaries. This Agreement is intended for the ---------------------------- benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. (11) Governing Law. All questions concerning the construction, validity, ------------- enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state or federal courts sitting in the Central District of the City of Los Angeles (the "California Courts"). Each party hereto hereby irrevocably submits to the - ------------------ jurisdiction of the California Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or that such California Courts are inconvenient or will be an improper forum for such proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. (12) Survival. The representations, warranties, agreements and covenants -------- contained herein shall survive the closing until the date on which the Registered Shares are delivered to the Purchaser pursuant to Section 1(b). (13) Execution. This Agreement may be executed in two or more --------- counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. (14) Severability. In the event that any court of competent jurisdiction ------------ shall determine that any provision, or any portion thereof, contained in this Agreement is unenforceable in any respect, then such provision shall be deemed limited to the extent such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be the interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. With regard to any provision, or portion thereof deemed wholly unenforceable, the parties shall attempt to agree upon a valid and enforceable provision or portion thereof, which shall be a reasonable substitute therefor, and upon such agreement, shall incorporate such substitute provision or portion thereof in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -- SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. THE ALLEN E. PAULSON LIVING TRUST By: /s/ John Michael Paulson ------------------------------------- Name: John Michael Paulson Title: Co-Trustee By: /s/ Nicholas Diaco ------------------------------------- Name: Nicholas Diaco Title: Co-Trustee GREEN COAST OFFSHORE LIMITED By:_____________________________________ Name: Title: Address for Notice: Green Coast Offshore Limited c/o Citco Fund Services (Curacao) N.V. P.O. Box 31106 SMB West Bay Road, Grand Cayman, Cayman Islands British West Indies Tel.: 415-394-0450 & 011-5999-732-2222 Fax: 415-394-0456 With a copy to: Fort Point Capital Management LLC One Montgomery Street San Francisco, CA 94104 Tel.: 415-394-0450 Fax: 415-394-0456 Schedule A ---------- Registered Shares Purchased by Purchaser ---------------------------------------- Purchaser Registered Shares Purchased --------- --------------------------- Green Coast Offshore Limited 37,660 Schedule B ---------- "Affiliate" means, with respect to any Person, any other Person that --------- directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with ------- respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings ---------- ----------- ---------- correlative to the foregoing. "Business Day" shall mean any day except Saturday, Sunday and any day which ------------ shall be a legal holiday or a day on which banking institutions in New York City or California are authorized or required by law or other governmental action to close. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Common Stock" shall mean the shares of common stock, no par value per ------------ share of CardioDynamics International Corporation. "Company" shall mean CardioDynamics International Corporation. ------- "Person" means an individual or corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. Schedule C ---------- Purchaser DTC Account Instructions ---------------------------------- DTC #0773 Banc of America Securities LLC A/C#: 313-14766 A/C NAME: GREEN COAST OFFSHORE LIMITED ATTN: SAHLE DENEKE Schedule D ---------- Schedule of Fees Payable by Seller ---------------------------------- In connection with the purchase of Registered Shares under this Agreement, the Seller shall pay (i) to Gruntal & Co., L.L.C., a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser and for the Registered Shares and (ii) to the Company, a dollar amount equal to 2.00% of the gross purchase price paid by the Purchaser for the Registered Shares. Schedule E ---------- Wire Transfer Instructions -------------------------- 1. The sum equal to 2.00% of the Purchase Price shall be paid to the Company by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: CardioDynamics International Corporation's Wire Transfer Instructions --------------------------------------------------------------------- Comerica Bank San Diego Regional Office San Diego, CA 92101 Phone (858) 338-1500 Account number 1891661462 Routing/ABA Number 121137522 In favor of: CardioDynamics International Corporation 6175 Nancy Ridge Drive, Suite 300 San Diego, CA 92121 2. The sum equal to 2.00% of the Purchase Price shall be paid to Gruntal & Co., L.L.C. by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: Gruntal & Co., L.L.C. Wire Transfer Instructions ------------------------------------------------ Pershing - - Chase Manhattan Bank NYC - - ABA# 021000021 - - Pershing A/C# 930-1-032992 - - Re: Cardio Dynamics - - FFC BondInvest A/C# 75F-891578 3. The remainder of the Purchase Price shall be paid to the Seller by wire transfer of immediately available funds, pursuant to the following wire transfer instructions: The Allen E. Paulson Living Trust's Wire Transfer Instructions -------------------------------------------------------------- DTC #352 Citibank 111 Wall Street New York, NY Routing/ABA Number 021000089 Bear Stearns Account Number 0925-3186 For Further Credit To: Account Number 720-51920 FBO: Allen E. Paulson Living Trust -----END PRIVACY-ENHANCED MESSAGE-----