50.0 Million Euro Equity Financing to Reinforce CARMAT’s Cash Resources

Regulatory News:

CARMAT (Paris:ALCAR) (FR0010907956, ALCAR), the designer and developer of the world’s most advanced artificial heart project, aiming to provide a therapeutic alternative for people suffering from end-stage biventricular heart failure, today announces, on the occasion of the publication of its annual results, a capital increase plan for a minimum of 50.0 million euros (issue premium included), entirely subscribed to by a pool of strategic investors and its core shareholders. CARMAT had a cash position of €3.0m as of December 31, 2015.

• Financing of further industrial and clinical development to seek CE Mark approval

With the completion of the First in Man study of its bioprosthetic heart, CARMAT has decided to reinforce its shareholders’ equity via a 50.0 million euro reserved capital increase. A pool of strategic investors comprised of ALIAD, Air Liquide’s venture capital investor, CorNovum, an investment holding company that will be held 50-50 by Bpifrance and the French State (Programme des Investissements d’Avenir - PIA), the family offices of Pierre Bastid (ZAKA) and of Dr. Antonino Ligresti (Santé Holdings S.R.L.), and core shareholders Airbus Group (Matra Défense) and Truffle Capital (via an existing fund and a number of new funds) will fully subscribe the 50.0 million euro equity financing. This reserved capital increase may be potentially supplemented by a private placement among qualified investors of a size yet to be determined. The round of financing should allow CARMAT to finance further industrial and clinical development in order to file for CE Mark.
CARMAT is currently finalizing the protocol of the Pivotal clinical study that will be submitted to the Comité de Protection des Patients (CPP, the patient protection committee) and the Agence Nationale de Sécurité du Médicament et des Produits de Santé (ANSM, the French health authority).

Marcello Conviti, Chief Executive Officer of CARMAT, comments: "We are delighted by the interest our project has aroused among corporate and financial investors as prestigious and selective as Air Liquide, Bpifrance, the French State via the PIA, Pierre Bastid and Doctor Antonino Ligresti, alongside our core shareholders, Airbus Group (Matra Défense) and Truffle Capital, who have been supporting us since inception. This major financing, adapted to the current financial market environment, will provide CARMAT with sound financial resources. It will support the industrial expansion (securing of the key elements of the supply chain, manufacturing scaling-up) and clinical trials in France and abroad to seek CE Mark approval. We are more confident than ever in CARMAT’s development and in our ability to market a real alternative to heart transplants for patients suffering from end-stage biventricular heart failure.”

• Terms and conditions of the financing

The investment agreement was signed on February 26, 2016 between CARMAT, its core shareholders and the pool of strategic investors. It foresees the implementation of a 50.0 million euro reserved capital increase and, potentially, a private placement among qualified investors of a size yet to be determined.

The issue price of the new shares of the reserved capital increase and, if applicable, the private placement will be equal to the lower of the two following prices:

• 40 euros; or
• The volume-weighted average price during the five trading sessions preceding the date of the Board meeting that approves, as authorized by the Shareholders’ Meeting, the reserved capital increase and, if applicable, the private placement. The Board should meet after the Shareholders’ Meeting scheduled for April 12, 2016.

Subscriptions to the reserved capital increase would break down as follows:

* This amount could be reduced depending on the size of the private placement

The implementation of the reserved capital increase and, if applicable, the private placement will be subject to the usual conditions, including approval by the Shareholders’ Meeting of a delegation of authority enabling completion of the reserved capital increase and a delegation of authority to enable the private placement (rendering obsolete the 11^th resolution of the Shareholders’ Meeting of June 24, 2015 which provided for the delegation of authority enabling the Board to carry out a private placement). A Shareholders’ Meeting should be held on April 12, 2016, and will also vote on the appointment of the Board members listed below.

To avoid delays in the availability of funds, Airbus Group (Matra Défense) and Truffle Capital have accepted to immediately subscribe to bonds issued by CARMAT for 2 million euros, whose repayment would be offset against the subscription price of the shares issued within the framework of the reserved capital increase with a 12% annual interest rate. The bond issue could, at CARMAT’s request, be increased to 4 million euros. Its reimbursement is guaranteed by a lien on the Company’s patents and trademarks.

Following the Shareholders’ Meeting, the Board of Directors will use the abovementioned delegation of authority to define the final size of the capital increase and set the subscription price based on the abovementioned rule. Subject to the identification of additional qualified investors by this date, this Board meeting may also decide the completion of a private placement.

CorNovum’s investment will be reduced if the total size of the financings (reserved capital increase and private placement) were to exceed 50.0 million euros.

• Capital allocation

As of January 31, 2016, the breakdown of share capital and voting rights was as follows:

As an example, CARMAT’s shareholding breakdown post-reserved capital increase would be the following, based on an issue price equal to CARMAT’s volume-weighted average price during the five trading sessions to February 23, 2016, i.e. €32.60:

A shareholder with 1% of the capital ex-ante would see their stake diluted to 0.75% of the capital following the reserved capital increase.

Should the issue price of the new shares be €40, CARMAT’s shareholding breakdown post-reserved capital increase would be the following:

A shareholder with 1% of the capital ex-ante would see their stake diluted to 0.79% of the capital following the reserved capital increase.

The dilutive impact and shareholding breakdown post-reserved capital increase, depending on the issue price, do not take into account the completion of a potential private placement.

• Governance

To take into account the entry of new investors, CARMAT’s governance would be modified in accordance with the following principles, and in compliance with the AFEP-MEDEF code:

• CARMAT’s Board of Directors would have a maximum of 11 members, including a representative of each of the following shareholders: Airbus Group (Matra Défense), Truffle Capital, Pierre Bastid, Dr. Antonino Ligresti, and Pr. Alain Carpentier (it being specified that Pierre Bastid will not be appointed immediately);
• CARMAT’s Chief Executive Officer would be a Board member;
• The Board of Directors would also include four independent members;
• The composition of the Board’s committees (recruitment and compensation board, audit committee and scientific advisory board) would also be modified, given the new composition of the Board of Directors;
• The Board of Directors would be expanded to include two independent board members, recognized for their international expertise in the targeted markets;
• Moreover, the investment agreement conditions a number of decisions to prior approval by the Board of Directors, notably in the fields of strategic agreements, investments, divestments and acquisitions, debt policy, recruitment, etc.

Reminder: no strategic and/or core investor would act in concert vis-à-vis CARMAT.

• Investor and shareholder lock-up agreement

The investors (CorNovum – an investment holding company that will be held 50-50 by the French State and Bpifrance), ZAKA (Pierre Bastid), ALIAD (Air Liquide’s venture capital investor), Santé Holdings S.R.L (Dr. Ligresti’s vehicle) and longstanding shareholders (Airbus Group (Matra Défense), Truffle funds, Pr Carpentier & Association) have pledged not to divest their CARMAT shares (existing or subscribed to the operation), either directly or indirectly, unless they receive prior approval from the Company’s investors and shareholders, until the earlier of the two following dates: (i) 2 years from the settlement-delivery of the reserved capital increase or (ii) the date on which the CARMAT artificial heart receives the CE Mark.

Truffle Capital’s lock-up commitment would not apply to certain funds (FCPI innovation UCITS) managed by Truffle, for which the divestment of CARMAT shares would become necessary to meet their regulatory obligations. In particular, the lock-up commitment would not apply to UFF Innovation 5 and Europe Innovation 2006 UCITS. These two funds would represent between 9.1% and 9.5% of the share capital post-reserved capital increase, depending on whether the issue price is €32.60 or €40.

Altogether, post-reserved capital increase, the proportion of shares subject to a lock-up commitment would represent 58% or 56% of the share capital respectively, depending on whether the issue price is €32.60 or €40.

The Company’s CEO and the other Board members will be subject to similar lock-up agreements.

• CARMAT lock-up commitment

CARMAT has pledged, for a period of 180 days following the settlement-delivery of the reserved capital increase, not to carry out a public offer of shares, securities or any other rights giving access to its share capital.

• Indicative timetable
  • February 29, 2016: resumption of trading when the markets open
  • March 7, 2016: Publication in the BALO official legal notices bulletin of the convening of the Shareholders’ Meeting
  • No earlier than March 11, 2016: Filing of the 2015 reference document with the AMF
  • April 12, 2016: CARMAT Shareholders’ Meeting
  • April 15, 2016: Settlement-delivery of the new shares issued within the framework of the reserved capital increase and, if applicable, the new shares issued within the framework of the private placement.

Natixis will act as CARMAT’s financial advisor for this reserved capital increase.

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About CARMAT: the world’s most advanced total artificial heart project

A credible response to end-stage heart failure: CARMAT aims to eventually provide a response to a major public health issue associated with heart disease, the world’s leading cause of death: chronic and acute heart failure. By pursuing the development of its total artificial heart, CARMAT intends to overcome the well-known shortfall in heart transplants for the tens of thousands of people suffering from irreversible end-stage heart failure, the most seriously affected of the 20 million patients with this progressive disease in Europe and the United States.

The result of combining two types of unique expertise: the medical expertise of Professor Carpentier, known throughout the world for inventing Carpentier-Edwards^® heart valves, which are the most used in the world, and the technological expertise of Airbus Group, world aerospace leader.

Imitating the natural heart: given its size, the choice of structural materials and its innovative physiological functions, CARMAT’s total artificial heart could, assuming the necessary clinical trials are successful, potentially benefit the lives of thousands of patients a year with no risk of rejection and with a good quality of life.

A project leader acknowledged at a European level: with the backing of the European Commission, CARMAT has been granted the largest subsidy ever given to an SME by Bpifrance; a total of €33 million.

Strongly committed, prestigious founders and shareholders: Airbus Group (Matra Défense), Professor Alain Carpentier, the Centre Chirurgical Marie Lannelongue, Truffle Capital, a leading European venture capital firm, and the thousands of institutional and individual shareholders who have placed their trust in CARMAT.

For more information: www.carmatsa.com

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Disclaimer
This press release and the information it contains is not intended to constitute and should not be construed as an offer to sell or a solicitation to buy or subscribe to any Carmat securities, in any jurisdiction. Any public offering of securities would be made by means of a prospectus approved by the French financial market authority (the Autorité des marchés financiers) that contains detailed information about Inside Secure.

The distribution of this press release may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restrictions.

This document is not for publication or distribution, directly or indirectly, in or into the United States. This document does not constitute or form part of an offer of securities for sale or solicitation of an offer to purchase securities in the United States, Canada, Australia, Japan or in any other jurisdiction where such offer may be restricted. The Carmat securities referred to in this press release have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "Securities Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from registration or in a transaction not subject to the registration requirements of the Securities Act. There will be no public offering of Carmat securities in the United States.

This communication is directed only at persons who: (i) are qualified investors within the meaning of the Financial Services and Markets Act 2000 (as amended) and any relevant implementing measures, and/or (ii) are outside the United Kingdom, and/or (iii) have professional experience in matters relating to investments who fall within the definition of "investment professionals" contained in article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the "Order"), or are persons falling within article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the Order, or fall within another exemption to the Order (all such persons referred to in (i) to (iii) above together being referred to as "Relevant Persons"). Any person who is not a Relevant Person must not act or rely on this communication or any of its contents. Any investment or investment activity to which this communication relates is available only to Relevant Persons and will be engaged in only with Relevant Persons.

Name: CARMAT
ISIN code: FR0010907956
Ticker: ALCAR

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