UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
---- Exchange Act of 1934.
For the quarterly period ended June 30, 1998.
Transition period pursuant to Section 13 or 15(d) of the Securities
---- Exchange Act of 1934.
For the transition period from _____________ to ______________.
0-20727
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(Commission File Number)
Novoste Corporation
-------------------
(Exact Name of Registrant as Specified in Its Charter)
Florida 59-2787476
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4350-C International Blvd., Norcross, GA 30093
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone, including area code: (770) 717-0904
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
requirements for the past 90 days.
(Item 1) Yes X No
--------------- ---------------
(Item 2) Yes X No
--------------- ---------------
As of July 31, 1998, there were 10,569,312 shares of the Registrant's Common
Stock outstanding.
Exhibit Index on page: 17
Total number of pages:
1
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NOVOSTE CORPORATION
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Condensed Financial Statements
Condensed Balance Sheets as of June 30, 1998 (unaudited)
and December 31, 1997 3
Condensed Statements of Operations (unaudited) for the
three and six months ended June 30, 1998 and 1997 and
the period from inception (May 22, 1992) through
June 30, 1998 4
Condensed Statements of Cash Flows (unaudited) for the
six months ended June 30, 1998 and 1997 and the period
from inception (May 22, 1992) through June 30, 1998
5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Matters 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
EXHIBIT 27 - FINANCIAL DATA SCHEDULE 53
2
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NOVOSTE CORPORATION
(A Development Stage Company)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 32,842,206 $ 35,993,933
Short-term investments 7,247,546 12,408,785
Prepaid expenses 246,409 88,099
------------ ------------
Total current assets 40,336,161 48,490,817
Property and equipment, net 1,804,807 1,061,526
License agreements, net 132,940 139,758
Other assets 299,188 103,855
------------ ------------
$ 42,573,096 $ 49,795,956
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 21,686 $ 523,678
Accrued expenses and taxes withheld 2,420,945 1,903,276
------------ ------------
Total current liabilities 2,442,631 2,426,954
------------ ------------
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized;
no shares issued and outstanding -- --
Common stock, $.01 par value, 25,000,000 shares authorized;
10,571,617 and 10,332,042 shares issued, respectively 105,716 103,320
Additional paid-in capital 76,644,528 74,908,631
Deficit accumulated during the development stage (36,242,950) (27,619,109)
------------ ------------
40,507,295 47,392,842
Less treasury stock, 5,780 shares of common stock at cost (23,840) (23,840)
Unearned compensation (352,990) --
------------ ------------
Total shareholders' equity 40,483,455 47,369,002
------------ ------------
$ 42,926,086 $ 49,795,956
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
NOVOSTE CORPORATION
(A Development Stage Company)
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From inception
Three months ended Six months ended (May 22, 1992)
June 30, June 30, through June 30,
1998 1997 1998 1997 1998
------------------------ ------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Miscellaneous revenues $ -- $ 29,313 $ -- $ 29,313 $ 320,200
Costs and expenses:
Research and development 3,984,103 3,157,439 7,912,637 5,481,277 29,672,536
General and administrative 541,548 443,023 1,052,866 960,121 6,876,741
Marketing 505,468 152,137 871,426 290,667 3,425,527
---------- ----------- ----------- ----------- ------------
5,031,119 3,752,599 9,836,929 6,732,065 39,974,804
---------- ----------- ----------- ----------- ------------
Loss from operations (5,031,119) (3,723,286) (9,836,929) (6,702,752) $(39,654,604)
---------- ----------- ----------- ----------- ------------
Interest income 585,209 317,964 1,213,088 655,024 3,593,413
Interest expense -- -- -- (181,759)
---------- ----------- ----------- ----------- ------------
Net loss (4,445,910) ($3,405,322) ($8,623,841) ($6,047,728) $(36,242,950)
========== =========== =========== =========== ============
Net loss per share, basic
and diluted ($0.43) ($0.40) ($0.83) ($0.72)
========== =========== =========== ===========
Weighted average shares
outstanding 10,464,573 8,453,621 10,424,013 8,393,106
========== =========== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
NOVOSTE CORPORATION
(A Development Stage Company)
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From inception
For the six months (May 22, 1992)
ended June 30, through June 30,
1998 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $(8,623,841) $(6,047,728) $(36,242,950)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 219,343 199,717 1,520,081
Issuance of stock for services or compensation 593,060 135,000 1,810,378
Changes in assets and liabilities:
Prepaid expenses (158,310) (58,738) (253,868)
Accounts payable (501,992) (132,091) 21,686
Accrued expenses and taxes withheld 517,669 34,844 2,815,452
Other (188,515) 130,719 (323,833)
----------- ----------- ------------
Net cash used by operations (8,142,586) (5,738,277) (30,653,054)
----------- ----------- ------------
Cash flows from investing activities
Maturity (purchase) of short-term investments 5,161,239 2,036,335 (7,247,546)
Purchase of property and equipment, net (962,624) (53,365) (2,988,077)
----------- ----------- ------------
Net cash provided (used) by investing activities 4,198,615 1,982,970 (10,235,623)
----------- ----------- ------------
Cash flows from financing activities
Proceeds from issuance of notes payable -- -- 4,770,150
Repayment of notes payable -- -- (2,970,150)
Proceeds from issuance of common stock 792,244 230,794 71,930,883
----------- ----------- ------------
Net cash provided by financing activities 792,244 230,794 73,730,883
----------- ----------- ------------
Net increase (decrease) in cash and cash equivalents (3,151,727) (3,524,513) 32,842,206
Cash and cash equivalents at beginning of period 35,993,933 19,954,827 --
----------- ----------- ------------
Cash and cash equivalents at end of period $32,842,206 $16,430,314 $ 32,842,206
=========== =========== ============
Supplemental disclosures of cash flow information
Cash paid for interest -- -- $ 165,137
=========== =========== ============
</TABLE>
See accompanying notes.
5
<PAGE>
NOVOSTE CORPORATION
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
June 30, 1998
Note 1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with instructions to Article 10 of Regulation S-X.
Accordingly, such financial statements do not include all of the information and
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.
The operating results of the interim periods presented are not necessarily
indicative of the results to be achieved for the year ending December 31, 1998.
The accompanying financial statements should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 31,
1997 and for the cumulative period from May 22, 1992 (inception) through
December 31, 1997, included in the Company's 1997 Annual Report on Form 10-K
filed with the Securities and Exchange Commission ("SEC").
Note 2. Net Loss Per Share
The basic and diluted loss per share is computed based on the weighted average
number of common shares outstanding. Common equivalent shares are not included
in the per share calculations where the effect of their inclusion would be
antidilutive.
Note 3. Cash Equivalents and Investments
Cash equivalents are comprised of certain highly liquid investments with
maturities of less than three months at the time of their acquisition. In
addition to cash equivalents, the Company has investments in commercial paper
that are classified as short-term (mature in more than 90 days but less than one
year). Such investments are classified as held-to-maturity, as the Company has
the ability and intent to hold them until maturity. Investments held-to-maturity
are carried at amortized cost, adjusted for the amortization or accretion of
premiums or discounts without recognition of gains or losses that are deemed to
be temporary. Premiums and discounts are amortized or accreted over the life of
the related instrument as an adjustment to yield using the straight-line method,
which approximates the effective interest method. Interest income is recognized
when earned. Fair value approximates carrying value for all cash equivalents and
investments.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Information
The statements contained in this Form 10-Q that are not historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
statements regarding the expectations, beliefs, intentions or strategies
regarding the future. The Company intends that all forward-looking statements be
subject to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect the Company's views
as of the date they are made with respect to future events and financial
performance, but are subject to many uncertainties and risks which could cause
the actual results of the Company to differ materially from any future results
expressed or implied by such forward-looking statements. Some of these risks are
discussed below in the section "Certain Factors That May Impact Future
Operations." Additional risk factors are discussed in "Item 1 - Business" of the
Company's Form 10-K and other reports filed by the Company from time to time on
Forms 10-Q and 8-K. The Company does not undertake any obligation to update or
revise any forward-looking statement, made by it or on its behalf, whether as a
result of new information, future events, or otherwise.
Overview
Novoste commenced operations as a medical device company in May 1992. Commencing
in 1994 the Company has devoted substantially all of its efforts to developing
the Beta-Cath(TM) System, an intraluminal beta radiation catheter delivery
system designed to reduce the frequency of restenosis subsequent to percutaneous
transluminal coronary angioplasty ("PTCA").
For the period since its capitalization through June 30, 1998 the Company has
earned minimal non-recurring revenues and experienced significant losses in each
period. At June 30, 1998 the Company had an accumulated deficit of approximately
$36.2 million. Novoste expects to incur significant operating losses through at
least 2000 as the Company continues research and development projects, conducts
its clinical trials in the United States, Canada and Europe, seeks regulatory
approval or clearance for its products, expands its sales and marketing efforts
in contemplation of product introduction and market development, and increases
its administrative activities to support growth of the Company.
The development, manufacture, sale and distribution of medical devices such as
the Company's Beta-Cath(TM) System are subject to numerous regulations imposed
by governmental authorities, principally the FDA and corresponding state and
foreign agencies. The regulatory process is lengthy, expensive and uncertain.
FDA approval of a Pre Market Approval ("PMA") application and approval from the
Nuclear Regulatory Commission (NRC) are required before the Beta-Cath(TM) System
can be marketed in the United States. Securing FDA approval will require
submission to the FDA of extensive clinical data and technical information. The
Company expects to receive approval of the Beta-Cath(TM) System for sale in
Europe during the third quarter of 1998. However, the Company does not expect
regulatory approval of the Beta-Cath(TM) System for sale in the United States
prior to 2000 and there can be no assurance when or if such approvals will be
obtained.
In 1996 and 1997 the Company conducted a feasibility clinical trial at four
hospitals under an Investigational Device Exemption ("IDE") granted by the FDA
to determine the clinical safety of the Beta-Cath(TM) System for use in coronary
arteries and a total of 85 patients were enrolled. As of March 31, 1998, 64 of
the 85 patients had received angiographic follow-up analyzed in a core lab. Of
the 64 patients
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<PAGE>
14% were reported restenotic. This data suggests a 67% reduction in the rate of
restenosis in patients who received treatment with the Beta-Cath(TM) System when
compared to a historical control group (from the Lovastatin Restenosis Trial)
which received PTCA only and had been selected based upon inclusion and
exclusion criteria similar to those utilized by the Company. Arteries treated
with the Beta-Cath(TM) System on average maintained 100% of the enlargement
achieved with PTCA (a "late loss index" of 0%). The following table compares the
Company's data on the 64 patients to the historical control group:
Novoste Lovastatin
Feasibility Placebo
Studies Group
------- -----
No. of Treated Patients... 64 161
Restenosis Rate........... 14% 42%
Late Loss Index........... 0% 43%
On July 30, 1997 the Company initiated a randomized, triple-masked, placebo-
controlled, multicenter human clinical trial under an IDE granted by the FDA to
determine the clinical safety and efficacy of the Beta-Cath(TM) System for use
in coronary arteries. The Company expects to enroll approximately 1,100 patients
in the trial at up to 45 medical sites located in the United States as well as
additional sites located in Europe and Canada. The patients will be divided into
two approximately equal subgroups, one for PTCA alone and one with coronary
stenting. Each subgroup of the trial will be randomized to either intracoronary
radiation therapy or a placebo control. In both subgroups patients who receive
the beta radiation will receive dosages of 14Gy for vessels ranging from at
least 2.7 to 3.35 millimeters and 18Gy for vessels ranging from 3.35 to 4.0
millimeters. A follow-up review of patients 30 days after treatment and a
follow-up angiogram eight months after the initial treatment will be performed
to observe the treated artery. The angiograms will be analyzed to determine
whether there has been an incidence of restenosis and to measure the late loss
index (the extent of the loss in the enlargement of lumen achieved with PTCA).
As of July 28, 1998 a total of 467 patients had been enrolled at 30 medical
centers.
On July 9, 1998 the Company received approval from the FDA for an
Investigational Device Exemption (IDE) supplement to begin the "STents And
Radiation Therapy" (START) Trial, designed to determine the safety and efficacy
of ICRT in treating "in-stent restenosis." Novoste expects to enroll 386
patients in this trial starting in September 1998.
There can be no assurance that the Company's research and development efforts
will be successfully completed. There can be no assurance that clinical trials
will be completed in a timely fashion or demonstrate the safety and efficacy of
the Beta-Cath(TM) System. Additionally, there can be no assurance that the
Beta-Cath(TM) System will be approved by the FDA, the NRC, any foreign
governmental agency, or that the Beta-Cath(TM) System or any other product
developed by Novoste will be successfully introduced or attain any significant
level of market acceptance. There can be no assurance that the Company will ever
achieve either significant revenues from sales of its Beta-Cath(TM) System or
ever achieve or sustain profitability.
Results of Operations
Net loss for the three months ended June 30, 1998 was $4,446,000, or ($0.43) per
share, as compared to $3,405,000, or ($0.40) per share, for the three months
ended June 30, 1997. Net loss for the six months ended June 30, 1998 was
$8,624,000, or ($0.83) per share, as compared to $6,048,000 or ($0.72) per share
for the year earlier period. The increase in net loss for the three and six
months ended June 30, 1998
8
<PAGE>
compared to the year earlier period is primarily due to increased spending for
research and development as well as increased marketing related to the Company's
development of its Beta-Cath(TM) System, offset by increased interest income
earned from the investment of the net proceeds from the secondary public
offering in November 1997.
Revenues. No revenues were earned in the three and six months ended June 30,
1998. Miscellaneous revenues were $29,000 for the three and six months ended
June 30, 1997, due to the sale of a product line.
Research and Development Expenses. Research and development expenses increased
26% to $3,984,000 for the three months ended June 30, 1998 from $3,157,000 for
the three months ended June 30, 1997. For the six months ended June 30, 1998,
research and development expenses increased 44% to $7,913,000 from $5,481,000
for the same period in 1997. These increases were primarily a result of (a)
patient enrollment and follow-up costs in the Company's clinical trials, (b)
services provided by outside consultants in the development of the Beta-Cath(TM)
System and manufacture of its components, (c) cost overruns related to a new
production line at its supplier of radioactive sources (see Liquidity and
Capital Resources), and (d) the increased size of the Company's research and
development staff. The Company expects research and development expenses to
further increase in the immediate future as the Company continues clinical
trials of its Beta-Cath(TM) System in both the U.S. and selected foreign
countries.
General and Administrative Expenses. General and administrative expenses
increased 22% to $542,000 for the three months ended June 30, 1998 from $443,000
for the three months ended June 30, 1997. For the six months ended June 30, 1998
general and administrative expenses increased 10% to $1,053,000 from $960,000,
for the same period in 1997. This increase for the three month period was
primarily a result of additional personnel and higher salaries. The Company
expects general and administrative expenses to increase in the future in support
of a higher level of operations.
Marketing Expenses. Marketing expenses increased 232% to $505,000 for the three
months ended June 30, 1998 from $152,000 for the three months ended June 30,
1997. For the six months ended June 30, 1998, marketing expenses increased 199%
to $871,000 from $291,000 for the same period in 1997. These increases primarily
relate to preparation for the European commercial launch of the Beta-Cath(TM)
System and arise from increased trade show costs, consulting fees and higher
staff and salaries. The Company expects sales and marketing expenses to
significantly increase in the future, if and when the Beta-Cath(TM) System is
approved in the U.S. and other countries.
Interest Income. Net interest income increased 84% to $585,000 for the three
months ended June 30, 1998 from $318,000 for the three months ended June 30,
1997. For the six months ended June 30, 1998 interest income increased 85% to
$1,213,000 from $655,000 for the same period in 1998. The increase in interest
income was primarily due to larger cash equivalents and short-term investment
balances after the Company's secondary public offering in November 1997.
Liquidity and Capital Resources
The Company has financed its activities since inception up to May 23, 1996, the
date of the Company's initial public offering, through private placements of its
Common Stock, Class B Common Stock and promissory notes. Since inception through
June 30, 1998 the Company obtained funds aggregating approximately $71.9 million
in net proceeds from the issuance of Common Stock and Class B Common Stock
(including approximately $30.6 million in net proceeds from its initial public
offering which closed in May 1996 and approximately $32.2 million in net
proceeds from its secondary public offering which closed in November 1997), and
approximately $1.8 million in net proceeds from the issuance of convertible
promissory notes.
9
<PAGE>
During the six months ended June 30, 1998 and 1997 the Company used cash to fund
operations of $8.1 million and $5.7 million, respectively. Cash used to fund
operations since inception was approximately $30.6 million. The increase in cash
used in operations was due primarily to increased research and development
activities and initiation of marketing activities related to the Beta-Cath(TM)
System. The Company's expenditures for equipment and improvements have
aggregated $3.0 million since inception. Future cash needs for operating
activities are anticipated to be higher than historical levels because of the
development, manufacturing scale-up and commercialization of the Beta-Cath(TM)
System, subject to the factors discussed below.
The Company's principal source of liquidity at June 30, 1998 consisted of cash,
cash equivalents and short-term investments of $40.1 million. The Company did
not have any credit lines available or outstanding borrowings at June 30, 1998.
The Company has obtained all of its requirements of radioactive sources to date
pursuant to an agreement with a single supplier, Bebig Isotopentechnik and
Umweltdiagnostik GmbH, (the "Supplier"), a German corporation. On July 23, 1998
the Company executed an amendment to its framework agreement with the Supplier,
whereby it agreed to reimburse DM 1 Million ($560,000) in cost overruns for a
new production line. This amount was accrued at March 31, 1998 and charged to
research and development expense. The Company received a lien on all tangible
and intangible assets used by the Supplier in the design and manufacture of the
Strontium 90 radioactive sources. In addition, the agreement provides for the
Company's exercise of an option to purchase the tangible assets, and obtain a
fully-paid license to all intellectual property used in the manufacture of the
radioactive sources, for $4,019,400. This amount will be paid in the form of a
license fee on certain production quantities prior to August 31, 2002.
The Company anticipates that its operating losses will continue through at least
2000 because it plans to expend substantial resources in funding clinical trials
in support of regulatory approvals, and continues to expand research and
development and marketing activities. Novoste believes that current cash
balances and short-term investments, together with interest thereon, will be
sufficient to meet the Company's operating and capital requirements through
1999. However, the Company's future liquidity and capital requirements will
depend upon numerous factors, including the progress of the Company's clinical
research and product development programs; the receipt of and the time required
to obtain regulatory clearances and approvals; the resources required to gain
approvals; the resources the Company devotes to the development, manufacture and
marketing of its products; the resources required to hire and develop a direct
sales force in the United States, develop distributors internationally, and to
expand manufacturing capacity; market acceptance and demand for its products;
and other factors. Novoste may in the future seek to raise additional funds
through bank facilities, debt or equity offerings or other sources of capital.
There can be no assurance that additional financing, if required, will be
available on satisfactory terms, or at all.
Impact of Year 2000
In July 1998 the Company installed and implemented a complete manufacturing
software package that includes integrated financial modules that replaced the
Company's then existing financial software program. The vendor of the new
software package has warranted that it is compliant with year 2000 requirements.
The Company believes that any year 2000 problems encountered by suppliers are
not likely to have a material adverse effect on the Company's operations. There
can be no assurance, however, that such problems will not arise.
10
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Additional Risk Factors
Limited Operating History. The Company has a limited history of operations.
Since its inception in May 1992 the Company has been primarily engaged in
research and development of its Beta-Cath(TM) System. The Company has generated
only limited revenue and does not have experience in manufacturing, marketing or
selling its products in quantities necessary for achieving profitability. There
can be no assurance that the Company's products will be commercialized or that
the Company will achieve significant revenues from either international or
United States sales. In addition, there can be no assurance that the Company
will achieve or sustain profitability in the future.
History of Losses and Expectation of Future Losses. The Company has experienced
significant operating losses since inception and as of June 30, 1998 had an
accumulated deficit of $36.2 million. The development and further
commercialization of the Company's current products and other new products, if
any, will require substantial development, clinical, regulatory, manufacturing
and other expenditures. The Company expects its operating losses to continue
through at least the year 2000 as the Company continues to expand its product
development, clinical trials, and marketing efforts.
Risk of Inadequate Funding. The Company anticipates that its operating losses
will continue through at least 2000 because it plans to expend substantial
resources in funding clinical trials in support of regulatory approvals and
continues to expand research and development and marketing activities. Novoste
believes that current cash balances and short-term investments, together with
interest thereon, will be sufficient to meet the Company's operating and capital
requirements through 1999. However, the Company's future liquidity and capital
requirements will depend upon numerous factors, including the progress of the
Company's clinical research and product development programs; the receipt of and
the time required to obtain regulatory clearances and approvals; the resources
required to gain approvals; the resources the Company devotes to the
development, manufacture, and marketing of its products; the resources required
to hire and develop a direct sales force in Europe and the United States; the
rate of sales in Europe, expansion of manufacturing capacity and other
facilities requirements; market acceptance and demand for its products; and
other factors. Novoste may in the future seek to raise additional funds through
bank facilities, debt or equity offerings or other sources of capital. There can
be no assurance that additional financing, if required, will be available on
satisfactory terms, or at all.
Dependence on Beta-Cath(TM) System; Market Acceptance. The Company anticipates
that for the foreseeable future it will be solely dependent on the successful
development and commercialization of the Beta-Cath(TM) System. The Beta-Cath(TM)
System will require further development, as well as regulatory clearance or
approval, before it can be marketed in the United States or internationally.
There can be no assurance that the Company's development efforts will be
successful or that the Beta-Cath(TM) System will be shown to be safe or
effective, cleared or approved by regulatory authorities, capable of being
manufactured in commercial quantities at acceptable costs, approved by payors
for reimbursement or successfully marketed. In addition, there can be no
assurance that demand for the Beta-Cath(TM) System will be sufficient to allow
profitable operations. Failure of the Beta-Cath(TM) System to be successfully
commercialized would have a material adverse effect on the Company's business,
financial condition and results of operations.
Early Stages of Clinical Trials; No Assurance of Safety and Efficacy. The
Beta-Cath(TM) System is in an early stage of clinical testing, and there can be
no assurance as to when, if ever, its safety and efficacy in reducing the
frequency of restenosis will be demonstrated. The Company has commenced a
randomized,
11
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triple-masked, placebo-controlled, multicenter, human clinical trial under an
Investigational Device Exemption ("IDE") granted by the U.S. Food and Drug
Administration ("FDA") to determine the clinical safety and efficacy of the
Beta-Cath(TM) System for use in coronary arteries. The Company anticipates
completing enrollment in this pivotal clinical trial by March 31, 1999. Various
factors, including difficulties in enrolling patients or scheduling physicians,
could delay completion for an indeterminate amount of time.
The multicenter trial will require the treatment of a statistically significant
number of patients, and clinical follow-ups of such patients after eight months.
It is only after completion of these trials that the Company would apply to the
FDA for the regulatory approval required to commence marketing of the
Beta-Cath(TM) System in the U.S. Subsequent experience may uncover unforeseen
problems with the therapy which could require removal of the product from the
market or additional testing. There can be no assurance that the Beta-Cath(TM)
System or any of the Company's other products will prove to be safe and
effective in clinical trials or ultimately will be approved for marketing by the
United States or foreign regulatory authorities. The Company does not expect to
submit an application for pre-market approval ("PMA") for its Beta-Cath(TM)
System until the first quarter of 2000, and there can be no assurance that the
Company will ever submit a PMA or that, if submitted, such PMA will be approved
by the FDA. If the Beta-Cath(TM) System does not prove to be safe and effective
in clinical trials, the Company's business, financial condition and results of
operations will be materially adversely affected and could result in cessation
of the Company's business. In addition, the clinical trials may identify
significant technical or other obstacles to be overcome prior to obtaining
necessary regulatory approvals. Even if such obstacles are identified and
overcome, commercialization of the Beta-Cath(TM) System may be delayed.
Limited Sales, Marketing and Distribution Experience. At present the Company has
no sales and a limited marketing capability. The Company intends to sell its
products both inside the United States and in the key European markets directly.
There can be no assurance that the Company will be able to recruit and train
adequate sales and marketing personnel to successfully commercialize the
Beta-Cath(TM) System in the key markets of Europe and the United States. The
Company intends to select one or more established market leaders in the
radioisotope business to inventory and deliver the radiation sources and provide
related training, testing and support services to hospitals in both the United
States and international markets. The inability to recruit or retain one or more
such entities for this purpose could have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence on a Key Supplier. The Company currently purchases all radiation
source materials from a single supplier. The Company believes that because of
the technical expertise and capital investment required to manufacture the
radiation source materials, it could be extremely difficult and expensive to
find an alternate source of supply. Any failure or disruption in the ability of
the supplier to provide the radiation source materials could have a material
adverse effect on the business, financial condition and results of operations of
the Company.
Fluctuations in Operating Results. The Company's results of operations may
fluctuate significantly from quarter to quarter and will depend upon numerous
factors, including product development efforts, actions relating to regulatory
and reimbursement matters, progress of clinical trials, the extent to which the
Company's products gain market acceptance, and competition.
12
<PAGE>
Possible Volatility of Stock Price. The stock market has from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These broad market fluctuations
may adversely affect the market price of the Company's Common Stock. In
addition, the market price of the shares of Common Stock is likely to be highly
volatile. Factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new products by the Company or its
competitors, FDA and international regulatory actions, actions with respect to
reimbursement matters, developments with respect to patents or proprietary
rights, public concern as to the safety of products developed by the Company or
others, changes in health care policy in the United States and internationally,
changes in stock market analyst recommendations regarding the Company, other
medical device companies or the medical device industry generally, and general
market conditions may have a significant effect on the market price of the
Common Stock.
Product Development. The focus of the Company's current development efforts is
to design future generation components of the Beta-Cath(TM) System. The medical
device industry is characterized by rapid and significant technological change.
Therefore, the Company's future success will depend in a large part on the
Company's ability to continue to respond to such changes, as well as expand the
applications for which its products are used, through the timely development and
successful introduction of enhanced and new versions of its Beta-Cath(TM)
System. Product research and development will require substantial expenditures
and will be subject to inherent risks, and there can be no assurance that any
new product introduced will receive regulatory approval or will be commercially
successful.
Highly Competitive Market; Risk of Alternative Therapies. Competition in the
medical device industry, and specifically the market for cardiovascular devices,
is intense. Many companies are developing devices and therapies to improve the
outcome of coronary revascularization procedures and to reduce the frequency of
restenosis, such as coronary stents. Other companies have various radiation
therapy products under development to reduce restenosis. In addition, drugs,
gene therapy and other minimally invasive catheter-based procedures are
currently being developed. Many of the Company's competitors and potential
competitors have substantially greater financial resources than the Company and
also have greater resources and expertise in the areas of research and
development, obtaining regulatory approvals, manufacturing and marketing. There
can be no assurance that the Company's competitors will not succeed in
developing, marketing and distributing technologies and products that are more
effective than those developed and marketed by the Company or that would render
the Company's technology and products obsolete or noncompetitive. Additionally,
there is no assurance that the Company will be able to compete effectively
against such competitors in terms of manufacturing, marketing and sales.
Patents and Proprietary Technology. The medical device industry has been
characterized by extensive litigation regarding patents and other intellectual
property rights and companies in the medical device industry have employed
intellectual property litigation to gain a competitive advantage. There can be
no assurance that the Company will not become subject to patent infringement
claims or litigation or interference proceedings declared by the USPTO to
determine the priority of inventions. The defense and prosecution of
intellectual property suits, USPTO interference proceedings and related legal
and administrative proceedings are both costly and time consuming. Litigation
may be necessary to enforce patents issued to the Company, to protect trade
secrets or know-how owned by the Company or to determine the enforceability,
scope and validity of the proprietary rights of others. Any litigation or
interference proceedings will result in substantial expense to the Company and
significant diversion of effort by the Company's technical and management
personnel. An adverse determination in litigation or interference proceedings to
which the Company may become a party could subject the Company to significant
liabilities to third parties or require the Company to seek licenses from third
parties or require
13
<PAGE>
the Company to redesign its products or processes to avoid infringement or
prevent the Company from selling its products in certain markets, if at all.
Although patent and intellectual property disputes regarding medical devices
have often been settled through licensing or similar arrangements, costs
associated with such arrangements may be substantial and could include ongoing
royalties. Furthermore, there can be no assurance that the necessary licenses
would be available to the Company on satisfactory terms, if at all, or that the
Company could redesign its products or processes to avoid infringement. Any
adverse determination in a judicial or administrative proceeding or failure to
obtain necessary licenses could prevent the Company from manufacturing and
selling its products, which would have a material adverse effect on the
Company's business, financial condition and results of operations.
Government Regulation. Clinical testing, manufacture, promotion and sale of the
Company's products are subject to extensive regulation by numerous governmental
authorities in the United States, principally the FDA, and corresponding foreign
regulatory agencies. The Federal Food, Drug, and Cosmetic Act ("FDC Act"), and
other federal and state statutes and regulations govern or influence the
testing, manufacture, labeling, advertising, distribution and promotion of drugs
and devices. Noncompliance with applicable requirements can result in fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, failure of the government to grant premarket clearance
or premarket approval for devices, refusal to authorize the marketing of
products or to allow the Company to enter into government supply contracts, and
criminal prosecution. The Company's Beta-Cath(TM) System is regulated as a Class
III medical device for which FDA approval of a PMA application must be obtained
prior to U.S. commercial sales. Failure to receive or delays in receipt of FDA
clearances or approvals could have a material adverse effect on the Company's
business, financial condition and results of operations.
Sales of medical devices outside of the United States are subject to
international regulatory requirements that vary from country to country. The
time required to obtain approval for sale internationally may be longer or
shorter than that required for FDA approval, and the requirements may differ.
The European Union ("EU") has promulgated rules which require that medical
products receive by June 12, 1998 the right to affix the CE mark, an
international symbol of adherence to quality assurance standards and compliance
with applicable European medical device directives. While the Company intends to
satisfy the requisite policies and procedures that will permit it to receive the
CE mark certification for the Beta-Cath(TM) System, there can be no assurance
that the Company will be successful in meeting the European certification
requirements and failure to receive the right to affix the CE mark will prohibit
the Company from selling the product in member countries of the European Union.
14
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its annual meeting of stockholders on May 1, 1998 and
solicited votes by proxy in connection with such meeting.
(b) The following matters were approved by the shareholders:
(i) The approval of the following nominees to the Board of Directors:
8,939,494 in favor, 0 against, and 2,595 broker non-votes for both
Pieter J. Schiller and William A. Hawkins.
(ii) The ratification of amendments to the Company's Amended and Restated
Stock Option Plan (the "Plan Amendments"), which Plan Amendments (a)
increase the number of shares of Common Stock reserved for issuance
thereunder by 700,000 shares to 3,400,000 shares, (b) increase the
maximum number of shares from 100,000 to 350,000 with respect to
options that may be granted to any person or entity eligible within
one calendar year, (c) allow the Stock Option and Compensation
Committee to determine as of the date of grant the acceleration, if
any, of the exercisability of a performance-based option upon a
Change in Control (as defined) of the Company. Shareholders approved
Plan Amendments by votes as follows: 4,447,997 in favor, 1,639,615
against, 3,521 abstained, and 2,850,956 broker non-votes.
(iii) The ratification of the appointment of Ernst & Young LLP as
independent auditors of the Company for the year ending December 31,
1998. The proposal received 8,939,389 votes in favor, 0 against,
2,700 abstained, and 0 broker non-votes.
Item 5. Other Matters
William A. Hawkins was elected to the office of President of the Company
effective June 1, 1998. Thomas D. Weldon, previous President & CEO, remains the
Company's CEO and was elected to the additional post of Chairman on May 1, 1998.
Dr. Norman Weldon retired as Chairman effective May 1, 1998 but remains a
director of the Company. Dr. Raoul Bonan was elected Medical Director and Vice
President of Clinical Affairs effective June 1, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
(10) Material Contracts
(27) Financial data schedule
(b) The Company did not file any reports on Form 8-K during the three months
ended June 30, 1998.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NOVOSTE CORPORATION
August 7, 1998 /s/ Thomas D. Weldon
- --------------------- -------------------------------
Date Thomas D. Weldon
Chairman & Chief Executive Officer
August 7, 1998 /s/ David N. Gill
- --------------------- -------------------------------
Date David N. Gill
Vice President - Finance,
Chief Operating Officer
and Chief Financial Officer
(Principal Financial & Accounting Officer)
16
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Exhibit Description Number
- ------ -------------------------------- ------
10.14 Employment Agreement with William A. Hawkins III
10.15 Employment Agreement with Dr. Raoul Bonan
10.16 Restricted Stock Award Agreement with William A. Hawkins III
10.17 Non-Incentive Stock Option Agreement with William A. Hawkins III
*10.18 Amendment to Framework Agreement and Security Agreement with
Bebig GmbH
27 Financial data schedule 53
- --------------------------------------------------------------------------------
* Portions have been omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment.
17
EXHIBIT 10.14
EXECUTION COPY
NOVOSTE CORPORATION
4350-C International Boulevard
Norcross, Georgia 30093
April 23, 1998
William A. Hawkins III
7 Gleneagles Drive
New Vernon
Basking Ridge, New Jersey 07920
Dear Bill:
We are delighted to welcome you to join Novoste Corporation ("Novoste") as
its new President. This letter sets forth the agreement between you and Novoste
as to the terms and conditions of your employment by Novoste.
1. Duties and Responsibilities. In your capacity as President of Novoste,
you will report to Novoste's Chairman and Chief Executive Officer and perform
such duties and responsibilities as are from time to time directed by Novoste's
Chairman and Chief Executive Officer consistent with your position as President.
Subject to your continued employment, Novoste will cause you to be elected or
designated Chief Executive Officer of Novoste on or prior to June 1, 1999, and
upon any such election or designation pursuant to this Paragraph 1, you further
agree to serve in such additional capacity with the understanding that at such
time you shall report directly to the Novoste's Board of Directors (the "Board")
and shall perform such duties and responsibilities as are from time to time
directed by the Board consistent with the position of Chief Executive Officer.
2. Related Agreements. Simultaneously herewith, you are entering into the
Confidentiality Agreement and Arbitration Agreement, Business Conduct Agreement,
Conflict of Interest Agreement, Patent Agreement and Unfair Competition
Agreement, in the forms of Exhibits A, B, C, D and E hereto, respectively, all
of which agreements are incorporated herein by reference thereto and made a part
hereof. Your employment is also subject to successful completion of a
pre-employment drug screening.
3. Term. The term of your employment will commence on June 1, 1998, and
continue until terminated under the provisions of Paragraph 7 below. By
accepting this Agreement, you accept such employment as a full-time employee of
Novoste and agree to devote all of your
<PAGE>
William A. Hawkins III
April 23, 1998
business and professional time, energy and skills to the affairs of Novoste and
to serve faithfully and to the best of your ability.
4. Compensation. As compensation for the services to be rendered by you
hereunder, following the commencement of your employment, Novoste will:
(a) pay you a base salary of $275,000 per annum, payable in
installments in accordance with Novoste's regular payroll practices. Your
performance will be reviewed annually by Novoste's Compensation Committee of the
Board, in conjunction with which goals and possible increases in your base
salary for the future will be discussed, it being understood that any such
increases shall be within the discretion of the Compensation Committee (or other
similar committee duly appointed by the Board or, in the absence of any such
committee, the Board).
(b) subject to shareholder approval of the amendments (the
"Amendments") to Novoste's 1992 Stock Option Plan (the "Stock Option Plan")
described in Novoste's Proxy Statement dated March 31, 1998, receipt of a copy
of which you acknowledge, grant you promptly following the commencement of your
employment with Novoste a ten-year non-incentive stock option to purchase an
aggregate of 240,000 shares of Novoste's Common Stock under the Stock Option
Plan, at an exercise price equal to $24.00 per share, upon the terms and
conditions summarized below and as more fully set forth in, and subject to the
provisions of, the stock option agreement to be executed by you (the "Paragraph
4(b) Stock Option Agreement") and the Stock Option Plan. Such options shall
become exercisable at the annual rate of 60,000 shares commencing June 1, 1999
and shall become exercisable in full upon a Change of Control (as defined in the
Stock Option Plan), upon a termination of your employment by you for Good Reason
(as defined in Paragraph 7(f) below) or upon a termination of your employment by
Novoste without Cause. If Novoste terminates your employment for Unsatisfactory
Performance (as defined in Paragraph 7(b) below), in addition to the options
then currently exercisable in accordance with the annual rate described above,
options to purchase an additional 60,000 shares shall also become exercisable as
of the date of termination (though in no event shall more than 240,000 options
be exercisable under such grant). These options may be exercisable while you are
employed and for a period of six months following termination of employment to
the extent such options were exercisable at the date of such termination, but in
no event subsequent to the option's expiration date.
(c) subject to shareholder approval of the Amendments, grant you
promptly following the commencement of your employment with Novoste a ten-year
non-incentive stock option to purchase an aggregate of 100,000 shares of
Novoste's Common Stock under the Stock Option Plan, at an exercise price equal
to $24.00 per share, upon the terms and conditions summarized below and as more
fully set forth in, and subject to the provisions of, the stock option agreement
to be executed by you (the "Paragraph 4(c) Stock Option Agreement" and together
with the Paragraph 4(b) Stock Option Agreement, the "Stock Option Plan") and the
Stock Option Plan. Such options shall become exercisable in full on June 1,
2003, or upon the earlier of (i) the date (the "Trigger Date") on which the
average closing sale prices of Novoste's Common Stock for twenty (20)
consecutive trading days shall be equal to or greater than $48.00 per share,
other than by reason
<PAGE>
William A. Hawkins III
April 23, 1998
of the announcement of a Change of Control on or before June 1, 1999, provided
the Trigger Date occurs prior to June 1, 2001, and (ii) the date of termination
of your employment by you for Good Reason. Such options may be exercisable while
you are employed and for a period of six months following termination of
employment to the extent such options were exercisable at the date of such
termination, but in no event subsequent to the option's expiration date.
(d) grant you promptly following the commencement of your employment
with Novoste Fourteen Thousand (14,000) shares of Novoste Common Stock upon the
terms and conditions summarized below and as more fully set forth in, and
subject to the provisions of, the restricted stock award agreement to be
executed by you (the "Restricted Stock Award Agreement"). The shares shall
contain a restriction on transfer, which restriction shall lapse at the annual
rate of 3,500 shares, commencing June 1, 1999. Such shares (to the extent the
restrictions on transfer have lapsed) will be eligible for resale under Rule 144
commencing one year from the date of issuance, or on June 1, 1999. In the event
of your termination of employment by Novoste for Unsatisfactory Performance, in
addition to those shares subject to the Restricted Stock Award Agreement which
are then no longer subject to the transfer restrictions, an additional 3,500
shares shall also no longer be subject to such restrictions unless all such
restrictions shall have previously lapsed. In the event of a Change of Control
(as that term is defined in the Stock Option Plan) or termination of your
employment by you for Good Reason or termination of your employment by Novoste
without Cause, all restrictions on transfer set forth in the Restricted Stock
Award Agreement shall lapse.
(e) entitle you to participate in Novoste's discretionary annual
incentive cash plan for executive officers, established to reward participating
individuals for their contribution to the accomplishment of key annual corporate
objectives. For calendar year 1998, subject to your continued employment for the
remainder of 1998, you shall be entitled to a cash bonus of 20% of your annual
base salary, or $54,000. The amount of any bonus in subsequent years shall be at
the discretion of the Compensation Committee of the Board.
(f) entitle you to participate in Novoste's medical, dental, life
and long-term disability insurance and other benefit programs from time to time
generally in effect for Novoste's senior executives, including any 401(k) or
other retirement plans, your participation in any such plans to be being subject
to their respective terms and conditions.
5. Vacation. You will be entitled to take up to an aggregate of four weeks
of vacation each calendar year as business conditions permit, it being
understood that unused vacation may not accumulate from year to year, and any
vacation time not used by the end of any year shall not require any additional
payment to you.
6. Reimbursement of Expenses. Novoste will reimburse you for all
reasonable and documented business expenses incurred by you on behalf of Novoste
during the term of your employment hereunder consistent with Novoste's expense
reporting policy (as the same may be modified from time to time).
<PAGE>
William A. Hawkins III
April 23, 1998
7. Events of Termination.
(a) By Novoste for Cause. Your employment hereunder may be
terminated at any time by Novoste for "Cause." "Cause" shall mean termination
due to any or more of the following: (i) if you are indicted for committing a
felony or a decision or determination is rendered by any court or governmental
authority that you have committed any act involving fraud, dishonesty, breach of
trust or moral turpitude or if you enter a plea of guilty or nolo contendere to
any of the foregoing; (ii) if you willfully breach your duty of loyalty to, or
commit an act of fraud or dishonesty upon, Novoste; (iii) if you demonstrate
gross negligence or willful misconduct; (iv) if, in the reasonable, good faith
opinion of a majority of Novoste's whole Board of Directors (excluding yourself
if you shall then be a director of Novoste), you engage in personal misconduct
of such a material nature as to render your presence as President and/or Chief
Executive Officer detrimental to Novoste or its reputation and you fail to cure
the same (if curable) within five days after written notice thereof from
Novoste; or (v) if you commit a material breach of or a default under any of the
terms or conditions of this Agreement (including the agreements incorporated
herein by reference thereto) and you fail to cure such breach or default (if
curable) within ten days' after written notice thereof from Novoste; provided,
however, your unsatisfactory performance, as determined in accordance with
paragraph 7(b), shall not be deemed "Cause."
(b) By Novoste for Unsatisfactory Performance. Your employment may
be terminated at any time by Novoste if a majority of Novoste's whole Board of
Directors (excluding yourself if you shall then be a director of Novoste) shall
have given you a vote of no confidence based upon your unsatisfactory
performance of your duties hereunder ("Unsatisfactory Performance"). Without
limiting the foregoing, Unsatisfactory Performance shall include:
(i) as of the end of any fiscal quarter, the unaudited interim
consolidated financial statements of Novoste for such quarterly
period or the audited consolidated financial statements for the
fiscal year then ended, as the case may be, indicate that during the
prior twelve-month period (or such shorter period from the date of
commencement of your employment), Novoste has (A) incurred net
losses on a consolidated basis (determined in accordance with the
same accounting principles utilized in preparing the audited
financial statements of Novoste) which substantially exceed those
projected for such twelve-month (or shorter) period contemplated in
the budget of Novoste for such twelve month (or shorter) period
theretofore approved by the Novoste Board of Directors, or (B)
achieved net income (after taxes) (or net loss) on a consolidated
basis (determined in accordance with the same accounting principles
utilized in preparing the audited financial statements of Novoste)
which are substantially worse than the net income (after taxes) for
such twelve-month (or shorter) period contemplated in the budget of
Novoste for such twelve-month (or shorter) period theretofore
approved by the Novoste Board of Directors;
<PAGE>
William A. Hawkins III
April 23, 1998
(ii) a substantial delay in the completion of the multi-center
clinical trial currently being conducted by Novoste from the date
that Novoste currently projects for completion,
(iii) substantial delay in the commencement of sales of the
Beta-Cath System in Europe or in the United States from the
perspective dates currently contemplated by Novoste, or
(iv) if the Common Stock substantially underperforms to other
publicly-traded stocks or indexes based on the "peer group" chosen
in any Novoste Proxy Statement.
(c) By Novoste without Cause or Unsatisfactory Performance. Your
employment hereunder may be terminated at any time by Novoste, upon 30 days'
prior written notice to you, without "Cause" or "Unsatisfactory Performance."
(d) Upon Death or Permanent Disability. Your employment hereunder
shall additionally terminate immediately upon your death or "Permanent
Disability." "Permanent Disability" shall have the meaning set forth in the
long-term disability insurance policy or policies then maintained by Novoste for
the benefit of its employees, or if no such policy shall then be in effect, or
if more than one such policy shall then be in effect in which the term
"Permanent Disability" shall be assigned different definitions, then the term
"permanent disability" shall be defined for purposes hereof to mean any physical
or mental disability or incapacity which renders you incapable of fully
performing the services required of you in accordance with your obligations
hereunder for a period of 120 consecutive days or for shorter periods
aggregating 120 days during any twelve-month period.
(e) By You without Good Reason. Your employment hereunder may be
terminated at any time by you, upon 90 days' prior written notice to Novoste,
without Good Reason.
(f) By You for Good Reason. Your employment hereunder may be
terminated at any time by you for "Good Reason." "Good Reason" shall mean one or
more of the following events: (i) a material breach of or default under this
Agreement by Novoste (including but not limited to its failure to designate you
as the Chief Executive Officer on or about June 1, 1999), which is not cured by
Novoste within thirty (30) days after its receipt of prior written notice
thereof from you; (ii) a material reduction in your duties or a material
interference with the exercise of your authority by Novoste's Board of Directors
(not arising from any disabling physical or mental disability you may sustain)
which would be inconsistent with your position as President and/or Chief
Executive Officer (as the case may be) of Novoste and the same shall not have
been remedied by Novoste's Board of Directors within thirty (30) days after its
receipt of prior written notice thereof from you; or (iii) a relocation of
Novoste's principal executive offices to a location whose distance is more than
twenty-five (25) miles from its current location, provided that you shall not
have approved the decision to effect such relocation. A termination by you of
your employment pursuant to this Paragraph 7(f) shall not be deemed for purposes
hereof to constitute a termination of your employment by you for Good Reason if,
at the time of such termination by you, Novoste shall
<PAGE>
William A. Hawkins III
April 23, 1998
be entitled to terminate this Agreement by reason of your Permanent Disability
(subject to the passage of any remaining time necessary to render any disability
you may sustain a Permanent Disability under Paragraph 7(d) above), or for Cause
(subject to the passage of any applicable cure period) and Novoste shall have
sent, or shall send, you within 10 days of Novoste's receipt of your notice of
termination, a notice of termination by Novoste specifying the Cause or notice
by Novoste of such pending Permanent Disability.
8. Consequences of Termination.
(a) By Novoste for Cause. If your employment is terminated for
Cause, this Agreement shall terminate immediately upon the date fixed for the
cessation of your employment and you shall be entitled to be paid any accrued
but unpaid salary earned by you through the date of such termination.
(b) By Novoste for Unsatisfactory Performance. In the event your
employment is terminated by Novoste for Unsatisfactory Performance, this
Agreement shall terminate immediately n the date fixed for the cessation of your
employment and you shall be entitled to receive: (i) all accrued but unpaid
salary earned by you through the date of such termination; and (ii) a lump sum,
cash severance payment within 60 days of the date of termination of employment
equal to the product of (x) an amount equal to 120% of your annual base salary
in effect on the date of termination of employment multiplied by (y) two (2).
(c) By Novoste without Cause or Unsatisfactory Performance. In the
event your employment is terminated by Novoste without Cause or Unsatisfactory
Performance (other than by reason of your death or Permanent Disability), this
Agreement shall terminate immediately on the date fixed for cessation of your
employment and you shall be entitled to receive: (i) all accrued but unpaid
salary earned by you through the date of such termination; and (ii) a lump sum,
cash severance payment within 60 days of the date of termination of employment
equal to the product of (x) an amount equal to 120% of your annual base salary
in effect on the date of termination of employment multiplied by (y) three (3).
(d) Upon your Death or Permanent Disability. In the event your
employment terminates by reason of your death or Permanent Disability, this
Agreement shall terminate immediately upon such occurrence and you, your estate
or your personal representative, as the case may be, shall be entitled to be
paid any accrued but unpaid salary earned by you through the date of such
termination.
(e) By You without Good Reason. If your employment is terminated by
you without Good Reason, this Agreement shall terminate immediately upon the
date of your resignation, consistent with the notice requirements set forth in
Paragraph 7(e) and you shall be entitled to be paid any accrued but unpaid
salary earned by you through the date of such termination
(f) By You for Good Reason. In the event your employment is
terminated by you for Good Reason, this Agreement shall terminate immediately on
the date set forth in your notice of termination consistent with Paragraph 7(f)
and you shall be entitled to receive: (i) all accrued but
<PAGE>
William A. Hawkins III
April 23, 1998
unpaid salary earned by you through the date of such termination; and (ii) a
lump sum, cash severance payment within 60 days of the date of termination of
employment equal to the product of (x) an amount equal to 120% of your annual
base salary in effect on the date of termination of employment multiplied by (y)
three (3).
(g) Effect on Stock Options and Restricted Stock. In the event of
the termination of your employment, the options granted under the Stock Option
Agreements shall be then exercisable to the extent provided therein, as
summarized in Paragraphs 4(b) and (c) above, and the restrictions on transfer on
the shares of Common Stock issued under the Restricted Stock Award Agreement
shall be those provided therein as summarized in Paragraph 4(d) above.
9. Key Man Life Insurance. You agree that Novoste may, in its discretion,
apply for and take out in its name and at its own expense, and solely for its
benefit, key man life insurance on you in any amount deemed necessary or
advisable by Novoste to protect its interests, and you agree that you shall have
no right, title or interest therein and further agree to submit to any medical
or other examination and to execute and deliver any application or other
instruments or information reasonably necessary to effectuate such insurance.
10. Your Representations and Warranties. You represent and warrant that
you are not under any obligation, restriction or limitation, contractual or
otherwise, to any other individual or entity which would prohibit or impede you
from performing your duties and responsibilities hereunder, and that you are
free to enter into and perform the terms and provisions of this Agreement, such
representation and warranty to survive the execution, delivery and termination
hereof.
11. Notices. Any notice required hereunder shall be delivered by hand,
sent by telecopy, or sent registered or certified mail, addressed to the other
party hereto at its address set forth above or at such other address as notice
thereof shall have been given in accordance with the provisions of this
Paragraph 11. Any such notice shall become effective (a) when mailed, three days
after having been deposited in the mail, postage prepaid, and (b) in the case of
delivery by hand or telecopy, upon delivery.
12. Entire Agreement. This Agreement, together with the Confidentiality
Agreement and Arbitration Agreement, Business Conduct Agreement, Conflict of
Interest Agreement, Patent Agreement, Unfair Competition Agreement, the Stock
Option Agreements and the Restricted Stock Award Agreement, contains the entire
agreement and understanding between the parties hereto relating to the subject
matter hereof and thereof and supersedes any and all prior understandings,
agreements and representations, written or oral, expressed or implied, with
respect thereto.
13. Amendments. This Agreement may not be amended, modified, altered or
terminated except by an instrument in writing signed by the parties.
14. Successors and Assigns. This Agreement is personal in nature and
neither this Agreement nor any rights or obligations hereunder may be assigned
or transferred by you. This Agreement may not be assigned or transferred by
Novoste without your prior written consent; provided, however, Novoste may
assign and/or delegate any or all of its rights and obligations
<PAGE>
William A. Hawkins III
April 23, 1998
hereunder to (i) any person or entity which shall acquire (whether by sale of
assets, merger or otherwise) all or substantially all of its assets (excluding
cash and cash equivalents) or (ii) any person or entity controlling, controlled
by or under common control with Novoste. Subject to the foregoing, this
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and Novoste's successors and permitted assigns
and your executors, administrators, personal representatives, heirs and
distributees.
15. Severability. In case any one or more of the provisions of this
Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected thereby.
16. Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Georgia applicable to
contracts made and to be performed entirely therein (without giving effect to
the conflicts of law rules thereof).
17. Effectiveness. Of course, notwithstanding anything herein to the
contrary, the effectiveness of this Agreement and your employment pursuant
hereto is contingent upon the mutual execution and delivery of this Agreement by
you and Novoste.
<PAGE>
William A. Hawkins III
April 23, 1998
We would appreciate it if you would kindly indicate your agreement with
the foregoing by countersigning the enclosed duplicate copy of this letter
agreement and returning it to me on behalf of Novoste.
On behalf of Novoste, we look forward to a long and mutually rewarding
relationship.
Sincerely,
NOVOSTE CORPORATION
By:
-----------------------------
Thomas D. Weldon
Chief Executive Officer
ACCEPTED AND AGREED TO THIS
____ DAY OF APRIL, 1998:
- -----------------------------------
William A. Hawkins III
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
Agreement, dated as of April 17, 1998, by and between Novoste Corporation,
a Florida corporation with offices at 4350-C International Boulevard, Norcross,
GA 30093 (the "Company"), and Dr. Raoul Bonan, an individual currently residing
at 9451 Cote St. Louis, Mirabel, Quebec, Canada G0N 1S0 (hereinafter referred to
as the "Employee").
W I T N E S S E T H:
WHEREAS, the Company and the Employee mutually desire to enter into an
Employment Agreement with respect to the Employee's employment by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration the receipt of which is hereby
acknowledged, the Company and the Employee hereby agree as follows:
1. Term and Position.
Subject to Employee's receipt of any required work authorization from the
Immigration and Naturalization Service, the Company agrees to employ the
Employee as its Vice President and Medical Officer for the period (the
"Employment Period") commencing on June 1, 1998 and continuing until terminated
by either party in accordance with the terms of this Agreement. The Employee
accepts such employment, agrees to perform the functions and duties incident to
such position, and further agrees to perform such other services as shall from
time to time be assigned to him by, or pursuant to authorization of, the Board
of Directors of the Company and agrees to devote substantially all of his
business time, skill and attention to such services. Employee shall report
directly to the President of the Company.
Notwithstanding the foregoing and any other agreement with the Company,
the Company acknowledges and agrees that Employee has the following existing
obligations, the performance of which by Employee (and the receipt by Employee
of compensation therefor) shall not be deemed a breach of this Agreement:
a. One day per week of research activities at Emory University.
b. Consulting services for:
i) Electromed International (cath lab)
ii) AngioTrax Incorporated (TMR)
iii) C.R. Bard Inc. (TMS)
iv) InterVentional Technologies Incorporated
v) Percu Surge Incorporated
vi) Boston Scientific Corporation (Scimed)
<PAGE>
2. Compensation and Benefits.
a. The Company shall pay to the Employee, and the Employee shall accept
from the Company, for the Employee's services hereunder during the Employment
Period, base compensation at the initial rate of $200,000 per annum, payable in
accordance with the customary payroll policy of the Company and subject to such
payroll deductions as are required by law. Such salary shall be subject to
annual review by the Company's Board of Directors.
b. The Company agrees to reimburse the Employee for all reasonable
business expenses incurred by him during the Employment Period in connection
with the performance of his services hereunder, including expenses incurred in
connection with activities associated with promoting the business of the Company
that are authorized from time to time by the Board of Directors, upon
presentation by Employee of an accounting of such expenses in such detail as may
be required by then-applicable tax laws.
c. The Employee will be entitled to four (4) weeks paid annual vacation
and shall participate at the Company's expense on the same basis, subject to the
same qualifications, as other executive officers of the Company in any pension,
savings, bonus (not pro-rated for partial years), hospitalization, long-term
disability, and other fringe benefit plans (the "Fringe Benefits") generally
available from time to time to executive officers of the Company.
d. The Employee will be granted (i) 6,000 shares of the Company's common
stock upon reporting for work which shares shall be registered for resale by the
Employee at the next available opportunity other than an underwritten offering
for the sole account of the Company and (ii) non-statutory options to purchase
100,000 shares of the Company's common stock under the Company's Amended and
Restated Stock Option Plan (the "Plan"). The vesting schedule for such options
shall be as follows:
Options To Purchase Vesting Date
------------------- ------------
25,000 Shares June 1, 1999
25,000 Shares June 1, 2000
25,000 Shares June 1, 2001
25,000 shares June 1, 2002
The Employee must be employed by the Company on each Vesting Date in order
for the applicable options to vest. The options, when vested, will be
exercisable at a price per share equal to $24.00. All other terms shall be as
specified in the Plan.
e. The Company shall reimburse Employee up to $2,000 per month (grossed up
for any required tax withholdings) in respect of rental accommodations until
such time as Employee has purchased housing in the Norcross area, but in no
event to exceed a period of twelve months. Except to the extent provided herein,
the relocation policy of the Company, a copy of which has been provided to
Employee, shall apply.
<PAGE>
3. Termination.
a. For Cause.
The employment of Employee hereunder may be terminated by the Company in
the event of the occurrence of any of the following conditions or events: (i)
the death of Employee or the failure of Employee to substantially perform his
duties hereunder as a result of physical or mental incapacity, for either one
continuous period of two (2) months or a total of three (3) out of any four (4)
consecutive months ("Total Disability"); (ii) the entering by Employee of a plea
of guilty or nolo contendere to, or the commission by Employee of, a felony or
any other criminal act involving moral turpitude, dishonesty or theft; (iii) the
failure or refusal of Employee to perform his duties hereunder (other than as a
result of death, illness or other objective incapacity, including Total
Disability); (iv) the commission by Employee of misconduct or insubordination in
connection with his employment; (v) the commission by Employee of any willful or
intentional act having the effect of injuring the reputation, business or
business relationships of the Company; or (vi) any other material breach of this
Agreement (or any of the other agreements referred to in Section 9) by Employee.
b. Without Cause.
This Agreement may be terminated by the Company at any time without cause,
upon at least forty-five (45) days' prior written notice to Employee, subject to
the payments set forth in subsection 3.c below.
c. Compensation Upon Termination.
In the event that Employee is terminated for cause (other than death, in
which case the Company will pay to Employee's estate three months' base
compensation, based on the Employee's base compensation rate in effect as of the
date of death), as set forth in Section 3.a above, then the obligation of the
Company to compensate Employee shall cease with the payment of all amounts
accrued (including reimbursement of expenses properly incurred by Employee prior
to termination) as of such date. In the event that Employee is terminated
without cause on or after May 31, 1999, as set forth in Section 3.b above, then
the Company shall be obligated to pay Employee as his sole compensation upon
termination the sum of One Hundred Thousand Dollars ($100,000), in regular
salary payments without setoff for new employment by Employee. If Employee is
terminated without cause prior to May 31, 1999, then no severance shall be
payable to Employee, unless the Company shall then have in place a written
severance policy which is applicable to the Company's employees generally, in
which case such general policy, if any, shall also be applicable to Employee.
d. Termination by Employee.
In the event that Employee chooses to terminate his services hereunder,
Employee agrees to endeavor in good faith to provide the Company with not less
than ninety (90) days' notice of such decision. Employee shall be entitled to
his base pay and benefits through such date of termination.
<PAGE>
4. Exclusion from Patent Assignment.
Notwithstanding the provisions of the Patent Agreement attached hereto and
executed simultaneously herewith, Employee shall not be required to, and shall
not be deemed to have assigned to the Company any patent or other intellectual
property rights developed by Employee during the term of this Agreement except
if and to the extent that such rights relate to the medical field of
intravascular radiation therapy. Employee does, however, hereby grant the
Company a right of first refusal to acquire any patent or other intellectual
property rights developed by Employee during the term of this Agreement within
the scope of his employment, such right to be exercised or waived by the Company
within sixty (60) days of the Company's receipt of a written proposal therefor
from Employee.
5. Immigration Status.
The Company shall provide Employee with all reasonable legal assistance to
secure Employee's lawful work and residence status and any renewals thereof
during the term of this Agreement at the Company's sole cost and expense.
6. Successors and Assigns.
This Employment Agreement shall be binding upon and inure to the benefit
of the parties hereto, their respective heirs, administrators, executors,
successors and assigns; provided, however, that this Employment Agreement may
not be assigned by either party hereto. A non-surviving merger by the Company or
a sale of substantially all of the Company's assets to a single buyer in a
single transaction shall not be deemed an assignment of this Agreement by the
Company for this purpose.
7. Governing Law.
This Employment Agreement shall be governed by, and construed in
accordance with, the laws of the State of Georgia.
8. Notice.
Any notice required hereunder shall be delivered by hand, sent by
telecopy, or sent by registered or certified mail, addressed to the other party
hereto at its address set forth above or at such other address as notice thereof
shall have been given in accordance with the provisions of this Section 8. Any
such notice shall become effective (a) when mailed, three days after having been
deposited in the mail, postage prepaid, and (b) in the case of delivery by hand
or telecopy, upon delivery.
9. Agreement; Amendment.
This Agreement, together with the Confidentiality Agreement and
Arbitration Agreement, Business Conduct Agreement, Conflict of Interest
Agreement, Patent Agreement and Unfair Competition Agreement, each executed
simultaneously herewith, and which together constitute
<PAGE>
one agreement, supersedes any prior agreements or understandings, oral or
written, between the parties hereto and represents their entire understanding
and agreement with respect to the subject matter hereof and thereof, and this
Agreement can be amended, supplemented or changed, and any provision hereof can
be waived, only by written instrument making specific reference to this
Agreement which is signed by the party against whom enforcement of any such
amendment, supplement, modification or waiver is sought.
10. Severability.
In the event of the invalidity or unenforceability of any one or more
provisions of this Agreement, such illegality or unenforceability shall not
affect the validity or enforceability of the other provisions hereof and such
other provisions shall be deemed to remain in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Employment Agreement the day and year first above written.
NOVOSTE CORORATION
By:
---------------------------
Thomas D. Weldon,
President and C.E.O.
EMPLOYEE:
-------------------------------
Dr. Raoul Bonan
EXHIBIT 10.16
NOVOSTE CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
To: William A. Hawkins III
We are pleased to notify you that, by the determination of the Stock
Option and Compensation Committee of Novoste Corporation (the "Company"), 14,000
shares of common stock, $.01 par value per share (the "Restricted Stock"), of
the Company have this 27th day of February 1998 been awarded to you, subject to
the commencement of your employment with the Company by June 1, 1998, and
subject to the terms and conditions set forth below. Capitalized terms not
defined herein shall have the meanings ascribed to such terms in the Employment
Agreement, dated April 23, 1998, between the Company and you (the "Employment
Agreement").
In consideration of the Company's accepting this Restricted Stock
Award Agreement (this "Agreement") and awarding to you the shares of Restricted
Stock provided for herein, the you hereby agrees with the Company as follows:
1. Restricted Stock.
During the period of time that any of the shares of Restricted Stock
are unvested as set forth below, the shares of Restricted Stock awarded to you
pursuant to this Agreement that shall not have vested shall not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of, except by
will or the laws of descent and distribution, or as provided in this Agreement.
Shares of Restricted Stock shall vest as follows:
(i) 25% of the total number of shares of Restricted Stock
subject to this Agreement on June 1, 1999;
(ii) 25% of the total number of shares of Restricted
Stock subject to this Agreement on June 1, 2000;
(iii) 25% of the total number of shares of Restricted Stock
subject to the Agreement on June 1, 2001; and
(iv) 25% of the total number of shares of Restricted
Stock subject to the Agreement on June 1, 2002;
provided, however, that on any such date, you are then employed by the Company
under the Employment Agreement.
<PAGE>
Notwithstanding the foregoing, upon the occurrence of (i) a
Change in Control (as such term is defined in the Company's Amended and Restated
Stock Option Plan) of the Company so long as you are then employed by the
Company under the Employment Agreement or (ii) the termination of your
employment with the Company (x) by the Company without Cause or without
Unsatisfactory Performance or (y) by you for Good Reason, all restrictions on
shares of Restricted Stock set forth in this Section shall immediately lapse.
2. Termination of Employment for Unsatisfactory Performance.
If the Company terminates your employment for Unsatisfactory
Performance, in addition to those shares of Restricted Stock that are vested and
unrestricted in accordance with Section 1 hereof, an additional 3,500 shares of
Restricted Stock shall also become vested and unrestricted unless all such
restrictions shall have previously lapsed.
3. Death, Disability and Certain Types of Termination of Employment.
If you cease to be an employee of the Company due to (i) your
death, (ii) your disability (as such term is defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code"), (iii) the termination of
your employment by the Company for Cause or (iv) the termination of your
employment by you without Good Reason, you (or in the event of your death, your
legatee or legatees under your Last Will, or your personal representatives or
distributees) shall only retain ownership of those shares of Restricted Stock
that are vested and unrestricted in accordance with Sections 1 and 2 hereof; all
remaining unvested and restricted shares of Restricted Stock shall be forfeited.
4. Stock Certificates.
You hereby acknowledge that any certificates evidencing shares of
Restricted Stock of the Company issued pursuant to this Agreement shall bear the
following restrictive legends:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT FOR THESE
SHARES OR AN OPINION OF THE CORPORATION'S COUNSEL THAT
REGISTRATION IS NOT REQUIRED.
<PAGE>
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
RESTRICTIONS ON TRANSFER AND POTENTIAL FORFEITURE PURSUANT TO
THE PROVISIONS OF THE RESTRICTED STOCK AWARD AGREEMENT, DATED
JUNE 1, 1998, BETWEEN THE COMPANY AND WILLIAM A. HAWKINS III,
WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICES OF
NOVOSTE CORPORATION.
5. Rights with Respect to Shares.
The undersigned shall have, after issuance of certificates for the
number of shares of Restricted Stock awarded, ownership of all such shares,
including the right to vote the same and to receive dividends or other
distributions made or paid with respect to such Restricted Stock, subject,
however, to the restrictions imposed thereon pursuant to this Agreement.
6. Governing Law.
This Agreement shall be construed in accordance with, and any
dispute arising in connection herewith shall be governed by, the internal laws
of the State of Florida.
7. Amendments.
This Agreement may not be amended, modified or terminated except by
a writing signed by the Company and you.
Sincerely yours,
NOVOSTE CORPORATION
By:
------------------------------
Thomas D. Weldon
Chief Executive Officer
Agreed to, acknowledged and accepted this
1st day of June, 1998.
- -------------------------------
William A. Hawkins III
EXHIBIT 10.17
NOVOSTE CORPORATION
NON-INCENTIVE STOCK OPTION AGREEMENT
To: William A. Hawkins III
We are pleased to notify you that, by the determination of the Stock
Option and Compensation Committee (the "Committee") of Novoste Corporation (the
"Company"), a non-incentive stock option to purchase 100,000 shares of the
common stock, $.01 par value per share ("Common Stock"), of the Company at a
price of $24.00 per share has this 10th day of April 1998 been granted to you
under the Company's Amended and Restated Stock Option Plan (the "Plan"), subject
to the commencement of your employment with the Company by June 1, 1998. This
option may be exercised only upon the terms and conditions set forth below.
Capitalized terms not defined herein shall have the meanings ascribed to such
terms in the Plan.
1. Purpose of Option.
The purpose of the Plan under which this option has been granted is
to provide incentives for selected employees, officers, consultants and
independent contractors to contribute materially to the success of the Company
(or any Parent, Subsidiary or Affiliate of the Company) by obtaining a
proprietary interest in the Company through the ownership of stock, thereby
providing such persons with an added incentive to promote the long-term
financial success and progress of the Company, including the growth in value of
the Company's equity and enhancement of long-term shareholder return. The Plan
is further intended to afford the Company and any Parent, Subsidiary or
Affiliate of the Company a means of attracting to its service persons of
outstanding ability.
2. Acceptance of Option Agreement.
Your execution of this non-incentive stock option agreement will
indicate your acceptance of and your willingness to be bound by its terms; it
imposes no obligation upon you to purchase any of the shares subject to this
option. Your obligation to purchase shares can arise only upon your exercise of
this option in the manner set forth in Section 4 hereof.
3. When Option May Be Exercised.
This option shall be exercisable in full upon the first to occur of
the following:
(i) the date (the "Trigger Date") on which the average closing sale
price of the Common Stock for 20 consecutive trading days (on the principal
market on which the shares of Common Stock are listed or admitted to trading)
shall be equal to or greater than $48.00 per share, other than by reason of the
announcement of a Change of Control of the Company on or before June 1, 1999,
provided the Trigger Date occurs prior to June 1, 2001;
<PAGE>
(ii) the date of your termination of employment with the Company for
Good Reason (as defined in the Employment Agreement, dated April 23, 1998,
between the Company and you (the "Employment Agreement")); or
(iii) June 1, 2003.
This option may not be exercised for less than 100 shares at any one
time (or the remaining shares then purchasable if lower) and expires at the end
of 10 years from the date of grant whether or not it has been duly exercised,
unless sooner terminated as provided in Section 6 hereof.
4. How Option May Be Exercised.
This option is exercisable by a written notice signed by you and
delivered to the Company at its executive offices, signifying your election to
exercise this option. The notice must state the number of shares of Common Stock
as to which your option is being exercised, and contain a statement by you (in a
form acceptable to the Company) that such shares are being acquired by you for
investment and not with a view to their distribution or resale (unless a
registration statement covering the shares purchasable has been declared
effective by the Securities and Exchange Commission) and must be accompanied by
payment pursuant to Section 5 hereof for the full purchase price of the shares
being purchased.
If notice of the exercise of this option is given by a person or
persons other than you, the Company may require, as a condition to the exercise
of this option, the submission to the Company of appropriate proof of the right
of such person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will be
issued as soon as practicable. The Company, however, shall not be required to
issue or deliver a certificate for any shares until it has complied with all
requirements of the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, any stock exchange on which the Company's Common Stock
may then be listed and all applicable state laws in connection with the issuance
or sale of such shares or the listing of such shares on said exchange. The
Company may cause each certificate evidencing the purchased Common stock to be
endorsed with one or more legends setting forth the restrictions on transfer of
such Common Stock. Until the issuance of the certificate for such shares, you or
such other person as may be entitled to exercise this option, shall have none of
the rights of a shareholder with respect to shares subject to this option.
5. Payment of Options.
The exercise price shall be payable in cash or by tendering shares
of Common Stock (by either actual delivery of shares or by attestation, with
such shares valued at Fair Market Value as of the day of exercise), or in any
combination thereof, as determined by the Committee; provided, however, any such
tendering shares, if purchased upon exercise of a stock option, shall have been
held for more than 6 months.
<PAGE>
6. Death, Disability or Termination of Employment.
If your employment with the Company is terminated for any reason,
including without limitation by reason of your death or disability (as such term
is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code")), you (or in the event of your death, your legatee or legatees
under your Last Will, or your personal representatives or distributees) may
exercise, within 6 months from the date of such termination (but in no event
later than the date of expiration of this option), that portion of this option
which was exercisable by you at the date of such termination (including, if
applicable, that portion of your option exercisable upon the occurrence of the
events described in Section 3 hereof).
7. Transferability of Options.
Except to your Family Group (as defined below), this option is not
transferable otherwise than by will or the laws of descent or distribution, and
is exercisable, during your lifetime, only by you.
For purposes of this non-incentive stock option agreement, your
"Family Group" shall mean your descendants (whether natural or adopted) together
with your spouse, parents, siblings and their respective descendants (whether
natural or adopted) and any trust solely for the benefit of you and/or such
other persons and any partnership or limited liability company, the partners or
member of which include one or more individuals within the Family Group.
8. Withholding Taxes.
Prior to the issuance to you of any certificates for shares of
Common Stock upon your valid exercise of this option, you shall be required to
pay or make adequate provision for any federal, state or local withholding
obligations of the Company.
9. Subject to Terms of the Plan.
This non-incentive stock option agreement shall be subject in all
respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan, the decision of the
Committee shall be conclusive.
<PAGE>
10. Tax Status.
This option does not qualify as an "incentive stock option" under
the provisions of Section 422 of the Code, and the income tax implications of
your receipt of a non-incentive stock option and your exercise of such an option
should be discussed with your tax counsel.
Sincerely yours,
NOVOSTE CORPORATION
By:
------------------------------
Thomas D. Weldon
Chief Executive Officer
Agreed to, acknowledged and accepted this
_____ day of __________, 1998.
- -------------------------------
William A. Hawkins III
EXHIBIT 10.18
AMENDMENT TO FRAMEWORK AGREEMENT AND SECURITY AGREEMENT
between
Novoste Corporation
4350 / C International Boulevard
Norcross, GA 30093/3027
represented by its Chief Operating Officer David N. Gill
- hereinafter referred to as "NOVOSTE" -
and
BEBIG Isotopentechnik und Umweltdiagnostik GmbH
Robert-Rossle-Stra(beta)e 10, 13125 Berlin
represented by its managing director Dr. Andreas Eckert
- hereinafter referred to as "BEBIG" -
Preamble
1. NOVOSTE produces medical devices and has developed a catheter for the
inhibition and prevention of restenosis of a blood vessel after
interventional therapy (hereinafter referred to as "Restenosis
Device").
2. BEBIG manufactures radioactive sealed Strontium-90 sources (BEBIG
Product Code SrO.SO 3) in units called seed-trains usable in the
Restenosis device (hereinafter referred to as "Seed-Trains").
<PAGE>
3. On November 24th, 1994 the parties hereto concluded an agreement under
the term "RESTENOSIS THERAPY PROJECT DEVELOPMENT AND SUPPLY AGREEMENT",
amended by the "FRAME AGREEMENT CONTAINING PURCHASE ORDER PROVISION AND
INVESTMENT GRANT" dated November 15, 1996 (hereinafter referred to as
the "Framework-Agreement"), dealing et. al. with the supply of
Seed-Trains to NOVOSTE.
Additionally, BEBIG granted NOVOSTE an option to purchase all of BEBIG's
tangible and intangible assets required for the production of
Seed-Trains under an agreement called the "OPTION TO PURCHASE ASSETS
AGREEMENT" dated September 1st, 1995 (hereinafter referred to as the
"Purchase Option Agreement").
4.a) In August 1997, BEBIG started building a new automated seed production
line. It turned out that the line was more expensive than expected.
Also, BEBIG decommissioned the earlier (contaminated) Strontium-90
prototype line and had to absorb substantial cost.
b) At the same time both parties realized that there are desirable changes
in the design of the Seed Trains that may increase their technical life
time and improve their quality.
c) Furthermore, both parties see a need to address the issue of recycling
and disposal of used radioactive trains.
5. The parties hereto mutually agree that
(i) the Framework Agreement shall be adapted for recent developments,
(ii) the Purchase Option Agreement shall be altered by a special
security agreement leaving the contractual framework of the
Purchase Option Agreement in other respects unchanged.
<PAGE>
A.
Amendment of the Framework Agreement
I. Para. 1 of the Framework Agreement shall be revised as follows:
"ss. 1
Payment Liability
1. The customer now pays an additional investment grant to the supplier
amounting to an aggregate of DM 1,000,000.00 (in words: German Marks one
million) in the following installments:
- DM 700,000.00 within one week after the initial delivery of "active"
Seed-Trains (XXXXX);
- DM 300,000.00 within one week after delivery of the XXXXX active
Seed-Train (XXXXX).
2. The aforementioned installments are to be paid free of charge to the
account no. 0000424648 at the Commerzbank Berlin, code number
(Bankleitzahl) 120 400 00."
ss. 2
Changing in the Pricing Formula
a) BEBIG and NOVOSTE agree to a new pricing formula that will take into
account the time Seed Trains are used. For any trains that are delivered
after the execution of this agreement, NOVOSTE will pay to BEBIG US$
XXXXX for any XXXXX period a train is in use. The US$ XXXXX price is
exclusive of freight and packaging.
- --------------------------------------------------------------------------------
Confidential treatment has been requested for portions of this page of this
exhibit. The copy filed herewith omits the information subject to the
confidentiality request. Omissions are designated as "XXXXX". The portions
omitted have been filed separately with the Securities and Exchange Commission
pursuant to such request for confidential treatment.
<PAGE>
b) For the first XXXXX trains delivered to NOVOSTE after the execution of
this Agreement, the XXXXX period shall commence with the day of the
first clinical use of the train. At the end of the XXXXX period NOVOSTE
has one month time to test each train and either (1) return it to BEBIG
for recycling or (2) XXXXX. Novoste will provide Bebig with true and
accurate information about the date of first clinical use.
c) For any Seed-Trains delivered thereafter, the XXXXX period shall
commence with the date of manufacture, as evidenced by the
manufacturer's certificate, provided that:
(1) BEBIG has delivered XXXXX Seed-Trains, which pass NOVOSTE's
specifications on P.O. 970381 to NOVOSTE prior to XXXXX or over
any consecutive XXXXX period once deliveries commence.
(2) No more than 10 days transpire between date of manufacture and
receipt by NOVOSTE (just in time delivery),
(3) The date of manufacture cannot predate the desired delivery date
in NOVOSTE's purchase order by 30 days (should BEBIG decide to
build on a speculative basis prior to a NOVOSTE purchase order).
II. Any other provisions under the Framework remain unchanged as far as they
are not (i) amended, or replaced by the aforementioned clauses or (ii)
settled otherwise (e. g. expiry of time, performance).
- --------------------------------------------------------------------------------
Confidential treatment has been requested for portions of this page of this
exhibit. The copy filed herewith omits the information subject to the
confidentiality request. Omissions are designated as "XXXXX". The portions
omitted have been filed separately with the Securities and Exchange Commission
pursuant to such request for confidential treatment.
<PAGE>
ss. 3
Recycling of radioactive Seed Trains/Decommissioning
a) BEBIG will accept free of charge, for the period until August 22,
2002, returned radioactive Seed-Trains from NOVOSTE, as long as
the following conditions are met:
(1) The number of returned trains in any given year that are
unfit for recycling ("Disposal Trains") does not exceed 20
% of the total number of returned trains in that year.
(2) The sum of returned trains for any given year is not
larger than the sum of new trains shipped out during that
period.
b) Both parties will work together in good faith to find an economic
solution for trains that do not meet these conditions.
B.
Chattel Mortgage and Assignment for Security Agreement
(Sicherungsubereignungs- und -abtretungsvertrag)
ss. 1
Security Object
1.1 Under the Framework Agreement NOVOSTE committed itself to pay to BEBIG
monthly investment grants of DM 100,000.00 each for a period of 15
months, starting in November 1996. This investment obligation has been
increased by an additional amount of DM 1,000,000.00 by the foregoing
Agreement under A.
With a view to these investment grants BEBIG committed itself to a
series of obligations in favor of NOVOSTE. For further reference see
Para. 2 through 6 of the Framework Agreement.
<PAGE>
Furthermore, BEBIG promised an annual delivery of XXXXX Seed-Trains
under Para. 8 through 10 of the Framework Agreement.
1.2 For the purpose of safeguarding all claims of NOVOSTE deriving from the
Framework Agreement and this Agreement BEBIG transfers to NOVOSTE all
assets required for the production of Seed-Trains according to the
following provisions.
ss. 2
Security Collaterals
2.1 The following items shall serve as security collateral:
a) all assets situated in room 27 of BEBIG's premises,
Robert-Rossle-Stra(beta)e 10, 13125 Berlin, which are used in the
production of Strontium 90 Seed-Trains for NOVOSTE and which are
listed and attached as Exhibit 2.1 a to this Agreement
(hereinafter referred to as the "Premises") at the date hereof or
at any later point of time during the duration of the Framework
Agreement (hereinafter referred to as the "Security Collateral
A"). At a minimum these assets include the full production line
used to produce the Strontium 90 Seed Trains and do not include
assets which are also used in the production of other isotopes.
b) all intangible assets which are required for the production of
Seed-Trains and (i) are listed in Exhibit 2.1 b to this contract
or (ii) will be acquired by BEBIG during the duration of the
Framework Agreement (hereinafter referred to as the "Security
Collateral B").
- --------------------------------------------------------------------------------
Confidential treatment has been requested for portions of this page of this
exhibit. The copy filed herewith omits the information subject to the
confidentiality request. Omissions are designated as "XXXXX". The portions
omitted have been filed separately with the Securities and Exchange Commission
pursuant to such request for confidential treatment.
<PAGE>
2.2 Security Collateral A
2.2.1 As far as BEBIG is the owner or the co-owner of the Security Collateral
A, BEBIG transfers to NOVOSTE the ownership or the co-ownership. As far
as BEBIG holds an expectant right (Anwartschaftsrecht) in the Security
Collateral A, this is also transferred to NOVOSTE.
Expectant right, ownership and co-ownership in the Security Collateral A
are transferred at the date hereof; expectant right, ownership and
co-ownership in those parts of the Security Collateral A being brought
into the Premises later on are transferred at the time of the actual
deposit. A further explicit act of transfer is redundant. As far as an
expectant right is transferred, NOVOSTE becomes the owner of the
respective asset at that point of time the supplier's reservation of
title (Eigentumsvorbehalt) expires.
2.2.2 BEBIG guarantees that it holds the ownership, the co-ownership or an
expectant right in the Security Collateral A, has not mortgaged them or
assigned them and that it is entitled to dispose of these rights. BEBIG
also guarantees that it will pay all supplier invoices related to the
strontium 90 production line so that suppliers' liens to the assets will
expire quickly.
2.2.3 The handing over of the Security Collateral A is replaced by BEBIG's
commitment to keep the Security Collateral A in safe custody for NOVOSTE
free of any charges, provided that BEBIG either receives (a) an annual
revenue from seed manufacturing of more than US$ XXXXX or b) a flat
storage charge of US-$ 120,000 per year
2.2.4 BEBIG's right to make use of the Security Collateral A in the ordinary
course of its business remains unaffected subject to the regulation
under Para. 5 hereunder.
- --------------------------------------------------------------------------------
Confidential treatment has been requested for portions of this page of this
exhibit. The copy filed herewith omits the information subject to the
confidentiality request. Omissions are designated as "XXXXX". The portions
omitted have been filed separately with the Securities and Exchange Commission
pursuant to such request for confidential treatment.
<PAGE>
2.3 Security Collateral B
BEBIG herewith assigns all of its rights in the Security Collateral B to
NOVOSTE. As far as an assignment is impossible due to legal or actual
reasons, BEBIG transfers to NOVOSTE the right of every possible use,
including the use of trademark, patents, licensing rights BEBIG has as
regards the Security Collateral B. BEBIG's right to make use of the
Security Collateral B in the ordinary course of its business remains
unaffected subject to the regulation under Para. 5 hereunder.
BEBIG guarantees that it is unrestrictedly entitled to dispose of the
Security Collateral B to the aforementioned extent.
ss. 3
Duties of BEBIG
3.1 BEBIG shall refrain from any disposal of the Security Collateral A and B
except with (i) NOVOSTE's explicit prior consent not unreasonably
withheld and (ii) limited to disposals due to normal wear, repair and
replacement.
BEBIG warrants that it will maintain its premises and the assets in such
a state to ensure compliance with all regulatory and licensing
requirements as long as doing so costs less than DM 50,000. The parties
will discuss how to handle issues on any capital investments mandated by
regulatory authorities which exceeding DM 50,000.
3.2 BEBIG will inform NOVOSTE without undue delay about any damage, pledge,
German regulatory body actions or other enforcement measures which might
be detrimental to NOVOSTE's legal position according to Para. 2
hereunder. As far as pledges occur, BEBIG has to submit to NOVOSTE all
documents and information necessary for an intervention. BEBIG shall
furthermore inform all of its bank creditors of NOVOSTE's rights under
this Agreement.
3.3 NOVOSTE shall have the right to inspect the Security Collateral A and B
at any time after giving BEBIG one week's notice.
<PAGE>
BEBIG shall give all necessary information to NOVOSTE and shall grant to
NOVOSTE the right of inspection of all relevant documents through
appointment by NOVOSTE of a certified public accountant or lawyer
together with an engineer subjected to the same rules as to
confidentiality as applicable to a certified public accountant or
lawyer.
ss. 4
Retransfer of Title
4.1 Except for (i) NOVOSTE's rights under Para. 5 hereunder or (ii) an
extension of this Agreement by the parties hereto NOVOSTE shall
retransfer the title in Security Collateral A and B to BEBIG on
September 1st, 2002 unless it exercises its option to acquire said
assets according to Para. 4.2.
4.2 Except for the provision under Para. 4.1 hereunder, NOVOSTE shall
retransfer title in the Security Collateral A and B upon BEBIG's written
request if NOVOSTE is in default with the payment of the two subsequent
investment grants per Paragraph 1 of this Agreement for more than one
month.
Option to Acquire Unrestricted Title
5.1 The Security Object agreed upon in Para. 1 hereunder and BEBIG's claim
for retransfer of title according to Para. 4.1 hereunder are subject to
the condition subsequent that NOVOSTE submits a written notice to BEBIG
that all rights in the Security Collateral A and B shall finally be
forfeited in favor of NOVOSTE (hereinafter referred to as the "Notice").
NOVOSTE's right to acquire unrestricted title in the Security Collateral
A and B by submitting the Notice to BEBIG shall be hereinafter referred
to as the "Option". The Option may be exercised at any time until
September 1st, 2002 subject to an extension of the term of the Option by
a mutual written agreement of the parties hereto (hereinafter referred
to as the "Option Period") for the amount of US-$ 4,019,400 Million
(four million nineteen thousand four hundred US-dollars) (see Para. 8).
<PAGE>
5.2 In the Notice NOVOSTE shall specify a date for closing the acquisition
(hereinafter referred to as the "Closing Date") which shall occur at
least ninety (90) days but no more than two hundred seventy (270) days
subsequent to the date of the Notice.
ss. 6
Non-Assumption of Liabilities
NOVOSTE shall not assume, discharge or be liable for any debts, liabilities or
obligations of BEBIG including, without limitation, any (a) liabilities or
obligations of BEBIG to its creditors or equity owners; (b) liabilities or
obligations of BEBIG with respect to any transactions; (c) taxes or other
liabilities or obligations of BEBIG incurred in connection with the grant of the
Option pursuant to this Agreement; or (d) contingent liabilities or obligations
of BEBIG. If NOVOSTE is subjected to any claims that arise from BEBIG's
operations to its mere possession of security ownership, BEBIG promises to hold
NOVOSTE harmless from any such claims.
However, if (1) NOVOSTE exercises the Option and wishes to move the assets to
another location, or (2) NOVOSTE does less than US$ XXXXX in seed business with
BEBIG from August 1, 1998 to August 31, 2002, then NOVOSTE agrees to pay BEBIG
the costs to decontaminate the strontium 90 line assets, up to a maximum of DM
500,000.
- --------------------------------------------------------------------------------
Confidential treatment has been requested for portions of this page of this
exhibit. The copy filed herewith omits the information subject to the
confidentiality request. Omissions are designated as "XXXXX". The portions
omitted have been filed separately with the Securities and Exchange Commission
pursuant to such request for confidential treatment.
<PAGE>
ss. 7
Facilitation
Appurtenant to the transfer of the Security Collateral A and B in connection
with the exercise of the Option and covered by the Purchase Price, BEBIG shall
assign at its expense such personnel bearing the necessary technical and
operational expertise to spend up to three (3) months at NOVOSTE (or its
assignee or successor) facilitating the transfer of the Security Collateral A
and B and training personnel as to the operation of the Security Collateral A
and B as a Seed-Train producing business. BEBIG shall also assign at its expense
for up to three (3) months such personnel bearing essential administrative and
regulatory expertise to guide NOVOSTE (or its assignee or successor) in
licensing and approval processes with which BEBIG has relevant experience.
ss. 8
Purchase Price
8.1 The purchase price (hereinafter referred to as the "Purchase Price") for
the Security Collateral A and B to be acquired upon exercise of the
Option shall be 4,019,400 Million dollars (four million nineteen
thousand four hundred US dollars).
8.2 The option agreement will be exercised in the following manner.
1. Novoste will pay Bebig an additional US$ XXXXX per train to Novoste in
the form of a license fee for the use of all tangible an intangible
assets used in the design and manufacture of the Strontium 90 seed
trains.
2. This license fee will be paid only on the first XXXXX trains delivered
to Novoste under this agreement; thereafter no license fee will be
charged.
- --------------------------------------------------------------------------------
Confidential treatment has been requested for portions of this page of this
exhibit. The copy filed herewith omits the information subject to the
confidentiality request. Omissions are designated as "XXXXX". The portions
omitted have been filed separately with the Securities and Exchange Commission
pursuant to such request for confidential treatment.
<PAGE>
3. As the US$ XXXXX license fee is paid, Novoste's lien on the line's hard
assets will grow on a proportionate basis (Deutsche Mark for Deutsche
Mark at the then current exchange rates).
4. Once Novoste has paid Bebig an aggregate of $ 4,019,400 towards the
option purchase price, either in the form of license fees or an
accelerated cash payment, then the title to all tangible assets used on
the line will automatically be transferred to Novoste at that time, and
Novoste will receive a fully-paid license to all intangible assets and
intellectual property used in the design and manufacture of the seed
trains.
5. Novoste does not guarantee a certain purchase volume in any one year.
Novoste continues to have until August 31, 2002 to pay for the option in
full.
C.
Common Final Provisions
1. This Agreement, including this Para. 1., may only be amended or modified
at any time and in all respects by an instrument in writing executed by
NOVOSTE and BEBIG.
2. Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered personally or sent by
registered or certified mail, postage prepaid, addressed to:
To BEBIG: BEBIG Isotopentechnik und Umweltdiagnostik GmbH
Robert-Rossle-Stra(beta)e 10
D-13125 Berlin, Germany
Attn: Dr. Andreas Eckert
- --------------------------------------------------------------------------------
Confidential treatment has been requested for portions of this page of this
exhibit. The copy filed herewith omits the information subject to the
confidentiality request. Omissions are designated as "XXXXX". The portions
omitted have been filed separately with the Securities and Exchange Commission
pursuant to such request for confidential treatment.
<PAGE>
To NOVOSTE: NOVOSTE Corporation
4340-C International Blvd.
Norcross, GA 30093-3027
Attn: David N. Gill
or to such other address as shall be furnished in writing by a party to
the other and shall be deemed to have been given as of the date so
personally delivered or three (3) days after being deposited in the
United States mail, postage pre-paid, as the case may be.
3. It is the intention of the parties that the laws of the Federal Republic
of Germany, both substantive and remedial, should govern the validity of
this Agreement, the construction of its terms and the interpretation of
the rights and duties of the parties. Place of jurisdiction shall be
Berlin, Germany.
4. Section headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of
this Agreement.
5. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but both of which together shall constitute one and
the same instrument.
6. All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of, and be enforceable by, BEBIG and NOVOSTE and
their successors and valid assigns.
7. This Agreement constitutes the entire agreement between the parties
hereto, and there are no agreements, understandings, restrictions,
warranties or representations between the parties other than those set
forth herein.
8. BEBIG may not assign this Agreement.
9. Should any provision of this Agreement be or become invalid or void, the
remaining provisions will continue to be in effect. Invalid or void
provisions are to be replaced by such provisions which will fulfill the
economic purpose of this Agreement in a legally binding form. The same
applies mutatis mutandis if a gap is found which requires a regulation.
<PAGE>
10. All the provisions of the Purchase Option agreement mentioned in the
Preamble remain fully in effect if not expressly changed by the previous
sections.
11. This Agreement shall be executed in an English version only.
Norcross, ___________________ Berlin, _________________
- ---------------------------- ------------------------
NOVOSTE BEBIG
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jun-30-1998
<CASH> 32,842,206
<SECURITIES> 7,247,546
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 40,336,161
<PP&E> 2,841,529
<DEPRECIATION> 1,036,722
<TOTAL-ASSETS> 42,573,096
<CURRENT-LIABILITIES> 2,442,631
<BONDS> 0
0
0
<COMMON> 105,716
<OTHER-SE> 40,024,749
<TOTAL-LIABILITY-AND-EQUITY> 42,573,096
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 9,836,929
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,213,088
<INCOME-PRETAX> (8,623,841)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,623,841)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,623,841)
<EPS-PRIMARY> (.83)
<EPS-DILUTED> (.83)
</TABLE>
