<PAGE>
As filed with the Securities and Exchange Commission on July 12, 1996
Registration No. 333-06463
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NITINOL MEDICAL TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3841 95-4090463
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
263 SUMMER STREET
BOSTON, MASSACHUSETTS 02210
(617) 737-0930
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
THOMAS M. TULLY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
263 SUMMER STREET
BOSTON, MASSACHUSETTS 02210
(617) 737-0930
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
Copies to:
STEPHEN H. KAY, ESQ. TIMOTHY G. MASSAD, ESQ.
SQUADRON, ELLENOFF, PLESENT & CRAVATH, 551 SWAINE & MOORE
SHEINFELD, LLP 825 EIGHTH AVENUE
FIFTH AVENUE NEW YORK, NEW YORK 10019
NEW YORK, NEW YORK 10176 (212) 474-1000
(212) 661-6500
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
CROSS-REFERENCE
SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY
ITEMS OF FORM S-1 PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
REGISTRATION STATEMENT AND ITEM AND HEADING LOCATION IN PROSPECTUS
------------------------------------------- ----------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus.................... Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front and Outside Back Cover of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges......................... Prospectus Summary; Risk Factors (Page
6);
Not Applicable
4. Use of Proceeds................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price................... Outside Front Cover of Prospectus;
Underwriting
6. Dilution.......................................... Dilution
7. Selling Security Holders.......................... Not Applicable
8. Plan of Distribution.............................. Outside Front Cover of Prospectus;
Underwriting
9. Description of Securities to be Registered........ Description of Capital Stock
10. Interests of Named Experts and Counsel............ Legal Matters
11. Information with Respect to the Registrant........ Prospectus Summary; Risk Factors; Use
of Proceeds; Dividend Policy;
Capitalization; Selected Consolidated
Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Principal
Stockholders; Description of Capital
Stock; Financial Statements; Financial
Statement Schedules
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.... Not Applicable
13. Other Expenses of Issuance and Distribution....... Part II
14. Indemnification of Directors and Officers......... Part II
15. Recent Sales of Unregistered Securities........... Part II
16. Exhibits and Financial Statement Schedules........ Part II; Exhibits
17. Undertakings...................................... Part II
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
PROSPECTUS
Subject To Completion
Dated July 12, 1996
2,700,000 Shares
Nitinol Medical
- --------------------------------------------------------------------------------
Technologies, Inc.
Common Stock
(par value $.001 per share)
All of the Common Stock offered hereby is being offered by Nitinol Medical
Technologies, Inc., a Delaware corporation (together with its subsidiaries,
"NMT" or the "Company").
Prior to the Offering, there has been no public market for the Common Stock. It
is currently anticipated that the initial public offering price will be between
$12.00 and $14.00 per share. See "Underwriting" for information relating to the
factors considered in determining the initial public offering price.
The Company's Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol "NMTI", subject only to official notice of
issuance.
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share $ $ $
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Total (3) $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $700,000.
(3) The Company has granted the Underwriters an option to purchase up to an
additional 405,000 shares of Common Stock, on the same terms as set forth
above, solely to cover over-allotments, if any. If such option is exercised in
full, the total Price to Public, Underwriting Discount and Proceeds to Company
will be $ , $ and $ , respectively. See
"Underwriting."
The shares of Common Stock being offered by this Prospectus are being offered
by the Underwriters, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters, and subject to approval of certain legal matters
by Cravath, Swaine & Moore, counsel for the Underwriters. It is expected that
delivery of the shares of Common Stock will be made against payment therefor on
or about , 1996 at the offices of J.P. Morgan Securities Inc., 60
Wall Street, New York, New York.
J.P. MORGAN & CO.
CS FIRST BOSTON
JEFFERIES & COMPANY, INC.
, 1996
<PAGE>
No person has been authorized to give any information or make any
representations not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or any Underwriter. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, the Common Stock in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation.
No action has been or will be taken in any jurisdiction by the Company or by
any Underwriter that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for that purpose is required, other than in the United States. Persons into
whose possession this Prospectus comes are required by the Company and the
Underwriters to inform themselves about and to observe any restrictions as to
the Offering of the Common Stock and the distribution of this Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 6
Use of Proceeds......................... 12
Dividend Policy......................... 13
Capitalization.......................... 13
Dilution................................ 14
Selected Consolidated Financial Data.... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 16
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Business.......................... 21
Management........................ 39
Certain Transactions.............. 48
Principal Stockholders............ 50
Description of Capital Stock...... 52
Shares Eligible for Future Sale... 54
Underwriting...................... 55
Legal Matters..................... 56
Experts........................... 56
Additional Information............ 56
Index to Financial Statements..... F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
Prior to the Offering, the Company has not been subject to the reporting
requirements of the Securities Exchange Act of 1934 (the "Exchange Act"). The
Company intends to furnish stockholders with annual reports containing
consolidated financial statements audited by its independent auditors and such
other periodic reports as the Company may determine to be appropriate or as may
be required by law.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING IN
THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN COMMON STOCK OF THE COMPANY PURSUANT TO EXEMPTIONS FROM
RULES 10B-6, 10B-7, AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
The product names Simon Nitinol Filter(R), SNF(R) and CardioSeal(TM) and the
Company's logo are trademarks of the Company. All other brand names or
trademarks appearing in this Prospectus are the property of their respective
holders.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the Consolidated Financial
Statements and the Notes thereto included elsewhere in this Prospectus. Unless
otherwise noted herein, all information contained in this Prospectus (i)
reflects a 1 for 1.9 reverse stock split effective as of July 9, 1996, (ii)
reflects the conversion of all outstanding Convertible Preferred Stock of the
Company into 1,993,212 shares of Common Stock and 37,871 shares of Redeemable
Preferred Stock of the Company upon the closing of the Offering (the
"Conversion") and the immediate application of a portion of the net proceeds of
the Offering to redeem all such shares of Redeemable Preferred Stock (the
"Redemption"), and (iii) assumes no exercise of the Underwriters' over-
allotment option.
THE COMPANY
Nitinol Medical Technologies, Inc. designs, develops, and markets innovative
medical devices that utilize advanced materials and are delivered by minimally
invasive procedures. The Company's products are designed to offer alternative
approaches to existing complex treatments, thereby reducing patient trauma,
shortening procedure, hospitalization and recovery times, and lowering overall
treatment costs. The Company's patented medical devices include self-expanding
stents, vena cava filters and septal repair devices. At this time, the
Company's stents are in European clinical trials for certain indications, its
vena cava filters are marketed in the United States and abroad, and the Company
is completing the development of its septal repair device.
NMT has developed an expertise in precisely engineering nitinol and other
advanced materials for a variety of innovative medical device applications.
Nitinol is a nickel-titanium alloy that exhibits unique superelastic and
thermal shape-memory characteristics which enable the Company's nitinol-based
medical devices to transform into their intended shape once deployed into the
body. The Company has developed capabilities in advanced device fabrication,
materials characterization, manufacturing and process control and sophisticated
in vitro testing resulting in highly efficient and reliable manufacturing
processes.
The Company has established arrangements with Boston Scientific Corporation
("Boston Scientific") and C. R. Bard, Inc. ("Bard"), worldwide leaders in sales
of minimally invasive medical devices, for the distribution, sales and
marketing of its stents and its nitinol vena cava filter, respectively.
BUSINESS STRATEGY
The Company's strategy is to develop and commercialize a broad range of
advanced medical devices for minimally invasive applications to address unmet
medical needs by (i) designing and developing new products by leveraging its
core technologies to precisely engineer nitinol and other advanced materials,
(ii) continuing to market products with more extensive distribution
requirements through collaborations with established market leaders, (iii)
creating direct marketing and distribution capabilities for products, such as
the septal repair device, with smaller and more easily accessible user groups,
(iv) developing commercial scale manufacturing facilities to become a fully-
integrated medical device company, and (v) seeking licensing and acquisition
opportunities that will complement the Company's business and strengthen its
competitive position.
PRODUCTS
Stents. NMT's patented self-expanding nitinol stents are designed to hold open
arteries, veins and other passageways of the body that have closed or become
obstructed as a result of aging, disease or trauma. The Company's stents are
placed in the body using catheter-based delivery systems. Once deployed, they
exert radial force against the walls of passageways to enable such passageways
to remain open and functional. NMT's proprietary stents can be manufactured in
a variety of sizes, shapes and flexibilities and with varying radial force
characteristics to treat a number of specific medical indications. Stents have
emerged as one of the fastest growing segments of the medical device market and
are increasingly being used as adjuncts or alternatives to a variety of medical
procedures. The stent market has grown from its infancy in 1990 to estimated
worldwide sales of $500 million in 1995, with continued growth expected. In
November 1994, the Company entered into an exclusive license agreement with
Boston Scientific to further develop, manufacture, market and distribute
3
<PAGE>
NMT's stents worldwide. Boston Scientific is currently conducting clinical
trials in Europe for peripheral vascular stenting and peripheral vascular stent
grafting applications. The Company has been advised by Boston Scientific that
it intends to commence marketing of the Company's peripheral vascular stents in
Europe during 1996 and that it intends to seek Food and Drug Administration
("FDA") approval for an Investigational Device Exemption ("IDE") to permit the
commencement of United States clinical trials for peripheral vascular stenting
in the near future.
Vena Cava Filters. The Company's patented Simon Nitinol Filter ("SNF") is a
nitinol vena cava filter designed to prevent pulmonary embolism (a blood clot
lodged in the vessels supplying blood to the lungs), a condition which results
in approximately 125,000 to 150,000 deaths annually in the United States. Vena
cava filters are generally used in cases where drug therapy has failed or is
contraindicated. The Company's vena cava filter is implanted using the
Company's patented, catheter-based delivery systems from veins in the leg or
neck. Additionally, the SNF is the only currently available vena cava filter
which can be implanted from veins in the arm. In 1990, the Company obtained FDA
clearance to market the SNF in the United States. The SNF has been distributed
in the United States and certain other countries by the Bard Radiology Division
of Bard ("Bard Radiology") since 1992. In 1996, Bard International, Inc. ("Bard
International") began distributing the SNF outside the United States.
Septal Repair Devices. The Company is currently completing the development of
the CardioSeal Septal Occluder, an innovative, patented device for the
minimally invasive repair of defects in the septal wall of the heart, commonly
known as "holes in the heart." These defects, which occur primarily in
children, presently are treated by open heart surgery. The Company believes
that the CardioSeal Septal Occluder may be suitable for use in approximately
55,000 patients annually with congenital heart defects, as well as for
approximately 145,000 adult patients annually with Patent Foramen Ovale,
another septal defect which may contribute to embolic stroke. The septal repair
device was originally developed by Bard in collaboration with Children's
Hospital of Boston. NMT acquired the rights to develop and commercialize the
septal repair device in February 1996. The Company believes that the clinical
utility of the septal repair device was demonstrated with an earlier version of
the device that was evaluated in over 700 patients in clinical trials conducted
between 1989 and 1991. Children's Hospital of Boston is conducting clinical
trials of the current version of the septal repair device under an IDE
permitting implantation of such devices in patients at high risk for surgery.
In May 1996, the Company submitted an IDE application to the FDA for the
CardioSeal Septal Occluder requesting authority to conduct multi-center
clinical trials in the United States. NMT intends to begin clinical trials for
the CardioSeal Septal Occluder in Canada and Europe in late 1996.
The Company's principal executive offices are located at 263 Summer Street,
Boston, MA 02210, and its telephone number is (617) 737-0930.
RISK FACTORS
Prospective purchasers should carefully consider the "Risk Factors" immediately
following this Prospectus Summary.
THE OFFERING
The offering of 2,700,000 shares of Common Stock initially being offered is re-
ferred to herein as the "Offering."
COMMON STOCK OFFERED....................2,700,000 shares
COMMON STOCK OUTSTANDING AFTER THE 8,985,922 shares
OFFERING(1)............................
USE OF PROCEEDS.........................
Redemption of the Redeemable Preferred
Stock and funding of research,
development, clinical trials and
regulatory matters, leasehold
improvements and equipment lease
financing obligations, potential
licenses and acquisitions of
technologies or products that
complement NMT's business and for
working capital and other general
corporate purposes.
"NMTI"
NASDAQ NATIONAL MARKET SYMBOL......
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(1)Excludes an aggregate of 1,982,945 shares of Common Stock issuable pursuant
to options and warrants outstanding as of June 15, 1996. Includes 3,947 shares
of Common Stock issued after March 31, 1996. See "Capitalization,"
"Management--Stock Option Plans" and "Description of Capital Stock."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary consolidated financial data derived from
the Consolidated Financial Statements of the Company. The data should be read
in conjunction with the Consolidated Financial Statements and the Notes thereto
and other financial information included elsewhere in this Prospectus.
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<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
1991 1992 1993 1994 1995 1995 1996
----------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
In thousands, except per share data
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DA-
TA:
Revenues:
Product sales.............. $ 1,292 $ 2,073 $ 2,003 $ 1,837 $ 2,716 $ 583 $ 860
License fees............... -- -- -- 773 625 -- 438
Product development........ -- -- -- 38 492 121 65
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,292 2,073 2,003 2,647 3,833 705 1,362
Expenses:
Cost of product sales...... 265 497 655 812 1,264 236 378
Research and development... 173 210 272 555 871 157 523
General and administrative. 410 536 468 770 871 149 452
Selling and marketing...... 413 454 285 182 169 32 48
In-process research and
development(1)............ -- -- -- -- -- -- 1,111
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,261 1,697 1,680 2,319 3,175 575 2,512
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income(loss) from opera-
tions...................... 31 376 323 328 658 130 (1,150)
Interest income (expense),
net........................ (180) (136) (62) (39) (29) (4) 25
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
provision for income taxes. (149) 240 261 289 628 126 (1,125)
Provision for income tax-
es(2) -- -- -- -- 44 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income(loss)............ $ (149) $ 240 $ 261 $ 289 $ 584 $ 126 $ (1,125)
========== ========== ========== ========== ========== ========== ==========
Net income(loss) per common
and common equivalent
share(3)................... $ (.02) $ .04 $ .04 $ .04 $ .08 $ .02 $ (.17)
========== ========== ========== ========== ========== ========== ==========
Weighted average common and
common equivalent shares
outstanding(3)............. 6,406 6,704 6,678 6,856 6,985 6,984 6,819
</TABLE>
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<TABLE>
<CAPTION>
AT MARCH 31, 1996
PRO FORMA
PRO FORMA(4) AS ADJUSTED(5)
------------ --------------
(UNAUDITED)
In thousands
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $6,884 $34,427
Working capital.................................... 5,924 33,467
Total assets....................................... 8,642 36,185
Redeemable preferred stock......................... 4,250 --
Stockholders' equity............................... 2,396 34,189
</TABLE>
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(1) Relates to a write-off of in-process research and development incurred in
connection with the Company's acquisition of the septal repair device
technology. See Note 3 of Notes to the Consolidated Financial Statements.
(2) In the periods prior to October 19, 1995 the Company elected to be taxed as
an "S" corporation for income tax purposes. Accordingly, there was no provision
for income taxes in these periods. See Note 4 of Notes to the Consolidated
Financial Statements.
(3) Computed on the basis described in Note 2(j) of Notes to the Consolidated
Financial Statements.
(4) The pro forma balance sheet data gives effect to the Conversion.
(5) Adjusted to reflect the sale of 2,700,000 shares of Common Stock offered
hereby (at an assumed initial public offering price of $13.00 per share) and
receipt by the Company of the estimated net proceeds therefrom, and the
application of a portion of such proceeds to fund the Redemption. See "Use of
Proceeds" and "Capitalization."
SECOND QUARTER RESULTS
The following is based on preliminary data relating to the three months ended
June 30, 1996 and is subject to revision. For the three months ended June 30,
1996 the Company expects that total revenues will be approximately $1.3 million
compared to total revenues of $867,000 for the three months ended June 30,
1995. The Company expects a net loss for the three months ended June 30, 1996
of approximately $(312,000), $(.06) per share, compared to net income of
$178,000, $.03 per share, for the three months ended June 30, 1995. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Second Quarter Results."
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following factors
should be considered carefully by prospective investors in evaluating the
Company and its business before purchasing shares of Common Stock offered
hereby.
LIMITED COMMERCIALIZATION; UNCERTAINTIES OF PRODUCT DEVELOPMENT AND MARKET
ACCEPTANCE
The Company currently markets only one product, the Simon Nitinol Filter. The
Company's stents and CardioSeal Septal Occluder may require substantial further
investment in research, product development, preclinical and clinical testing
and governmental regulatory approvals prior to being marketed and sold in the
United States and other countries. The Company's success will depend, in part,
on its ability, either by itself or in collaboration with others, to complete
such product development efforts, obtain such regulatory approvals, establish
manufacturing and marketing programs for such proposed products and gain market
acceptance.
The Company's product development efforts are subject to the risks inherent in
the development of products based on innovative technologies. These risks
include the possibilities that the Company's technologies or any or all of its
products will be found to be ineffective or unsafe, or will otherwise fail to
receive necessary regulatory approvals; that the products, if safe and
effective, will be difficult to manufacture on a large scale or be uneconomical
to market; that the proprietary rights of third parties will interfere with the
Company's product development; or that third parties will market superior or
equivalent products which achieve greater market acceptance. Furthermore, there
can be no assurance that the Company or its collaborators will conduct their
product development efforts within the time frames currently anticipated or
that such efforts will be completed successfully. See "Business--Products."
There can be no assurance that the Company's stents, septal repair devices, or
any other products developed by the Company will achieve market acceptance. The
degree of market acceptance for the Company's products will depend upon a
number of factors, including the receipt and timing of regulatory approvals,
the establishment and demonstration in the medical community of the clinical
safety, efficacy and cost-effectiveness of the Company's products and their
advantages over existing technologies. Additionally, certain of the medical
indications that can be treated by the Company's devices can also be treated by
surgery, drugs or other medical devices. Many alternative treatments currently
are widely accepted in the medical community and have a long history of use.
There can be no assurance that the Company's devices and procedures will be
able to replace such established treatments or that physicians or the medical
community in general will accept and utilize the Company's devices or any other
medical products that may be developed by the Company. Long-term market
acceptance of NMT's products will depend, in part, on the capabilities and
operating features of the Company's products as compared to other available
products. Failure of the Company's products to gain market acceptance would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "--Intense Competition; Rapid Technological
Change" and "Business--Products."
DEPENDENCE UPON COLLABORATORS
The Company has entered into distribution agreements with Bard Radiology and
Bard International granting them exclusive distribution rights to the Company's
SNF, and a license agreement with Boston Scientific granting Boston Scientific
exclusive worldwide rights to develop, manufacture, market and distribute the
Company's stent technology and products which incorporate such technology.
Although Bard Radiology and Bard International have agreed not to sell
competing filters, Boston Scientific is not prohibited from selling other
stents and, in fact, manufactures and licenses from others a variety of stents
that may compete with the Company's stents. Boston Scientific may choose to
emphasize such other stents in its developmental and marketing efforts. See "--
Intense Competition; Rapid Technological Change."
The Company's future product development and marketing depends on the success
of these arrangements and the ability to renew such arrangements. There can be
no assurance that such arrangements will be renewed or that the Company's
existing relationships with Bard Radiology, Bard International or Boston
Scientific will continue in their current form. The Company's business could be
materially adversely affected if its arrangements with Bard Radiology, Bard
International or Boston Scientific prove unsuccessful or if such companies
terminate their arrangements with the Company, negotiate lower prices, sell
additional competing products, whether manufactured by themselves or others, or
otherwise alter the nature of their relationships with the Company. The amount
and timing of resources to be
6
<PAGE>
devoted by the Company's existing and future collaborators to performing their
contractual responsibilities are not within the control of the Company. In
addition, there can be no assurance that such collaborators will perform their
obligations as expected or that the Company will derive any additional revenue
from such arrangements. There also can be no assurance that the Company's
collaborators will not pursue existing or alternative technologies in
preference to products being developed in collaboration with the Company. There
can be no assurance that the Company will be able to negotiate additional
collaborative arrangements in the future on acceptable terms, if at all, or
that such collaborative arrangements will be successful. See "Business--
Strategy," "Business--Products" and "Business--Agreements with Boston
Scientific and Bard."
INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE
The medical device industry is characterized by rapidly evolving technology and
intense competition. Other companies in the medical device industry are
currently marketing products that compete with the Company's devices and may be
developing, or could in the future develop, additional products that are
competitive with the Company's. Many of the Company's competitors have
substantially greater capital resources, greater research and development,
manufacturing and marketing resources and experience and greater name
recognition than the Company. There can be no assurance that the Company will
be able to compete against such competitors and potential competitors in terms
of research and development, manufacturing, marketing and sales. Certain of the
Company's competitors, including Johnson & Johnson, Inc., currently market
stents, and Boston Scientific, which has entered into an exclusive license
agreement with the Company relating to the Company's stent technology,
distributes competing stents and competes with the Company in the vena cava
filter market. The Company believes that other companies are actively
developing competitive septal repair devices. Such companies may succeed in
obtaining regulatory approvals and commercializing their septal repair devices
sooner than the Company. There can be no assurance that the Company's
competitors will not succeed in developing or marketing technologies and
products that are more effective than those developed or marketed by the
Company or that would render the Company's technology and products obsolete or
noncompetitive. Additionally, new surgical procedures and medications could be
developed that replace or reduce the importance of current or future procedures
that use the Company's products. Accordingly, the Company's success will depend
in part on its ability to respond quickly to medical and technological changes
through the development and introduction of new products. Product development
involves a high degree of risk and there can be no assurance that the Company's
new product development efforts will result in any commercially successful
products. Additionally, in many cases the medical indications that can be
treated by the Company's devices can also be treated by surgery and drugs as
well as other medical devices. See "Business--Products."
LIMITED MANUFACTURING HISTORY; DEPENDENCE ON THIRD PARTY MANUFACTURERS
The Company currently uses third parties to manufacture and distribute the SNF
and, pursuant to its exclusive license agreement, will use Boston Scientific to
manufacture and distribute its stents. The Company intends to continue to use
third parties to manufacture and distribute such products and certain other
products which the Company may seek to develop.
If the Company should encounter delays or difficulties with third party
manufacturers in producing, packaging or distributing its proposed products,
market introduction and subsequent sales of such products would be adversely
affected and the Company may have to seek alternative sources of supply. No
assurance can be made that the Company will be able to enter into alternative
supply arrangements at commercially acceptable rates, if at all. Moreover,
contract manufacturers that the Company may use must adhere to current Good
Manufacturing Practice ("GMP") regulations enforced by the FDA. If the Company
is unable to obtain or retain third party manufacturers on commercially
acceptable terms, it may not be able to commercialize medical products as
planned. The Company's dependence upon third parties for the manufacture of
medical products may materially adversely affect the Company's profit margins
and its ability to develop and distribute products on a timely and competitive
basis.
The Company plans to manufacture the CardioSeal Septal Occluder itself and, for
such purpose, is currently constructing its own manufacturing facility. The
Company has had no previous experience in the scale-up or manufacture of
medical products. The Company's manufacturing facility will be subject to GMP,
ISO 9000 and other regulatory requirements, will be subject to risks regarding
delays or difficulties encountered in manufacturing any such medical products
and will require a substantial investment of capital. There can be no assurance
that the Company will be able to manufacture any such products successfully or
in a cost-effective manner or that the
7
<PAGE>
Company can achieve and maintain compliance with GMP, ISO 9000 and other
regulatory requirements. See "Business--Products" and "Business--Government
Regulation."
LIMITED MARKETING AND SALES EXPERIENCE
Although the Company has limited internal marketing and sales resources and
personnel, and currently relies primarily on third parties to market and sell
its products, the Company plans to market the CardioSeal Septal Occluder
directly, if and when it receives the required regulatory approvals. In order
to market the CardioSeal Septal Occluder and any other products that it may
develop, the Company will have to develop a marketing and sales organization
with technical expertise and distribution capabilities. The development of such
an organization will require significant expenditures, management resources and
time. There can be no assurance that the Company will be able to develop such a
marketing and sales organization. See "Business--Products."
DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY
The Company's success will depend, in part, on its ability to obtain patents,
maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. The validity and breadth of claims covered
in medical technology patents involve complex legal and factual questions and,
therefore, may be highly uncertain. No assurance can be given that any pending
patent applications or any future patent application will result in issued
patents, the scope of any patent protection will exclude competitors or provide
competitive advantages to the Company, any of the Company's patents will be
held valid if subsequently challenged or others will not claim rights in or
ownership of the patents and other proprietary rights held by the Company.
Furthermore, there can be no assurances that others have not or will not
develop similar products, duplicate any of the Company's products or design
around any patents issued or that may be issued in the future to the Company or
its licensors. In addition, whether or not patents are issued to the Company or
its licensors, others may hold or receive patents which contain claims having a
scope that covers products developed by the Company.
Moreover, there can be no assurances that patents issued to or licensed by or
to the Company will not be challenged, invalidated or circumvented or that the
rights thereunder will provide any competitive advantage. The Company could
incur substantial costs in defending any patent infringement suits or in
asserting any patent rights, including those granted by third parties. In
addition, the Company may be required to obtain licenses to patents or
proprietary rights from third parties. There can be no assurance that such
licenses will be available on acceptable terms if at all. If the Company does
not obtain required licenses, it could encounter delays in product development
or find that the development, manufacture or sale of products requiring such
licenses could be foreclosed. See "Business--Patents and Proprietary Rights"
and "Business--Licensed Technology; Royalty Obligations."
The Company also relies on unpatented proprietary technology, trade secrets and
know-how and no assurance can be given that others will not independently
develop substantially equivalent proprietary information, techniques or
processes, that such technology or know-how will not be disclosed or that the
Company can meaningfully protect its rights to such unpatented proprietary
technology, trade secrets, or know-how. Although the Company has entered into
non-disclosure agreements with its employees and consultants, there can be no
assurance that such non-disclosure agreements will provide adequate protection
for the Company's trade secrets or other proprietary know-how.
GOVERNMENT REGULATION; PRODUCT APPROVALS UNCERTAIN
The manufacture and sale of medical devices intended for commercial
distribution are subject to extensive governmental regulations in the United
States. Medical devices are regulated in the United States by the FDA under the
Federal Food, Drug, and Cosmetic Act (the "FDC Act") and generally require pre-
market clearance or pre-market approval prior to commercial distribution. In
addition, certain material changes or modifications to medical devices also are
subject to FDA review and clearance or approval. Pursuant to the FDC Act, the
FDA regulates the research, testing, manufacture, safety, labeling, storage,
record keeping, advertising, distribution and production of medical devices in
the United States. Noncompliance with applicable requirements can result in
failure of the government to grant pre-market clearance or approval for
devices, withdrawal of approvals, total or partial suspension of production,
fines, injunctions, civil penalties, recall or seizure of products, and
criminal prosecution. The FDA also has the authority to request repair,
replacement or refund of the cost of any device manufactured or distributed by
the Company.
Generally, before a new device can be introduced into the market in the United
States, the manufacturer must obtain FDA clearance of a pre-market notification
("510(k) notification") or approval of a PMA application. If a medical
8
<PAGE>
device manufacturer can establish that a device is "substantially equivalent"
to a legally marketed device, the manufacturer may seek clearance from the FDA
to market the device by filing a 510(k) notification. If a manufacturer or
distributor of medical devices cannot establish that a proposed device is
substantially equivalent to a legally marketed device, the manufacturer must
seek pre-market approval of the proposed device through submission of a PMA
application.
The PMA approval process is expensive, uncertain and lengthy. A number of
devices for which pre-market approval has been sought by other companies have
never been approved for marketing. The review time is often significantly
extended by the FDA, which may require more information or clarification of
information already provided in the submission. In addition, the FDA will
inspect the manufacturing facility to ensure compliance with the GMP
regulations for medical devices prior to approval of the PMA application. If
granted, the approval may include significant limitations on the indicated uses
for which a product may be marketed.
Any products manufactured or distributed by the Company are subject to
continuing regulation by the FDA including record keeping requirements,
reporting of adverse experience with the use of the device, postmarket
surveillance, postmarket registry and other actions deemed necessary by the
FDA. The FDA's regulations require agency approval of a PMA supplement for
certain changes if they affect the safety and effectiveness of the device,
including, but not limited to, new indications for use; labeling changes; the
use of a different facility to manufacture, process, or package the device. For
any devices that are cleared through the 510(k) process, modifications or
enhancements that could significantly affect safety or effectiveness, or that
constitute a major change in the intended use of the device, will require new
510(k) submissions. There can be no assurance that the Company will be able to
obtain necessary regulatory approvals or clearances for its products on a
timely basis or at all, and delays in receipt of, or failure to receive, such
approvals or clearances, the loss of previously received approvals or
clearances, limitations on intended use imposed as a condition of such
approvals or clearances, or failure to comply with existing or future
regulatory requirements could have a material adverse effect on the Company's
business, financial conditions and results of operations.
The Company's first product, the SNF, underwent significant clinical
investigation under an IDE and received 510(k) clearance in 1990. Subsequent
improvements and modifications to the SNF have also received 510(k) clearance
from the FDA. There can be no assurance that future modifications of the device
will obtain such clearance. The 510(k) clearances for the SNF were based on
substantial equivalence of the device to other cardiovascular intravascular
filters, which are "preamendments Class III devices." It is likely that the FDA
will call for PMAs for such preamendments Class III devices, including the SNF,
and that the Company will be required to have a PMA for the SNF accepted for
filing by the FDA within 90 days after the date that the FDA calls for PMAs.
There can be no assurance that the Company will be able to file a PMA within
the prescribed time period or that any data and information submitted in a PMA
will be adequate to support approval of the device. If the FDA were to require
the Company to conduct a new clinical study to support the safety and efficacy
of the SNF, the preparation of the PMA would take substantially longer. Failure
of the Company to submit a PMA and have it accepted for filing by the FDA
within the required timeframe could result in the Company being required to
cease commercial distribution of the SNF. In addition the Company may not be
permitted to continue commercial distribution of the SNF pending the FDA's
review of the PMA. The Company's failure to have a PMA accepted for filing, or
a failure to obtain FDA approval of the PMA, would result in the Company being
required to cease commercial distribution of the SNF which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Sales of medical device products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country. The
time required to obtain approvals required by foreign countries may be longer
or shorter than that required for FDA approval, and requirements for licensing
may differ from FDA requirements. Failure to comply with foreign regulatory
requirements also could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Government Regulation."
UNCERTAIN AVAILABILITY OF THIRD PARTY REIMBURSEMENT; POSSIBLE HEALTH CARE RE-
FORMS
In the United States, suppliers of health care products and services are
greatly affected by Medicare, Medicaid and other government insurance programs,
as well as by private insurance reimbursement programs. Third party payers may
affect the pricing or relative attractiveness of the Company's products by
regulating the maximum amount of
9
<PAGE>
reimbursement provided for by such payers to the physicians and clinics using
the Company's devices, or any other products that the Company may develop, or
by taking the position that such reimbursement is not available at all. The
level of reimbursement by third party payers in those states that do provide
reimbursement varies considerably. Major third party payers reimburse inpatient
medical treatment, including all operating costs and all furnished items or
services, including devices such as the Company's, at a prospectively fixed
rate based on the diagnosis-related group ("DRG") that covers such treatment as
established by the federal Health Care Financing Administration. For
interventional procedures, the fixed rate of reimbursement is based on the
procedure or procedures performed and is unrelated to the specific devices used
in such procedure. The amount of profit realized by suppliers of health care
services relating to the procedure may be reduced by the use of the Company's
devices. If a procedure is not covered by a DRG, certain third party payers may
deny reimbursement. Alternatively, a DRG may be assigned that does not reflect
the costs associated with the use of the Company's devices, resulting in
limited reimbursement. If, for any reason, the Company's products were not to
be reimbursed by third party payers, the Company's ability to sell its products
may be materially adversely affected. Mounting concerns about rising health
care costs may cause more restrictive coverage and reimbursement policies to be
implemented in the future. Several states and the federal government are
investigating a variety of alternatives to reform the health care delivery
system and further reduce and control health care spending. These reform
efforts include proposals to limit spending on health care items and services,
limit coverage for new technology and limit or control directly the price
health care providers and drug and device manufacturers may charge for their
services and products. In the international market, reimbursement by private
third party medical insurance providers, and governmental insurers and
providers varies from country to country. In certain countries, the Company's
ability to achieve significant market penetration may depend upon the
availability of third party governmental reimbursement. See "Business--
Government Regulation."
UNCERTAINTIES OF SUCCESSFUL REDESIGN OF THE SEPTAL REPAIR DEVICE
Between 1989 and 1991 Bard sponsored trials of an earlier version of the septal
repair device, known as the Clamshell. In 1991, Bard discovered fractures of
the stainless steel framework in certain of the devices implanted during such
clinical trials. Although no significant adverse clinical consequences were
observed as a result of these fractures, Bard suspended its clinical trials
worldwide except for patients at high risk for surgery. It was determined that
the fractures were caused by metal fatigue resulting from higher than
anticipated forces acting on the Clamshell. Redesign efforts were initiated in
collaboration with Dr. James Lock, Chairman of the Cardiology Department at
Children's Hospital of Boston (to which Bard donated the technology and
associated assets), resulting in the design of the current version of the
septal repair device. Although the CardioSeal Septal Occluder has undergone
extensive in vitro testing, there can be no assurance that such testing
accurately simulates the actual forces in the human body or that similar
fractures will not occur with the CardioSeal Septal Occluder. If such fractures
occur, the Company's efforts to commercialize the CardioSeal Septal Occluder
may be significantly delayed and the Company may be required to invest
significant resources in further designing and engineering the device or to
discontinue its development efforts. See "Business--Products."
PRODUCT LIABILITY RISKS; INSURANCE
The testing, marketing and sale of implantable devices and materials entail an
inherent risk that product liability claims will be asserted against the
Company or its third party distributors in the event that the use of the
Company's devices is alleged to have adverse effects on a patient. A product
liability claim or a product recall could have a material adverse effect on the
Company's business, financial condition and results of operations. Certain of
the Company's devices are designed to be used in life-threatening situations
where there is a high risk of serious injury or death. Although the Company
currently maintains limited product liability insurance coverage, there can be
no assurance that in the future the Company will be able to maintain such
coverage on acceptable terms or that current insurance or insurance
subsequently obtained will provide adequate coverage against any or all
potential claims. Furthermore there can be no assurance that the Company will
avoid significant product liability claims and the attendant adverse publicity.
Any product liability claim or other claim with respect to uninsured or
underinsured liabilities could have a material adverse effect on the Company's
business, financial condition, and result of operations. See "Business--Product
Liability and Insurance."
EXPECTED NEAR-TERM LOSSES
The Company expects operating losses to continue at least through early 1997 as
it continues to expend substantial resources to complete development of the
Company's products, seek regulatory clearances or approvals, build its
marketing, sales and manufacturing organizations and conduct further research
and development. There can be no
10
<PAGE>
assurance that the Company's products under development will ever gain
commercial acceptance, generate revenues or achieve profitability or that the
Company will resume profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
UNCERTAIN FUTURE CAPITAL REQUIREMENTS
The Company may require funds in addition to the net proceeds of the Offering
for its research and product development programs, preclinical and clinical
testing, operating expenses, regulatory processes and manufacturing and
marketing programs. The Company may seek such additional funding through public
or private financing or collaborative, licensing or other arrangements with
corporate partners. If additional funds are raised by issuing equity
securities, further dilution to existing stockholders will result and future
investors may be granted rights superior to those of existing stockholders;
debt financing, if available, may involve restrictive covenants. The Company's
capital requirements will depend on numerous factors, including the sales of
its products, the progress of its research and development programs, the
progress of preclinical and clinical testing, the time and cost involved in
obtaining regulatory approvals, the cost of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property rights, competing
technological and market developments, developments and changes in the
Company's existing research, licensing and other relationships and the terms of
any new collaborative, licensing and other arrangements that the Company may
establish. See "Business--Licensed Technology; Royalty Obligations,"
"Management-Employment Agreements" and "Certain Transactions." The Company's
cash requirements will vary from those now planned and such variances may be
material.
There can be no assurance that additional financing will be available when
needed or, if available, will be available on acceptable or affordable terms.
Insufficient funds may prevent the Company from implementing its business
strategy or may require the Company to delay, scale back or eliminate certain
of its research and product development programs or to license to third parties
rights to commercialize products or technologies that the Company would
otherwise seek to develop itself. See "Management Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
DEPENDENCE ON QUALIFIED PERSONNEL
There is intense competition for qualified personnel in the medical device
field, and there can be no assurance that the Company will be able to continue
to attract and retain qualified personnel necessary for the development of its
business. The loss of the services of existing personnel as well as the failure
to recruit additional qualified scientific, technical and managerial personnel
in a timely manner would be detrimental to the Company's anticipated growth and
expansion into areas and activities requiring additional expertise such as
marketing. The failure to attract and retain such personnel could adversely
affect the Company's business. See "Business--Employees" and "Management."
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Company's Common
Stock and there can be no assurance that an active public market for the
Company's Common Stock will develop or be sustained in the future. The initial
public offering price of the Common Stock will be determined by negotiations
between the Company and the Underwriters. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. In addition, the market price of the Common Stock is likely to be highly
volatile as frequently occurs with publicly traded emerging growth companies
and medical device companies. Factors such as results of clinical trials,
announcements of technological innovations or new products by the Company or
its competitors, government regulatory action affecting the Company's proposed
products in either the United States or foreign countries, developments or
disputes concerning patent or proprietary rights and market conditions for
emerging growth and medical device companies in general, as well as period-to-
period fluctuations in the Company's financial results, could have a
significant impact on the market price of the Common Stock.
BROAD DISCRETION AS TO USE OF PROCEEDS
Approximately 42% of the estimated net proceeds of the Offering has been
allocated to working capital and other general corporate purposes and will be
used for such specific purposes as management may determine, including
potential license or acquisition arrangements with other companies. The Company
is currently evaluating certain potential license or acquisition opportunities;
however, the Company has no agreements, arrangements or understandings with any
third parties for any such licenses or acquisitions at this time. There can be
no assurance that the Company will enter into or consummate any such license or
acquisition or, if entered into, that any such arrangements will be successful.
Accordingly, management will have broad discretion with respect to the
expenditure of a substantial portion of the net proceeds of the Offering. See
"Use of Proceeds."
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<PAGE>
AVAILABILITY OF PREFERRED STOCK FOR ISSUANCE
In addition to its authorized shares of Common Stock, the Company's Amended and
Restated Certificate of Incorporation authorizes the issuance of up to
3,000,000 shares of undesignated preferred stock. Upon completion of the
Offering, no shares of preferred stock of the Company will be outstanding, and
the Company has no present intention to issue any shares of preferred stock.
However, because the rights and preferences of any series of preferred stock
may be set by the Board of Directors in its sole discretion, the rights and
preferences of any such preferred stock may be superior to those of the Common
Stock and thus may adversely affect the rights of the holders of Common Stock.
See "Description of Capital Stock--Preferred Stock."
POSSIBLE ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALES
Upon completion of the Offering, the Company's existing stockholders will
beneficially own an aggregate of 6,285,922 shares of Common Stock. Sales of
substantial amounts of Common Stock in the public market by such persons after
the Offering could adversely affect prevailing market prices for the Common
Stock. At June 15, 1996, 281,521 shares of Common Stock were issuable upon
exercise of outstanding warrants at a weighted average exercise price of $3.34
per share and 1,701,424 shares of Common Stock were issuable upon exercise of
outstanding stock options at a weighted average exercise price of $2.51 per
share. The Company, certain stockholders and directors and officers of the
Company have agreed to enter into lock-up agreements with the Underwriters not
to dispose of any shares of Common Stock, nor any securities convertible into
or exchangeable or exercisable for any such shares, without the prior written
consent of J.P. Morgan Securities Inc. for a period of 180 days after the
Offering, subject to certain limited exceptions. After such 180-day period,
however, substantially all shares of Common Stock currently outstanding will be
eligible for sale in the public market pursuant to Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if the conditions to
that Rule have been met. The Company's current stockholders are also entitled
to certain rights with respect to the registration under the Securities Act of
shares held by them. See "Management," "Description of Capital Stock--
Registration Rights" and "Shares Eligible for Future Sale."
NO DIVIDENDS
The Company does not anticipate declaring or paying cash dividends in the
foreseeable future. The Company expects that any earnings which it may realize
will be retained for use in its business. See "Dividend Policy."
DILUTION
Investors purchasing shares of Common Stock in the Offering will incur
immediate dilution of $9.19 in the per share net tangible book value of their
Common Stock (assuming an initial public offering price of $13.00). The Company
has granted to officers, directors, certain principal stockholders and others
numerous options and warrants to purchase Common Stock at prices below the
offering price. Investors purchasing shares of Common Stock in the Offering
will incur additional dilution to the extent outstanding warrants and options
are exercised. See "Dilution," "Management--Options Granted Outside of the
Plans" and "Certain Transactions."
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
approximately $31.9 million, assuming an initial public offering price of
$13.00 per share ($36.8 million if the over-allotment option is exercised in
full), after deducting the underwriting discount and offering expenses payable
by the Company.
The Company will use approximately $4.4 million of the net proceeds for the
Redemption of the Company's Redeemable Preferred Stock, $.001 par value per
share ("Redeemable Preferred Stock"), including the payment of accrued
dividends. See "Certain Transactions." The Company anticipates that it will use
approximately $8.0 million of the net proceeds for research, development,
clinical trials and regulatory matters; approximately $3.0 million to develop
the Company's sales and marketing capabilities; and approximately $3.0 million
for leasehold improvements and payments under certain equipment lease financing
obligations to be incurred in connection with the Company's relocation to a new
manufacturing, laboratory and administrative facility. The Company intends to
use the balance of the net proceeds for potential licenses and acquisitions of
technologies or products that complement the business of the Company and for
other general corporate purposes, including working capital. As of the date of
this Prospectus, the Company is evaluating certain potential license or
acquisition opportunities; however, the Company has no agreements, arrangements
or understandings with any third parties for any such licenses or acquisitions.
Pending such uses, the Company intends to invest the net proceeds of the
Offering in interest-bearing, investment grade securities.
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<PAGE>
The foregoing represents the Company's best estimate of its allocation of the
net proceeds from the sale of the Common Stock offered hereby based upon the
current state of its business operations, its current plans and current
economic and industry conditions and is subject to reallocation among the
categories listed above or to new categories. The amounts actually expended for
each purpose may vary significantly depending upon numerous factors, including
the progress of the Company's clinical trials and actions relating to
regulatory matters, and the costs and timing of expansion of marketing, sales
and manufacturing activities, and hence the Company's management will retain
broad discretion in the allocation of a substantial portion of the net
proceeds. See "Risk Factors--Broad Discretion as to Use of Proceeds."
DIVIDEND POLICY
From the Company's inception through October 19, 1995, the Company was an "S"
corporation for federal and state income tax purposes. As such, the Company
generally was not subject to federal or state income taxes, but its income was
taxable to its stockholders. The Company declared and paid dividends in the
aggregate amount of $600,000 for such period.
The Company does not anticipate declaring or paying cash dividends in the
foreseeable future. The Company expects that any earnings which it may realize
will be retained for use in its business.
CAPITALIZATION
The following table sets forth as of March 31, 1996 (i) the pro forma
capitalization of the Company which gives effect to the Conversion, and (ii)
the pro forma capitalization as adjusted to give effect to the sale of the
shares of Common Stock offered hereby at an assumed offering price of $13.00
per share (after deducting the underwriting discount and offering expenses
payable by the Company) and the application of a portion of the net proceeds
therefrom for the Redemption. See "Use of Proceeds." This table should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and the Notes thereto included elsewhere in this Prospectus.
--------------
<TABLE>
AT MARCH 31, 1996
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
<S> <C> <C>
Dollars in thousands
Current portion of long term obligations $ 930 $ 930
========= ===========
Long term obligations $ -- $ --
Redeemable Preferred Stock, $.001 par value; 38,000
shares authorized, 37,871 shares issued and outstanding
pro forma; none issued and outstanding pro forma as
adjusted 4,250 --
--------- -----------
Stockholders' Equity:
Preferred Stock, $.001 par value; 3,000,000 shares
authorized; none issued and outstanding pro forma and
as adjusted -- --
Common Stock, $.001 par value; 30,000,000 shares
authorized; 6,281,975 shares issued and outstanding
pro forma; 8,981,975 shares pro forma as adjusted(1) 6 9
Additional paid-in capital 4,630 36,420
Accumulated deficit (2,240) (2,240)
--------- -----------
Total stockholders' equity 2,396 34,189
--------- -----------
Total capitalization $6,646 $34,189
========= ===========
</TABLE>
- -------
(1) Excludes 1,723,890 shares of the Company's Common Stock reserved for issu-
ance pursuant to the exercise of options and warrants outstanding as of March
31, 1996 at a weighted average exercise price of $2.11 per share of which op-
tions and warrants to purchase 859,770 shares of Common Stock were then exer-
cisable. From April 1, 1996 to June 15, 1996 the Company granted 263,002 addi-
tional options and warrants at a weighted average exercise price of $5.94 per
share and 3,947 shares were issued upon exercise of outstanding options.
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<PAGE>
DILUTION
Dilution is the amount by which the initial public offering price paid by the
purchasers of the shares of Common Stock will exceed the net tangible book
value per share of Common Stock after the Offering. Net tangible book value per
share is determined at any date by subtracting the total liabilities of the
Company from the total book value of the tangible assets of the Company and
dividing the difference by the number of shares of Common Stock deemed to be
outstanding at such date.
The net tangible book value of the Company as of March 31, 1996 was $2,396,291
or $.38 per share pro forma after giving effect to the Conversion. After giving
effect to the sale of 2,700,000 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $13.00 per share and the
application of a portion of the estimated net proceeds therefrom for the
Redemption, the pro forma net tangible book value of the Company as of March
31, 1996 would have been $34,189,291 or $3.81 per share. This represents an
immediate increase in net tangible book value of $3.43 per share to existing
stockholders and an immediate dilution of $9.19 per share to new investors
purchasing the shares of Common Stock in the Offering. The following table
illustrates the dilution of a new investor's equity on a per share basis as of
March 31, 1996:
-----------
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock $ 13.00
Pro forma net tangible book value per share of Common Stock be-
fore the Offering $ .38
Increase in net tangible book value per share attributable to
new investors 3.43
-----
Pro forma net tangible book value after the Offering (1) 3.81
-------
Dilution per share to new investors(1) $ 9.19
=======
</TABLE>
- -------
(1) If the Underwriters' over-allotment option is exercised in full, the pro
forma net tangible book value after the Offering would be approximately $4.16
per share, resulting in dilution to new investors in the Offering of $8.84 per
share. See "Underwriting."
The following table sets forth, as of March 31, 1996, the difference between
(i) the number of shares of Common Stock purchased from the Company (including
the Common Stock to be issued upon the Conversion), the total consideration
paid and the average price per share paid by the existing stockholders for such
shares and (ii) the number of shares of Common Stock to be purchased by new
investors in the Offering from the Company, the total consideration to be paid
and the average price per share to be paid by them for such shares and (iii)
the percentage of shares purchased from the Company by new investors and the
percentage of the consideration paid to the Company for such shares by new
investors.
---------------------------------------
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders 6,281,975 69.9% $ 4,520,006 11.4% $ .72
New Investors 2,700,000 30.1 35,100,000 88.6 13.00
--------- ----- ----------- -----
Total 8,981,975 100.0% $39,620,006 100.0%
========= ===== =========== =====
</TABLE>
At June 15, 1996, 281,521 shares of Common Stock were issuable upon exercise of
outstanding warrants at a weighted average exercise price of $3.34 per share
and 1,701,424 shares of Common Stock were issuable upon exercise of outstanding
stock options at a weighted average exercise price of $2.51 per share. To the
extent these warrants or options are exercised, there will be further dilution
to new investors. See "Capitalization," "Management--Stock Option Plans,"
"Management--Options Granted Outside of the Plans" and "Description of Capital
Stock."
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company. The selected consolidated financial data as of December 31, 1994 and
1995 and for the three years in the period ended December 31, 1995 are derived
from the Company's Consolidated Financial Statements, which have been audited
by Arthur Andersen LLP, independent public accountants and together with their
report thereon are included elsewhere in this Prospectus. The selected
consolidated financial data for the years ended December 31, 1991, 1992 and
1993 are derived from the Company's Consolidated Financial Statements which, in
the case of 1992 and 1993, have been audited by Arthur Andersen LLP. The
selected consolidated financial data as of March 31, 1996 and the three months
ended March 31, 1995 and 1996 are derived from the Company's unaudited
Consolidated Financial Statements included elsewhere in this Prospectus. In the
opinion of management, the unaudited Consolidated Financial Statements of the
Company have been prepared on the same basis as the audited Consolidated
Financial Statements and include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the financial
position and the results of operations for these periods. Results for the three
months ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996. The selected
consolidated financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus.
-----------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
1991 1992 1993 1994 1995 1995 1996
----------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
In thousands, except per share data
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DA-
TA:
Revenues:
Product sales $ 1,292 $ 2,073 $ 2,003 $ 1,837 $ 2,716 $ 583 $ 860
License fees -- -- -- 773 625 -- 438
Product development -- -- -- 38 492 121 65
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,292 2,073 2,003 2,647 3,833 705 1,362
Expenses:
Cost of product sales 265 497 655 812 1,264 236 378
Research and development 173 210 272 555 871 157 523
General and administrative 410 536 468 770 871 149 452
Selling and marketing 413 454 285 182 169 32 48
In-process research and
development(1) -- -- -- -- -- -- 1,111
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,261 1,697 1,680 2,319 3,175 575 2,512
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income(loss) from operations 31 376 323 328 658 130 (1,150)
Interest income (expense),
net (180) (136) (62) (39) (29) (4) 25
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income(loss) before
provision for income taxes (149) 240 261 289 628 126 (1,125)
Provision for income tax-
es(2) -- -- -- -- 44 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income(loss) $ (149) $ 240 $ 261 $ 289 $ 584 $ 126 $ (1,125)
========== ========== ========== ========== ========== ========== ==========
Net income(loss) per common
and common equivalent
share(3) $ (.02) $ .04 $ .04 $ .04 $ .08 $ .02 $ (.17)
========== ========== ========== ========== ========== ========== ==========
Weighted average common and
common equivalent shares
outstanding(3) 6,406 6,704 6,678 6,856 6,985 6,984 6,819
</TABLE>
-----------------------------------------------------
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
1991 1992 1993 1994 1995 1996
--------- -------- -------- -------- -------- ------------
(UNAUDITED)
In thousands
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equiva-
lents $ 32 $ 205 $ 644 $ 715 $ 533 $ 6,884
Working capital (defi-
cit) (957) 415 512 68 (1,277) 5,924
Total assets 419 1,207 1,152 1,253 1,661 8,642
Long-term obligations 825 2,141 1,957 1,690 -- --
Redemption value of pre-
ferred stock -- -- -- -- -- 4,250
Stockholders' equity
(deficit) (1,697) (1,457) (1,190) (1,331) (844) 2,396
</TABLE>
- -------
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+(1) RELATES TO A WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT INCURRED IN +
+CONNECTION WITH THE COMPANY'S ACQUISITION OF THE SEPTAL REPAIR DEVICE +
+TECHNOLOGY. SEE NOTE 3 OF NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+(2) IN THE PERIODS PRIOR TO OCTOBER 19, 1995 THE COMPANY ELECTED TO BE TAXED +
+AS AN "S" CORPORATION FOR INCOME TAX PURPOSES. ACCORDINGLY, THERE WAS NO +
+PROVISION FOR INCOME TAXES IN THESE PERIODS. SEE NOTE 4 OF NOTES TO THE +
+CONSOLIDATED FINANCIAL STATEMENTS. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
(3) Computed on the basis described in Note 2(j) of Notes to the Consolidated
Financial Statements.
SECOND QUARTER RESULTS
The following is based on preliminary data relating to the three months ended
June 30, 1996 and is subject to revision. For the three months ended June 30,
1996 the Company expects that total revenues will be approximately $1.3 million
compared to total revenues of $867,000 for the three months ended June 30,
1995. The Company expects a net loss for the three months ended June 30, 1996
of approximately $(312,000), $(.06) per share, compared to net income of
$178,000, $.03 per share, for the three months ended June 30, 1995. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Second Quarter Results."
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations
of the Company should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto included elsewhere in this Prospectus.
OVERVIEW
Since its inception in 1986, the Company has focused its efforts on the design,
development and commercialization of medical devices which are delivered by
minimally invasive procedures. The products developed or under development
include self-expanding stents, vena cava filters and septal repair devices.
The Company's initial product, a vena cava filter system, was given FDA
clearance in 1990. This product is distributed in the United States and certain
other countries by Bard Radiology and in other markets outside the United
States by Bard International. Both distributors are obligated to make annual
minimum purchases. The filter component of the current vena cava filter system
is manufactured by Lake Region Manufacturing Inc. ("Lake Region"). The Company
currently purchases its delivery systems for the vena cava filter under
purchase orders with third party suppliers. The vena cava filter is the only
product sold by the Company during the periods discussed below. The majority of
the Company's revenues, and all of its cost of product sales, are related to
the vena cava filter during such periods.
In November 1994, the Company entered into an agreement with Boston Scientific
pursuant to which Boston Scientific obtained exclusive worldwide rights to
develop, manufacture, market and distribute the Company's stent technology and
products which incorporate such technology. Under this license agreement,
Boston Scientific is responsible for performing clinical trials for stents
under development and for reimbursing the Company for stent development costs
incurred by the Company. These reimbursements are classified as product
development revenues in the Consolidated Statement of Operations. The Company
also receives license fees, including milestone payments, from Boston
Scientific under this license agreement. Upon commercialization, the Company
will receive royalties based upon product sales and certain manufacturing cost
reduction incentives from Boston Scientific under the license agreement. The
Company's revenues in the periods discussed below include such license fees and
reimbursements. Most of its costs associated with its stents are included in
research and development expenses.
In February 1996, the Company acquired, through the issuance of Common Stock,
the rights to develop and commercialize its septal repair device. The Company
has not yet realized any revenue related to its septal repair device. The
Company expects to manufacture this device itself which will result in
increased operating expenses as discussed below.
In the first quarter of 1996 the Company significantly increased the scope of
its operations. This included the addition of a new Chief Executive Officer, an
Executive Vice President and Chief Financial Officer and a President of the
Septal Repair Division, which was formed in February 1996. In addition, in
April 1996, the Company entered into a lease for a new manufacturing,
laboratory and administrative space which will increase the Company's annual
facility lease payments by approximately $400,000. The Company anticipates
taking full occupancy in September 1996 upon completion of construction of the
facility to the Company's specifications. The Company expects operating
expenses to continue to increase significantly as it enters into clinical
trials for the septal repair device, accelerates its other product development
programs and builds the infrastructure necessary to commercialize its
technologies.
The Company has agreed to make certain royalty payments to Children's Medical
Center Corporation based on net sales of the CardioSeal Septal Occluder. The
Company has also agreed to pay certain royalties to Morris Simon, M.D., the
Company's Scientific Director and co-founder, based on sales of products using
the technology invented by Dr. Simon relating to the SNF. In addition, pursuant
to the Company's employment agreements with Mr. Kleshinski and Dr. Harry,
respectively, the Company has agreed to pay certain royalties based on sales or
licenses of products where either Mr. Kleshinski or Dr. Harry, as the case may
be, was the sole or joint inventor. See "Management--Employment Agreements" and
Note 8(d) of Notes to the Consolidated Financial Statements.
16
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
Revenues. Revenues for the three months ended March 31, 1996 increased to $1.4
million from $705,000 for the three months ended March 31, 1995 (a 99%
increase). Product sales derived from the sale of vena cava filters increased
to $860,000 for the three months ended March 31, 1996 from $583,000 for the
three months ended March 31, 1995 (a 48% increase). The increase in product
sales is primarily due to increased unit sales of vena cava filters, which in
turn, was primarily due to the introduction of the straight-line delivery
system in November 1995, and the commencement of international distribution by
Bard International in January 1996. The Company recorded $438,000 in license
fees from Boston Scientific related to its stent technology in the three months
ended March 31, 1996, consisting of a $250,000 milestone payment and the first
quarter minimum royalty payment of $187,500. Product development revenues from
Boston Scientific (which consist of reimbursement of certain costs incurred by
the Company) decreased to $65,000 for the three months ended March 31, 1996
from $121,000 for the three months ended March 31, 1995 (a 46% decrease), due
to the completion of the Company's transfer of its stent technology to Boston
Scientific in November 1995 which has resulted in a reduction in stent
development costs incurred by the Company on behalf of Boston Scientific.
Cost of Product Sales. Cost of product sales increased to $378,000 for the
three months ended March 31, 1996 from $236,000 for the three months ended
March 31, 1995 (a 60% increase). The cost of product sales in both periods was
entirely related to vena cava filters, and the increase reflects the increase
in vena cava filters sold in the three months ended March 31, 1996. Cost of
product sales, as a percent of product sales, increased to 44% for the three
months ended March 31, 1996 from 40% for the three months ended March 31, 1995.
This increase reflects the impact of the introduction of the straight-line
delivery system which has a higher unit manufacturing cost as a percent of the
selling price.
Research and Development. Research and development expenses increased to
$523,000 for the three months ended March 31, 1996 from $157,000 for the three
months ended March 31, 1995 (a 233% increase). The increase reflects increased
activity in the Company's development programs for vena cava filters, the
CardioSeal Septal Occluder and other products under development. Increased
expenses resulted primarily from increases in personnel and related costs,
engineering expenses and facilities related costs. The Company received
reimbursement from Boston Scientific for $65,000 and $121,000 of these expenses
in the three months ended March 31, 1996 and 1995 respectively, which amounts
are included in revenues.
General and Administrative. General and administrative expenses increased to
$452,000 for the three months ended March 31, 1996 from $149,000 for the three
months ended March 31, 1995 (a 203% increase). The increase consisted primarily
of increases in personnel and related costs, legal and professional fees and
consulting expenses. These increases resulted from the Company's expanded scope
of operations.
Selling and Marketing. Selling and marketing expenses increased to $48,000 for
the three months ended March 31, 1996 from $32,000 for the three months ended
March 31, 1995 (a 50% increase). Selling and marketing expenses in both periods
were entirely related to vena cava filters, and the increase related to the
introduction of the straight-line delivery system and the international
distribution of the vena cava filter by Bard International beginning in January
1996.
In-Process Research and Development. In the three months ended March 31, 1996,
the Company recorded a charge of $1.1 million for in-process research and
development related to the CardioSeal Septal Occluder which was acquired in
February 1996. See Note 3 of Notes to the Consolidated Financial Statements.
Interest Income (Expense), Net. Interest income, net was $25,000 for the three
months ended March 31, 1996 as compared to interest expense, net amounting to
$4,000 for the three months ended March 31, 1995. This increase was primarily
due to the receipt in February 1996 of $7.5 million in net proceeds from the
sale of Convertible Preferred Stock. Interest expense in both periods consisted
primarily of interest on subordinated debt to stockholders, which was fully
repaid in April 1996.
Income Taxes. The Company had no income tax provision for the three months
ended March 31, 1996 as it incurred an operating loss. Prior to October 19,
1995, the Company elected to be taxed as an "S" Corporation for
17
<PAGE>
federal and state income tax purposes and, accordingly, the financial
statements do not include a provision for income taxes for the three months
ended March 31, 1995. See Note 4 of Notes to the Consolidated Financial
Statements.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Revenues. Revenues increased to $3.8 million in 1995 from $2.6 million in 1994
(a 46% increase). Product sales of vena cava filters increased to $2.7 million
in 1995 from $1.8 million in 1994 (a 50% increase). This increase is primarily
due to increased unit sales of vena cava filters which the Company attributes
primarily to the distribution agreements with Bard. License fees, which consist
of payments from Boston Scientific related to the Company's stent technology,
decreased to $625,000 in 1995 from $773,000 in 1994 (a 19% decrease). License
fees in 1995 represent amounts received upon the achievement of a contractual
milestone. License fees in 1994 represented initial license fees received from
Boston Scientific upon entering into the license agreement in November 1994.
Product development revenues increased to $492,000 in 1995 from $38,000 in
1994. The significant increase in 1995 reflects a full year of development
efforts funded by Boston Scientific under the agreements entered into in
November 1994.
Cost of Product Sales. Cost of product sales increased to $1.3 million in 1995
from $812,000 in 1994 (a 60% increase). The increase in cost of product sales
reflects the increase in vena cava filter units sold in 1995. Cost of product
sales, as a percent of product sales, increased to 47% in 1995 from 44% in 1994
primarily due to the introduction of the vena cava straight-line delivery
system in November 1995, which has a higher unit manufacturing cost as a
percent of the selling price.
Research and Development. Research and development expenses increased to
$871,000 in 1995 from $555,000 in 1994 (a 57% increase). The increase reflects
increased product development and patent registration costs associated with the
development of the Company's stent technology which was licensed to Boston
Scientific in November 1994. Increased expenses resulted primarily from
increases in personnel, engineering expenses and facilities related costs. The
Company received reimbursement from Boston Scientific for $492,000 and $38,000
of these expenses in 1995 and 1994, respectively, which amounts are included in
revenues.
General and Administrative. General and administrative expenses increased to
$871,000 in 1995 from $770,000 in 1994 (a 13% increase). The increase is
primarily due to the expansion of the Company's infrastructure necessary to
support the growth of the Company and increases in product development
activities. Increased expenses consisted primarily of increases in personnel
and related costs and consulting expenses.
Selling and Marketing. Selling and marketing expenses decreased to $169,000 in
1995 from $182,000 in 1994 (a 7% decrease). Selling and marketing expenses in
1995 and 1994 are entirely related to the Company's vena cava filter.
Interest Income (Expense), Net. Interest expense, net decreased to $29,000 in
1995 from $39,000 in 1994 (a 26% decrease). The decrease reflects the repayment
of subordinated debt to stockholders. Interest income in 1995 and 1994 was not
significant.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Revenues. Revenues increased to $2.6 million in 1994 from $2.0 million in 1993
(a 30% increase). Product sales decreased to $1.8 million in 1994 from $2.0
million in 1993 (a 10% decrease). The decrease in product sales was due
primarily to a decrease in the sales price of such filters received by the
Company, as a result of the distribution agreement with Bard Radiology, offset
in part by increased unit sales. In 1992 the Company entered into its exclusive
distribution agreement with Bard Radiology, pursuant to which it receives a
specified percentage of the average selling price of the vena cava filter. This
percentage decreased in August 1993 from its introductory level and then again
in October 1994, to its current level under the agreement. The Company does not
anticipate any additional reductions under the terms of the agreement in the
near future. License fees were $773,000 in 1994. The Company had no license fee
revenue in 1993. License fees represent initial license fees received from
Boston Scientific upon entering into the license agreement in November 1994.
Product development revenues were $38,000 in 1994. The increase reflects
development efforts funded by Boston Scientific under the agreement entered
into in November 1994.
18
<PAGE>
Cost of Product Sales. Cost of product sales increased to $812,000 in 1994,
from $655,000 in 1993 (a 24% increase). The increase in cost of product sales
reflects the increase in vena cava filter units sold. Cost of product sales, as
a percent of product sales, increased to 44% in 1994 as compared to 33% in 1993
primarily due to the impact of the contractual reduction in the unit selling
price of vena cava filters.
Research and Development. Research and development expenses increased to
$555,000 in 1994 from $272,000 in 1993 (a 104% increase). The increase reflects
increased product development and patent registration costs associated with the
development of the Company's stent technology which was licensed to Boston
Scientific in November 1994. Increased expenses consisted primarily of
increases in personnel, engineering expenses and facilities related costs. The
Company received reimbursement from Boston Scientific for $38,000 of these
expenses in 1994, which amount is included in revenues.
General and Administrative. General and administrative expenses increased to
$770,000 in 1994 from $468,000 in 1993 (a 65% increase). The increase is
primarily due to the expansion of the Company's infrastructure necessary to
support the growth of the Company and increases in product development
activities. Increased expenses consisted primarily of increases in personnel
and related costs and consulting expenses.
Selling and Marketing. Selling and marketing expenses decreased to $182,000 in
1994 from $285,000 in 1993 (a 36% decrease). Selling and marketing expenses in
1994 and 1993 are primarily related to the Company's vena cava filter. The
decrease reflects the Company's decision in 1993 to discontinue selling the
filter through independent distributors and begin distributing exclusively
through Bard.
Interest Income (Expense), Net. Interest expense, net decreased to $39,000 in
1994 from $62,000 in 1993 (a 37% decrease). The decrease in 1994 reflects the
repayment of a portion of the subordinated debt due to stockholders. Interest
income in 1994 and 1993 was not significant.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations primarily through cash flows from
operations of $525,000, $1.2 million and $647,000 in the years ended December
31, 1995, 1994 and 1993, respectively. In the three months ended March 31,
1996, operations utilized cash of $882,000 of which part was used to fund a
portion of the acquisition of the septal repair device technology and for
working capital. Cash flows from operations include $500,000 of upfront license
fees and a $100,000 advance product development billing received from Boston
Scientific in 1994 and recorded as deferred revenue. In February 1996, the
Company received approximately $7.5 million in net proceeds from the sale of
3,787,104 shares of Convertible Preferred Stock, which funds were used in part
to accelerate its facilities and infrastructure expansion. In the year ended
December 31, 1994 and the three months ended March 31, 1996, the Company made
distributions to its stockholders of $500,000 and $100,000, respectively. In
1994, the Company began repaying a $1.5 million loan received in 1992 from
Bard. Loan payments are based upon the number of domestic vena cava units sold
to Bard Radiology. The loan is expected to be fully repaid by the end of 1996.
Payments during 1994, 1995 and the three months ended March 31, 1996 amounted
to $242,000, $477,000 and $160,000, respectively. In addition, during the years
ended December 31, 1993, 1994 and 1995 the Company repaid subordinated debt to
its stockholders amounting to $184,000, $329,000 and $2,500, respectively. The
balance outstanding as of March 31, 1996 of $309,000 was repaid in April 1996.
Purchases of property and equipment for use in its research and development and
general and administrative activities amounted to $336,000 during the three
years ended December 31, 1995 and $44,000 during the three months ended March
31, 1996. In May 1996, the Company entered into a lease for a new manufacturing
research and administrative facility which is expected to increase its annual
facility lease payments by approximately $400,000 beginning in the third
quarter of 1996. The Company anticipates incurring costs during 1996 and 1997
for leasehold improvements for its new facility of approximately $1.4 million,
net of the landlord's contribution, and for purchases of equipment and
furniture of approximately $1.5 million. The Company has received a $1.5
million firm commitment for financing substantially all of the equipment and
furniture. The Company anticipates incurring additional leasehold improvements
and purchases of equipment and furniture.
The Company is party to various other substantial contractual arrangements
including salaries and fees for current employees and consultants which are
likely to increase as additional agreements are entered into and additional
19
<PAGE>
personnel are retained. The Company has also committed to purchase certain
minimum quantities of the vena cava filter from a supplier through June 2001.
See Note 8(a) of Notes to the Consolidated Financial Statements. All of these
arrangements require cash payments by the Company over varying periods of time.
Certain of these arrangements are cancelable on short notice and certain
require termination or severance payments as part of any early termination.
The Company believes that the anticipated net proceeds of the Offering, its
existing resources and cash flow from current operations will be sufficient to
fund its current level of operations and planned new product development,
including increased working capital requirements and capital expenditures, for
the foreseeable future. The Company expects to accelerate its product
development, marketing and other activities with the proceeds of the Offering.
The Company has incurred an operating loss of $1.1 million for the three months
ended March 31, 1996, primarily as a result of a charge of $1.1 million for
acquired in-process research and development. See Note 3 of Notes to the
Consolidated Financial Statements. The Company expects operating losses to
continue at least through early 1997 as it continues to expend substantial
resources to complete development of the Company's products, seek regulatory
clearances or approvals, build its marketing, sales and manufacturing
organizations and conduct further research and development.
The Company may require funds in addition to the net proceeds of the Offering
for its research and product development programs, preclinical and clinical
testing, operating expenses, regulatory processes, manufacturing and marketing
programs and potential licenses and acquisitions. Any additional equity
financing may be dilutive to stockholders, and debt financing, if available,
may involve restrictive covenants. The Company's capital requirements will
depend on numerous factors, including the sales of its products, the progress
of its research and development programs, the progress of preclinical and
clinical testing, the time and cost involved in obtaining regulatory approvals,
the cost of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights, competing technological and market
developments, developments and changes in the Company's existing research,
licensing and other relationships and terms of any collaborative, licensing and
other arrangements that the Company may establish.
SECOND QUARTER RESULTS
The following is based on preliminary data relating to the three months ended
June 30, 1996 and is subject to revision. The Company estimates that (i) total
revenues increased to approximately $1.3 million from $867,000 (a 50%
increase), (ii) revenues from product sales increased to approximately $1.1
million from $719,000, (iii) license fees increased to approximately $188,000
from $0 and (iv) product development revenues decreased to approximately
$14,000 from $65,000, in each case, for the three months ended June 30, 1996
from the three months ended June 30, 1995. The Company estimates that (i) cost
of product sales increased to approximately $547,000 for the three months ended
June 30, 1996 from $298,000 for the three months ended June 30, 1995 (an 84%
increase) and (ii) research and development, general and administrative and
selling and marketing expenses increased in total to approximately $1.2 million
for the three months ended June 30, 1996 from $383,000 for the three months
ended June 30, 1995 (a 213% increase). The increases associated with the cost
of product sales, research and development, general and administrative and
selling and marketing expenses reflect the continued impact of the factors
discussed in "--Results of Operations--Three months ended March 31, 1996
compared with three months ended March 31, 1995." The Company estimates that
net loss for the three months ended June 30, 1996 was approximately $(312,000)
compared to net income of $178,000 for the three months ended June 30, 1995.
20
<PAGE>
BUSINESS
OVERVIEW
The Company designs, develops, and markets innovative medical devices that
utilize advanced materials and are delivered by minimally invasive procedures.
The Company's products offer alternative approaches to complex medical
treatments, thereby reducing patient trauma, shortening procedure,
hospitalization and recovery times, and lowering overall treatment costs. The
Company's patented medical devices include self-expanding stents, vena cava
filters (the Simon Nitinol Filter) and septal repair devices (the CardioSeal
Septal Occluder). The Company's strategy is to develop and commercialize a
broad range of advanced medical devices for minimally invasive applications to
address unmet medical needs. At this time, the Company's stents are in European
clinical trials for certain indications, its vena cava filters are marketed in
the United States and abroad, and the Company is completing development of its
septal repair device.
The Company has established arrangements with Boston Scientific and Bard,
worldwide leaders in sales of minimally invasive medical devices, for the
distribution, sale and marketing of its stents and its Simon Nitinol Filter,
respectively. The Company intends to continue to market products with extensive
distribution requirements through collaborations with established market
leaders. NMT intends to develop direct marketing and distribution capabilities
for products with smaller and more easily accessible user groups (such as the
CardioSeal Septal Occluder).
BACKGROUND
The Company was founded in July 1986 to develop and commercialize medical
devices using nitinol. Dr. Morris Simon, the Company's Scientific Director and
co-founder, was one of the first medical researchers to investigate the use of
nitinol for medical device applications. In April 1990, the Company obtained
FDA clearance to market its initial product, the Simon Nitinol Filter, in the
United States. The Company entered into an exclusive distribution agreement
with Bard Radiology for distribution of the SNF in the United States and
certain other countries in May 1992. The Company's primary stent patent was
issued in November 1994 and, during the same month, the Company entered into an
exclusive license agreement with Boston Scientific to further develop,
manufacture, market and distribute NMT's stents worldwide. In November 1995,
the Company expanded its relationship with Bard by granting Bard International
the right to distribute the SNF in most markets outside the United States. In
February 1996, the Company acquired the rights to its CardioSeal Septal
Occluder to complement the Company's core technologies and expand its product
base.
CORE TECHNOLOGIES
NMT has developed an expertise in precisely engineering nitinol and other
advanced materials, such as MP35N, for a variety of innovative medical device
applications. The Company has developed capabilities in advanced device
fabrication, materials characterization, manufacturing and process control and
sophisticated in vitro testing resulting in highly efficient and reliable
manufacturing processes.
Nitinol, a nickel-titanium alloy, has unique superelastic and thermal shape-
memory characteristics. The superelastic characteristics enable a nitinol-based
device to undergo severe deformation without permanent damage to either its
shape or strength. The thermal shape-memory characteristics of nitinol enable a
device which has been radically deformed to return to its intended shape in
response to a small change in temperature. The mechanical properties that can
be engineered into nitinol-based devices permit innovative product designs that
presently would be difficult or impossible to replicate with other materials.
The Company is a leader among medical device companies that utilize both the
superelastic and thermal shape-memory characteristics of nitinol. The Company
has demonstrated its ability to utilize these characteristics to provide for
ease of access and delivery of sophisticated medical devices that transform
into their intended shape once placed into the body. Nitinol is biocompatible
and non-ferromagnetic, thereby allowing the use of magnetic resonance imaging
on patients with nitinol-based device implants.
MP35N is an advanced metal alloy which is biocompatible and resistant to
corrosion and fatigue. The Company has combined the use of MP35N with knitted
polyester in developing the CardioSeal Septal Occluder. Knitted polyester, a
biocompatible fabric that encourages tissue in-growth, has been extensively
used in the vasculature for many years.
21
<PAGE>
STRATEGY
The key elements of the Company's business strategy include:
.Developing a broad range of advanced medical devices for
minimally invasive applications which offer alternative
approaches to existing medical treatments to reduce patient
trauma, procedure, hospitalization and recovery times, and
overall treatment costs.
.Targeting development of products for large, fast growing
market segments with unmet medical needs.
.Focusing development efforts on core technologies which
leverage the Company's expertise in nitinol and other
advanced materials.
.Establishing collaborations with market leaders for the
marketing and distribution of products in larger markets with
more extensive distribution requirements.
.Creating direct marketing and distribution capabilities for
products with smaller and more easily accessible user groups.
.Developing commercial scale manufacturing facilities to become
a fully-integrated medical device company.
.Strengthening the Company's competitive position by
developing, acquiring and licensing technologies and products
that complement its business.
PRODUCTS
Stents
Stents are small tubes that hold open arteries, veins and other passageways in
the body, such as the esophagus and bile duct, that have closed or become
obstructed as a result of disease, trauma, or aging. Stents are placed in the
body using catheter-based delivery systems in minimally invasive procedures.
Once deployed, they exert radial force against the walls of passageways to
enable such passageways to remain open and functional. A number of different
stent designs, materials and delivery systems, with varying characteristics are
currently available. The three most prevalent stent designs are slotted tubes
(a metal tube from which most of the material is removed, resulting in a
lattice-like structure), coiled stents (continuous coiled wire) and wire mesh
stents (knitted metal wire). Most stents are currently manufactured using
stainless steel or similar alloys and are deployed through the expansion of a
balloon on a catheter-based delivery system. After deployment, a second balloon
may be used to further expand the stent. Certain stents, including the
Company's, are self-expanding, thereby eliminating the need for a balloon on
the delivery catheter. The factors influencing the performance of a stent
include ease of deployment, radial strength, flexibility, stability and the
ability to achieve precise placement.
Stents have emerged as one of the fastest growing segments of the medical
device market and are used increasingly as adjuncts or alternatives to a
variety of medical procedures because it is believed that they are beneficial
to overall patient outcome and may, over time, reduce total treatment costs.
Stents are increasingly being used in connection with the treatment of
atherosclerosis, a vascular disease characterized by the deposit of fatty
substances (plaque) in the interior walls of blood vessels. The accumulation of
plaque narrows the blood vessels, thereby reducing blood flow. Accumulation of
atherosclerotic plaque in the vessels of the heart can result in narrowing or
blockage of the arteries that provide blood flow to the heart, causing chest
pain (angina pectoris) and heart attacks. Atherosclerosis in the peripheral
vessels can cause a narrowing or blockage of the vessels that provide blood to
the legs, causing pain and cramps, and possible tissue damage, which in severe
cases can result in amputation. Atherosclerotic plaque in the carotid arteries,
located near the surface of the neck, can cause a narrowing of the vessels that
provide the primary blood flow to the brain, causing dizzy spells, "mini
strokes" known as transient ischemic attacks (TIA's) and strokes.
22
<PAGE>
Balloon dilation (angioplasty) of the coronary and peripheral arteries has
become one of the most common minimally invasive procedures performed
worldwide. The effectiveness of angioplasty has been limited by the relatively
high rate of reclosure of the treated vessels (restenosis) during the first
several months after dilation. Therefore, the use of stents in conjunction with
angioplasty is increasingly becoming an accepted practice to reduce the
incidence of restenosis. Advanced carotid artery disease is currently generally
treated by invasive surgery (endarterectomy). Angioplasty with stenting is
being used on an experimental basis as a minimally invasive alternative to
surgery in the carotid arteries.
Injury, disease, birth defect or trauma can cause a weakening of a section of
an arterial wall that can result in a bulge in the artery called an aneurysm,
which if ruptured can lead to death. One of the most common of these aneurysms
is an abdominal aortic aneurysm ("AAA"). Current treatment of AAA requires
highly invasive surgery. Stent grafts using catheter-based delivery systems are
currently being performed on an experimental basis.
Stents are also being used for palliative treatment of certain cancers. During
the later stages of esophageal cancer, for example, patients often develop a
narrowing of the esophagus due to tumor ingrowth. This narrowing inhibits the
ability to swallow. These strictures are now treated most often with painful
dilations or laser ablation. Pancreatic cancer often results in a narrowing of
the bile duct due to tumor ingrowth. The patient can become jaundiced and
develop fever. Current treatment for tumor ingrowth of the bile duct includes
the use of plastic and self-expanding metal mesh stents.
NMT's Hex-cell Stents. The Company has developed and patented a nitinol stent
which relies on a novel hexagonal cell (hex-cell) design. NMT's stents can be
customized into a variety of sizes, shapes, flexibilities, and radial force
characteristics for use in treating specific indications. The Company utilizes
both the superelastic and thermal shape-memory characteristics of nitinol to
provide for ease of access and delivery of its stents which transform into
their intended shape once placed into the body.
NMT's stents have the following characteristics which the Company believes will
offer patients and physicians advantages over many competing stents and
surgical procedures:
. Self-expanding deployment does not necessitate the use of a
balloon catheter-based delivery system, thereby avoiding
vessel occlusion during stent placement and simplifying the
procedure.
. Controlled, sustained radial force, prevents movement of the
stent after deployment and provides resistance to vessel
spasm.
. Cannot be permanently deformed by compression or trauma to
the stented vessel, thereby avoiding accidental reclosure.
.Radial strength, overall rigidity and shape can be varied for
different medical applications.
. Large expansion ratio (up to 15:1) enables a larger diameter
NMT stent to be delivered by a small diameter catheter,
helping to prevent injury at the access site and to adjacent
vessels and may provide improved access to smaller vessels.
.Minimal length change during deployment aids in precise
placement.
. Easy mating with graft material to enable use in procedures
such as AAA repair and peripheral vascular stent grafting.
Market Opportunity. The stent market has grown from its infancy in 1990 to
estimated worldwide sales of $500 million in 1995 with continued growth
expected. As shown in the following table, the Company estimates that in 1995
there were approximately 1.7 million procedures for medical conditions that
stents have been designed to address. Although stents are not used currently in
most of these cases, the Company believes that stents may be used as an adjunct
or alternative treatment in many of these procedures.
23
<PAGE>
PROCEDURES POTENTIALLY SUITABLE FOR STENTS--1995
-------------------------
<TABLE>
<CAPTION>
UNITED STATES INTERNATIONAL WORLDWIDE
------------- ------------- ---------
<S> <C> <C> <C>
Coronary Angioplasty 450,000 245,000 695,000
Peripheral Vascular Graft Surgery 175,000 145,000 320,000
Peripheral Vascular Angioplasty 140,000 130,000 270,000
Carotid Surgery 100,000 85,000 185,000
Abdominal Aortic Aneurysm Surgery 45,000 45,000 90,000
Biliary 40,000 60,000 100,000
Esophageal 10,000 15,000 25,000
--------- --------- ---------
Total 960,000 725,000 1,685,000
========= ========= =========
</TABLE>
The estimates in the foregoing table are based on available data concerning
procedures performed in the United States. The Company's estimates outside the
United States are based upon its extrapolation of such data.
To date, most stents have been used for the treatment of atherosclerotic plaque
in the coronary arteries. The Company believes that the increase in stent usage
for other procedures and indications has been limited, in part, by the
characteristics of stents currently available. NMT believes that its stents may
offer certain advantages over currently available stents and, in connection
with its collaboration with Boston Scientific, is actively pursuing the
development of its stents in each of the market segments described below. See
"Risk Factors--Limited Commercialization; Uncertainties of Product Development
and Market Acceptance," "--Relationship with Boston Scientific," "--Current
Status" and "--Agreements with Boston Scientific and Bard."
Peripheral Vascular. Existing stents for vascular disease include both balloon-
expandable and self-expanding stents. While stent use is well established in
the larger vessels such as the iliac arteries, currently available stents have
limitations in their use in the smaller, more exposed vessels of the leg due to
difficulty of placement, insufficient radial strength and flexibility and a
higher risk of clot formation.
The Company believes that its stents may offer advantages over currently
available stents in flexibility, radial strength and placement. NMT's stents
have precisely engineered radial strength, cannot be permanently deformed after
deployment, and can be delivered using a small diameter catheter.
Peripheral Vascular Stent Grafts. For many patients who currently undergo
surgical bypass grafting for the treatment of atherosclerosis in the vessels of
the legs, the length of the blockage makes balloon dilation and traditional
stenting difficult or impractical.
The Company believes that its stents may provide for a new minimally invasive
alternative to bypass surgery using long covered stents or multiple stents
joined with graft material (stent grafts) and inserted in the vessel
percutaneously. NMT's stents can be mated easily to graft material, cannot be
deformed by trauma to the stented vessel, can be engineered with precise radial
force to prevent movement and assure hemostasis (absence of blood leakage
around the stent) after deployment. The self-expanding deployment of NMT's
stents may also simplify the delivery mechanics for the physician.
Carotid Arteries. While some stenting of the carotid arteries (located near the
surface of the neck) is being done experimentally, the Company believes that
the characteristics of current stents limit their utility in the carotid
arteries. Balloon expandable stents require occluding blood flow to the brain
during deployment. In addition, balloon expandable stents can be permanently
deformed by compression or trauma to the stented vessel.
The Company believes its stents will not require occluding blood flow to the
brain during deployment and, unlike currently available balloon expandable
stents, cannot be permanently deformed after deployment, thereby preventing
accidental closure of the vessel. In addition, the Company believes that its
stents can be engineered to exert precise radial force to prevent movement, are
designed to conform well to the vessel shape, have minimal length change during
deployment for highly accurate placement, and can be delivered by a small
diameter catheter.
24
<PAGE>
Abdominal Aortic Aneurysm. The Company believes that the use of a covered stent
or stented graft could provide a minimally invasive alternative to surgery in
the treatment of AAA.
The Company believes that its stents may be particularly well suited for AAA
treatment. Specifically, NMT's stents can be mated easily to grafting material
and have sustained radial force to prevent migration and assure hemostasis. In
addition, NMT's stents have a large expansion (up to 15:1) ratio for deployment
of a large diameter stent on a small diameter catheter and are self-expanding
thereby avoiding occlusion of the aorta during deployment and simplifying the
procedure.
Esophageal/Biliary. Existing palliative treatment for esophageal cancer
includes painful dilations. Laser ablation is also utilized, but is a treatment
that requires sophisticated equipment and highly-trained physicians, and often
requires expensive repeat procedures. Existing stents for tumor ingrowth of the
bile duct primarily include plastic and self-expanding wire mesh stents.
Plastic stents can become blocked rather quickly because of their narrow
diameter, and the wire mesh stents, due to their mesh design, may not resist
further tumor growth.
The Company believes that its stents may have advantages for both of these
indications. NMT's stents have a large expansion ratio for delivery of a large
diameter stent on a small diameter catheter and exert sustained radial force
which may resist recoil from continued tumor growth.
Coronary Arteries. Existing stents for coronary disease include balloon-
expandable or self-expanding wire mesh stents.
The Company believes that its stents may have advantages over other stents for
use in coronary arteries. NMT's stents are self-expanding to avoid balloon
occlusion of the vessel during placement, may not require post-deployment
ballooning, and exhibit minimal length change during deployment for highly
accurate placement.
Relationship with Boston Scientific. In November 1994, NMT licensed to Boston
Scientific, a worldwide leader in sales of minimally invasive medical devices,
exclusive worldwide rights to develop, manufacture, market and distribute the
Company's stent technology. Boston Scientific is the leader in the peripheral
angioplasty market, a leader in the vascular graft market and a leader in the
coronary angioplasty market. Under the terms of this agreement, Boston
Scientific funds, and has control over, product development, manufacturing
scale-up, clinical trials, marketing and distribution worldwide and has the
sole right to use the patents and technical information owned by NMT related to
stents. NMT receives a sales royalty, milestone payments, minimum license fees,
manufacturing cost reduction incentives and reimbursement of development costs.
Boston Scientific has assumed responsibility for conducting the necessary
preclinical and clinical studies, obtaining the regulatory approvals it deems
necessary, and manufacturing and marketing NMT's stents worldwide.
Boston Scientific is not prohibited from selling competing stents and has
established a broad-based stent program. In addition to its collaboration with
the Company, Boston Scientific has obtained exclusive worldwide rights to
Medinol, Ltd.'s balloon expandable stent technology and has developed its own
Strecker knitted stent technology and Sabre(TM) self-expanding stent
technology. Boston Scientific launched Medinol's NIR(TM) coronary stent in
Europe in March 1996. In May 1996, Boston Scientific acquired Mintec, Inc., a
privately held company, which develops stent graft technology and has announced
its intention to launch a device for the repair of AAAs in the near future.
The Company believes that its relationship with Boston Scientific, a market
leader which has made a significant commitment to developing stent technology,
will facilitate the development and commercialization of the Company's stents.
The Company and Boston Scientific are currently pursuing projects to develop
the Company's stents for a variety of applications. The markets ultimately
targeted for commercial sales will be determined by Boston Scientific pursuant
to the license agreement. See "Risk Factors--Dependence Upon Collaborators" and
"--Agreements with Boston Scientific and Bard."
Current Status. European clinical trials for the NMT stent in peripheral
vessels have been initiated by Boston Scientific. Boston Scientific has advised
the Company that it intends to begin marketing a line of the Company's
peripheral vascular stents in Europe during 1996 under the name Symphony and
intends to seek FDA approval of an
25
<PAGE>
IDE for peripheral vascular applications in the near future. Boston Scientific
has also initiated European trials of the NMT stent for peripheral vascular
stent grafts. Such trials are intended to demonstrate that a stent graft may
provide for a new minimally invasive alternative to bypass surgery using
multiple NMT stents joined with graft material and inserted in the vessel
percutaneously. See "Risk Factors--Limited Commercialization; Uncertainties of
Product Development and Market Acceptance."
Boston Scientific is completing a scale-up of its stent manufacturing
capabilities in the United States to enable it to manufacture NMT's stents in
quantities to support clinical trials and initial anticipated commercialization
in certain markets. The Company and Boston Scientific continue to work
collaboratively towards the development of NMT's stents for additional
indications and to achieve manufacturing efficiencies.
Competition. Competition in the stent market is intense and is expected to
increase. Most of the stents sold today are balloon expandable and have been
designed primarily for coronary applications. However, the companies listed
below, as well as other companies, may be developing additional stents. Some of
the stents being developed may be more similar to the Company's stents than
those in the market today, although the Company does not know of any competitor
that is developing a stent substantially similar to its product.
Johnson & Johnson Interventional Systems Co., Cook Inc., Guidant
Corporation/ACS, Boston Scientific/Medinol, and Arterial Vascular Engineering,
Inc., among others, currently sell stainless steel, balloon expandable stents
in the United States or internationally.
The following table lists the Company's major competitors who are currently
selling or, to the Company's knowledge, developing self-expanding stents in the
United States or internationally.
<TABLE>
<CAPTION>
----------------------------
MATERIAL DESIGN
COMPANY --------------- ------------
<S> <C> <C>
Pfizer, Inc./Schneider Stainless steel Wire mesh
Medtronic, Inc./Instent Nitinol Coil
Boston Scientific (Strecker) Tantalum Wire mesh
Boston Scientific (Sabre(TM)) Nitinol Slotted tube
Bard/Angiomed Nitinol Slotted tube
</TABLE>
Vena Cava Filters
Vena cava filters are used for the prevention of pulmonary embolism (a blood
clot lodged in the vessels supplying blood to the lungs). These emboli (clots),
which often develop initially in the veins of the legs, can break loose and
travel up the vena cava, through the heart and into the blood vessels of the
lungs, causing acute respiratory and circulation problems. Vena cava filters
are intended to trap these clots before they can reach the lungs. Patients at
high risk for pulmonary embolism include post-operative orthopedic and
neurosurgery patients, cancer patients undergoing surgery and chemotherapy and
severe trauma victims. There are 600,000 incidents of pulmonary embolism
diagnosed in the United States each year with 125,000 to 150,000 deaths per
year. While usually treated initially with anticoagulant drugs, vena cava
filters may be used in cases where drug therapy has failed or is
contraindicated. Factors influencing the performance of vena cava filters
include coverage of the vena cava and the pattern of the filtering method.
Additionally, the variety of entry site options and the size of the delivery
system affects ease of deployment.
Simon Nitinol Filter. The Company has developed a nitinol vena cava filter
which possesses highly efficient clot filtering characteristics. The Company
has engineered both the superelastic and thermal shape-memory characteristics
of nitinol to provide for ease of delivery of a vena cava filter which can be
easily implanted in the patient by a minimally invasive procedure using the
Company's patented catheter-based delivery systems. The Company's vena
26
<PAGE>
cava filter transforms into its intended shape once deployed into the body. The
SNF can be implanted from the veins in the leg or neck, and is the only
currently available vena cava filter which can also be implanted from the veins
in the arm.
NMT believes the Simon Nitinol Filter offers patients and physicians several
advantages over competing vena cava filters, including the following:
.Sophisticated design facilitates accurate deployment and
provides for highly efficient clot filtration.
.Smallest diameter catheter-based delivery system results in
minimal trauma to the access site or to the vessels during
deployment.
.Largest number of delivery options (leg, neck and arm)
provides adaptability to individual patient conditions and
anatomy.
.Device flexibility facilitates easy maneuvering of the device
through tortuous anatomy during deployment to the filter
delivery site.
Market Opportunity. The worldwide sales for vena cava filters were estimated to
be $53 million in 1995. Worldwide sales for vena cava filters has grown at a
rate of 14% annually for the past four years. The United States represents 75%
of current worldwide sales. NMT's vena cava filters currently have an
approximately 11% share of vena cava filter sales in the United States. The
European market is currently small but is expected to grow as clinical data on
the cost effectiveness of vena cava filter use continues to be developed.
Current Status. The Company received FDA 510(k) clearance to market the SNF,
and commenced sales, in April 1990. All 510(k) notifications with respect to
subsequent modifications to the SNF have also been accepted by the FDA. In
November 1995, the Company introduced a simplified, straight line catheter-
based delivery system for its SNF.
New Product Development. The Company is currently developing a retrievable vena
cava filter and a superelastic vena cava filter, discussed below.
Retrievable Vena Cava Filter. Currently available vena cava filters are
permanent implants which can only be removed surgically. Therefore, patients
who are at risk for pulmonary embolism for a defined period of time (post-
operative recovery, recovery from trauma, etc.) and receive a vena cava filter
have the implant in place for life. Although the Company believes that there
are no adverse physical risks to leaving a vena cava filter in place, there is
often a psychological resistance to implantation of a permanent device. As a
result, a vena cava filter is often not used until a patient at risk has
experienced his or her first pulmonary embolism. However, recent controlled
studies conducted by others of the prophylactic use of currently available
permanent vena cava filters in severe trauma patients have demonstrated a
significant reduction in morbidity and mortality in this category of high-risk
patients for pulmonary embolism. The Company believes that the availability of
a retrievable vena cava filter may result in greater prophylactic use, and may
be used in lieu of a permanently implanted device in certain circumstances.
The Company is conducting early design and feasibility work on a retrievable
vena cava filter which can be placed into the body and later removed. Vena cava
filters which remained implanted for six weeks were successfully removed from
sheep in studies conducted by the Company in April 1996. Following additional
laboratory and animal testing, the Company anticipates commencing European
clinical trials during 1997. The Company also anticipates filing an IDE for a
retrievable vena cava filter during 1997 to enable the Company to conduct human
clinical trials in the United States. See "Risk Factors--Limited
Commercialization; Uncertainties of Product Development and Market Acceptance."
Superelastic Vena Cava Filter. Presently, all vena cava filters have the
potential for a filter leg to penetrate the wall of the vena cava into
surrounding organs or structures. Although no significant adverse clinical
consequences have resulted from reported protrusions to date associated with
the Simon Nitinol Filter (nor to the Company's knowledge with respect to any
other vena cava filter), the Company believes that a vena cava filter which
utilizes the superelastic
27
<PAGE>
characteristic of Nitinol to avoid this phenomenon would represent a
technological advance. Furthermore, there can be no assurances that adverse
clinical consequences associated with filter leg penetration will not occur in
the future. See "Risk Factors--Product Liability Risks; Insurance."
The Company is conducting research and development related to a superelastic
vena cava filter. The Company's proposed superelastic vena cava filter would
resemble the current SNF but would incorporate structural changes in the legs
of the device enabling each leg of the filter to exert an evenly measured
degree of controlled outward force against the wall of the vessel regardless of
the diameter of the patient's vena cava. The superelastic vena cava filter
would be designed to enable secure placement, while offering constant radial
leg force and reduced potential for penetration of the wall of the vena cava.
The Company believes that this cannot be achieved presently using traditional
device materials. See "Risk Factors--Limited Commercialization; Uncertainties
of Product Development and Market Acceptance."
Relationship with Bard. The Company entered into an exclusive distribution
agreement in May 1992 with Bard Radiology for distribution of the SNF in the
United States and certain other countries. Sales and market penetration for the
SNF have increased significantly as a result of this agreement. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Beginning November 30, 1995, Bard International was granted the
exclusive right to distribute the SNF in most markets outside the United
States. Although there can be no assurance, NMT believes that international
sales and market share growth will increase substantially as a result. The loss
of either distributor would have a material adverse affect on the Company's
business. See "Risk Factors--Dependence Upon Collaborators."
Each of the distribution agreements is for a five year term. Bard Radiology may
renew, at its option, its agreement thereafter for periods of five years. The
Company's agreement with Bard International renews automatically for successive
one year periods unless terminated by either party. Both distributors are
obligated to make annual minimum purchases and have agreed not to sell
competing vena cava filters during the term of the respective distribution
agreements. Bard Radiology has also agreed not to compete for an additional two
years after its distribution agreement with the Company has terminated. In
addition, the Company has granted Bard Radiology a right of first offer for any
of NMT's new devices which may be marketed to interventional radiologists and
for which NMT desires to enter into an exclusive distributorship within the
United States. See "--Agreements with Boston Scientific and Bard."
Manufacturing. The Company has contracted with Lake Region for the production
of the filter component of the SNF. The Company's agreement with Lake Region
grants Lake Region the right to manufacture at least 75% of the Company's
worldwide requirements of the current filter, for a period of five years until
June 30, 2001. The Company is obligated to order a minimum quantity of the
current filters and pay Lake Region a fixed price per unit. Lake Region has
agreed not to manufacture filters for a third party for a period of two years
after the termination of the agreement. See "Risk Factors--Limited
Manufacturing History; Dependence on Third Parties." The Company currently
purchases the delivery systems for the SNF under purchase orders from third-
party suppliers.
Competition. Boston Scientific, among others, currently competes with the
Company in sales of vena cava filters. Boston Scientific introduced the
Greenfield Filter to the market in the mid-1970's and is still the predominant
leader with approximately 70% of current unit sales of vena cava filters in the
United States. Since the introduction of the Simon Nitinol Filter in 1990, NMT
has achieved the second highest level of sales (approximately 11% of current
unit sales) in the United States due primarily to its distribution agreement
with Bard Radiology and the introduction of a new simplified delivery system.
Other competitors in this market include B. Braun and Cook, Inc.
28
<PAGE>
Septal Repair Devices
The Company has acquired exclusive rights to develop and market a patented
septal repair device, the CardioSeal Septal Occluder, which is designed for the
repair of intracardiac shunts commonly known as "holes in the heart."
Intracardiac shunts are common medical problems, occurring primarily in
children, that result in abnormal blood flow through the chambers of the heart.
The most common defects occur in either the atrial ("ASD") or ventricular
("VSD") septum which divide the left and right pumping chambers of the heart.
Patients with these defects may suffer from poorly oxygenated blood and require
increased cardiac effort to adequately supply blood to the body. This may lead
to congestive heart failure and pulmonary hypertension, resulting in severe
incapacity or even death. The current treatment is open heart surgery. Open-
heart surgery involves opening a patient's chest, cutting through the sternum,
connecting the patient to a heart/lung machine and opening the heart to
surgically repair the hole. Such a procedure is costly and generally requires
up to a week of hospitalization and an extensive recovery period. The
CardioSeal Septal Occluder is designed to be a minimally invasive, less costly
alternative to open heart surgery.
The following three diagrams illustrate normal
cardiac anatomy, a hole in the atrial septum of
the heart (ASD) and a hole in the ventricular
septum of the heart (VSD), respectively.
[GRAPHIC APPEARS HERE]
Another common septal defect is the Patent Foramen Ovale ("PFO"), a transient
hole which may open under straining efforts (coughing, defecating, etc.). PFO
has been implicated as a possible cause of embolic strokes, in which small
blood clots escape through the PFO and travel to the brain. Current treatment
for patients who have experienced embolic strokes is lifelong anticoagulation
therapy, which may result in significant side effects and/or patient
noncompliance with the treatment regimen. Recently, some institutions have
begun advocating open heart surgery to close PFO's to prevent additional
strokes. The Company believes that its septal repair device using a minimally-
invasive delivery system may address the needs of the PFO market.
The diagram below shows a cross-section of the
heart and a transient hole between the left and
right atriums, know as a PFO.
[GRAPHIC APPEARS HERE]
29
<PAGE>
CardioSeal Septal Occluder. The CardioSeal Septal Occluder is a catheter-
delivered cardiac implant designed to close septal defects. The device consists
of eight wire spring arms covered with two pieces of knitted polyester fabric
which form two opposed disk-like occluders each having an umbrella shape. The
framework is made of MP35N, a material chosen because of its superior
characteristics as an implant material (biocompatibility and corrosion and
fatigue resistance). Knitted polyester was chosen because of its extensive use
in the cardiovascular system and its ability to promote normal tissue in-
growth. At the center of the occluders is an inter-connection point which
allows the product to be placed within the septal defect so that one umbrella
is opened on each side of the defect. The product is designed to be
manufactured in five diameter sizes ranging from 17mm to 40mm.
The CardioSeal Septal Occluder is delivered to the site of the defect through a
puncture of the femoral vein in the leg. The device is loaded into a delivery
catheter and moved toward the defect site (top left diagram). At the defect
site, the CardioSeal Septal Occluder is deployed through the defect (top center
diagram) and the first umbrella is opened (top right diagram). The delivery
system is then retracted through the hole so that the first umbrella comes into
contact with the septal wall (bottom left diagram). The delivery system is then
retracted further allowing the second umbrella to open and seal the defect from
both sides (bottom center diagram). Once the position of the CardioSeal Septal
Occluder is confirmed, the physician detaches the delivery system and removes
it from the patient (bottom right diagram).
[GRAPHIC APPEARS HERE]
An earlier version of the septal repair device, named the Clamshell, was
developed by Bard in collaboration with Children's Hospital of Boston. Between
1989 and 1991 Bard sponsored clinical trials of the Clamshell in over 700
patients. In 1991, Bard discovered fractures of the stainless steel framework
of the original septal repair device. Although no significant adverse clinical
consequences were observed as a result of these fractures, Bard suspended its
clinical trials. However, the FDA permitted the continued use of the Clamshell
for patients at high risk for surgery. Redesign efforts were initiated in
collaboration with Dr. James Lock, Chairman of the Cardiology Department at
Children's Hospital in Boston. Extensive engineering redesign and testing,
including the use of MP35N for the framework, resulted in significant
improvements in both the fatigue and corrosion resistance of the device. See
"Risk Factors--Uncertainties of Successful Redesign of the Septal Repair
Device" and "Risk Factors--Product Liability Risks; Insurance."
In 1995, Bard donated the technology and associated assets to Children's
Hospital of Boston which subsequently licensed the technology to InnerVentions.
The Company acquired the rights to develop and commercialize the current septal
repair device in February 1996. In connection with the acquisition, the Company
acquired all of the existing development, manufacturing and testing equipment,
patent licenses, know-how and documentation necessary to manufacture septal
repair devices which had been originally developed by Bard. NMT has hired
certain key personnel who worked on this project at Bard. See "Certain
Transactions."
Market Opportunity. The Company believes the CardioSeal Septal Occluder may be
suitable for approximately 55,000 patients annually with congenital heart
defects and approximately 145,000 adult patients annually with PFOs. Such
estimates are based on industry reports of the total numbers of patients
diagnosed with such conditions and the Company's own analysis of the portions
of such populations for whom its device may be suitable. See "Risk Factors--
Limited Commercialization; Uncertainties of Product Development and Market
Acceptance."
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Current Status. The Company believes that based on clinical usage of the septal
repair device since 1989, clinical utility has been demonstrated. Children's
Hospital of Boston is currently conducting clinical trials of the redesigned
Clamshell device under an IDE granted by the FDA in the second quarter of 1996
to allow for use of the devices in patients with a variety of cardiac
conditions and at high risk for surgery. The devices being tested by Children's
Hospital of Boston were provided by Bard and were not included in the assets
acquired by the Company. The CardioSeal Septal Occluder will be manufactured
based on the same design specifications as the redesigned Clamshell devices
currently being tested by Children's Hospital of Boston.
The Company has tested the CardioSeal Septal Occluder with an extensive series
of pre-clinical tests. Such pre-clinical testing culminated with an accelerated
in vitro life test of 630 million cycles (which equates to 10 years at 120
heartbeats per minute). During such testing, no fractures occurred in the
CardioSeal Septal Occluder even though the stress levels were set to simulate
significantly greater levels of stress observed clinically with the original
Clamshell device. The Company believes that the current CardioSeal Septal
Occluder is now ready to enter clinical trials and intends to commence clinical
trials for the CardioSeal Septal Occluder in Europe in late 1996. In the United
States, the FDA classifies the septal repair device as a Class III medical
device, which requires receipt of pre-market approval prior to marketing. In
May 1996, the Company submitted an IDE to the FDA to pursue a multi-center,
pivotal clinical trial in the United States for ASDs. Extensive pre-clinical
information has already been reviewed by the FDA as part of the approval
process for the institutionally-sponsored IDE by Children's Hospital of Boston.
The Company anticipates initiating its United States clinical trials for ASD in
the fourth quarter of 1996 pending both product availability and FDA approval
of its IDE. There is no assurance that the FDA will approve the IDE nor of the
timing of any such FDA action. See "Risk Factors--Government Regulation;
Product Approvals Uncertain."
Clinical protocol submissions have been made in Canada and Europe to commence
ASD clinical trials. The study protocol will be substantially the same as that
used in the United States. The Company anticipates commencement of these
clinical trials in late 1996 and will pursue clinical studies for the PFO
indication following the successful completion of its ASD trials. There can be
no assurances, however, that the Company's proposed clinical trials will be
successfully completed or that the Company will be able to achieve the
foregoing product development schedule. See "Risk Factors--Government
Regulation; Product Approvals Uncertain."
New Product Development. The Company is currently evaluating design
enhancements to the CardioSeal Septal Occluder as well as alternative designs
for the device. The Company is considering the use of nitinol for the device to
further reduce the size of the delivery system, further simplify the deployment
procedure and potentially broaden the range of therapeutic indications.
Marketing and Sales Strategy. The Company intends to develop its own sales
force to market the CardioSeal Septal Occluder. There are approximately 150 to
200 pediatric interventional cardiologists in the United States who could
potentially implant the device. These specialists practice at an estimated 75
to 100 institutions that provide advanced cardiac care to children. It is
estimated that a similar number of centers would be targeted internationally.
Therefore, the Company believes that the size and scope of the target audience
is manageable with a small, specialized sales and marketing team. The Company's
marketing strategy will require a specific physician training program prior to
selling products into any center. See "Risk Factors-- Limited Manufacturing
History; Dependence on Third Party Manufacturers."
Manufacturing. The Company has signed a lease for, and is in the process of
renovating, an approximately 27,000 square foot facility in Boston,
Massachusetts. A fully integrated GMP and ISO 9000 manufacturing facility will
be included in this space so that the manufacture of the CardioSeal Septal
Occluder can be appropriately controlled. Integral to the facility will be a
Class 10,000 clean room for the final manufacture of the device. See "Risk
Factors--Limited Manufacturing History; Dependence on Third Party
Manufacturers."
Competition. The Company believes that only three companies, Microvena
Corporation, Dr. Osypka GmbH, and Pediatric Cardiology Custom Medical Devices
are actively developing competitive devices and that none of these companies
currently has a product on the market.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company seeks to protect its technology through the use of patents and
trade secrets. The Company is the owner or licensee of eight issued United
States patents, and corresponding foreign patents, relating to its stents, the
SNF, the septal repair device and nitinol radiopaque markers. The Company has
received a notice of allowance from the United States Patent and Trademark
Office on a ninth United States patent application. In addition, the Company
has pending applications for additional patents in the United States and
abroad. The Company's owned United States and
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foreign patents and patent applications cover its stents, methods of
manufacturing its stents, methods and devices for inserting its stents, its SNF
and devices for inserting its SNF. The expiration dates of the Company's
patents relating to its stents range from 2012 to 2013. The patent for its vena
cava filters expires in 2001 and the patent for its radiopaque markers expires
in 2014. In addition, the Company is the exclusive licensee under certain
patents relating to the CardioSeal Septal Occluder and methods for repairing
cardiac and vascular defects. The Company also holds licenses to certain
technology used in the SNF and in nitinol septal repair devices. See "--
Licensed Technology; Royalty Obligations."
There can be no assurance that the Company's pending patent applications in the
United States and abroad will be granted. No assurance can be given that
patents issued to or licensed by or to the Company will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
any competitive advantage. The Company could incur substantial costs in
defending any patent infringement suit or in asserting any patent rights,
including those granted by third parties. Any adverse outcome could subject the
Company to significant liabilities to third parties, require disputed rights to
be licensed from third parties, or require the Company to cease selling its
devices.
The Company also relies on trade secrets and technical know-how in the
development and manufacture of its devices, which it seeks to protect, in part,
through confidentiality agreements with its employees, consultants and other
parties. The Company's agreements with its employees and consultants generally
require such individuals to assign to the Company any inventions conceived or
reduced to practice by them while employed or retained by the Company. There
can be no assurance, however, that these agreements will provide meaningful
protection or adequate remedies for the Company in the event of unauthorized
use, transfer or disclosure of such information or inventions.
The employment agreements between the Company and Mr. Kleshinski, Vice
President of Research and Development, and Mr. Harry, Vice President of
Research Engineering, while requiring that their inventions be assigned to the
Company, provide that the Company is obligated to pay certain royalties to
Messrs. Kleshinski and Harry based on sales or licenses of products where
either Mr. Kleshinski or Dr. Harry, as the case may be, was the sole or joint
inventor.
The Company has seven trademarks, two of which are registered in the United
States Patent and Trademark Office.
LICENSED TECHNOLOGY; ROYALTY OBLIGATIONS
In connection with its septal repair device, the Company has obtained an
exclusive worldwide license from Children's Medical Center Corporation under
United States patents entitled "Occluder and Method for Repair of Cardiac and
Vascular Defects" and "Occluder for Repair of Cardiac and Vascular Defects" and
the respective corresponding foreign patents, patent applications and
associated know-how. The license agreement provides for royalty payments of
five percent based on net sales of the Company's CardioSeal Septal Occluder
until the end of the term of the patents or termination of the agreement. The
patents expire in September 2012 and June 2012, respectively. Pursuant to the
license agreement, the Company is required to achieve certain milestones in
exploiting the patent rights. The Company has achieved all required milestones
to date. If the Company fails to achieve the milestones, Children's Medical
Center Corporation may terminate the license agreement. The Company also has a
royalty-free, worldwide sublicense under the United States patent entitled
"System for the Percutaneous Transluminal Front-End Loading Delivery and
Retrieval of a Prosthetic Occluder" and its corresponding foreign patents and
associated know-how. The sublicense is exclusive in the field of the repair of
atrial septal defects and nonexclusive in certain other fields. The Company has
also obtained an exclusive worldwide license from Lloyd A. Marks, M.D. under
the United States patent entitled "Aperture Occlusion Device". The license
agreement with Dr. Marks provides for royalty payments based on net sales of
nitinol septal repair devices which are covered by the patent until the end of
term of the patent in 2011. Certain minimum royalty payments must be paid
regardless of net sales. Dr. Marks was also issued warrants to purchase 5,263
shares of Common Stock, which warrants are accompanied by certain "piggy-back"
registration rights. See "Description of Capital Stock--Registration Rights."
In connection with the Simon Nitinol Filter, the Company entered into a
Technology Purchase Agreement dated April 14, 1987 with Morris Simon, M.D., the
Company's Scientific Director and co-founder. Pursuant to the agreement, Dr.
Simon assigned all the technology relating to the SNF to the Company in
exchange for certain royalty payments based on net sales of technology invented
by Dr. Simon relating to the SNF, to continue perpetually unless the agreement
is sooner terminated. Dr. Simon agreed not to compete with the Company in the
vena cava filter market during the term of the agreement. In connection with
the agreement, Beth Israel Hospital Association granted the Company an
exclusive worldwide license under U.S. patent entitled "Blood Clot Filter". In
consideration for the license, Dr. Simon assigned a percentage of his royalty
payments from the Company to Beth Israel Hospital Association.
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Pursuant to their respective employment agreements, the Company has agreed to
pay royalties of one to five percent to Messrs. Kleshinski and Harry based on
sales or licenses of products where either Mr. Kleshinski or Dr. Harry, as the
case may be, was the sole or joint inventor. See Note 8 of Notes to the
Consolidated Financial Statements. The Company is not obligated to pay
royalties to Mr. Kleshinski with respect to the Company's stents or vena cava
filters or to Dr. Harry with respect to the Company's devices which were being
sold prior to January 1994 unless Dr. Harry's inventions result in an increased
sales price to the Company. See "Management--Employment Agreements."
AGREEMENTS WITH BOSTON SCIENTIFIC AND BARD
Boston Scientific
In November 1994, NMT entered into an agreement with Boston Scientific,
pertaining to its stent technology. Under the terms of the agreement, NMT
granted to Boston Scientific exclusive worldwide rights to develop,
manufacture, market and distribute products incorporating NMT's stent
technology. Boston Scientific has the right to market and advertise products
based on the Company's stent technology exclusively under its own name and the
Company has no right to any trademarks or tradenames developed by Boston
Scientific. Boston Scientific has exclusive control over, and is responsible
for, funding product development, manufacturing scale-up, clinical trials,
marketing and distribution worldwide. The agreement obligates Boston Scientific
to use diligent efforts in a commercially reasonable manner to develop,
manufacture and market products using NMT's stent technology; however, there
can be no assurance that Boston Scientific will develop the Company's stents
for any particular application. In addition, Boston Scientific is not
prohibited from developing or selling competing stents. See "Risk Factors--
Dependence Upon Collaborators."
Boston Scientific is obligated to pay NMT a percentage of revenue from the sale
of products using NMT's stent technology. If the fees payable are less than
certain minimum levels, Boston Scientific must pay the difference or NMT can
elect to make the license non-exclusive. The license fees may be reduced in the
event a competing stent with a similar design, as defined in the agreement,
acquires a 10% or greater sales share with respect to any particular
application. Boston Scientific is also obligated to make payments upon the
occurrence of certain developmental events and the achievement of certain
manufacturing cost reductions, and reimburse certain development costs.
The term of the agreement is for the longer of 20 years from market launch or
the date on which the last NMT patent relating to stents expires. Boston
Scientific also has the perpetual non-exclusive and royalty-free right to
manufacture, use and sell all products as to which it has previously paid
licensing fees and on products for which all applicable patents have expired or
have been held invalid. Such additional rights granted to Boston Scientific
survive termination of the agreement.
Bard
The Company has entered into strategic distribution agreements with Bard
Radiology (as amended, the "Bard Radiology Agreement") and Bard International
(the "Bard International Agreement") to distribute the SNF in the United States
and certain other countries.
The Bard Radiology Agreement, signed in May 1992 and amended in February 1993
and October 1995, grants Bard Radiology the exclusive right to distribute the
Simon Nitinol Filter, and any changes, improvements or modifications thereto,
in the United States and certain other countries for a five year term renewable
by Bard Radiology for additional five year terms thereafter. The Company also
granted Bard Radiology a right of first offer to obtain exclusive distribution
rights in the United States for any new devices developed by the Company that
may be marketed to interventional radiologists and for which NMT desires to
enter into an exclusive distributorship within the United States. The Company
sells the SNF to Bard Radiology at determined prices and Bard Radiology is
required to purchase certain minimums to maintain its exclusivity. Pursuant to
the Bard Radiology Agreement, Bard Radiology is obligated to provide the
Company with quarterly purchase orders in substantial conformity with its
purchase forecasts submitted to the Company. Bard Radiology has further agreed
not to compete with the Company in the vena cava filter market during the term
of the agreement and for two years after termination. The Company has agreed
not to make or sell any competing device as long as Bard maintains its
exclusivity under the agreement.
The Bard International Agreement, signed in November 1995, grants Bard
International the exclusive right to distribute the Simon Nitinol Filter, and
any changes, improvements or modifications thereto, worldwide (excluding the
United States and certain other countries) for a five year term which is
automatically renewed for successive one year periods unless terminated by
either party. The Company sells the SNF to Bard International at determined
prices and Bard International is required to make certain minimum purchases
which, if not met, could result in termination of the agreement by the Company.
Pursuant to the Bard International Agreement, Bard International is obligated
to
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provide the Company with quarterly purchase orders in substantial conformity
with its forecasts submitted to the Company. Bard International has further
agreed not to compete with the Company in the vena cava filter market during
the term of the Bard International Agreement.
GOVERNMENT REGULATION
The manufacture and sale of medical devices intended for commercial
distribution are subject to extensive governmental regulations in the United
States. Medical devices are regulated in the United States by the FDA under the
FDC Act and generally require pre-market clearance or pre-market approval prior
to commercial distribution. In addition, certain material changes or
modifications to medical devices also are subject to FDA review and clearance
or approval. Pursuant to the FDC Act, the FDA regulates the research, testing,
manufacture, safety, labeling, storage, record keeping, advertising,
distribution and production of medical devices in the United States.
Noncompliance with applicable requirements can result in failure of the
government to grant pre-market clearance or approval for devices, withdrawal of
approvals, total or partial suspension of production, fines, injunctions, civil
penalties, recall or seizure of products, and criminal prosecution. The FDA
also has the authority to request repair, replacement or refund of the cost of
any device manufactured or distributed by the Company.
Medical devices are classified into one of three classes, Class I, II or III,
on the basis of the controls deemed by the FDA to be necessary to reasonably
ensure their safety and effectiveness. Class I devices are subject to general
controls and Class II devices are subject to general and to special controls
(e.g., performance standards, postmarket surveillance, patient registries, and
FDA guidelines). Generally, Class III devices are those that must receive pre-
market approval by the FDA to ensure their safety and effectiveness (e.g.,
life-sustaining, life-supporting and implantable devices, or new devices which
have not been found to be substantially equivalent to legally marketed
devices), and require clinical testing to ensure safety and effectiveness and
FDA approval prior to marketing and distribution. The FDA also has the
authority to require clinical testing of Class I and Class II devices. A PMA
application must be filed if a proposed device is not substantially equivalent
to a legally marketed predicate device or if it is a Class III device for which
the FDA has called for such applications.
If human clinical trials of a device are required and if the device presents a
"significant risk," the manufacturer or distributor of the device is required
to file an IDE application with the FDA prior to commencing human clinical
trials. The IDE application must be supported by data, typically the results of
animal and, possibly, mechanical testing. If the IDE application is approved by
the FDA, human clinical trials may begin at a specific number of
investigational sites with a maximum number of patients, as approved by the
agency. Sponsors of clinical trials are permitted to sell those devices
distributed in the course of the study provided such costs do not exceed
recovery of the costs of manufacture, research, development and handling. The
clinical trials must be conducted under the auspices of an independent
institutional review board ("IRB") established pursuant to FDA regulations. If
one or more IRBs determine that a clinical trial involves a "nonsignificant
risk" device, the sponsor of the study is not required to obtain FDA approval
of an IDE application before beginning the study. However, prior IRB approval
of the study is required and the study must be conducted in compliance with the
applicable FDA regulations, including, but not limited to, FDA's regulations
regarding the protection of human subjects.
Generally, before a new device can be introduced into the market in the United
States, the manufacturer or distributor must obtain FDA clearance of a pre-
market notification ("510(k) notification") submission or approval of a PMA
application. If a medical device manufacturer or distributor can establish that
a device is "substantially equivalent" to a legally marketed Class I or Class
II device, or to a Class III device for which the FDA has not called for PMAs,
the manufacturer or distributor may seek clearance from the FDA to market the
device by filing a 510(k) notification. The 510(k) notification may need to be
supported by appropriate data establishing the claim of substantial equivalence
to the satisfaction of the FDA. The FDA recently has been requiring a more
rigorous demonstration of substantial equivalence.
Following submission of the 510(k) notification, the manufacturer or
distributor may not place the device into commercial distribution until an
order is issued by the FDA. At this time, the FDA typically responds to the
submission of a 510(k) notification within 90 to 200 days, but it may take
longer. An FDA order may declare that the device is substantially equivalent to
a legally marketed device and allow the proposed device to be marketed in the
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United States. The FDA, however, may determine that the proposed device is not
substantially equivalent or require further information, including clinical
data, to make a determination regarding substantial equivalence. Such
determination or request for additional information could delay market
introduction of the product that is the subject of the 510(k) notification.
If a manufacturer or distributor of medical devices cannot establish that a
proposed device is substantially equivalent to a legally marketed device, the
manufacturer or distributor must seek pre-market approval of the proposed
device through submission of a PMA application. A PMA application must be
supported by extensive data, including preclinical and clinical trial data, as
well as extensive literature to prove the safety and effectiveness of the
device. Following receipt of a PMA application, if the FDA determines that the
application is sufficiently complete to permit a substantive review, the agency
will "file" the application. Under the FDC Act, the FDA has 180 days to review
a filed PMA application, although the review of an application more often
occurs over a protracted time period, and generally takes approximately two
years or more from the filing date to complete.
The PMA approval process is expensive, uncertain and lengthy. A number of
devices for which pre-market approval has been sought have never been approved
for marketing. The review time is often significantly extended by the FDA,
which may require more information or clarification of information already
provided in the submission. During the review period, an advisory committee
likely will be convened by the FDA to review and evaluate the application and
provide recommendations to the agency as to whether the device should be
approved. In addition, the FDA will inspect the manufacturing facility to
ensure compliance with the GMP regulations for medical devices prior to
approval of the PMA application. If granted, the approval may include
significant limitations on the indicated uses for which a product may be
marketed.
Certain Class III devices that were on the market before May 28, 1976
("preamendments Class III devices"), and devices that are determined to be
substantially equivalent to them, can be brought to market through the 510(k)
process until the FDA, by regulation, calls for PMA applications for the
devices. Generally, the FDA will not grant 510(k) clearance for such devices
unless the facilities at which they are manufactured successfully undergo an
FDA pre-approval GMP inspection. In addition, the FDC Act requires the FDA
either to down-classify preamendments Class III devices to Class I or Class II,
or to publish a classification regulation retaining the devices in Class III.
Manufacturers of preamendments Class III devices that the FDA retains in Class
III must have PMA applications accepted by the FDA for filing within 90 days
after the publication of a final regulation in which the FDA calls for PMAs. If
the FDA calls for a PMA for preamendments Class III device, a PMA must be
submitted for the device even if the device has already received 510(k) pre-
market clearance; however, if the FDA down-classifies a preamendments Class III
device to Class I or Class II, a PMA application is not required. The FDA's
reclassification determinations are to be based on safety and effectiveness
information that manufacturers of certain preamendments Class III devices are
required to submit to the FDA as set forth in two FDA orders published in
August 1995.
The Company's first product, the SNF, underwent significant clinical
investigation under an IDE and received 510(k) clearance in 1990. Subsequent
improvements and modifications to the SNF have also received 510(k) clearance
from the FDA. The Company currently is preparing a 510(k) submission seeking
clearance for additional modifications. There can be no assurances that future
modifications of the device will obtain clearance. The 510(k) clearances for
the SNF were based on substantial equivalence of the device to other
cardiovascular intravascular filters, which are Class III preamendments
devices. The FDA has characterized cardiovascular intravascular filters as not
likely candidates for down-classification under the reclassification provisions
of the FDC Act pertaining to preamendments Class III devices. Thus, it is
likely that the FDA will call for PMAs for cardiovascular intravascular filters
and that the Company will be required to have a PMA for the SNF accepted for
filing by the FDA within 90 days after the date that the FDA calls for PMAs.
There can be no assurance that the Company will be able to file a PMA within
the prescribed time period or that any data and information submitted in a PMA
will be adequate to support approval of the device. The Company believes it
would be able to file a PMA within a 90 day time frame utilizing its existing
clinical data. If the FDA were to require the Company to conduct a new clinical
study to support the safety and efficacy of the SNF, the preparation of the PMA
would take substantially longer. Failure of the Company to submit a PMA and
have it accepted for filing by the FDA within the required timeframe could
result in the Company being required to cease commercial distribution of the
SNF. Upon timely filing of a PMA, the Company believes, based on FDA's
announced position as to certain other preamendments class III medical devices,
that the FDA would permit
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continued commercial distribution of the SNF during the time necessary to
review the PMA. There can be no assurance, however, that FDA would permit
continued commercial distribution of the SNF pending FDA's review of a PMA for
that device nor can there be any assurance given that the FDA would approve a
PMA submitted for the SNF. Any denial by the FDA of a PMA for the SNF would
result in the Company being required to cease commercial distribution of the
SNF. Any requirement by the agency that the Company cease commercial
distribution of the SNF would have a material adverse effect on the Company's
business, financial condition and results of operations.
In addition, the Company will be required to submit safety and effectiveness
information about the SNF to the FDA by August 14, 1996 in accordance with one
of the August 1995 FDA orders addressing the classification of preamendments
Class III devices. The FDA order prescribes the format and type of information
required to be submitted. The Company is currently in the process of preparing
such information for submission to the FDA; any failure by the Company to
submit safety and effectiveness information about the SNF in accordance with
the order would result in the SNF being deemed misbranded and could result in
FDA enforcement action against the Company.
Boston Scientific is responsible for applying for registrations and regulatory
approvals it deems necessary for NMT's stents. It is believed that each of the
vascular indications for the stent (coronary arteries, carotid arteries,
peripheral vascular, AAA and peripheral vascular stent grafts) will require
separate PMA applications prior to commercialization in the United States.
Boston Scientific has commenced clinical trials in Europe of NMT's stents for
peripheral vascular and peripheral vascular stent grafts applications.
Commencing clinical trials in Europe is a strategy, now commonly used in the
industry, which allows significant information to be gained and may enhance the
ability to develop a United States based protocol of study.
The Company believes, based on competitive product filings, that the non-
vascular stent indications will qualify for the 510(k) notification. These
filings for esophageal and biliary indications will also be the responsibility
of Boston Scientific. There can be no assurance that the FDA will agree that
the non-vascular stent indications may be cleared through the 510(k) process
or, if a 510(k) notification is submitted, that the non-vascular stent will be
deemed substantially equivalent to a legally marketed predicate device. In
addition, there can be no assurance that Boston Scientific will submit
regulatory filings for any particular indications for the stents, or that
Boston Scientific will submit regulatory filings in every country in which the
stents could be marketed. See "Risk Factors--Government Regulation; Product
Approvals Uncertain."
The septal repair device will also be subject to the PMA process in the United
States. NMT submitted an application for an IDE to the FDA in May 1996.
Submission of an IDE does not give assurance that the FDA will approve the IDE
and, if it is approved, there can be no assurance that the FDA will determine
that the data derived from these studies support the safety and efficacy of the
device or warrant the continuation of clinical studies.
There can be no assurance that the Company will be able to obtain necessary
regulatory approvals or clearances for its products on a timely basis or at
all, and delays in receipt of or failure to receive such approvals or
clearances, the loss of previously received approvals or clearances,
limitations on intended use imposed as a condition of such approvals or
clearances, or failure to comply with existing or future regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
Currently, the Company is dependent on third parties to manufacture its
products for use in clinical trials and commercial distribution. These third
parties are required to register with the FDA as medical device manufacturers.
The third party manufacturers are inspected by the FDA for compliance with the
GMP and other applicable regulations. In addition, the third party
manufacturers will be specifically inspected by the FDA before the agency will
approve a PMA application for the Company's products. There can be no assurance
that the third party manufacturers on which the Company depends for the
manufacture of its products will be able to come into compliance with the GMP
regulations at the time of the preapproval inspection or to maintain such
compliance.
The Company currently intends to manufacture its septal repair device. The
Company's manufacturing facilities will be required to be registered with the
FDA and will be subject to the GMP regulations. FDA approval will be required
before the Company could begin commercial distribution of medical devices from
its own manufacturing facilities.
Any products manufactured or distributed by the Company are subject to
continuing regulation by the FDA including record keeping requirements,
reporting of adverse experience with the use of the device, post-market
surveillance,
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post-market registry and other actions deemed necessary by the FDA. The FDA's
regulations require agency approval of a PMA supplement for certain changes if
they affect the safety and effectiveness of the device, including, but not
limited to, new indications for use; labeling changes; the use of a different
facility to manufacture, process, or package the device. For any devices that
are cleared through the 510(k) process, modifications or enhancements that
could significantly affect safety or effectiveness, or constitute a major
change in the intended use of the device, will require new 510(k) submissions.
The Company currently is preparing a 510(k) submission seeking clearance for
additional modifications.
The Company is required to provide information to the FDA on deaths or serious
injuries alleged to have been associated with the use of its medical devices,
as well as product malfunctions that would likely cause or contribute to death
or serious injury if the malfunction were to recur in a similar device marketed
by the manufacturer. In addition, the FDA prohibits an approved device from
being marketed or promoted for unapproved uses. If the FDA believes that a
company is not in compliance with the law, it can initiate proceedings to
detain or seize products, issue a recall, enjoin future violations and assess
civil and criminal penalties against the Company, its officers and its
employees. Failure to comply with applicable regulatory requirements could have
a material adverse effect on the Company's business, financial condition and
results of operation.
The advertising of most FDA-regulated products is subject to both FDA and
Federal Trade Commission jurisdiction. The Company also is subject to
regulation by the Occupational Safety and Health Administration and by other
governmental entities.
Sales of medical device products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country. The
time required to obtain approvals required by foreign countries may be longer
or shorter than that required for FDA approval, and requirements for licensing
may differ from FDA requirements. Failure to comply with foreign regulatory
requirements also could have a material adverse effect on the Company's
business, financial condition and results of operations.
The current regulatory environment in Europe for medical devices differs
significantly from that in the United States. There is currently no universally
accepted definition of a medical device in Europe and there is no common
approach to medical device regulation among the various countries. There are
several different regulatory regimes operating within the different European
countries. Regulatory requirements for medical devices range from no
regulations in some countries to rigorous regulations approaching the
requirements of the FDA's regulations for Class III medical devices. Several
countries require that device safety be demonstrated prior to approval for
commercialization. The regulatory environment in certain European countries is
expected to undergo major changes as a result of the creation of medical device
directives by the European Union.
Regulations regarding the manufacture and sale of the Company's products are
subject to change. The Company cannot predict what impact, if any, such changes
might have on its business, financial condition or results of operations.
The Company plans to implement policies and procedures intended to allow the
Company to receive ISO 9000 certification. ISO 9000 certification is based on
adherence to established standards in the areas of quality assurance and
manufacturing process control. This certification is a significant European
Union sales requirement that will permit the Company or its collaborators to
affix the prescribed "CE" mark to its products. The European Union has
promulgated rules which require that medical products receive a CE mark by mid-
1998 in order to commercially market and sell medical products in the countries
of the European Economic Area. Failure to receive CE mark certification will
prohibit the Company from selling its products in Europe. There can be no
assurance that the Company will be successful in meeting their certification
requirements.
THIRD PARTY REIMBURSEMENT
Health care providers, such as hospitals and physicians, that purchase medical
devices such as stents, generally rely on third party payers, principally
Medicare, Medicaid and private health insurance plans, to reimburse all or part
of the costs and fees associated with the Company's devices. Major third party
payers reimburse inpatient medical treatment, including all operating costs and
all furnished items or services, including devices such as the Company's,
37
<PAGE>
at a prospectively fixed rate based on the DRG that covers such treatment as
established by the federal Health Care Financing Administration. For
interventional procedures, the fixed rate of reimbursement is based on the
procedure or procedures performed and is unrelated to the specific devices used
in that procedure. The amount of profit relating to the procedure may be
reduced by the use of the Company's devices. If a procedure is not covered by a
DRG, certain third party payers may deny reimbursement. Alternatively, a DRG
may be assigned that does not reflect the costs associated with the use of the
Company's devices, resulting in underreimbursement. If, for any reason, the
Company's products were not to be reimbursed by third party payers, the
Company's ability to sell its products may be materially adversely affected.
Mounting concerns about rising health care costs may cause more restrictive
coverage and reimbursement policies to be implemented in the future. Several
states and the federal government are investigating a variety of alternatives
to reform the health care delivery system and further reduce and control health
care spending. These reform efforts include proposals to limit spending on
health care items and services, limit coverage for new technology and limit or
control directly the price health care providers and drug and device
manufacturers may charge for their services and products. The Company believes
that domestic health care providers currently are reimbursed for the cost of
purchasing the Company's SNF. In the international market, reimbursement by
private third party medical insurance providers, including governmental
insurers and providers, varies from country to country. In certain countries,
the Company's ability to achieve significant market penetration may depend upon
the availability of third party governmental reimbursement. The Company's
independent distributors, and the health care providers to whom such
distributors sell, obtain any necessary reimbursement approvals. There can be
no assurance as to either United States or foreign markets that third party
reimbursement and coverage will be available and adequate, that current
reimbursement amounts will not be decreased in the future or that future
legislation, regulation or reimbursement policies of third party payers will
not occur. See "Risk Factors--Uncertain Availability of Third Party
Reimbursement; Possible Health Care Reforms."
EMPLOYEES
As of May 31, 1996, NMT employed 25 full-time and three part-time employees.
Further staff will be added at the completion of the Offering as required by
the demands of the planned manufacturing scale-up for the septal repair device
and other development programs. No employees are covered by collective
bargaining agreements, and the Company believes it maintains good relations
with its employees.
FACILITIES
The Company currently occupies approximately 7,500 square feet of laboratory,
pilot manufacturing and office space in Boston. The Company has entered into a
lease for a new manufacturing, laboratory and administrative facility in Boston
comprising approximately 27,000 square feet which it expects to occupy
commencing in the third quarter of 1996.
LEGAL PROCEEDINGS
The Company has no material pending legal proceedings.
PRODUCT LIABILITY AND INSURANCE
The Company's business involves the risk of product liability claims. The
Company has not experienced any product liability claims to date. Although the
Company maintains product liability insurance with coverage limits of $5
million per occurrence and an annual aggregate maximum of $5 million, there can
be no assurance that product liability claims will not exceed such insurance
coverage limits, which could have a material adverse effect on the Company's
business, financial condition and results of operations, or that such insurance
will be available on commercially reasonably terms or at all. See "Risk
Factors--Product Liability Risks; Insurance."
38
<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to certain
directors, executive officers and other key personnel of the Company:
Directors and Executive Officers
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------------------------------------------
<S> <C> <C>
Thomas M. Tully (1) 50 President, Chief Executive Officer and Director
David A. Chazanovitz 45 President, Septal Repair Division
Theodore I. Pincus 53 Executive Vice President and Chief Financial Officer
C. Leonard Gordon 66 Chairman of the Board
(1)(2)
Morris Simon, M.D. 70 Director and Scientific Director
Michael C. Brooks (2) 51 Director
Robert G. Brown 53 Director
R. John Fletcher 50 Director
(2)(3)
Jeffrey R. Jay, M.D. 37 Director
(1)(3)
- -------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Stock Option Committee
Key Personnel
- -------------------------------------------------------------------------------
<CAPTION>
NAME AGE POSITION
- -------------------------------------------------------------------------------
<S> <C> <C>
Sherrie Coval-Gold- 39 Vice President of Regulatory Affairs
smith
Rudy Davis 44 Vice President of Marketing and Sales,
Septal Repair Division
Jason Harry, Ph.D. 38 Vice President of Research Engineering
Stephen Kleshinski 43 Vice President of Research and Development
Eugene O'Donnell 49 Vice President for Vena Cava Filter Operations
Carol Ryan 33 Vice President of Product Development,
Septal Repair Division
James W. Sheppard 37 Director of Operations, Septal Repair Division
</TABLE>
THOMAS M. TULLY has served as President, Chief Executive Officer and Director
of NMT since January 1996. From June 1995 to January 1996 Mr. Tully served as a
consultant to the Company. From May 1994 to April 1995, Mr. Tully served as
President of the Institute of Molecular Biology and from August 1991 to March
1994, Mr. Tully served as President of Organogenesis, Inc. Prior to that Mr.
Tully served for three years as the President of the Schneider division of
Pfizer, Inc. and spent nine years in various executive positions in consumer
products and medical devices at Johnson & Johnson, Inc. and was the founding
President of Johnson & Johnson Interventional Systems.
DAVID A. CHAZANOVITZ has served as President of NMT's Septal Repair Division
since January 1996. He has over 20 years of experience in the medical products
business. Mr. Chazanovitz served as President and Chief Executive Officer of
InnerVentions from April 1995 until January 1996. Mr. Chazanovitz was employed
by Bard from 1979 to 1995 in various positions including President of the USCI
Angiography Division, Bard Electrophysiology Division and Bard Ventures
Division where he was a founder. During his last two and one-half years at Bard
Mr. Chazanovitz had overall responsibility for the septal defect repair
program.
THEODORE I. PINCUS has served as Chief Financial Officer of the Company, as a
part-time employee since June 1995 and became an Executive Vice President and a
full-time employee in May 1996. From September 1993 to April 1996 he served as
Chief Financial Officer of Immunotherapy, Inc., a privately-held
biopharmaceutical company, and for the
39
<PAGE>
past six years until joining the Company as a full-time employee he has been
President of The Pincus Group, a management consulting firm. From August 1992
to March 1995 he also served as the Chief Financial Officer of Biofield Corp.,
then a privately-held medical device company. Mr. Pincus is a Certified Public
Accountant and from 1985 to 1989 he was a partner at Ernst & Young.
MORRIS SIMON, M.D., a co-founder of NMT, is a Director and Scientific Director
of the Company. Since 1973, Dr. Simon has been a Director of Clinical
Radiology, Department of Radiology, at Beth Israel Hospital, and since 1976, a
Professor of Radiology at Harvard Medical School.
C. LEONARD GORDON, a co-founder of NMT, served as the Company's Chief Executive
Officer and President, from August 1990 to January 1996. Mr. Gordon has served
as a Director of the Company since its inception in 1986 and as Chairman of the
Board of the Company since January 1996. Mr. Gordon has been engaged in venture
capital enterprises for more than 10 years, particularly in the field of new
medical technologies and devices. He was co-founder and Chief Executive Officer
of (i) Oxigene, Inc. a publicly-traded company engaged in the design and
development of drugs and (ii) Biofield Corp., a publicly-traded medical device
company that has developed a breast cancer detection system. Mr. Gordon
presently serves as Chairman of the Board of Biofield Corp. and Chairman of the
Board of Immunotherapy, Inc. Mr. Gordon has practiced law in New York City for
approximately 41 years and is currently of counsel to Gordon Altman Butowsky
Weitzen Shalov & Wein.
MICHAEL C. BROOKS has been a director of the Company since March 1996. Mr.
Brooks was appointed as a Director as a designee selected by the holders of the
Company's Convertible Preferred Stock. He has been a General Partner of J.H.
Whitney & Co., a venture capital partnership, since January 1985 and currently
serves as Managing Partner. Mr. Brooks is also a director of SunGard Data
Systems, Inc., a computer software and services company, DecisionOne Holdings
Corp., a multivendor computer service company, P-Com, Inc., a millimeter wave
wireless system technology company, and several private companies.
ROBERT G. BROWN has been a Director of the Company since 1992. From 1987 to
1992 he served as President and Chief Operating Officer of NMT. Prior to
joining NMT, Mr. Brown spent approximately 15 years in various marketing and
business development positions with the Boston Scientific Corporation.
R. JOHN FLETCHER was elected a Director of the Company in January 1996. Mr.
Fletcher is the founder and Chief Executive Officer of Fletcher Spaght, Inc., a
management consulting company which specializes in strategic development for
health care and high technology businesses. Prior to founding Fletcher Spaght,
Inc. in 1983, he was a senior member of The Boston Consulting Group. Mr.
Fletcher was the Chairman of the Board of InnerVentions from its inception. Mr.
Fletcher is a director of AutoImmune, a biotechnology company developing orally
administered pharmaceutical products and Bachman Information Systems, Inc., a
software development company.
JEFFREY R. JAY, M.D. has been a Director of the Company since March 1996. Dr.
Jay was appointed as a director as a designee selected by the holders of the
Company's Convertible Preferred Stock. Since 1993, he has been a General
Partner of J.H. Whitney & Co. From 1988 to 1993, Dr. Jay was employed by Canaan
Partners, a venture capital firm. Dr. Jay currently is a national advisory
member of the American Medical Association's Physician Capital Source Committee
and is on the Board of CRA Managed Care, Inc., a workers compensation managed
care company, UtiliMed, a diagnostic imaging managed care company, and Advance
ParadigM, Inc., a health benefits manager.
SHERRIE COVAL-GOLDSMITH, Vice President of Regulatory Affairs, joined the
Company in February 1996. From 1995 until January 1996, Ms. Coval-Goldsmith had
been Director of Regulatory Affairs for T-Cell Sciences, Inc. From 1994 until
1995, she had been Director of Regulatory Affairs of Institute of Molecular
Biology, Inc. Prior to that, Ms. Coval-Goldsmith had over 10 years of clinical
research experience, including serving as Manager of Clinical Research and
Regulatory Affairs for the Stryker Biotech Division of Stryker Corp. where she
had responsibility for an advanced implantable device.
RUDY DAVIS joined the Company as its Vice President of Marketing and Sales,
Septal Repair Division in May 1996. During the past 11 years he has held
marketing positions of increasing responsibility with various divisions of
Bard, and is a co-inventor of the original Clamshell device. He is a registered
respiratory therapist with ten years clinical and administrative experience in
the Cardiology Department at the Catherine McAuley Health Center in Ann Arbor,
Michigan.
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<PAGE>
JASON HARRY, PH.D. joined NMT in July 1994 as Director of Engineering and
became Vice President of Research Engineering in January 1996. Dr. Harry has
been involved in biomedical engineering research and development for over 15
years. His fields of interest have included ocular mechanics, orthopaedics,
skeletal muscle biophysics and locomotion, and functional neural stimulation.
He worked for three years as a research engineer in the Orthopaedic
Biomechanics Laboratory of Beth Israel Hospital/Harvard Medical School.
Following his doctoral work at Harvard University, he was a member of the
engineering faculty at Brown University for five years. During that time, he
developed a research program based in part on the use of shape memory alloys in
medical devices, including a miniature neural electrode and a hip joint
prosthesis component.
STEPHEN KLESHINSKI, Vice President of Research and Development, joined NMT in
1987 as the Company's first employee. Mr. Kleshinski has 15 years of medical
experience in academic and commercial settings. From 1980 to 1987 he was
involved in academic medical research at Beth Israel Hospital/Harvard Medical
School. For the last eight years he has been responsible for all technical
aspects of product and process design and development for NMT.
EUGENE O'DONNELL was appointed Vice President for Vena Cava Filter Operations
effective January 1, 1996. Mr. O'Donnell previously served as General Manager
of the Company since November 1992. He joined the Company in 1990 as National
Sales Manager after the SNF became commercially available. Prior to joining
NMT, he spent nine years in a variety of sales and product marketing positions
with Boston Scientific. His experience includes over 19 years in the field of
cardiovascular medical devices.
CAROL RYAN has served as Vice President of Product Development, Septal Repair
Division, since February 1996. She has nine years of medical device engineering
experience with various divisions of Bard including both manufacturing and new
product development. During the past three and one-half years, she has had the
responsibility for management of the technical activities associated with the
re-design effort leading to the current septal repair device.
JAMES W. SHEPPARD joined NMT in March 1996 as Director of Operations, Septal
Repair Division. Mr. Sheppard has fourteen years of increasing responsibility
in medical device manufacturing, twelve of which were at Bard manufacturing
various cardiovascular devices including angiography, critical care and
electrophysiology catheters. While at Bard he established new manufacturing
facilities and organizations. More recently, Mr. Sheppard served as Director of
Manufacturing for Summit Technology, Inc.
COMMITTEES
The Board of Directors has a Compensation Committee which has authority to
review and approve all compensation arrangements, including annual incentive
awards for senior officers of the Company, an Audit Committee which has
authority to recommend annually to the Board of Directors the engagement of the
independent auditors of the Company and review the scope and results of the
audit, the adequacy of the Company's internal accounting controls and the
professional services furnished by the independent auditors and a Stock Option
Committee which administers the Company's stock option plans.
DIRECTORS COMPENSATION
All directors hold their offices until the next stockholders' meeting of the
Company and until their successors are elected and qualified. Directors who do
not otherwise receive compensation from the Company receive $4,000 per year and
all directors receive reimbursement of travel expenses. The Company has entered
into oral arrangements with C. Leonard Gordon, the Company's Chairman of the
Board, and Dr. Morris Simon, the Company's Scientific Director. See "Certain
Transactions."
LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION
The Company's Amended and Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law.
Delaware law provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duties as directors,
except liability for (i) any breach of their duty of loyalty to the corporation
or its stockholders, (ii) acts or omissions not in good faith or which involve
intentional
41
<PAGE>
misconduct or a knowing violation of law, (iii) unlawful payments of dividends
or unlawful stock repurchases or redemptions or (iv) any transaction form which
the director derived an improper personal benefit. Such limitation of liability
does not apply to liabilities arising under the federal securities laws and
does not affect the availability of equitable remedies such as injunctive
relief or rescission. The Company's bylaws provide that the Company shall
indemnify its directors and executive officers and may indemnify its other
officers and employees and other agents to the fullest extent permitted by law.
At present, there is no pending litigation or proceeding involving a director
or officer of the Company in which indemnification is required or permitted and
the Company is not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
EXECUTIVE COMPENSATION
The following table sets forth compensation paid or earned for the fiscal year
ended December 31, 1995 for (i) those persons who served as the Company's Chief
Executive Officer during the year ended December 31, 1995 and (ii) the three
other most highly compensated executive officers of the Company at December 31,
1995 (collectively, the "Named Executive Officers").
1995 SUMMARY COMPENSATION TABLE
----------------------------------
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES
UNDERLYING ALL OTHER
SALARY(1) BONUS(1) OPTIONS(#) COMPENSATION
NAME AND PRINCIPAL POSITION -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Thomas M. Tully $45,000 $15,000 -- --
President and Chief Executive
Officer(2)
David A. Chazanovitz 20,000 -- -- --
President, Septal Repair
Division(3)
Theodore I. Pincus 31,000 10,000 52,630 --
Executive Vice President and
Chief Financial Officer(4)
C. Leonard Gordon 112,500 1,000 302,628 $4,000(7)
Chairman of the Board and Former
Chief Executive Officer(5)(6)
</TABLE>
- -------
(1) All four individuals listed were part-time consultants to the Company in
1995.
(2) The present annual base salary is $175,000.
(3) The present annual base salary is $160,000.
(4) The present annual base salary is $160,000.
(5) The present annual rate of compensation as a consultant to the Company is
$135,000.
(6) Does not include income as an "S" Corporation stockholder.
(7) Director's fees.
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<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning options granted
to the Chief Executive Officer and the Named Executive Officers during the
fiscal year ended December 31, 1995, including information concerning the
potential realizable value of such options.
-----------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------
POTENTIAL
PERCENTAGE REALIZABLE VALUE
OF TOTAL AT ASSUMED ANNUAL
NUMBER OF OPTIONS EXERCISE RATES OF STOCK
SECURITIES GRANTED TO OR BASE PRICE
UNDERLYING INDIVIDUALS PRICE PER APPRECIATION FOR
OPTIONS IN FISCAL SHARE EXPIRATION OPTION TERM
GRANTED YEAR ($/SHARE) DATE 5%($) 10%($)
NAME ---------- ----------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas M. Tully(1) -- -- -- -- -- --
David A. Chazanovitz(2) -- -- -- -- -- --
Theodore I. Pincus(3) 26,315 4.9% $2.15 10/13/02 $ 23,000 $ 53,500
26,315 4.9 2.15 12/21/05 35,500 90,000
C. Leonard Gordon 210,525 39.5 2.15 10/13/02 184,000 429,000
</TABLE>
- -------
(1)In February 1996, options to purchase 263,157 shares of Common Stock at
$2.15 per share were granted and in May 1996 options to purchase 116,433 shares
of Common Stock at $6.95 per share were granted.
(2) In February 1996, options to purchase 118,420 shares of Common Stock at
$2.15 per share were granted.
(3) In April 1996, additional options to purchase 39,473 shares of Common Stock
at $2.15 per share were granted.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning the number and
value of securities underlying exercisable and unexercisable stock options as
of the fiscal year ended December 31, 1995 by the Company's Chief Executive
Officer and the Named Executive Officers. Options for 15,789 shares at $.19 per
share were exercised by the Former Chief Executive Officer in September 1995.
There were no other exercises of stock options during the fiscal year ended
December 31, 1995.
--------------------------------------------------
<TABLE>
<CAPTION>
NUMBER NUMBER OF SECURITIES
OF SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS AT
ON VALUE DECEMBER 31, 1995 DECEMBER 31, 1995(4)
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas M. Tully -- -- -- -- -- --
David A. Chazanovitz -- -- -- -- -- --
Theodore I. Pincus -- -- 1,462(1) 51,168(1) -- --
C. Leonard Gordon 15,789 $30,900 198,828(2) 103,800(3) $103,024 --
</TABLE>
- -------
(1) Exercisable and unexercisable options are at $2.15 per share.
(2)Includes 26,315 options to purchase Common Stock at $.76 per share; 65,788
options to purchase Common Stock at $1.14 per share, and 106,725 options to
purchase Common Stock at $2.15 per share.
(3) All at $2.15 per share.
(4)Value is determined by subtracting the exercise price per share from the es-
timated fair market value at December 31, 1995 ($2.15 per share) as determined
by the Board of Directors, and multiplying by the number of shares subject to
the option.
EMPLOYMENT AGREEMENTS
Effective September 1, 1995, Thomas M. Tully became President and Chief
Executive Officer of the Company pursuant to an employment agreement dated
February 13, 1996. The agreement is for a term of three years, however, if Mr.
Tully is employed by the Company on June 1, 1998, the term will automatically
be extended until August 31,
43
<PAGE>
1999, unless either party gives three months prior written notice. Pursuant to
his agreement, Mr. Tully receives a salary of $175,000 the first year until
August 31, 1996, $200,000 the second year and after September 1, 1997, a salary
of $250,000 per year. Mr. Tully is also eligible to receive bonus payments upon
the achievement by the Company of certain specified goals. In addition, upon
the closing of the acquisition of the septal repair technology, Mr. Tully
received a lump sum payment of $125,000 and non-qualified stock options to
purchase 263,157 shares of the Company's Common Stock, which options are
exercisable at $2.15 per share. Options to purchase 42,631 shares vested upon
execution of the agreement and the remaining options vest at a rate of 3.45%
per month and are accompanied by certain "piggy-back" registration rights. See
"--Options Granted Outside of the Plans" and "Description of Capital Stock--
Registration Rights." The options are exercisable for a period of ten years
after the vesting thereof and become immediately exercisable in the event of a
change of control of the Company. If Mr. Tully's employment is terminated due
to his death or disability, the number of options deemed to be exercisable
shall be an amount equal to the number of options exercisable at the date of
termination multiplied by two and the portion of the options due to become
exercisable on the first day of the month coincident with or next following the
date of termination, prorated for the number of days he was employed during
that month, shall become exercisable and all other unexercisable options shall
expire. Mr. Tully will forfeit all unexercisable options if the Company
terminates him either with or without cause. If the Company terminates Mr.
Tully's employment without cause, the Company will be obligated to continue to
pay his annual salary for a period of one year from termination. Mr. Tully has
agreed not to compete with the Company for a period of one year after he ceases
to be employed with the Company. Mr. Tully has agreed to serve on the Company's
Board of Directors upon request of the Company during the term of his
employment agreement.
Effective January 1, 1996, David A. Chazanovitz became President, Septal Repair
Division pursuant to a three-year employment agreement dated February 13, 1996.
Pursuant to his agreement, Mr. Chazanovitz receives a salary of $160,000 the
first year, $175,000 the second year and $185,000 the third year. Mr.
Chazanovitz is also eligible to receive bonus payments upon the achievement by
the Company of certain specified goals. In connection with his employment, Mr.
Chazanovitz received (i) non-qualified stock options to purchase 92,105 shares
of the Company's Common Stock at an exercise price of $2.15 per share, which
vest at a rate of 2.77% per month and (ii) options to purchase an aggregate of
up to 26,315 shares of the Company's Common Stock at an exercise price of $2.15
per share subject to vesting in the amounts and upon the earlier of (x) the
achievement of certain milestones as described in his employment agreement or
(y) December 31, 2000. See "--Options Granted Outside of the Plans." The
options are exercisable for a period of ten years after the vesting thereof and
become immediately exercisable in the event of a change of control of the
Company. If Mr. Chazanovitz' employment is terminated due to his death or
disability, the portion of the options due to become exercisable on the first
day of the month coincident with or next following the date of termination,
prorated for the number of days he was employed during the month, shall become
exercisable and all other unexercisable options shall expire. Mr. Chazanovitz
will forfeit all unexercisable options if the Company terminates his employment
with or without cause. If the Company terminates Mr. Chazanovitz' employment
without cause, the Company will be obligated to continue to pay his annual
salary for a period of six months from termination. Mr. Chazanovitz has agreed
not to compete with the Company for a period of one year after he ceases to be
employed by the Company.
Effective May 1996, Theodore I. Pincus became Executive Vice President and
Chief Financial Officer pursuant to a three-year employment agreement. Pursuant
to his employment agreement, Mr. Pincus receives a salary of $160,000 the first
year, $175,000 the second year and $185,000 the third year. In addition, Mr.
Pincus receives living expenses of $35,000 the first year and $20,000 the
second year, in lieu of receiving the Company's relocation benefits package.
Mr. Pincus is also eligible to receive bonus payments upon the achievement by
the Company of certain specified goals. In connection with his employment, Mr.
Pincus received non-qualified stock options to purchase 39,473 shares of Common
Stock of the Company at an exercise price of $2.15 per share. The options vest
in equal monthly installments over three years. See "--Options Granted Outside
of the Plans." The options are exercisable for a period of ten years after the
vesting thereof and become immediately exercisable in the event of a change of
control of the Company. If Mr. Pincus' employment is terminated due to his
death or disability, the portion of the options due to become exercisable on
the first day of the month coincident with or next following the date of
termination, prorated for the number of days he was employed during that month,
shall become exercisable and all other unexercisable options shall expire. Mr.
Pincus will forfeit all unexercisable options if the Company terminates his
employment either with or without cause. If the Company terminates Mr. Pincus'
employment without cause, the Company will be
44
<PAGE>
obligated to continue to pay his annual salary for a period of six months after
termination. The Company loaned Mr. Pincus $65,000, which loan will be forgiven
over the next three years; provided, however, that (i) if Mr. Pincus is
terminated for cause (as defined in his employment agreement) the then-
outstanding loan together with interest at prime plus one percent shall become
immediately due and payable, or (ii) if Mr. Pincus is terminated for any other
reason, the then-outstanding loan together with interest at prime plus one
percent shall be payable monthly with a final payment due on April 30, 1999.
Mr. Pincus has agreed not to compete with the Company for a period of one year
after he ceases to be employed by the Company.
The Company has entered into employment agreements with each of Stephen
Kleshinski, Vice President of Research and Development and Jason Harry, Ph.D.,
Vice President of Research Engineering. The employment agreements provide for
terms of five years commencing on June 1, 1993 and for three years commencing
July 1, 1994, respectively. Mr. Kleshinski has agreed for a period of 18 months
following termination of his employment, and Dr. Harry has agreed for a period
of 12 months following termination of his employment, not to compete with the
Company and they each have agreed to assign to the Company any inventions he
may have. The Company is obligated, however, to pay certain royalties to
Messrs. Kleshinski and Harry based on sales or licenses of products where
either Mr. Kleshinski or Dr. Harry, as the case may be, was the sole or joint
inventor. See "Business--Licensed Technology; Royalty Obligations."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1995, Mr. Gordon served as a member
of the Board of Directors of the Company and participated in the deliberations
of the Board of Directors regarding executive compensation during such period,
including deliberations regarding the determination of his own compensation.
With the exception of Mr. Gordon who is a member of the Compensation Committee
of Biofield Corp., no executive officer of the Company serves or served on the
Compensation Committee of another entity and no executive officer of the
Company serves or served as a director of another entity who has or had an
executive officer serving on the Board of Directors of the Company.
STOCK OPTION PLANS
The 1994 Plan
The Nitinol Medical Technologies, Inc. 1994 Stock Option Plan (the "1994 Plan")
provides for the granting of stock options to acquire a maximum of 315,789
shares of Common Stock. As of June 15, 1996, no shares had been issued upon the
exercise of options granted under the 1994 Plan, 300,789 shares were subject to
outstanding options and 15,000 shares remained available for future grant. The
1994 Plan is administered by the Board of Directors; and, unless previously
terminated, shall terminate on May 31, 2004.
Under the 1994 Plan, options may be granted to employees, directors and
consultants, at the discretion of the Board of Directors. Incentive stock
options ("ISOs") may only be granted to individuals who, at the time of the
grant, are employees or directors of the Company. Non-qualified stock options
("NSOs") may be granted to employees, directors or consultants. The exercise
price of ISOs and NSOs shall be established by the Board of Directors, provided
that the exercise price must be at least equal to the fair market value per
share at the date of the grant. However, if ISOs are granted to persons owning,
directly or indirectly, at the time of the option grant, over 10% of the total
combined voting power of all classes of stock of the Company, the 1994 Plan
provides that the exercise price for such ISOs shall not be less than 110% of
fair market value per share at the date of the grant. Each ISO or NSO must
expire within ten years of the date of grant or at such earlier time as the
Board of Directors shall determine. Options are nontransferable, except by will
or the laws of descent and distribution. The amount and exercise price of
options granted under the 1994 Plan may be adjusted, at the discretion of the
Board of Directors, in the event of any change in the Company's capitalization
or in the event of any merger, consolidation or corporate reorganization where
the Company is the surviving corporation.
Any unexercised options held by a grantee whose relationship with the Company
ceases for any reason (other than retirement, death or disability) shall
immediately terminate. Upon cessation of a grantee's relationship with the
Company resulting from retirement, disability or death, the period during which
the grantee may exercise options
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<PAGE>
shall not exceed (i) one year from the date of termination in the case of
death, and (ii) three months from the date of termination in the case of
retirement or disability. However, in no event shall the exercise period extend
beyond the option term. Unexercised options shall terminate upon the
dissolution or liquidation of the Company or in the event of a merger,
consolidation or any corporate reorganization where the Company is not the
surviving corporation.
1996 Plan
The Nitinol Medical Technologies, Inc. 1996 Stock Option Plan (the "1996 Plan")
was adopted by the Board of Directors in June 1996, subject to approval by the
Company's stockholders.
The purpose of the 1996 Plan is to attract and retain key personnel. The 1996
Plan provides for the grant of options to acquire a maximum of 600,000 shares
of the Common Stock. As of the date hereof, no shares are subject to
outstanding options. The 1996 Plan permits the granting of ISOs or NSOs at the
discretion of the administrator of the 1996 Plan (the "Plan Administrator").
The Board of Directors has appointed a Stock Option Committee of the Board as
the Plan Administrator. Subject to the terms of the 1996 Plan, the Plan
Administrator determines the terms and conditions of options granted under the
1996 Plan. Options granted under the 1996 Plan are evidenced by written
agreements which contain such terms, conditions, limitations and restrictions
as the Plan Administrator deems advisable and which are not inconsistent with
the 1996 Plan. ISOs may be granted to individuals who, at the time of grant,
are employees of the Company or its affiliates. NSOs may be granted to
directors, employees, consultants and other agents of the Company or its
affiliates. The 1996 Plan provides that the Plan Administrator must establish
an exercise price for ISOs that is not less than the fair market value per
share of the Common Stock at the date of grant and an exercise price for NSOs
of not less than 85% of such fair market value. Each ISO must expire with ten
years of the date of grant. However, if ISOs are granted to a person owning
more than 10% of the voting stock of the Company, the 1996 Plan provides that
the exercise price may not be less than 110% of the fair market value per share
at the date of grant and that the term of such ISOs may not exceed five years.
The Plan Administrator has the authority to establish vesting periods for
options granted under the 1996 Plan, or to grant options which are fully vested
at the time of grant.
An optionee whose relationship with the Company or any related corporation
ceases for any reason (other than termination for cause, death or total
disability, as such terms are defined in the 1996 Plan) may exercise options in
the three-month period following such cessation (unless such options terminate
or expire sooner by their terms), or in such longer period determined by the
Plan Administrator in the case of NSOs. Unexercised options granted under the
1996 Plan terminate upon a merger (other than a stock merger), reorganization
or liquidation of the Company; however, immediately prior to such a
transaction, optionees may exercise such options without regard to whether the
vesting requirements have been satisfied.
Options granted under the 1996 Plan covert into options to purchase shares of
another corporation involved in a stock merger with the Company, unless the
Company and such other corporation, in their sole discretion, determine that
such options terminate. Such converted options become fully vested without
regard to whether the vesting requirements in the option agreement for such
options have been satisfied, unless the Board of Directors determines
otherwise.
The option exercise price may be paid in full at the time the notice of
exercise of the option is delivered to the Company and must be paid in cash, by
bank certified or cashier's check or by personal check. Options are
nontransferable with certain exceptions. The Board has certain rights to
suspend, amend or terminate the 1996 Plan provided stockholder approval is
obtained.
The 1996 Directors' Stock Plan
The Nitinol Medical Technologies, Inc. 1996 Stock Option Plan for Non-Employee
Directors (the "1996 Directors' Stock Plan") was adopted by the Company's Board
of Directors in June 1996, subject to approval by the Company's stockholders.
The 1996 Directors' Stock Plan is administered by the Company's Board of
Directors. Subject to the provisions of the 1996 Directors' Stock Plan, the
Board has the authority to interpret the plan and apply its provisions and to
adopt, amend or rescind rules, procedures and forms relating to it. The 1996
Directors' Stock Plan provides for the automatic grant of nonstatutory stock
options to purchase shares of Common Stock to directors of the Company who are
not employees of the Company and do not otherwise receive compensation from the
Company.
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<PAGE>
Under the 1996 Directors' Stock Plan, 150,000 shares of Common Stock have been
reserved for issuance of options. If any options granted under the 1996
Directors' Stock Plan shall for any reason expire or be cancelled or otherwise
terminated without having been exercised in full, the shares allocable to the
unexercised portion of such options shall again become available. The 1996
Directors' Stock Plan provides for the automatic grant of options to eligible
directors. Each eligible director serving on the Board on the effective date of
the 1996 Directors' Stock Plan automatically will receive an option to purchase
10,000 shares of Common Stock at the current market price on the date of grant,
subject to vesting in equal monthly installments over a period of three years.
In the future, each nonemployee director who joins the Board will automatically
receive an initial grant of options to purchase 10,000 shares of Common Stock
at an exercise price equal to the fair market value per share at the date of
grant, subject to vesting in equal monthly installments over a three year
period. In each year other than the year in which a director receives an
initial grant of options, such director will automatically receive options to
purchase 2,500 shares of Common Stock which shall become fully-vested six
months after the date of grant.
The term of each option granted under the 1996 Directors' Stock Plan is 10
years. Options granted under the 1996 Directors' Stock Plan must be exercised
prior to the earlier of the scheduled expiration date or the date one year
following the date of termination of service.
The exercise price of each option under the 1996 Directors' Stock Plan must be
equal to the fair market value of the Common Stock subject to the option on the
date of the grant. The exercise price of each option is payable upon exercise
in cash. The 1996 Directors' Stock Plan also permits an optionee to pay the
exercise price of an option by delivery of an irrevocable direction to pledge
the optionee's shares to a securities broker or lender approved by the Company
as security for a loan and to deliver all or part of the loan proceeds to the
Company in payment of all or part of the exercise price and any withholding
taxes. Unless sooner terminated by the Board, the 1996 Directors' Stock Plan
will terminate in June 2006, and no further options may be granted pursuant to
the plan following the termination date.
OPTIONS GRANTED OUTSIDE OF THE PLANS
In addition to the ISOs and NSOs which may be granted under the 1994 Plan, as
at June 15, 1996 the Company has granted options to purchase an aggregate of
1,400,635 shares outside of the 1994 Plan, to certain of its employees,
consultants, executive officers and directors, of which 516,747 are vested and
the remainder of which vest upon the passage of time or the achievement of
certain milestones by the Company. Additionally, the Company has granted
certain "piggy-back" registration rights with respect to the shares underlying
such options. See "Description of Capital Stock--Registration Rights."
401 (K) PROFIT SHARING PLAN & TRUST
In October 1995, the Company adopted a 401 (k) Profit Sharing Plan & Trust (the
"401 (k) Plan"), a tax-qualified plan covering all of its employees who are at
least 21 years of age and have completed three months of service with the
Company. Each employee may elect to reduce his or her current compensation by
up to 15%, subject to the statutory limit (a maximum of $9,500 in 1996) and
have the amount of the reduction contributed to the 401 (k) Plan. The 401 (k)
Plan provides that the Company may, as determined from time to time by the
Board of Directors, provide a matching contribution. In addition, the Company
may contribute an additional amount to the 401 (k) Plan, as determined by the
Board of Directors, which will be allocated based on the proportion of the
employee's compensation for the plan year to the aggregate compensation for the
plan year for all eligible employees. The Company has made no contributions to
date.
All employee contributions to the 401 (k) Plan are fully vested at all times.
Upon termination of employment, a participant may elect a lump sum distribution
or, if his or her total amount in the 401 (k) Plan is greater than $3,500, may
elect to receive benefits as retirement income.
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<PAGE>
CERTAIN TRANSACTIONS
In February 1996, the Company entered into an Agreement and Plan of Merger
pursuant to which InnerVentions, Inc., a wholly-owned subsidiary of Fletcher
Spaght, Inc. and the exclusive licensee of the technology relating to the
CardioSeal Septal Occluder, was merged with and into NMT Heart, Inc., a wholly-
owned subsidiary of the Company. Pursuant to the Agreement and Plan of Merger,
the Company acquired all the existing development, manufacturing and testing
equipment, patent licenses, know-how and documentation relating to the
manufacture of the CardioSeal Septal Occluder, which had been originally
developed by Bard, donated to Children's Hospital of Boston, then licensed to
InnerVentions. In connection with the merger, Fletcher Spaght, Inc. received
514,651 shares of Common Stock of NMT and warrants to purchase 111,818 shares
of Common Stock at an exercise price of $2.15 per share, which shares and
warrants are accompanied by certain "piggy-back" registration rights. See
"Description of Capital Stock--Registration Rights." NMT has also agreed to use
its best efforts to nominate a designee of Fletcher Spaght, Inc. as a director
of NMT. Certain of the Company's existing stockholders have agreed to vote
their shares of Common Stock in favor of such a designee.
In February 1996, the Company sold an aggregate of 3,787,104 shares of
Convertible Preferred Stock for an aggregate purchase price of $8,500,000
pursuant to the Convertible Stock Offering. Upon the completion of the
Offering, the outstanding shares of Convertible Preferred Stock will
automatically be converted into units, consisting of an aggregate of 1,993,212
shares of Common Stock and 37,871 shares of the Company's Redeemable Preferred
Stock. The Redeemable Preferred Stock will be redeemed by the Company upon
completion of the Offering at a redemption price of $4,250,000 plus accrued
dividends of approximately $150,000 thereon. See "Use of Proceeds." In
connection with the Convertible Stock Offering, the Company entered into a
Registration Rights Agreement with the purchasers of the Convertible Preferred
Stock, granting to such purchasers certain demand and "piggy-back"
registrations rights. See "Description of Capital Stock--Registration Rights."
Whitney Equity Partners, L.P. and Boston Scientific purchased 1,829,065 and
117,247 shares (on a common equivalent basis), respectively, in the Convertible
Stock Offering. Michael C. Brooks and Jeffrey R. Jay, M.D., each a Director of
the Company, are each a General Partner of J.H. Whitney & Co., an affiliate of
Whitney Equity Partners L.P.
In connection with the foregoing transactions, in February 1996, the Company
also entered into a Termination Agreement with its existing stockholders
terminating a Stockholders Agreement dated as of April 30, 1987, as amended.
Pursuant to the Termination Agreement, the Company granted certain "piggy-back"
registration rights to existing stockholders. See "Description of Capital
Stock--Registration Rights."
In October 1995, C. Leonard Gordon, the Chairman of the Board of the Company,
received a non-qualified option to purchase 184,210 shares of the Company's
Common Stock at an exercise price of $2.15 per share. Of these options, (i)
105,263 vested immediately, (ii) 39,473 options will vest over three years
commencing with the closing of the acquisition in February 1996 of
InnerVentions; and (iii) 39,473 options will vest over three years commencing
with the closing of the Convertible Stock Offering which occurred in February
1996. In May 1994, in connection with Mr. Gordon's efforts in negotiating the
exclusive license agreement with Boston Scientific relating to the Company's
stent technology, Mr. Gordon received (i) a non-qualified stock option to
purchase 52,631 shares of the Company's Common Stock at an exercise price of
$1.14 to vest one year from the date of issuance, and (ii) $100,000 paid from
5% of payments received by the Company under the exclusive license agreement
with Boston Scientific. Mr. Gordon has entered into an oral arrangement with
the Company whereby Mr. Gordon will provide certain executive services as are
required by the Company and will be compensated for such services rendered in
an amount not to exceed $135,000 per year. The services Mr. Gordon performs for
the Company include serving as Chairman of the Board and consulting upon
various aspects of the Company's business including certain contractual
arrangements. The Company believes the terms of the arrangement are no less
favorable to the Company than terms that it could have obtained from an
unaffiliated third party. See Note 13 of Notes to the Consolidated Financial
Statements.
In April, 1987 the Company entered into a Technology Purchase Agreement with
Morris Simon, M.D. pursuant to which the Company has agreed to pay to Dr. Simon
certain royalty payments based on sales of products using the technology
invented by Dr. Simon relating to the SNF. Dr. Simon assigned a percentage of
his royalty payments to Beth Israel Hospital Association. See "Business--
Licensed Technology; Royalty Obligations." Dr. Simon has entered into an oral
arrangement with the Company whereby Dr. Simon will provide consulting services
as are required by the
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<PAGE>
Company and will be compensated for such services rendered in an amount not to
exceed $100,000 per year. Pursuant to this arrangement, Dr. Simon serves as
Scientific Director and provides related consulting services to the Company.
The Company believes the terms of the arrangement are no less favorable to the
Company than terms that it could have obtained from an unaffiliated third
party. See Note 13 of Notes to the Consolidated Financial Statements.
Pursuant to the Company's employment agreements with Messrs. Kleshinski and
Harry, respectively, the Company has agreed to pay certain royalties to Messrs.
Kleshinski and Harry based on sales or licenses of products where either Mr.
Kleshinski or Dr. Harry, as the case may be, was the sole or joint inventor.
See "Business--Licensed Technology; Royalty Obligations" and Note 8(d) of Notes
to the Consolidated Financial Statements.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of May 31, 1996 and as adjusted to reflect the
sale by the Company of the Common Stock offered hereby, by (i) each executive
officer and Director, (ii) all Directors and executive officers as a group and
(iii) each person or group known to the Company to be the beneficial owner of
more than 5% of the Common Stock.
-------------------------
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)(2)
SHARES
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF OWNED(1) OFFERING OFFERING
BENEFICIAL OWNER (3) ------------ ------------ ------------
<S> <C> <C> <C>
Whitney Equity Partners, L.P. 1,829,065 29.12% 20.36%
c/o J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
C. Leonard Gordon (4) 683,215 10.52% 7.43%
c/o Immunotherapy Inc.
360 Lexington Avenue
New York, NY 10017
Fletcher Spaght, Inc. (5) 626,469 9.80% 6.89%
222 Berkeley Street
Boston, MA 02116-3761
Jack Reinstein (6) 623,744 9.86% 6.91%
7779 Willow Glen Road
Los Angeles, CA 90046
Morris Simon, M.D. (7) 88,815 1.39% *
Michael C. Brooks (8) - - -
c/o J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
Robert G. Brown (9) 94,342 1.50% 1.05%
217 Echo Drive
Jupiter, FL 33458
R. John Fletcher (5) - - -
c/o Fletcher Spaght, Inc.
222 Berkeley Street
Boston, MA 02116-3761
Jeffrey R. Jay, M.D. (10) - - -
c/o J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
David A. Chazanovitz (11) 12,792 * *
Theodore I. Pincus (12) 13,888 * *
Thomas M. Tully (13) 87,121 1.37% *
All directors and executive 1,606,646 23.50% 16.85%
officers of the Company as
a group (9 persons) (14)
</TABLE>
- -------
* Less than one percent.
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<PAGE>
(1) Except as indicated in the footnotes to this table, based on information
provided by such persons, the persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Percentage of ownership before the Offering is based on 6,281,975 shares of
Common Stock outstanding as of May 31, 1996 which includes the shares of Common
Stock to be issued in the Conversion. For each person or group shares of Common
Stock subject to stock options that are exercisable within 60 days of May 31,
1996 are deemed outstanding for computing the percentage of such person or
group.
(3) Except as otherwise indicated, the address of each beneficial owner is c/o
Nitinol Medical Technologies, Inc., 263 Summer Street, Boston, MA 02210.
(4) Mr. Gordon's shares are all owned jointly with his wife. Includes 122,806
options to purchase Common Stock at $2.15 per share; 65,789 options to purchase
Common Stock at $1.14 per share, and 26,315 options to purchase Common Stock at
$.76 per share. Mr. Gordon disclaims beneficial ownership in an aggregate of
237,870 shares owned by, or in trust for, his children and grandchildren.
(5) An aggregate of 514,651 shares and 111,818 warrants to purchase Common
Stock at $2.15 per share are held by Fletcher Spaght, Inc., of which Mr.
Fletcher is the founder, Chief Executive Officer and a principal stockholder.
Includes 28,489 warrants to purchase Common Stock at $2.15 per share which may
be transferred to Mr. Chazanovitz under certain conditions pursuant to an
agreement between Mr. Chazanovitz and Fletcher Spaght, Inc. Mr. Fletcher is a
director of NMT.
(6) Includes 6,578 options to purchase Common Stock at $2.15 per share; 13,157
options to purchase Common Stock at $1.14 per share, and 26,315 options to
purchase Common Stock at $.76 per share and 104,008 shares owned by Synergistic
Associates, Inc. Money Purchase Pension Plan of which Mr. Reinstein is sole
trustee. Mr. Reinstein disclaims beneficial ownership of 190,315 shares owned
by his children.
(7) Includes 9,868 options to purchase Common Stock at $2.15 per share; 52,631
options to purchase Common Stock at $1.14 per share, and 26,315 options to
purchase Common Stock at $.76 per share. Dr. Simon disclaims beneficial
ownership of 655,324 shares owned by his wife and children.
(8) Mr. Brooks is a General Partner of J.H. Whitney & Co., an affiliate of
Whitney Equity Partners, L.P. Mr. Brooks disclaims beneficial ownership of the
shares held by Whitney Equity Partners, L.P., except to the extent of his
proportionate interest.
(9) Includes 11,184 options to purchase Common Stock at $2.15 per share and
13,157 options at $1.14 per share.
(10) Dr. Jay is a General Partner of J.H. Whitney & Co., an affiliate of
Whitney Equity Partners, L.P. Dr. Jay disclaims beneficial ownership of the
shares held by Whitney Equity Partners, L.P., except to the extent of his
proportionate interest.
(11) Represents 12,792 options to purchase Common Stock at $2.15 per share.
Does not include 28,489 warrants to purchase Common Stock at $2.15 per share
which may be transferred to Mr. Chazanovitz under certain conditions pursuant
to an agreement between Mr. Chazanovitz and Fletcher Spaght, Inc.
(12) Represents 13,888 options to purchase Common Stock at $2.15 per share.
(13) Represents 80,653 options to purchase Common Stock at $2.15 per share and
6,468 options to purchase Common Stock at $6.95 per share.
(14) Includes 6,468 options to purchase Common Stock at $6.95 per share;
363,012 options to purchase Common Stock at $2.15 per share; 131,578 options to
purchase Common Stock at $1.14 per share and 52,631 options to purchase Common
Stock at $.76 per share.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares of
Common Stock, $.001 par value, 3,800,000 shares of Convertible Preferred Stock,
$.001 par value, 38,000 Redeemable Preferred Stock, $.001 par value and
3,000,000 shares of Preferred Stock, $.001 par value.
COMMON STOCK
As of June 15, 1996, there were 6,285,922 shares of Common Stock outstanding
and held of record by approximately 74 stockholders. There will be 8,985,922
shares of Common Stock outstanding after giving effect to the sale of the
shares of Common Stock offered hereby.
Holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of the stockholders, and stockholders have
no right to cumulate their votes in the election of directors. Subject to
preferences that may be applicable to any outstanding shares of preferred
stock, holders of Common Stock are entitled to receive ratably such dividends
as may be declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and liquidation preferences of any
outstanding shares of preferred stock. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are, and all shares of
Common Stock to be outstanding upon completion of the Offering will be, fully
paid and nonassessable.
PREFERRED STOCK
Upon the closing of the Offering, all outstanding shares of Convertible
Preferred Stock of the Company will convert automatically into shares of Common
Stock and Redeemable Preferred Stock, which shall be redeemed with a portion of
the net proceeds of the Offering. See "Use of Proceeds." Accordingly, no shares
of preferred stock will be outstanding immediately after the closing of the
Offering. The Board of Directors has the authority, without further action by
the stockholders, to issue shares 3,000,000 of preferred stock in one or more
series and to fix the designations, powers (including voting powers, if any)
preferences and relative participating, optional, conversion and other special
rights, and the qualifications, limitations and restrictions to each series.
This provision may be deemed to have a potential anti-takeover effect and the
issuance of preferred stock in accordance with such provision may delay or
prevent a change of control of the Company. In addition, although it presently
has no intention to do so, the Board of Directors, without stockholder
approval, could issue preferred stock with voting and conversion rights which
could adversely affect the voting power of the holders of Common Stock.
REGISTRATION RIGHTS
In connection with the Convertible Stock Offering, the purchasers of the
Convertible Preferred Stock were granted certain registration rights which
pertain to the shares of Common Stock to be issued upon the Conversion. At any
time after six months following the closing of the Offering, the Company is
obligated to effect three demand registrations (subject to certain limitations)
at the Company's expense upon the request of holders owning 25% or more of the
aggregate number of shares of Common Stock into which shares of Convertible
Preferred Stock have been converted. In addition, the Convertible Preferred
Stock purchasers were granted "piggy-back" registration rights immediately
(subject to certain limitations) at the Company's expense, as part of a
registration of the Company's securities for its own account or the account of
others. In addition, Junewicz & Co., Inc. and Furman Selz LLC, in connection
with the Convertible Stock offering, were issued warrants as ("Private
Placement Agent Warrants") to purchase 99,660 and 64,779 shares of Common
Stock, respectively. The Private Placement Agent Warrants grant the holders
thereof "piggy-back" registration rights as part of a registration of the
Company's securities for its own account or the account of others which are
exercisable at any time after the closing of the Offering. The holders of the
Private Placement Agent Warrants have agreed not to dispose of such warrants
for a period of 180 days after the date of this Prospectus.
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<PAGE>
Furthermore, whenever the Company proposes to register any of its securities
under the Securities Act, either for its own account or the account of others,
the Company is required each such time to notify Thomas M. Tully, the Company's
President and Chief Executive Officer, Fletcher Spaght, Inc. and Lloyd A.
Marks, M.D. and to include, at their request, therein their shares and shares
transferred by them to and for the benefit of their family members or
affiliates. The Company is required to bear the expenses of such "piggy-back"
registration rights. Such rights are subject to the right of the underwriter(s)
of the Offering to limit the number of shares being registered and other terms
and conditions. The Company has also granted similar "piggy-back" registration
rights to certain of its existing stockholders in consideration for their
agreement to terminate their Shareholders Agreement with the Company.
The existence of the registration rights described above may involve added
costs and complexity in the event the Company desires to register shares of
Common Stock in the future and could have an adverse effect on the market price
of Common Stock.
No shares of Common Stock are being registered on behalf of the Company's
securityholders in connection with the Offering.
LIMITATIONS ON LIABILITY OF OFFICERS AND DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws provide broadly for indemnification of the officers and
directors of the Company. In addition, the Amended and Restated Certificate of
Incorporation provides that, to the fullest extent permitted by Delaware law,
no director shall be personally liable to the Company or its stockholders for
monetary damages for any breach of fiduciary duty by such director in his
capacity as a director.
DELAWARE ANTI-TAKEOVER STATUTE
The Company is subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date that the person became
an interested stockholder unless (with certain exceptions) the business
combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the stockholder. Generally, an "interested
stockholder" is a person who, together with affiliates and associates, owns or
(within three years prior, did own) 15% or more of the corporation's voting
stock.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer and Trust Company will act as transfer agent and
registrar for the Common Stock.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have a total of 8,985,922
shares of Common Stock outstanding (9,390,922 shares if the Underwriters' over-
allotment option is exercised in full). Of these shares, the 2,700,000 shares
of Common Stock offered hereby (3,105,000 shares if the Underwriters' over-
allotment option is exercised in full) will be freely tradable without
restriction or registration under the Securities Act, by persons other than
affiliates of the Company. The remaining 6,285,922 shares of Common Stock
outstanding are "restricted shares" as that term is defined by Rule 144
promulgated under the Securities Act. Under Rule 144 (and subject to the
conditions thereof) approximately 3,605,691 shares of the restricted shares
will become eligible for sale upon completion of the Offering. The Company's
officers and directors and certain other stockholders of the Company (who in
the aggregate will hold 6,248,499 shares of the restricted securities upon
completion of the Offering) have agreed to enter into lock-up agreements which
provide that they will not directly or indirectly, offer, sell, offer to sell,
grant any option to purchase or otherwise sell or dispose of any shares of
Common Stock or other capital stock of the Company, or any securities
convertible into, exercisable, or exchangeable for, any shares of Common Stock
or other capital stock of the Company without the prior written consent of J.P.
Morgan Securities, Inc. on behalf of the Underwriters, for a period of 180 days
from the date of this Prospectus, subject to certain limited exceptions. See
"Underwriting."
As of June 15, 1996, options to purchase a total of 1,701,424 shares of Common
Stock were outstanding with a weighted average exercise price of $2.51 per
share, of which options to purchase 667,314 shares of Common Stock were
exercisable. In addition, as of such date, an additional 15,000 shares of
Common Stock were available for future option grants under the 1994 Plan. In
June 1996, the Company adopted, subject to stockholder approval, the 1996 Plan
and the 1996 Directors' Stock Plan, which include 600,000 and 150,000 shares
available for future option grants, respectively. No options have been granted
under the 1996 Plan. Upon adoption of the 1996 Directors' Stock Plan, options
to purchase 10,000 shares of Common Stock at the initial public offering price
per share will be granted to four nonemployee directors, subject to stockholder
approval of the plan. As of June 15, 1996, Common Stock purchase warrants to
purchase a total of 281,522 shares of Common Stock were outstanding with a
weighted average price of $3.34 per share. The Company's officers, directors
and certain other stockholders of the Company holding an aggregate of 1,350,587
shares issuable upon the exercise of options and warrants have agreed to enter
into lock-up agreements. Rule 701 under the Securities Act provides that,
beginning 90 days after the date of this Prospectus, shares of Common Stock
acquired on the exercise of outstanding options may be resold subject to
certain provisions of Rule 144. The Company intends to file registration
statements under the Securities Act to register shares of Common Stock included
in its option plans, shares of Common Stock subject to outstanding stock
options granted outside of such plans and shares of Common Stock issuable upon
the exercise of certain warrants. See "Description of Capital Stock--
Registration Rights."
54
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom J.P. Morgan
Securities Inc., CS First Boston Corporation and Jefferies & Company, Inc. are
acting as representatives (the "Representatives"), have severally agreed,
subject to the terms and conditions set forth in the underwriting agreement
among the Company and the Representatives (the "Underwriting Agreement"), to
purchase from the Company, and the Company has agreed to sell to the
Underwriters, the respective number of shares of Common Stock set forth
opposite their names below:
----------
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITERS ----------------
<S> <C>
J.P. Morgan Securities Inc. ...................................
CS First Boston Corporation....................................
Jefferies & Company, Inc. .....................................
---------
Total........................................................ 2,700,000
=========
</TABLE>
The nature of the Underwriters' obligations under the Underwriting Agreement is
such that all of the Common Stock being offered, excluding shares covered by
the over-allotment option granted to the Underwriters, must be purchased if any
are purchased.
The Representatives have advised the Company that the several Underwriters
propose to offer the Common Stock to the public initially at the public
offering price set forth on the cover page of this Prospectus and may offer the
Common Stock to selected dealers at such price less a concession not to exceed
$ per share. The Underwriters may allow, and such dealers may reallow, a
concession to other dealers not in excess of $ per share. After the public
offering of the Common Stock, the public offering price and other selling terms
may be changed by the Representatives.
The Company has granted the Underwriters an option, exercisable within 30 days
after the date of this Prospectus, to purchase up to an additional 405,000
shares of Common Stock from the Company at the same price per share to be paid
by the Underwriters for the other shares offered hereby. If the Underwriters
purchase such additional shares pursuant to the option, each of the
Underwriters will be committed to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may exercise the option only to cover over-allotments, if any,
made in connection with the distribution of Common Stock offered hereby.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price has been determined by negotiations between
the Company and the Representatives. Among the factors considered in
determining the initial offering price include the prevailing market
conditions, the market valuations of certain publicly traded companies, revenue
and earnings of the Company and comparable companies in recent periods,
estimates of the business potential and prospects of the Company, the
experience of the Company's management and the position of the Company in its
industry.
The Representatives have advised the Company that they do not expect sales to
accounts over which they exercise discretionary authority will exceed 5% of the
shares of Common Stock offered hereby.
The Company and its directors and executive officers and certain stockholders
have agreed not to offer, sell or otherwise dispose of, any Common Stock or any
securities convertible into Common Stock or register for sale under the
Securities Act any Common Stock, for a period of 180 days after the date of
this Prospectus without the prior written consent of J.P. Morgan Securities
Inc., subject to certain limited exceptions. See "Shares Eligible for Future
Sale."
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the Underwriters may be required to make in respect thereof.
55
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Squadron, Ellenoff, Plesent & Sheinfeld, LLP, New York, New
York. The Underwriters have been represented by Cravath, Swaine & Moore, New
York, New York.
EXPERTS
The Consolidated Financial Statements of the Company included in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as stated in their report
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
The statements in the Prospectus under the captions "Risk Factors--Dependence
on Patents and Proprietary Technology," "Business--Patents and Proprietary
Technology," "Business--Licensed Technology; Royalty Obligations" and other
references herein to intellectual property have been reviewed and approved by
Sixbey, Friedman, Leedom & Ferguson, patent counsel for the Company, as experts
on such matters and are included herein in reliance upon that review and
approval.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act with respect to the shares of Common Stock
being offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the shares of Common Stock offered hereby, reference is made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete and,
where such contract or other document is an exhibit to the Registration
Statement, each such statement is qualified in all respects by the provisions
in such exhibit, to which reference is hereby made. Copies of the Registration
Statement may be examined without charge at the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and the
Commission's Regional Offices located at Seven World Trade Center, New York,
New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any portion of the Registration
Statement can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C., 20549, upon payment of certain fees
prescribed by the Commission.
56
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March
31, 1996 (Unaudited) F-3
Consolidated Statements of Operations for the Years Ended December 31,
1993, 1994 and 1995 and for the Three Months Ended March 31, 1995 and
1996 (Unaudited) F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 1993, 1994 and 1995, and for the Three Months Ended
March 31, 1996 (Unaudited) F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1994 and 1995 and for the Three Months Ended March 31, 1995 and
1996 (Unaudited) F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Nitinol Medical Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Nitinol Medical
Technologies, Inc. (a Delaware corporation) and subsidiary as of December 31,
1994 and 1995, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nitinol Medical Technologies,
Inc. and subsidiary as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
March 21, 1996 (except with
respect to the matters dis-
cussed in Note 9, as to
which the date is July 9,
1996)
F-2
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
----------------------------
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 715,400 $ 533,247 $ 6,884,019
Accounts receivable 84,796 323,217 623,256
Inventories 151,114 208,061 220,511
Prepaid expenses 10,814 20,326 48,952
Deferred tax asset -- 143,000 143,000
----------- ----------- -----------
Total current assets 962,124 1,227,851 7,919,738
----------- ----------- -----------
Property and equipment, at cost:
Laboratory and computer equipment 337,135 393,171 735,624
Leasehold improvements 12,987 124,461 124,461
Office furniture and equipment 42,419 76,030 76,696
----------- ----------- -----------
392,541 593,662 936,781
Less--Accumulated depreciation and
amortization 128,388 208,777 236,823
----------- ----------- -----------
264,153 384,885 699,958
----------- ----------- -----------
Other assets 27,008 48,014 21,977
----------- ----------- -----------
$ 1,253,285 $ 1,660,750 $ 8,641,673
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 119,470 $ 498,816 $ 236,367
Accrued expenses 295,506 215,983 300,821
Distribution payable to
stockholders -- 100,000 --
Current portion of subordinated
debt 2,500 309,356 309,356
Current portion of loan from
distributor 477,120 780,830 621,330
Current portion of deferred revenue -- 600,000 527,508
----------- ----------- -----------
Total current liabilities 894,596 2,504,985 1,995,382
----------- ----------- -----------
Loan from distributor, net of current
portion 780,830 -- --
----------- ----------- -----------
Deferred revenue, net of current
portion 600,000 -- --
----------- ----------- -----------
Subordinated debt, net of current
portion 309,356 -- --
----------- ----------- -----------
Commitments and contingencies (Note
8)
Redemption value of preferred stock -- -- 4,250,000
----------- ----------- -----------
Stockholders' equity (deficit):
Preferred stock, $.001 par value--
Authorized--3,000,000 shares
Issued and outstanding--none -- -- --
Convertible preferred stock, $.001
par value--
Authorized--3,800,000 shares
Issued and outstanding--3,787,104
shares at March 31, 1996
(preference in liquidation of
$8,500,000 at March 31, 1996) -- -- 3,787
Common stock, $.001 par value--
Authorized--30,000,000 shares
Issued and outstanding--3,758,322,
3,774,112 and 4,288,763 shares at
December 31, 1994 and 1995 and
March 31, 1996, respectively 3,759 3,775 4,290
Paid-in capital 263,247 266,231 4,627,884
Accumulated deficit (1,598,503) (1,114,241) (2,239,670)
----------- ----------- -----------
Total stockholders' equity
(deficit) (1,331,497) (844,235) 2,396,291
----------- ----------- -----------
$ 1,253,285 $ 1,660,750 $ 8,641,673
=========== =========== ===========
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-3
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
---------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales $2,003,313 $1,836,931 $2,716,022 $ 583,205 $ 859,554
License fees -- 772,500 625,000 -- 437,500
Product development -- 38,051 491,857 121,450 64,816
---------- ---------- ---------- ---------- -----------
2,003,313 2,647,482 3,832,879 704,655 1,361,870
---------- ---------- ---------- ---------- -----------
Expenses:
Cost of product sales 654,944 812,204 1,263,951 235,913 377,578
Research and develop-
ment 272,248 554,530 870,588 157,355 523,146
General and adminis-
trative 467,981 770,175 871,469 148,934 452,263
Selling and marketing 285,272 182,377 169,308 32,489 48,168
In-process research
and development -- -- -- -- 1,111,134
---------- ---------- ---------- ---------- -----------
1,680,445 2,319,286 3,175,316 574,691 2,512,289
---------- ---------- ---------- ---------- -----------
Income (loss) from
operations 322,868 328,196 657,563 129,964 (1,150,419)
---------- ---------- ---------- ---------- -----------
Interest expense (74,339) (52,838) (37,629) (8,005) (17,349)
Interest income 12,144 14,003 8,328 4,405 42,339
---------- ---------- ---------- ---------- -----------
(62,195) (38,835) (29,301) (3,600) 24,990
---------- ---------- ---------- ---------- -----------
Income (loss) before
provision for
income taxes 260,673 289,361 628,262 126,364 (1,125,429)
Provision for income
taxes -- -- 44,000 -- --
---------- ---------- ---------- ---------- -----------
Net income (loss) $ 260,673 $ 289,361 $ 584,262 $ 126,364 $(1,125,429)
========== ========== ========== ========== ===========
Net income (loss) per
common and common
equivalent share $ .04 $ .04 $ .08 $ .02 $ (.17)
========== ========== ========== ========== ===========
Weighted average common
and common equivalent
shares outstanding 6,678,065 6,855,549 6,984,924 6,984,461 6,819,262
========== ========== ========== ========== ===========
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------------------
<TABLE>
<CAPTION>
CONVERTIBLE TOTAL
PREFERRED STOCK COMMON STOCK STOCKHOLDERS'
NUMBER $.001 NUMBER $.001 PAID-IN ACCUMULATED EQUITY
OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL DEFICIT (DEFICIT)
--------- --------- --------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 -- $ -- 3,562,006 $3,562 $ 188,434 $(1,648,537) $(1,456,541)
Exercise of common
stock options -- -- 43,685 44 5,966 -- 6,010
Net income -- -- -- -- -- 260,673 260,673
--------- ------ --------- ------ ---------- ----------- -----------
Balance, December 31,
1993 -- -- 3,605,691 3,606 194,400 (1,387,864) (1,189,858)
Distributions to
stockholders -- -- -- -- -- (500,000) (500,000)
Exercise of common
stock options -- -- 152,631 153 68,847 -- 69,000
Net income -- -- -- -- -- 289,361 289,361
--------- ------ --------- ------ ---------- ----------- -----------
Balance, December 31,
1994 -- -- 3,758,322 3,759 263,247 (1,598,503) (1,331,497)
Exercise of common
stock options -- -- 15,790 16 2,984 -- 3,000
Distributions to
stockholders -- -- -- -- -- (100,000) (100,000)
Net income -- -- -- -- -- 584,262 584,262
--------- ------ --------- ------ ---------- ----------- -----------
Balance, December 31,
1995 -- -- 3,774,112 3,775 266,231 (1,114,241) (844,235)
Issuance of
convertible preferred
stock, net of
issuance costs of
approximately
$989,000 (Unaudited) 3,787,104 3,787 -- -- 3,257,211 -- 3,260,998
Common stock issued in
connection with the
purchase of
technology and other
assets (Unaudited) -- -- 514,651 515 1,104,442 -- 1,104,957
Net loss (Unaudited) -- -- -- -- -- (1,125,429) (1,125,429)
--------- ------ --------- ------ ---------- ----------- -----------
Balance, March 31, 1996
(Unaudited) 3,787,104 $3,787 4,288,763 $4,290 $4,627,884 $(2,239,670) $ 2,396,291
========= ====== ========= ====== ========== =========== ===========
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
1993 1994 1995 1995 1996
---------- ----------- ---------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss) $ 260,673 $ 289,361 $ 584,262 $ 126,364 $(1,125,429)
Adjustments to reconcile
net income (loss) to net
cash provided by (used
in) operating
activities--
Depreciation and
amortization 45,413 55,825 88,895 15,595 28,837
Deferred tax asset -- -- (143,000) -- --
Common stock issued for
in-process research and
development -- -- -- -- 806,174
Changes in assets and
liabilities--
Accounts receivable 328,804 (8,308) (238,421) (76,877) (300,039)
Inventories 154,519 12,386 (56,947) 30,002 (12,450)
Prepaid expenses (4,019) 2,086 (9,512) (3,306) (28,626)
Accounts payable (69,997) 24,171 379,347 41,451 (262,449)
Accrued expenses (67,895) 190,121 (79,523) (155,727) 84,838
Deferred revenue -- 600,000 -- -- (72,492)
---------- ----------- ---------- --------- -----------
Net cash provided by
(used in) operating
activities 647,498 1,165,642 525,101 (22,498) (881,636)
---------- ----------- ---------- --------- -----------
Cash flows from investing
activities:
Purchases of property and
equipment (30,564) (104,049) (201,121) (145,852) (44,336)
(Increase) decrease in
other assets -- 12,100 (29,513) (6,937) 25,246
---------- ----------- ---------- --------- -----------
Net cash used in
investing activities (30,564) (91,949) (230,634) (152,789) (19,090)
---------- ----------- ---------- --------- -----------
Cash flows from financing
activities:
Payments of subordinated
debt (183,858) (329,161) (2,500) (2,500) --
Payments of loan from
distributor -- (242,050) (477,120) (284,820) (159,500)
Proceeds from issuance of
convertible preferred
stock, net -- -- -- -- 7,510,998
Proceeds from issuance of
common stock 6,010 69,000 3,000 -- --
Distributions to
stockholders -- (500,000) -- -- (100,000)
---------- ----------- ---------- --------- -----------
Net cash provided by
(used in) financing
activities (177,848) (1,002,211) (476,620) (287,320) 7,251,498
---------- ----------- ---------- --------- -----------
Net increase (decrease) in
cash and cash equivalents 439,086 71,482 (182,153) (462,607) 6,350,772
Cash and cash equivalents,
beginning of period 204,832 643,918 715,400 715,400 533,247
---------- ----------- ---------- --------- -----------
Cash and cash equivalents,
end of period $ 643,918 $ 715,400 $ 533,247 $ 252,793 $ 6,884,019
========== =========== ========== ========= ===========
Supplemental disclosure of
cash flow information:
Cash paid during the
period for--
Interest $ 78,885 $ 52,838 $ 39,814 $ 10,427 $ 3,582
========== =========== ========== ========= ===========
Taxes $ 3,157 $ 1,862 $ 2,135 $ -- $ --
========== =========== ========== ========= ===========
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
F-6
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS
Nitinol Medical Technologies, Inc. (NMT or the Company) designs, develops
and markets innovative medical devices that utilize advanced materials and
are delivered by minimally invasive procedures. The Company's products are
designed to offer alternative approaches to existing complex treatments,
thereby reducing patient trauma, shortening procedure, hospitalization and
recovery times, and lowering overall treatment costs. The Company's
patented medical devices include self-expanding stents, vena cava filters
and septal repair devices. At this time, the Company's stents are in
European clinical trials for certain indications, its vena cava filters
are marketed in the United States and abroad, and the Company is
completing the development of its septal repair device. The Company is
subject to a number of risks similar to those of other companies in this
stage of development, including uncertainties regarding the development of
commercially viable products, competition from alternative procedures and
larger companies, dependence on key personnel, government regulation and
the ability to obtain adequate financing to fund product development. See
"Risk Factors" on pages 6-12 of this Prospectus.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of
the Company and its wholly owned subsidiary. All intercompany transactions
and balances have been eliminated in consolidation.
(b) Management Estimates
The preparation of accrual based financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimates.
(c) Interim Financial Statements
The accompanying Consolidated Financial Statements as of March 31, 1996
and for the three months ended March 31, 1995 and 1996 are unaudited. In
management's opinion, these unaudited Consolidated Financial Statements
have been prepared on the same basis as the audited Consolidated Financial
Statements and include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the results
for such periods. The unaudited results for the three months ended March
31, 1996 are not necessarily indicative of the results expected for the
fiscal year ending December 31, 1996.
(d) Cash and Cash Equivalents
The Company considers all investments with maturities of 90 days or less
from the date of purchase to be cash equivalents. At March 31, 1996, cash
equivalents consist of money market accounts, commercial paper and short-
term mutual funds that invest in U.S. government obligations. In
accordance with Statement of Financial Accounting Standards (SFAS) No.
115, Accounting for Certain Investments in Debt and Equity Securities, the
Company considers its cash equivalents, which are carried at market and
approximate cost, as available-for-sale.
(e) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
-----------------------
<TABLE>
<CAPTION>
AT DECEMBER 31, MARCH 31,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Components $ 96,817 $178,366 $193,646
Finished goods 54,297 29,695 26,865
-------- -------- --------
$151,114 $208,061 $220,511
======== ======== ========
</TABLE>
Finished goods consist of materials, labor and manufacturing overhead.
F-7
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(f) Financial Instruments
The estimated fair value of the Company's financial instruments, which
include cash and cash equivalents, accounts receivable and debt,
approximates their reported amounts.
(g) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentration of
Credit Risk, requires disclosure of any significant off-balance-sheet and
credit risk concentrations. Financial instruments that subject the Company
to credit risk consist primarily of trade accounts receivable. The Company
utilizes primarily one distributor for the sales of its filter products.
This distributor had amounts due to the Company of approximately $162,000,
$267,000 and $364,000 as of December 31, 1994 and 1995 and March 31, 1996,
respectively. This distributor accounted for 83%, 93%, 95%, 94% and 96% of
product revenues for fiscal 1993, 1994 and 1995 and for the three months
ended March 31, 1995 and 1996, respectively.
(h) Depreciation and Amortization
The Company provides for depreciation and amortization by charges to
operations using the straight-line method, which allocates the cost of
property and equipment over the following estimated useful lives:
---------
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
ASSET CLASSIFICATION -------------
<S> <C>
Laboratory and computer equipment 7 Years
Leasehold improvements Life of Lease
Office furniture and equipment 3-10 Years
</TABLE>
(i) Revenue Recognition
The Company records product sales upon shipment, and license fees and
product development revenue as earned.
The Company expects to recognize $500,000 of license fees, which are
currently recorded as deferred revenue, when the 24-month refund period
expires in November 1996 (see Note 6).
(j) Net Income (Loss) per Common and Common Equivalent Share
Net income (loss) per common and common equivalent share is based on the
weighted-average number of shares of common stock and common stock
equivalents outstanding during the respective periods. All shares of
capital stock, options and warrants issued during the 12 months
immediately preceding the anticipated initial public offering were treated
as if they had been outstanding for all periods, in accordance with the
Securities and Exchange Commission rules and regulations, calculated under
the treasury-stock method and based on the estimated initial public
offering share price appearing on the cover of this Prospectus. Pro forma
net income (loss) per common and common equivalent share has not been
presented as the results are not materially different from historical net
income (loss) per common and common equivalent share.
F-8
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(k) Postretirement Benefits
The Company has no material obligations for postretirement benefits.
(3) PURCHASE OF TECHNOLOGY AND OTHER ASSETS
In February 1996, the Company issued 514,651 shares of its common stock
and warrants to purchase 111,818 shares of common stock at $2.15 per share
for the purchase of certain technology and related fixed assets. The
Company has valued the common stock issued in this transaction at $2.15
per share, which represents the fair value as determined by its Board of
Directors and supported by an appraisal. The Company is required to pay
certain future royalties as defined in the agreement. The acquired
technology relates to a septal repair device for which the Company expects
to conduct human clinical trials. At the time of the acquisition, it was
determined that the commercial feasibility of the purchased technology was
uncertain, and accordingly, the Company charged the amount of the purchase
price allocated to the technology to operations as in-process research and
development. The amount allocated to laboratory and computer equipment
represents the estimated fair value at the date of acquisition. The
aggregate purchase price and acquisition costs incurred of $1,409,917 were
allocated as follows:
-------
<TABLE>
<S> <C>
Laboratory and computer equipment $ 298,783
In-process research and development 1,111,134
----------
$1,409,917
==========
</TABLE>
(4) INCOME TAXES
The Company uses the liability method to account for income taxes in
accordance with SFAS No. 109, Accounting for Income Taxes.
Prior to October 19, 1995, the Company elected to be taxed as an S
corporation for federal and state income tax purposes. Accordingly, the
accompanying Consolidated Financial Statements do not include a provision
for income taxes for 1993, 1994 and the first 10 1/2 months of 1995. The
provision for income taxes in the accompanying consolidated statement of
operations for the period from October 19, 1995 to December 31, 1995
consists of the following:
-----
<TABLE>
<S> <C>
Federal $ --
State 44,000
-------
$44,000
=======
</TABLE>
The accompanying consolidated statements of operations do not contain a
pro forma income tax adjustment for periods prior to the termination of
the S corporation election. If the election to be treated as an
S corporation was not made, the Company would have been subject to federal
and state corporate income taxes. However, the Company would have had
sufficient net operating loss carryforwards to offset income in all
periods presented.
The deferred tax asset of $143,000 at December 31, 1995 and March 31, 1996
relates primarily to deferred revenue, which was included in taxable
income in 1994.
F-9
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(5) LOAN FROM DISTRIBUTOR
The Company has an exclusive distribution agreement with an unrelated
third party to provide for the sale and distribution of the Simon Nitinol
Filter (SNF). In connection with this agreement, the Company received a
loan of $1,500,000 from the distributor in 1992. The agreement calls for
the repayment of this loan by the Company through certain minimum
purchases of the SNF by the distributor, as defined in the agreement. In
the event that the loan is not fully repaid upon expiration or termination
of the agreement, the amount outstanding becomes due and payable in
monthly installments. Based on projected sales levels for 1996, the
Company expects that the amount outstanding under the loan agreement at
December 31, 1995 and March 31, 1996 will be repaid in full in 1996.
Accordingly, the total outstanding amount has been classified as current
in the accompanying consolidated balance sheets as of December 31, 1995
and March 31, 1996.
(6) DEFERRED REVENUE
On November 22, 1994, the Company licensed exclusive, worldwide rights,
including the right to sublicense to others, to develop, produce and
market its stent technology to an unrelated third party (the Licensee). In
connection with the signing of the license agreement, the Company received
$500,000 in consideration for the license granted and an additional
$500,000 upon issuance of the United States patent for a specific stent.
The Company may be required to refund varying amounts of such payments
based on the occurrence of certain events, as defined in the license
agreement. To date, no such event has occurred. The Company deferred
recognition as revenue of amounts that may be subject to refund until the
expiration of the refund period. The final refund period expires in
November 1996. The Company also received $272,500 from the Licensee in
1994 which is nonrefundable and is to be credited against future license
fees payable to the Company, as defined. This amount is included in
license fees in the accompanying consolidated statements of operations in
1994. During 1995 and the three months ended March 31, 1996, the Company
received additional nonrefundable license fees upon the achievement of
certain milestones, as defined in the license agreement.
In 1994, the Company also received a $100,000 advance from the Licensee
under a product development program for the reimbursement of costs the
Company incurred related to the activities of product development,
registration and transfer of technology to the Licensee. For the years
ended December 31, 1994 and 1995 and for the three months ended March 31,
1995 and 1996, the Company received $38,051, $491,857, $121,450 and
$64,816, respectively, of reimbursements for development program costs.
These reimbursed amounts are included in revenues in the accompanying
consolidated statements of operations.
F-10
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(7) DEBT
Subordinated debt consists of the following:
-----------------------
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Subordinated unsecured debt to various
stockholders, principal due in annual
installments of $95,000 through July 1997,
bearing interest at 10% $190,000 $190,000 $190,000
Subordinated unsecured debt to various
stockholders, principal due in annual
installments of $25,000 through July 1997,
bearing interest at 10% 50,000 50,000 50,000
Subordinated unsecured debt to various
stockholders, principal due in annual
installments of $18,750 through July 1998,
bearing interest at 10% 56,250 56,250 56,250
Deferred interest due to various stockholders
and a related party and associated pension
plan, principal due in annual installments
of $6,553 through July 1997, bearing
interest at 10% 13,106 13,106 13,106
Other 2,500 -- --
-------- -------- --------
311,856 309,356 309,356
Less--Current portion 2,500 309,356 309,356
-------- -------- --------
$309,356 $ -- $ --
======== ======== ========
</TABLE>
The Company repaid all outstanding subordinated debt in April 1996. Ac-
cordingly, all subordinated debt has been reflected as current in the ac-
companying consolidated balance sheets as of December 31, 1995 and March
31, 1996.
(8) COMMITMENTS AND CONTINGENCIES
(a) Manufacturing Agreement
The Company contracts with an unrelated third party for the manufacture of
certain products. Under the amended agreement, the Company is required to
purchase minimum unit quantities through June 2001. The aggregate minimum
purchases under the agreement are approximately $2,600,000. In addition,
in the event of an order cancellation or product conversion, the Company
has agreed to purchase all in-process materials and all special materials
purchased by the manufacturer for use in the production of these products,
limited to purchase orders through 180 days after cancellation.
(b) Operating Leases
The Company has entered into operating leases for office and laboratory
space. These leases expire through 2005. The leases for office space
require payment for all related operating expenses of the building,
including real estate taxes and utilities.
F-11
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Future minimum rental payments due under operating lease agreements as of
March 31, 1996 are approximately as follows:
--------
<TABLE>
<CAPTION>
AMOUNT
YEAR ENDED ----------
<S> <C>
1996 $ 318,000
1997 468,000
1998 468,000
1999 468,000
2000 468,000
Thereafter 2,981,000
----------
$5,171,000
==========
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995 and for
the three months ended March 31, 1995 and 1996 amounted to approximately
$87,000, $84,000, $103,000, $26,000 and $42,000, respectively. In
connection with its facility lease, the Company entered into a
construction agreement whereby the Company is required to provide
approximately $900,000, beginning in June 1996, related to improvements of
the facility.
(c) Profit Sharing
Prior to 1995, the Company had entered into a distribution agreement with
a distributor which provided for an annual profit sharing payment (not to
exceed a specified aggregate amount) based on income before provision for
income taxes, as defined in the agreement. In 1995, the Company terminated
this agreement through a payment of $100,000 to the distributor. This
payment was charged to operations and is included in the accompanying
consolidated statements of operations.
(d) Royalties
The Company has entered into various agreements that require payment of
royalties to be paid based on specified percentages of future sales, as
defined (see Notes 3 and 12). In addition, the Company has agreed to pay
royalties to certain employees based on sales or licenses of products
where they were the sole or joint inventor. Future minimum commitments
under these agreements are approximately $15,000 per year. Royalty expense
under royalty agreements was $56,000, $66,000, $64,000, $17,000 and
$24,000 for the years December 31, 1993, 1994, 1995 and for the three
months ended March 31, 1995 and 1996, respectively.
(9) COMMON STOCK
(a) Authorized Common Stock
On July 9, 1996, the Company increased the number of authorized shares of
common stock from 10,000,000 to 30,000,000.
(b) Stock Split
On July 9, 1996, the Company effected a 1-for-1.9 reverse stock split of
its common stock. Accordingly, all share and per share amounts of common
stock have been retroactively restated for all periods presented to
reflect the reverse stock split.
F-12
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(10) PREFERRED STOCK
In February 1996, the Board of Directors authorized 3,800,000 shares of
convertible preferred stock and 38,000 shares of redeemable preferred
stock. The Company then sold 3,787,104 shares of preferred stock at $2.24
per share, resulting in net proceeds to the Company of approximately
$7,500,000. The Company has recorded the redemption value of the
convertible preferred stock outside of stockholder's equity (deficit) as
of March 31, 1996.
On July 9, 1996 the Company authorized 3,000,000 shares of undesignated
preferred stock.
(a) Convertible Preferred Stock
The convertible preferred stockholders maintain the following rights and
privileges.
Voting. The convertible preferred stockholders are entitled to vote
with the common stockholders based on the number of votes that they
would receive upon conversion.
Conversion. The convertible preferred stockholders may convert their
preferred stock at any time. Each share of convertible preferred stock
is convertible into one conversion unit. A conversion unit consists of
(i) 1/1.9 share of common stock, subject to certain antidilution
adjustments and (ii) one one-hundredth share of redeemable preferred
stock. The convertible preferred stock automatically converts into an
equal number of conversion units upon an initial public offering
resulting in gross proceeds to the Company of at least $22,000,000 and
a minimum price of $12.77 per share or a sale of the Company resulting
in gross proceeds to the stockholders of at least $100,000,000.
Liquidation. In the event of liquidation, dissolution or winding up of
the Company, the holders of the convertible preferred stock are
entitled to an amount equal to the greater of (i) the liquidation
preference, $2.24 per share at March 31, 1996, plus any accrued and
unpaid dividends or (ii) the amount the holders of convertible
preferred stock would be entitled to receive if all shares of
convertible preferred stock had been converted immediately prior to any
liquidation, dissolution or winding up.
Dividends. The holders of the convertible preferred stock shall be
entitled to receive dividends if and when declared by the Board of
Directors. Dividends payable on the convertible preferred stock shall
begin to accrue in May 1996 at an annual rate equal to 8% based on the
liquidation preference described above.
(b) Redeemable Preferred Stock
The redeemable preferred stockholders maintain the following rights and
privileges.
Voting. The holders of redeemable preferred stock shall not have any
right to vote unless required by law.
F-13
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Redemption. On the closing of a qualified initial public offering or a
qualified sale transaction, as defined above, each share of redeemable
preferred stock shall automatically be redeemed at a price equal to
$4,250,000 divided by the number of shares of redeemable preferred
stock outstanding, plus (i) all accrued and unpaid dividends and (ii)
any dividend amounts due to the redeemable preferred stockholders.
Liquidation. In the event of liquidation, dissolution or winding up of
the Company, the holders of the redeemable preferred stock shall be
entitled to receive an amount equal to the redemption liquidation
preference plus any accrued and unpaid dividends.
Dividends. The holders of the redeemable preferred stock shall be
entitled to receive dividends if and when declared by the Board of
Directors. Dividends on the redeemable preferred stock shall begin to
accrue from the issuance date of the redeemable preferred stock at an
annual rate equal to 16% based on the redemption liquidation
preference.
(11) STOCK OPTIONS AND WARRANTS
(a) Nonqualified Stock Options
The Company granted nonqualified options to various officers/stockholders
and members of the Board of Directors to purchase shares of common stock
at a given exercise price per share. The options become exercisable in
full or in part at issuance or within one to four years of the date of
issuance. All unexercised grants expire on the earlier of approximately
five to ten years from date of issuance or 90 days after termination of
service as an officer, director, employee and/or consultant.
(b) Stock Option Plans
1994 Stock Option Plan. In May 1994, the Board of Directors approved an
incentive stock option plan (the 1994 Plan), which authorizes the Company
to issue options to purchase up to 315,789 shares of the Company's common
stock under the 1994 Plan. The Company may grant options to officers, key
employees, directors and consultants of the Company at an exercise price
not less than fair market value as determined by the Board of Directors.
There were 39,210 shares available for grant under the 1994 Plan as of
March 31, 1996.
F-14
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
The following table summarizes all stock option activity including grants
outside of the 1994 Plan:
-------------------
<TABLE>
<CAPTION>
NUMBER PRICE PER
OF SHARES SHARE
--------- -----------
<S> <C> <C>
Balance, December 31, 1992 212,105 $ .13-$.57
Granted 78,947 .57
Exercised (43,685) .13
--------- -----------
Balance, December 31, 1993 247,367 .19-.76
Granted 297,368 .76-1.14
Exercised (152,631) .19-.57
--------- -----------
Balance, December 31, 1994 392,104 .19-1.14
Granted 539,473 2.15
Exercised (15,790) .19
--------- -----------
Balance, December 31, 1995 915,787 .76-2.15
Granted 531,845 2.15-3.19
--------- -----------
Balance, March 31, 1996 1,447,632 $ .76-$3.19
========= ===========
Exercisable, March 31, 1996 583,513 $ .76-$2.15
========= ===========
</TABLE>
Subsequent to March 31, 1996, the Company granted options to purchase
257,739 shares of common stock at per share prices ranging from $2.15 to
$6.95, and options to purchase 3,947 shares at $2.15 per share were
exercised.
1996 Stock Option Plan. The Nitinol Medical Technologies, Inc. 1996 Stock
Option Plan (the 1996 Plan) was approved by the Company's stockholders in
July 1996.
The 1996 Plan provides for the grant of options to acquire a maximum of
600,000 shares of the common stock. As of the date hereof, no shares are
subject to outstanding options. The 1996 Plan permits the granting of
incentive stock options or nonstatutory stock options at the discretion of
the administrator of the 1996 Plan (the Plan Administrator). The Board of
Directors has appointed a Stock Option Committee of the Board as the Plan
Administrator. Subject to the terms of the 1996 Plan, the Plan
Administrator determines the terms and conditions of options granted under
the 1996 Plan.
The 1996 Directors Stock Plan. The Nitinol Medical Technologies, Inc. 1996
stock option plan for non-employee directors (the 1996 Directors' Stock
Plan) was approved by the Company's stockholders in July 1996. The 1996
Directors' Stock Plan provides for the automatic grant of nonstatutory
stock options to purchase shares of common stock to directors of the
Company who are not employees of the Company and do not otherwise receive
compensation from the Company.
Under the 1996 Directors' Stock Plan 150,000 shares of common stock have
been reserved for issuance of options. The 1996 Directors' Stock Plan
provides for the automatic grant of options to eligible directors. Each
eligible director serving on the Board on the effective date of the 1996
Directors' Stock Plan automatically received an option to purchase 10,000
shares of common stock at a price equal to the initial public offering
price of this offering, subject to vesting in three equal monthly
installments over a period of
F-15
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
three years. In the future, each nonemployee director who joins the Board
will automatically receive an initial grant of options to purchase 10,000
shares of common stock at an exercise price equal to the fair market value
per share at the date of grant, subject to vesting in equal monthly
installments over a three year period. In each year other than the year in
which a director receives an initial grant of options, such director will
automatically receive options to purchase 2,500 shares of common stock
which shall become fully-vested six months after the date of grant.
(c) Warrants
In connection with the technology purchase discussed in Note 3, the
Company issued warrants to purchase 111,818 shares of common stock at
$2.15 per share. The warrants are fully exercisable and expire ten years
from the date of grant.
In February 1996, the Company issued warrants to purchase 164,440 shares
of common stock at $4.26 per share to placement agents in connection with
a private placement of the Company's convertible preferred stock. In April
1996, the Company issued a warrant to purchase 5,263 shares of common
stock at $.01 per share in connection with a patent license agreement. The
warrants are fully exercisable and expire ten years from the date of
grant.
(12) TECHNOLOGY PURCHASE AGREEMENT
Pursuant to a technology purchase agreement (TPA), the Company purchased
from a stockholder/founder the proprietary rights to the primary patent
for the SNF and related technology. Under the terms of the TPA, the
Company made an initial payment of $15,000 and agreed to pay royalties
based upon various rates of cumulative net sales, as defined, with minimum
royalties payable of $15,000 per year. Royalties are payable over the life
of the primary patent and commenced after FDA approval. The Company has
granted the stockholder/founder a security interest in substantially all
proprietary rights acquired by the Company. In the event of unsecured
defaults, as set forth in the TPA, the Company has agreed to immediately
pay the stockholder/founder damages of $100,000.
(13) RELATED PARTY TRANSACTIONS
Three stockholders of the Company and related entities provide management
consulting services to the Company. Total payments made during the years
ended December 31, 1993, 1994 and 1995 and for the three months ended
March 31, 1995 and 1996 in connection with such services were
approximately $180,000, $210,000, $242,000, $53,000 and $75,000,
respectively.
At December 31, 1994 and 1995 and March 31, 1996, the Company had
subordinated debt and deferred interest outstanding to various
stockholders, a related party and an associated pension plan of $311,856,
$309,356 and $309,356, respectively (see Note 7).
F-16
<PAGE>
Nitinol Medical
- --------------------------------------------------------------------------------
Technologies, Inc.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in
connection with the issuance and distribution of the securities being offered
hereby (items marked with an asterisk (*) represent estimated expenses):
<TABLE>
<S> <C>
SEC Registration Fee ........................................... $ 14,990
Legal Fees and Expenses......................................... 200,000*
Blue Sky Fees (including counsel fees).......................... 15,000*
NASD Filing Fee................................................. 4,847
Nasdaq National Market Fee...................................... 25,000*
Accounting Fees and Expenses.................................... 135,000*
Transfer Agent and Registrar Fees............................... 5,000*
Printing and Engraving Expenses................................. 125,000*
Miscellaneous Expenses.......................................... 175,163*
--------
Total......................................................... $700,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Delaware General Corporation Law, Section 102(b)(7), enables a corporation
in its original certificate of incorporation, or an amendment thereto validly
approved by stockholders, to eliminate or limit personal liability of members
of its Board of Directors for violations of a director's fiduciary duty of
care. However, the elimination or limitation shall not apply where there has
been a breach of the duty of loyalty, failure to act in good faith,
intentional misconduct or a knowing violation of a law, the payment of a
dividend or approval of a stock repurchase which is deemed illegal or an
improper personal benefit is obtained. Articles Eighth, Ninth and Tenth of the
Company's Amended and Restated Certificate of Incorporation includes the
following language:
"EIGHTH. A. Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a director,
officer, employee, or agent of the Corporation or any of its direct or
indirect subsidiaries or is or was serving at the request of the Corporation
as a director, officer, employee, or agent of any other corporation or of a
partnership, joint venture, trust, or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee, or agent or in any other capacity while serving
as a director, officer, employee, or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability, and loss (including
attorneys' fees, judgments, fines, excise or other taxes assessed with respect
to an employee benefit plan, penalties, and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in connection therewith,
and such indemnification shall continue as to an indemnitee who has ceased to
be a director, officer, employee, or agent and shall inure to the benefit of
the indemnitee's heirs, executors, and administrators; provided, however,
that, except as provided in Paragraph C of this Article EIGHTH with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
II-1
<PAGE>
B. The right to indemnification conferred in Paragraph A of this Article
EIGHTH shall include the right to be paid by the Corporation the expenses
incurred in defending any proceeding for which such right to indemnification
is applicable in advance of its final disposition (hereinafter an "advancement
of expenses"); provided, however, that, if the Delaware General Corporation
Law requires, an advancement of expenses incurred by an indemnitee in his or
her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf
of such indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Article EIGHTH or
otherwise.
C. The rights to indemnification and to the advancement of expenses
conferred in Paragraphs A and B of this Article EIGHTH shall be contract
rights. If a claim under Paragraph A or B of this Article EIGHTH is not paid
in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement
of expenses, in which case the applicable period shall be 20 days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by an indemnitee
to enforce a right to an advancement of expenses) it shall be a defense that
the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law, and (ii) any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the indemnitee has not
met such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article EIGHTH or otherwise, shall be on
the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article EIGHTH shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, this
certificate of incorporation, by-law, agreement, vote of stockholders or
disinterested directors, or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee, or agent of the Corporation or another
corporation, partnership, joint venture, trust, or other enterprise against
any expense, liability, or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability, or loss under
the Delaware General Corporation Law.
F. The Corporation's obligation, if any, to indemnify any person who was or
is serving as a director, officer, employee, or agent of any direct or
indirect subsidiary of the Corporation or, at the request of the Corporation,
of any other corporation or of a partnership, joint venture, trust, or other
enterprise shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture,
trust, or other enterprise.
G. Any repeal or modification of the foregoing provisions of this Article
EIGHTH shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
II-2
<PAGE>
NINTH. No director of the Corporation shall be liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision does not eliminate the liability of the
director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of Title 8 of the Delaware Code, or (iv) for any transaction
from which the director derived an improper personal benefit. For purposes of
the prior sentence, the term "damages" shall, to the extent permitted by law,
include without limitation, any judgment, fine, amount paid in settlement,
penalty, punitive damages, excise or other tax assessed with respect to an
employee benefit plan, or expense of any nature (including, without
limitation, counsel fees and disbursements). Each person who serves as a
director of the Corporation while this Article NINTH is in effect shall be
deemed to be doing so in reliance on the provisions of this Article NINTH, and
neither the amendment or repeal of this Article NINTH, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article
NINTH, shall apply to or have any effect on the liability or alleged liability
of any director of the Corporation for, arising out of, based upon, or in
connection with any acts or omissions of such director occurring prior to such
amendment, repeal, or adoption of an inconsistent provision. The provisions of
this Article NINTH are cumulative and shall be in addition to and independent
of any and all other limitations on or eliminations of the liabilities of
directors of the Corporation, as such, whether such limitations or
eliminations arise under or are created by any law, rule, regulation, by-law,
agreement, vote of stockholders or disinterested directors, or otherwise.
TENTH. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation."
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In February 1996, the Company sold an aggregate of 3,787,104 shares of
Convertible Preferred Stock for an aggregate purchase price of $8,500,000. The
Company believes that each such issuance and sale was exempt from registration
pursuant to Section 4(2) of the Securities Act and Regulation D promulgated
thereunder. Warrants to purchase 164,440 shares of Common Stock at an exercise
price of $4.26 were also issued for nominal consideration to certain brokers
that assisted the Company in the Convertible Stock Offering. The Company
believes that each such issuance and sale was exempt from registration
pursuant to Section 4(2) of the Securities Act.
In the last three years, the Company has issued options for the purchase of
an aggregate of 300,789 shares of Common Stock under the 1994 Plan, none of
which have been exercised. The Company believes that each of the foregoing
transactions was exempt from registration pursuant to Section 4(2) of the
Securities Act.
Each purchaser of the securities described above has represented that he or
she understands that the securities acquired may not be sold or otherwise
transferred absent registration under the Act or the availability of an
exemption from the registration requirements of the Act, and each certificate
evidencing the securities owned by each purchaser bears or will bear upon
issuance a legend to that effect.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Certificate of Incorporation. (1)
3.2 -- Amended and Restated By-laws. (1)
4.1 -- Form of Common Stock Certificate.
5.1 -- Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP. (3)
10.1 -- Stock Purchase Agreement by and among the Company, Whitney Equity
Partners, L.P., Boston Scientific Corporation, David J. Morrison,
Corporate Decisions, Inc., dated as of February 16, 1996. (1)
10.2 -- Registration Rights Agreement by and among the Company, Whitney
Equity Partners, L.P., Boston Scientific Corporation, David J.
Morrison, Corporate Decisions, Inc., dated as of February 16, 1996.
(1)
10.3 -- Agreement and Plan of Merger by and among the Company, NMT Heart,
Inc., InnerVentions, Inc. and Fletcher Spaght, Inc., dated as of
January 25, 1996. (1)
10.4 -- Stock Purchase Warrant by and between the Company and Fletcher
Spaght, Inc., dated February 14, 1996. (1)
10.5 -- Pledge Agreement by and between the Company and Fletcher Spaght,
Inc., dated February 14, 1996. (1)
10.6 -- Registration Rights Agreement by and between the Company and
Fletcher Spaght, Inc., dated as of February 14, 1996. (1)
10.7 -- Distribution Agreement by and between the Company and the Bard
Radiology division of C.R. Bard, Inc., dated May 19, 1992, as
amended on February 1, 1993 and October 1, 1995. (2)(3)
10.8 -- International Distribution Agreement by and between the Company and
Bard International, Inc., dated as of November 30, 1995. (2)(3)
10.9 -- License and Development Agreement by and between the Company and
Boston Scientific Corporation, dated as of November 22, 1994. (2)(3)
10.10 -- Manufacturing Agreement by and between the Company and Lake Region
Manufacturing Company, Inc., dated February 15, 1996. (2)(3)
10.11 -- Technology Purchase Agreement by and between the Company and Morris
Simon, M.D., dated as of April 14, 1987. (2)(3)
10.12 -- Asset and Technology Donation and Transfer Agreement by and between
C.R. Bard, Inc. and Children's Medical Center Corporation dated as
of May 12, 1995.
10.13 -- Stock Transfer Agreement by and between Children's Medical Center
Corporation and InnerVentions, Inc., dated as of June 19, 1995.
10.14 -- License Agreement by and between Children's Medical Center
Corporation and InnerVentions, Inc., dated June 19, 1995. (2)(3)
10.15 -- Sublicense Agreement by and between Children's Medical Center
Corporation and InnerVentions, Inc., dated June 19, 1995.
10.16 -- Assignment Agreement by and between the Company and The Beth Israel
Hospital Association, dated June 30, 1994.
10.17 -- License Agreement by and between the Company and Lloyd A. Marks,
dated as of April 15,
1996. (2)(3)
10.18 -- Share Purchase Warrant by and between the Company and Lloyd A.
Marks, dated April 15, 1996. (1)
10.19 -- Registration Rights Agreement by and between the Company and Lloyd
A. Marks, dated as of April 15, 1996. (1)
10.20 -- Employment Agreement by and between the Company and Thomas M.
Tully, dated February 13, 1996. (1)
10.21 -- Registration Rights Agreement by and between the Company and Thomas
M. Tully, dated as of February 13, 1996. (1)
10.22 -- Employment Agreement by and between the Company and David
Chazanovitz, dated February 13, 1996, as amended as of June 15,
1996. (1)
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.22.1 -- Amendment to Employment Agreement by and between the Company and
David Chazanovitz, dated July 9, 1996. (3)
10.23 -- Employment Agreement by and between the Company and Jason Harry,
dated as of July 1, 1994. (2)(3)
10.24 -- Employment Agreement by and between the Company and Stephen J.
Kleshinski, dated July 22, 1993, as supplemented by agreement dated
as of June 1, 1994. (2)(3)
10.25 -- Employment Agreement by and between the Company and Theodore I.
Pincus, dated as of May 17, 1996. (1)
10.26 -- Form of Registration Rights Agreement between the Company and
certain of its existing stockholders, dated as of February 14, 1996.
(1)
10.27 -- Agreement of Lease by and between the Company and the Trustees of
Wormwood Reality, dated as of May 8, 1996. (1)
10.28 -- Company 1994 Stock Option Plan. (1)
10.29 -- Company 1996 Stock Option Plan. (1)
10.30 -- Company 1996 Stock Option Plan for Non-Employee Directors. (1)
10.31 -- Registration Rights Agreement between the Company and Junewicz &
Co., Inc. dated as of February 16, 1996.
10.32 -- Registration Rights Agreement between the Company and Furman Selz,
LLC, dated as of February 16, 1996.
11.1 -- Statement re: Company's Earnings Per Share. (1)
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (contained
in the opinion filed as Exhibit 5.1). (1)
23.3 -- Consent of Sixbey, Friedman, Leedom & Ferguson.
24.1 -- Power of Attorney (included on the signature page to the
Registration Statement which has been previously filed). (1)
27.1 -- Financial Data Schedule. (1)
</TABLE>
- --------
(1) Previously filed.
(2) Confidential treatment requested.
(3) To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
All schedules have been omitted because they are not required, are inapplica-
ble or the information required is included in the Consolidated Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes to provide to the Underwriters at the closing
specified in the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt de-
livery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been ad-
vised that in the opinion of the Securities and Exchange Commission such indem-
nification is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the suc-
cessful defense of any action, suit or proceeding) is asserted by such direc-
tor, officer or controlling person in connection with the securities being reg-
istered, the Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate juris-
diction the question whether such indemnification by it is against public pol-
icy as expressed in the Securities Act and will be governed by the final adju-
dication of such issue.
The Company hereby undertakes that, for purposes of determining any liability
under the Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
II-5
<PAGE>
The Company hereby undertakes that, for the purpose of determining any
liability under the Securities Act, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BOSTON, COMMONWEALTH OF MASSACHUSETTS, ON JULY 11, 1996.
NITINOL MEDICAL TECHNOLOGIES, INC.
/s/ Thomas M. Tully
By: _________________________________
Thomas M. Tully
Chief Executive Officer,
President and Director
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES STATED.
SIGNATURES TITLE DATE
/s/ Thomas M. Tully Chief Executive
- ------------------------------------- Officer, President July 11, 1996
THOMAS M. TULLY and Director
(Principal
Executive Officer)
/s/ Theodore I. Pincus Executive Vice
- ------------------------------------- President and Chief July 11, 1996
THEODORE I. PINCUS Financial Officer
(Principal
Financial and
Accounting Officer)
Scientific Director
* and Director July 11, 1996
- -------------------------------------
MORRIS SIMON, M.D.
Chairman of the
* Board and Director July 11, 1996
- -------------------------------------
C. LEONARD GORDON
Director
* July 11, 1996
- -------------------------------------
MICHAEL C. BROOKS
Director
* July 11, 1996
- -------------------------------------
ROBERT G. BROWN
II-7
<PAGE>
SIGNATURES TITLE DATE
Director
* July 11, 1996
- -------------------------------------
R. JOHN FLETCHER
Director
* July 11, 1996
- -------------------------------------
JEFFREY R. JAY, M.D.
Thomas M. Tully
*By: ___________________________
AS ATTORNEY-IN-FACT
II-8
<PAGE>
EDGAR DESCRIPTION OF FRONT INSIDE COVER
Diagrams depicting the following:
1. The Company's CardioSeal Septal Occluder and its placement in
the human body;
2. Deployment of the Company's Simon Nitinol Filter and its
placement in the human body; and
3. The Company's Hex-cell Stent and its deployment and placement in
the human body.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
------- ---------------------- ------
<C> <S> <C>
1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Certificate of Incorporation. (1)
3.2 -- Amended and Restated By-laws. (1)
4.1 -- Form of Common Stock Certificate.
5.1 -- Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP.
(3)
10.1 -- Stock Purchase Agreement by and among the Company, Whitney
Equity Partners, L.P., Boston Scientific Corporation, David
J. Morrison, Corporate Decisions, Inc., dated as of
February 16, 1996. (1)
10.2 -- Registration Rights Agreement by and among the Company,
Whitney Equity Partners, L.P., Boston Scientific
Corporation, David J. Morrison, Corporate Decisions, Inc.,
dated as of February 16, 1996. (1)
10.3 -- Agreement and Plan of Merger by and among the Company, NMT
Heart, Inc., InnerVentions, Inc. and Fletcher Spaght, Inc.,
dated as of January 25, 1996. (1)
10.4 -- Stock Purchase Warrant by and between the Company and
Fletcher Spaght, Inc., dated February 14, 1996. (1)
10.5 -- Pledge Agreement by and between the Company and Fletcher
Spaght, Inc., dated February 14, 1996. (1)
10.6 -- Registration Rights Agreement by and between the Company
and Fletcher Spaght, Inc., dated as of February 14, 1996.
(1)
10.7 -- Distribution Agreement by and between the Company and the
Bard Radiology division of C.R. Bard, Inc., dated May 19,
1992, as amended on February 1, 1993 and October 1, 1995.
(2)(3)
10.8 -- International Distribution Agreement by and between the
Company and Bard International, Inc., dated as of November
30, 1995. (2)(3)
10.9 -- License and Development Agreement by and between the
Company and Boston Scientific Corporation, dated as of
November 22, 1994. (2)(3)
10.10 -- Manufacturing Agreement by and between the Company and
Lake Region Manufacturing Company, Inc., dated February 15,
1996. (2)(3)
10.11 -- Technology Purchase Agreement by and between the Company
and Morris Simon, M.D., dated as of April 14, 1987. (2)(3)
10.12 -- Asset and Technology Donation and Transfer Agreement by
and between C.R. Bard, Inc. and Children's Medical Center
Corporation dated as of May 12, 1995.
10.13 -- Stock Transfer Agreement by and between Children's Medical
Center Corporation and InnerVentions, Inc., dated as of
June 19, 1995.
10.14 -- License Agreement by and between Children's Medical Center
Corporation and InnerVentions, Inc., dated June 19, 1995.
(2)(3)
10.15 -- Sublicense Agreement by and between Children's Medical
Center Corporation and InnerVentions, Inc., dated June 19,
1995.
10.16 -- Assignment Agreement by and between the Company and The
Beth Israel Hospital Association, dated June 30, 1994.
10.17 -- License Agreement by and between the Company and Lloyd A.
Marks, dated as of
April 15, 1996. (2)(3)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
------- ---------------------- ------
<C> <S> <C>
10.18 -- Share Purchase Warrant by and between the Company and
Lloyd A. Marks, dated
April 15, 1996. (1)
10.19 -- Registration Rights Agreement by and between the Company
and Lloyd A. Marks, dated as of April 15, 1996. (1)
10.20 -- Employment Agreement by and between the Company and Thomas
M. Tully, dated February 13, 1996. (1)
10.21 -- Registration Rights Agreement by and between the Company
and Thomas M. Tully, dated as of February 13, 1996. (1)
10.22 -- Employment Agreement by and between the Company and David
Chazanovitz, dated February 13, 1996, as amended as of June
15, 1996. (1)
10.22.1 -- Amendment to Employment Agreement by and between the
Company and David Chazanovitz, dated July 9, 1996. (3)
10.23 -- Employment Agreement by and between the Company and Jason
Harry, dated as of
July 1, 1994. (2)(3)
10.24 -- Employment Agreement by and between the Company and
Stephen J. Kleshinski, dated July 22, 1993, as supplemented
by agreement dated as of June 1, 1994. (2)(3)
10.25 -- Employment Agreement by and between the Company and
Theodore I. Pincus, dated as of May 17, 1996. (1)
10.26 -- Form of Registration Rights Agreement between the Company
and certain of its existing stockholders, dated as of
February 14, 1996. (1)
10.27 -- Agreement of Lease by and between the Company and the
Trustees of Wormwood Reality, dated as of May 8, 1996. (1)
10.28 -- Company 1994 Stock Option Plan. (1)
10.29 -- Company 1996 Stock Option Plan. (1)
10.30 -- Company 1996 Stock Option Plan for Non-Employee Directors.
(1)
10.31 -- Registration Rights Agreement between the Company and
Junewicz & Co., Inc. dated as of February 16, 1996.
10.32 -- Registration Rights Agreement between the Company and
Furman Selz, LLC, dated as of February 16, 1996.
11.1 -- Statement re: Company's Earnings Per Share. (1)
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP
(contained in the opinion filed as Exhibit 5.1). (1)
23.3 -- Consent of Sixbey, Friedman, Leedom & Ferguson.
24.1 -- Power of Attorney (included on the signature page to the
Registration Statement which has been previously filed).
(1)
27.1 -- Financial Data Schedule. (1)
</TABLE>
- --------
(1) Previously filed.
(2) Confidential treatment requested.
(3) To be filed by amendment.
<PAGE>
EXHIBIT 1
Nitinol Medical Technologies, Inc.
2,700,000 Shares of Common Stock
Underwriting Agreement
July , 1996
J.P. Morgan Securities Inc.
CS First Boston Corporation
Jefferies & Company, Inc.
As Representatives of several underwriters
listed in Schedule I hereto
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
Nitinol Medical Technologies, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters listed in Schedule I
hereto (the "Underwriters") for whom you are acting as representatives (the
"Representatives") an aggregate of 2,700,000 shares of Common Stock, par value
$.001 per share, of the Company (the "Underwritten Shares") and, for the sole
purpose of covering over-allotments in connection with the sale of the
Underwritten Shares, at the option of the Underwriters, up to an additional
405,000 shares of Common Stock, of the Company (the "Option Shares"). The
Underwritten Shares and the Option Shares are herein referred to as the
"Shares". The shares of Common Stock of the Company to be outstanding after
giving effect to the sale of the Shares are herein referred to as the "Stock".
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement, including a prospectus, relating to the Shares. The registration
statement as amended at the time when it shall become effective including
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430A under the Securities Act, is referred to
in this Agreement as the "Registration Statement", and the prospectus in the
form first used to confirm sales of Shares is referred to in this Agreement as
the "Prospectus". If the Company has filed an abbreviated registration
statement pursuant to Rule 462(b) under the
<PAGE>
Securities Act (the "Rule 462 Registration Statement"), then any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462 Registration Statement.
The Company hereby agrees with the Underwriters as follows:
1. The Company agrees to issue and sell the Underwritten Shares to the
several Underwriters as hereinafter provided, and each Underwriter, upon the
basis of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from the Company the respective number of Underwritten Shares set forth opposite
such Underwriter's name in Schedule I hereto at a purchase price per share the
"Purchase Price" of $ _____________. [The public offering price of the Shares
is not in excess of the price recommended by __________, acting as a "qualified
independent underwriter" within the meaning of Schedule E to the By-Laws of the
National Association of Securities Dealers, Inc.]
In addition, the Company agrees to issue and sell the Option Shares to the
several Underwriters as hereinafter provided, and the Underwriters on the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, shall have the option to purchase, severally and
not jointly, from the Company up to an aggregate of 405,000 Option Shares at the
Purchase Price, for the sole purpose of covering over-allotments (if any) in the
sale of Underwritten Shares by the several Underwriters.
If any Option Shares are to be purchased, the number of Option Shares to be
purchased by each Underwriter shall be the number of Option Shares which bears
the same ratio to the aggregate number of Option Shares being purchased as the
number of Underwritten Shares set forth opposite the name of such Underwriter in
Schedule I hereto (or such number increased as set forth in Section 9 hereof)
bears to the aggregate number of Underwritten Shares being purchased from the
Company by the several Underwriters, subject, however, to such adjustments to
eliminate any fractional Shares as the Representatives in their sole discretion
shall make.
The Underwriters may exercise the option to purchase the Option Shares at
any time (but not more than once) on or before the thirtieth day following the
date of this Agreement, by written notice from the Representatives to the
Company. Such notice shall set forth the aggregate number of Option Shares as
to which the option is being exercised and the date and time when the Option
Shares are to be delivered and paid for which may be the same date and time as
the Closing Date (as hereinafter defined) but shall not be earlier than the
Closing Date nor later than the tenth full Business Day (as hereinafter defined)
after the date of such notice (unless such time and date are postponed in
accordance with the provisions of Section 9 hereof). Any such notice shall be
- 2 -
<PAGE>
given at least two Business Days prior to the date and time of delivery
specified therein.
2. The Company understands that the Underwriters intend (i) to make a
public offering of the Shares as soon after (A) the Registration Statement has
become effective and (B) the parties hereto have executed and delivered this
Agreement, as in the judgment of the Representatives is advisable and (ii)
initially to offer the Shares upon the terms set forth in the Prospectus.
3. Payment for the Shares shall be made by wire transfer in immediately
available funds to the account specified by the Company to the Representatives,
no later than noon the Business Day (as defined below) prior to the Closing Date
(as defined below), in the case of the Underwritten Shares, on ________, 1996,
or at such other time on the same or such other date, not later than the fifth
Business Day thereafter, as the Representatives and the Company may agree upon
in writing or, in the case of the Option Shares, on the date and time specified
by the Representatives in the written notice of the Underwriters' election to
purchase such Option Shares. The time and date of such payment for the
Underwritten Shares is referred to herein as the "Closing Date" and the time and
date for such payment for the Option Shares, if other than the Closing Date, are
herein referred to as the "Additional Closing Date". As used herein, the term
"Business Day" means any day other than a day on which banks are permitted or
required to be closed in New York City.
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date registered in such names and in such
denominations as the Representatives shall request in writing not later than two
full Business Days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the transfer
to the Underwriters of the Shares duly paid by the Company. The certificates
for the Shares will be made available for inspection and packaging by the
Representatives at the office of J.P. Morgan Securities Inc. set forth above not
later than 1:00 P.M., New York City time, on the Business Day prior to the
Closing Date or the Additional Closing Date, as the case may be.
As compensation to the Underwriters for their commitments hereunder, the
Company on the Closing Date or the Additional Closing Date, as the case may be,
will pay, or cause to be paid, to J.P. Morgan Securities Inc., for the accounts
of the several Underwriters, an amount equal to $_______ per share for the
Shares to be delivered by the Company hereunder on the Closing Date or the
Additional Closing Date, as the case may be. The Company will pay or cause to
be paid such commission payable to the order of J.P. Morgan Securities Inc. in
immediately available funds.
- 3 -
<PAGE>
4. The Company represents and warrants to each Underwriter that:
(a) no order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission, and each preliminary prospectus
filed as part of the Registration Statement as originally filed or as part of
any amendment thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act, and did
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided that this representation and warranty shall not apply to any statements
or omissions made in reliance upon and in conformity with information relating
to any Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use therein;
(b) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been instituted
or, to the knowledge of the Company, threatened by the Commission; and the
Registration Statement and Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) comply, or will
comply, as the case may be, in all material respects with the Securities Act and
do not and will not, as of the applicable effective date as to the Registration
Statement and any amendment thereto and as of the date of the Prospectus and any
amendment or supplement thereto, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Prospectus, as amended or
supplemented, if applicable, at the Closing Date or Additional Closing Date, as
the case may be, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; except
that the foregoing representations and warranties shall not apply to statements
or omissions in the Registration Statement or the Prospectus made in reliance
upon and in conformity with information relating to any Underwriting furnished
to the Company in writing by such Underwriter through the Representatives
expressly for use therein;
(c) the financial statements, and the related notes thereto, included
in the Registration Statement and the Prospectus present fairly the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates indicated and the results of their operations and changes in their
consolidated cash flows for the periods specified; and said financial statements
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis, and
- 4 -
<PAGE>
the supporting schedules included in the Registration Statement present fairly
the information required to be stated therein;
(d) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any change in
the capital stock or long-term debt of the Company or any of its subsidiaries,
or any material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, business,
prospects, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole, otherwise than
as set forth or contemplated in the Prospectus; and except as set forth or
contemplated in the Prospectus neither the Company nor any of its subsidiaries
has entered into any transaction or agreement (whether or not in the ordinary
course of business) material to the Company and its subsidiaries taken as a
whole;
(e) the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in good
standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(f) each of the Company's subsidiaries has been duly incorporated and
is validly existing as a corporation under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such qualification, other
than where the failure to be so qualified or in good standing would not have a
material adverse effect on the Company and its subsidiaries taken as a whole;
and all the outstanding shares of capital stock of each subsidiary of the
Company have been duly authorized and validly issued, are fully-paid and non-
assessable, and are owned by the Company, directly or indirectly, free and clear
of all liens, encumbrances, security interests and claims;
(g) this Agreement has been duly authorized, executed and delivered
by the Company;
(h) the Company has an authorized capitalization as set forth in the
Prospectus and such authorized capital stock conforms
- 5 -
<PAGE>
as to legal matters to the description thereof set forth in the Prospectus, and
all of the outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully-paid and non-assessable and are not
subject to any pre-emptive or similar rights; and, except as described in or
expressly contemplated by the Prospectus, there are no outstanding rights
(including, without limitation, pre-emptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares of
capital stock or other equity interest in the Company or any of its
subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock of the
Company or any such subsidiary, any such convertible or exchangeable securities
or any such rights, warrants or options;
(i) the Shares to be issued and sold by the Company hereunder have
been duly authorized, and, when issued and delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement, will be duly issued
and will be fully paid and non-assessable and will conform to the descriptions
thereof in the Prospectus; and the issuance of the Shares is not subject to any
preemptive or similar rights;
(j) neither the Company nor any of its subsidiaries is, or with the
giving of notice or lapse of time or both would be, in violation of or in
default under, its Certificate of Incorporation or By-Laws or any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which it or any of
them or any of their respective properties is bound, except for violations and
defaults which individually and in the aggregate are not material to the Company
and its subsidiaries taken as a whole; the issue and sale of the Shares and the
performance by the Company of its obligations under this Agreement and the
consummation of the transactions contemplated herein will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject, nor
will any such action result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws of the Company or any applicable law
or statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company, its subsidiaries or any of their
respective properties; and no consent, approval, authorization, order, license,
registration or qualification of or with any such court or governmental agency
or body is required for the issue and sale of the Shares or the consummation by
the Company of the transactions contemplated by this Agreement, except such
consents, approvals, authorizations, orders, licenses, registrations or
qualifications as have been
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obtained under the Securities Act and as may be required under state securities
or Blue Sky Laws in connection with the purchase and distribution of the Shares
by the Underwriters;
(k) other than as set forth or contemplated in the Prospectus, there
are no legal or governmental investigations, actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its subsidiaries or any of their respective properties or to
which the Company or any of its subsidiaries is or may be a party or to which
any property of the Company or any of its subsidiaries is or may be the subject
which, if determined adversely to the Company or any of its subsidiaries, could
individually or in the aggregate have, or reasonably be expected to have, a
material adverse effect on the general affairs, business, prospects, management,
financial position, stockholders' equity or results of operations of the Company
and its subsidiaries, taken as a whole, and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others; and there are no statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required;
(l) the Company and its subsidiaries have good and marketable title
in fee simple to all items of real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described or referred to in the
Prospectus or such as do not materially affect the value of such property and do
not interfere with the use made or proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings held under
lease by the Company and its subsidiaries are held by them under valid, existing
and enforceable leases with such exceptions as are not material and do not
interfere with the use made or proposed to be made of such property and
buildings by the Company or its subsidiaries;
(m) no relationship, direct or indirect, exists between or among the
Company or any or its subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of its subsidiaries
on the other hand, which is required by the Securities Act to be described in
the Registration Statement and the Prospectus which is not so described;
(n) no person has the right to require the Company to register any
securities for offering and sale under the Securities Act by reason of the
filing of the Registration Statement with the Commission or the issue and sale
of the Shares except as disclosed in the Prospectus;
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(o) the Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" or entity "controlled"
by an "investment company", as such terms are defined in the Investment Company
Act of 1940, as amended (the "Investment Company Act");
(p) the Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida) relating to doing business
with the Government of Cuba or with any person or affiliate located in Cuba;
(q) Arthur Andersen & Co. SC ("Arthur Andersen") who have certified
certain financial statements of the Company and its subsidiaries are independent
public accountants as required by the Securities Act;
(r) the Company and its subsidiaries have filed all federal, state,
local and foreign tax returns which have been required to be filed and have paid
all taxes shown thereon and all assessments received by them or any of them to
the extent that such taxes have become due and are not being contested in good
faith; and, except as disclosed in the Registration Statement and the
Prospectus, there is no tax deficiency which has been or might reasonably be
expected to be asserted or threatened against the Company or any subsidiary;
(s) the Company has not taken nor will it take, directly or
indirectly, any action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of the Common
Stock;
(t) each of the Company and its subsidiaries owns, possesses or has
obtained all licenses, permits, certificates, consents, orders, approvals and
other authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities (including, without
limitation, the Federal Drug Administration (the "FDA") and all foreign
regulatory agencies), all self-regulatory organizations and all courts and other
tribunals, domestic or foreign, necessary to own or lease, as the case may be,
and to operate its properties and to carry on its business as conducted as of
the date hereof, and neither the Company nor any such subsidiary has received
any actual notice of any proceeding relating to revocation or modification of
any such license, permit, certificate, consent, order, approval or other
authorization, except as described in the Registration Statement and the
Prospectus; and each of the Company and its subsidiaries is in compliance with
all laws and regulations relating to the conduct of its business as conducted as
of the date hereof;
(u) there are no existing or, to the best knowledge of the Company,
threatened labor disputes with the employees of the Company or any of its
subsidiaries which are likely to have a
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material adverse effect on the Company and its subsidiaries taken as a whole;
(v) the Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole; and
(w) Except as otherwise described in the Prospectus, the Company and
its subsidiaries own, have the perpetual right to use without payment to or
interference from any person, possess or can acquire on reasonable terms,
adequate trademarks, trade names and other rights to inventions, know-how,
patents, copyrights, confidential information and other intellectual property
(collectively, "intellectual property rights") necessary to conduct the business
now operated by them, or presently employed by them, and do not know of, and
have not received any notice of any infringement of or conflict with asserted
rights of others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the Company
and its subsidiaries taken as a whole.
5. The Company covenants and agrees with each of the several
Underwriters as follows:
(a) to use its best efforts to cause the Registration Statement to
become effective at the earliest possible time and, if required, to file the
final Prospectus with the Commission within the time periods specified by Rule
424(b) and Rule 430A under the Securities Act and to furnish copies of the
Prospectus to the Underwriters in New York City prior to 10:00 a.m., New York
City time, on the Business Day next succeeding the date of this Agreement in
such quantities as the Representatives may reasonably request;
(b) to deliver, at the expense of the Company, to the Representatives
four signed copies of the Registration Statement (as originally filed) and each
amendment thereto, in each case including exhibits and to each other Underwriter
a conformed copy of the Registration Statement (as originally filed) and each
amendment thereto, in each case without exhibits and, during the
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period mentioned in paragraph (e) below, to each of the Underwriters as many
copies of the Prospectus (including all amendments and supplements thereto) as
the Representatives may reasonably request;
(c) before filing any amendment or supplement to the Registration
Statement or the Prospectus, whether before or after the time the Registration
Statement becomes effective, to furnish to the Representatives a copy of the
proposed amendment or supplement for review and not to file any such proposed
amendment or supplement to which the Representatives reasonably object;
(d) to advise the Representatives promptly, and to confirm such
advice in writing (i) when the Registration Statement has become effective, (ii)
when any amendment to the Registration Statement has been filed or becomes
effective, (iii) when any supplement to the Prospectus or any amended Prospectus
has been filed and to furnish the Representatives with copies thereof, (iv) of
any request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectus or for any additional information,
(v) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the Prospectus or the
initiation or threatening of any proceeding for that purpose, (vi) of the
occurrence of any event, within the period referenced in paragraph (e) below, as
a result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
and (vii) of the receipt by the Company of any notification with respect to any
suspension of the qualification of the Shares for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and to use its best efforts to prevent the issuance of any such stop
order, or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any order suspending any such qualification
of the shares, or notification of any such order thereof and, if issued, to
obtain as soon as possible the withdrawal thereof;
(e) if, during such period of time after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters a
prospectus relating to the Shares is required by law to be delivered in
connection with sales by the Underwriters or any dealer, any event shall occur
as a result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with law, forthwith to prepare and
furnish, at the expense of the Company, to the Underwriters and to the
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dealers (whose names and addresses the Representatives will furnish to the
Company) to which Shares may have been sold by the Representatives on behalf of
the Underwriters and to any other dealers upon request, such amendments or
supplements to the Prospectus as may be necessary so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus will comply with law;
(f) to endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives shall
reasonably request and to continue such qualification in effect so long as
reasonably required for distribution of the Shares; provided that the Company
shall not be required to file a general consent to service of process in any
jurisdiction;
(g) to make generally available to its security holders and to the
Representatives as soon as practicable an earnings statement covering a period
of at least twelve months beginning with the first fiscal quarter of the Company
occurring after the effective date of the Registration Statement, which shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of
the Commission promulgated thereunder;
(h) so long as the Shares are outstanding, to furnish to the
Representatives copies of all reports or other communications (financial or
other) furnished to holders of the Shares, and copies of any reports and
financial statements furnished to or filed with the Commission or any national
securities exchange;
(i) for a period of 180 days after the date of the initial public
offering of the Shares not to (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warranty to purchase or otherwise transfer or dispose
of, directly or indirectly, any shares of Stock or any securities convertible
into or exercisable or exchangeable for Stock or (ii) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of the Stock, whether any such transaction described
in clause (i) or (ii) above is to be settled by delivery of Stock or such other
securities, in cash or otherwise without the prior written consent of the
Representatives, other than the Shares to be sold hereunder and any shares of
Stock of the Company issued upon the exercise of options granted under existing
employee stock option plans;
(j) to use the net proceeds received by the Company from the sale of
the Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds";
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(k) to use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National Market
(the "Nasdaq National Market");
(l) to file with the Commission such reports on Form SR as may be
required by Rule 463 under the Securities Act;
(m) whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid all
costs and expenses incident to the performance of its obligations hereunder,
including without limiting the generality of the foregoing, all costs and
expenses (i) incident to the preparation, issuance, execution and delivery of
the Shares, (ii) incident to the preparation, printing and filing under the
Securities Act of the Registration Statement, the Prospectus and any preliminary
prospectus (including in each case all exhibits, amendments and supplements
thereto), (iii) incurred in connection with the registration or qualification of
the Shares under the laws of such jurisdiction as the Representatives may
designate (including fees of counsel for the Underwriters and its
disbursements), (iv) in connection with the listing of the Shares on the Nasdaq
National Market, (v) related to the filing with, and clearance of the offering
by, the National Association of Securities Dealers, Inc. [(including the fees
and expenses of _________ acting as "qualified independent underwriter" within
the meaning of the aforementioned Schedule E),] (vi) in connection with the
printing (including word processing and duplication costs) and delivery of this
Agreement, the Preliminary and Supplemental Blue Sky Memoranda and the
furnishing to the Underwriters and dealers of copies of the Registration
Statement and the Prospectus, including mailing and shipping, as herein
provided, (vii) any expenses incurred by the Company in connection with a "road
show" presentation to potential investors, (viii) the cost of preparing stock
certificates and (ix) the cost and charges of any transfer agent and any
registrar.
6. The several obligations of the Underwriters hereunder to purchase the
Shares on the Closing Date or the Additional Closing Date, as the case may be,
are subject to the performance by the Company of its obligations hereunder and
to the following additional conditions:
(a) the Registration Statement shall have become effective (or if a
post-effective amendment is required to be filed under the Securities Act, such
post-effective amendment shall have become effective) not later than 5:00 P.M.,
New York City time, on the date hereof; and no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
shall be in effect, and no proceedings for such purpose shall be pending before
or threatened by the Commission; the Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Securities Act and
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<PAGE>
in accordance with Section 5(a) hereof; and all requests for additional
information shall have been complied with to the satisfaction of the
Representatives;
(b) the representations and warranties of the Company contained
herein are true and correct on and as of the Closing Date or the Additional
Closing Date, as the case may be, as if made on and as of the Closing Date or
the Additional Closing Date, as the case may be, and the Company shall have
complied with all agreements and all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date or the Additional Closing
Date, as the case may be,;
(c) subsequent to the execution and delivery of this Agreement and
prior to the Closing Date or the Additional Closing Date, as the case may be,
there shall not have occurred any downgrading, nor shall any notice have been
given of (i) any downgrading, (ii) any intended or potential downgrading or
(iii) any review or possible change that does not indicate an improvement, in
the rating accorded any securities of or guaranteed by the Company by any
"nationally recognized statistical rating organization", as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act;
(d) since the respective dates as of which information is given in
the Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse change, in
or affecting the general affairs, business, prospects, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or contemplated in
the Prospectus the effect of which in the judgment of the Representatives makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares on the Closing date or the Additional Closing Date, as
the case may be, on the terms and in the manner contemplated in the Prospectus;
and neither the Company nor any of its subsidiaries has sustained since the date
of the latest audited financial statements included in the Prospectus any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus;
(e) the Representatives shall have received on and as of the Closing
date or the Additional Closing Date, as the case may be, a certificate of an
executive officer of the Company, with specific knowledge about the Company's
financial matters, satisfactory to the Representatives to the effect set forth
in subsections (a) through (c) (with respect to the respective representations,
warranties, agreements and conditions of the Company) of this Section and to the
further effect that there has
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not occurred any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
business, prospects, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries taken as a whole from
that set forth or contemplated in the Registration Statement;
(f) Squadron, Ellenoff Plesent & Sheinfeld, LLP ("Squadron"), counsel
for the Company, shall have furnished to the Representatives their written
opinion, dated the Closing Date or the Additional Closing Date, as the case may
be, in form and substance satisfactory to the Representatives, to the effect
that:
(i) the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
(ii) the Company has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts any business, so
as to require such qualification, other than where the failure to be so
qualified or in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole;
(iii) each of the Company's subsidiaries has been duly incorporated
and is validly existing as a corporation under the laws of its jurisdiction of
incorporation with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus and has been
duly qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified and in good
standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole; and all of the outstanding shares of capital
stock of each subsidiary have been duly and validly authorized and issued, are
fully paid and non-assessable, and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims;
(iv) other than as set forth or contemplated in the Prospectus, there
are no legal or governmental investigations, actions, suits or proceedings
pending or, to the best of such counsel's knowledge, threatened against or
affecting the Company or any of its subsidiaries or any of their respective
properties or to which the Company or any of its subsidiaries is or may be a
party or to which any property of the Company or its subsidiaries is or may be
the subject which, if determined adversely to the Company or any of its
subsidiaries, could individually or in the
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aggregate have, or reasonably be expected to have, a material adverse effect on
the general affairs, business, prospects, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole; to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others; and such counsel does not know of any statutes,
regulations, contracts or other documents that are required to be described in
the Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required;
(v) this Agreement has been duly authorized, executed and delivered
by the Company;
(vi) the authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus;
(vii) the shares of capital stock of the Company outstanding prior to
the issuance of the Shares to be sold by the Company have been duly authorized
and are validly issued, fully paid and non-assessable and are not subject to any
preemptive or similar rights;
(viii) the Shares to be issued and sold by the Company hereunder have
been duly authorized, and when delivered to and paid for the Underwriters in
accordance with the terms of this Agreement, will be validly issued, fully paid
and non-assessable, will conform to the description thereof contained in the
prospectus and the issuance of the Shares is not subject to any preemptive or
similar rights;
(ix) the statements in the Prospectus under "Business-Products-
Stents-Relationship with Boston Scientific", "Business-Products-Vena Cava
Filters-Relationship with Bard", "Business-Products-Vena Cava Filters-
Manufacturing", "Business-Agreements with Boston Scientific and Bard",
"Business-Legal Proceedings", "Business-Product Liability and Insurance",
"Management-Limitation on Directors' Liability and Indemnification",
"Management-Employment Agreements", "Management-Stock Option Plans",
"Management-401(k) Profit Sharing Plan & Trust", "Certain Transactions",
"Description of Capital Stock", "Shares Eligible for Future Sale" and
"Underwriting", and in the Registration Statement in Items 14 and 15, insofar as
such statements constitute a summary of the terms of the Stock, legal matters,
documents or proceedings referred to therein, fairly present the information
called for with respect to such terms, legal matters, documents or proceedings;
(x) such counsel is of the opinion that the Registration Statement
and the Prospectus and any amendments and supplements thereto (other than the
financial statements and
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related schedules therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the
Securities Act and believes that the Registration Statement and the prospectus
included therein at the time the Registration Statement became effective did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and that the Prospectus, as amended or supplemented, if applicable,
as of its date and the Closing Date or the Additional Closing Date, as the case
may be, did not and does not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
(xi) neither the Company nor any of its subsidiaries is, or with the
giving of notice or lapse of time or both would be, in violation of or in
default under, its Certificate of Incorporation or By-Laws or any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument known
to such counsel to which the Company or any of its subsidiaries is a party or by
which it or any of them or any of their respective properties is bound, except
for violations and defaults which individually and in the aggregate are not
material to the Company and its subsidiaries taken as a whole; the issue and
sale of the Shares being delivered on the Closing Date or the Additional Closing
Date, as the case may be, and the performance by the Company of its obligations
under this Agreement and the consummation of the transactions contemplated
herein will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument know to such counsel to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will any such action
result in any violation of the provisions of the Certificate of Incorporation or
the By-Laws of the Company or any applicable law or statute or any order, rule
or regulation of any court or governmental agency or body having jurisdiction
over the Company, its subsidiaries or any of their respective properties;
(xii) no consent, approval, authorization, order, license,
registration or qualification of or with any court or governmental agency or
body is required for the issue and sale of the Shares or the consummation of the
other transactions contemplated by this Agreement, except such consents,
approvals, authorizations, orders, licenses, registration or qualifications as
have been obtained under the Securities Act and as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriters;
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(xiii) the Company is not and, after giving effect to the offering
and sale of the Shares, will not be an "investment company" or entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act;
(xiv) each of the Company and its subsidiaries owns, possesses or has
obtained all licenses, permits, certificates, consents, orders, approvals and
other authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities (including, without
limitation, the FDA and all foreign regulatory agencies), all self-regulatory
organizations and all courts and other tribunals, domestic or foreign, necessary
to own or lease, as the case may be, and to operate its properties and to carry
on its business as conducted as of the date hereof, and neither the Company nor
any such subsidiary has received any actual notice of any proceeding relating to
revocation or modification of any such license, permit, certificate, consent,
order, approval or other authorization, except as described in the Registration
Statement and the Prospectus; and each of the Company and its subsidiaries is in
compliance with all laws and regulations relating to the conduct of its business
as conducted as of the date of the Prospectus;
(xv) each of the Company and its subsidiaries owns, possesses or has
the right to use the intellectual property rights employed by it in connection
with the business conducted by it as of the date hereof; there are no
infringements of or, to the knowledge of such counsel, conflicts with asserted
rights of others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the Company
and its subsidiaries taken as a whole;
(xvi) each of the Company and its subsidiaries is in compliance with
all Environmental Laws, except, in each case, where noncompliance, individually
or in the aggregate, would not have a material adverse effect on the Company and
its subsidiaries taken as a whole; there are no legal or governmental
proceedings pending or, to the knowledge of such counsel, threatened against or
affecting the Company or any of its subsidiaries under any Environmental Law
which, individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the Company and its subsidiaries taken as a whole.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
the Commonwealth of Massachusetts and the State of New York, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' counsel) of other counsel reasonably acceptable to the
Underwriters' counsel, familiar with the applicable laws;
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(B) as to matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company and certificates or other
written statements of officials of jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company. The opinion
of such counsel for the Company shall state that the opinion of any such counsel
upon which they relied is in form satisfactory to such counsel and, in such
counsel's opinion, the Underwriters and they are justified in relying thereon.
With respect to the matters to be covered in subparagraph (x) above counsel may
state their opinion and belief is based upon their participation in the
preparation of the Registration Statement and the Prospectus and any amendment
or supplement thereto and review and discussion of the contents thereof but is
without independent check or verification except as specified.
The opinion of Squadron described above shall be rendered to the
Underwriters at the request of the Company and shall so state therein.
(g) Sixbey, Friedman, Leedom & Ferguson, patent counsel for the
Company, shall have furnished to the Representatives their written opinion,
dated the Closing Date or the Additional Closing Date, as the case may be, in
form and substance satisfactory to the Representatives, to the effect that the
statements in the Prospectus and the Registration Statement under "Risk Factors-
Dependence on Patents and Proprietary Technology", "Business-Patents and
Proprietary Technology", "Business-Licensed Technology; Royalty Obligations" and
other references to intellectual property therein (i) insofar as such statements
constitute a summary of the terms of legal matters, documents or proceedings
referred to therein, fairly present the information called for with respect to
such terms, legal matters, documents and proceedings;
(h) Hogan & Hartson, regulatory counsel for the Company, shall have
furnished to the Representatives their written opinion, dated the Closing Date
or the Additional Closing Date, as the case may be, in form and substance
satisfactory to the Representatives, to the effect that the statements in the
Prospectus and the Registration Statement under "Risk Factors-Government
Regulation; Product Approvals Uncertain", "Risk Factors-Uncertain Availability
of Third Party Reimbursement; Possible Health Care Reforms", "Business-
Government Regulation: and "Business-Third Party Reimbursement", and other
references to regulatory matters therein insofar as such statements constitute a
summary of the terms of legal matters, documents or proceedings referred to
therein, fairly present the information called for with respect to such terms,
legal matters, documents and proceedings;
(i) On the effective date of the Registration Statement and the
effective date of the most recently filed post-effective
- 18 -
<PAGE>
amendment to the Registration Statement and also on the Closing Date or
Additional Closing Date, as the case may be, Arthur Andersen shall have
furnished to you letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, containing statements and information of
the type customarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial information
contained in the Registration Statement and the Prospectus;
(j) the Representatives shall have received on and as of the Closing
Date or Additional Closing Date, as the case may be, an opinion of Cravath,
Swaine & Moore, counsel to the Underwriters, with respect to the due
authorization and valid issuance of the Shares, the Registration Statement, the
Prospectus and other related matters as the Representatives may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters;
(k) the Shares to be delivered on the Closing Date or Additional
Closing Date, as the case may be, shall have been approved for listing on the
Nasdaq National Market subject to official notice of issuance;
(l) on or prior to the Closing Date or Additional Closing Date, as
the case may be, the Company shall have furnished to the Representatives such
further certificates and documents as the Representatives shall reasonably
request; and
(m) the "lock-up" agreements between the Representatives and the
shareholders listed on Schedule II hereto, officers and directors of the Company
relating to sales and certain other dispositions of shares of Stock or certain
other securities, delivered to the Representatives on or before the date hereof,
shall be in full force and effect on the Closing Date or Additional Closing
Date, as the case may be.
7. The Company agrees to indemnify and hold harmless each Underwriter,
each affiliate of any Underwriter which assists such Underwriter in the
distribution of the Shares and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, the legal fees and other expenses
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements
- 19 -
<PAGE>
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use therein.
[The Company also agrees to indemnify and hold harmless, [_________] and
each person, if any, who controls [_________] within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities incurred as a result
of [_________]'s participation as a "qualified independent underwriter" within
the meaning of Section 1 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. in connection with the offering
of the shares.]
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers who sign the Registration
Statement and each person who controls the Company within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act to the same extent
as the foregoing indemnity from the Company to each Underwriter, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through the Representatives expressly for use in
the Registration Statement, the Prospectus, any amendment or supplement thereto,
or any preliminary prospectus.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to any of the three
preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding,
any Indemnified Person shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the Indemnifying Person and the Indemnified person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Person shall not, in connection
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<PAGE>
with any proceeding or related proceeding in the same jurisdiction, be liable
for the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Indemnified Persons, and that all such fees and expenses
shall be reimbursed as they are incurred; provided, however that if indemnity
may be sought pursuant to the second paragraph of this Section 7 in respect of
such proceeding, then in addition to such separate firm of the Underwriters and
such control persons of the Underwriters the indemnifying party shall be liable
for the fees and expenses of not more than one separate firm (in addition to any
local counsel) for [_________] in its capacity as a "qualified independent
underwriter" and all persons, if any, who control [_________] within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act.
Any such separate firm for the Underwriters, each affiliate of any Underwriter
which assists such Underwriter in the distribution of the Shares and such
control persons of Underwriters shall be designated in writing by J.P. Morgan
Securities Inc. and any such separate firm for the Company, its directors, its
officers who sign the Registration Statement and such control persons of the
Company shall be designated in writing by the Company. The Indemnifying Person
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the Indemnifying Person agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 7 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraph, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or
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<PAGE>
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, the Underwriters and [___] in its capacity as
a "qualified independent underwriter" from the offering of the Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, the
Underwriters and of [___]in its capacity as a "qualified independent
underwriter" in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company , the
Underwriters and [___] in its capacity as a "qualified independent underwriter"
shall be deemed to be in the same respective proportions as the net proceeds
from the offering (before deducting expenses) received by the Company and the
total underwriting discounts and the commissions received by the Underwriters,
in each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate public offering price of the Shares. The relative fault of the
Company , the Underwriters and [___] in its capacity as a "qualified independent
underwriter" shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company, by the Underwriters or by [___] in its capacity as a "qualified
independent underwriter" and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
--- ----
allocation (even if the Underwriters were treated as one entity for such
purposes) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Shares underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 7 are several in proportion to the
- 22 -
<PAGE>
respective number of Shares set forth opposite their names in Schedule I hereto,
and not joint.
The remedies provided for in this Section 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
The indemnity and contribution agreements contained in this Section 7 and
the representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter or by or on behalf of
the Company, its officers or directors or any other person controlling the
Company and (iii) acceptance of and payment for any of the Shares.
8. Notwithstanding anything herein contained, this Agreement (or the
obligations of the several Underwriters with respect to the Option Shares) may
be terminated in the absolute discretion of the Representatives, by notice given
to the Company, if after the execution and delivery of this Agreement and prior
to the Closing Date (or, in the case of the Option Shares, prior to the
Additional Closing Date) (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange or the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of or
guaranteed by the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities, or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in the judgment of the Representatives, is material and adverse and which,
in the judgment of the Representatives, makes it impracticable to market the
Shares being delivered at the Closing Date or the Additional Closing Date, as
the case may be, on the terms and in the manner contemplated in the Prospectus.
9. This Agreement shall become effective upon the later of (x) execution
and delivery hereof by the parties hereto and (y) release of notification of the
effectiveness of the Registration Statement (or, if applicable, any post-
effective amendment) by the Commission.
If on the Closing Date or the Additional Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares
which it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate
- 23 -
<PAGE>
number of Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Underwritten Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as the Representatives may specify,
to purchase the Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase on such date; provided that in no event shall
--------
the number of Shares that any Underwriter has agreed to purchase pursuant to
Section 1 be increased pursuant to this Section 9 by an amount in excess of one-
ninth of such number of Shares without the written consent of such Underwriter.
If on the Closing Date or the Additional Closing Date, as the case may be, any
Underwriter or Underwriters shall fail or refuse to purchaser Shares which it or
they have agreed to purchase hereunder on such date, and the aggregate number of
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares to be purchased on such date, and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Shares are not made within 36 hours after such default, this Agreement (or the
obligations of the several Underwriters to purchase the Option Shares, as the
case may be) shall terminate without liability on the part of any non-defaulting
Underwriter or the Company. In any such case either you or the Company shall
have the right to postpone the Closing Date (or, in the case of the Option
Shares, the Additional Closing Date), but in no event for longer than seven
days, in order that the required changes, if any, in the Registration Statement
and in the Prospectus or in any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
10. If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
agreement or any condition of the Underwriters' obligations cannot be fulfilled,
the Company agrees to reimburse the Underwriters or such Underwriters as have so
terminated this Agreement with respect to themselves, severally, for all out-of-
pocket expenses (including the fees and expenses of its counsel) reasonably
incurred by the Underwriter in connection with this Agreement or the offering
contemplated hereunder.
11. This Agreement shall inure to the benefit of and be binding upon the
Company, the Underwriters , each affiliate of any Underwriter which assists such
Underwriter in the distribution of the Shares, any controlling persons referred
to herein and their respective successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
- 24 -
<PAGE>
other person, firm or corporation any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. No
purchaser of Shares from any Underwriter shall be deemed to be a successor by
reason merely of such purchase.
12. Any action by the Underwriters hereunder may be taken by the
Representatives jointly or by J.P. Morgan Securities Inc. alone on behalf of the
Underwriters, and any such action taken by the Representatives jointly or by
J.P. Morgan Securities Inc. alone shall be binding upon the Underwriters. All
notices and other Communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be given to the
Representatives, c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New
York 10260 (telefax: (212) 648-5705); Attention: Syndicate Department.
Notices to the Company shall be given to it at 263 Summer Street, 7th Floor,
Boston, MA 02210, (telefax: (617) 737-0924); Attention: [Ted Pincus, Executive
Vice President and Chief Financial Officer].
13. This Agreement may be signed in counterparts, each of which shall be an
original and all of which together shall constitute one and the same instrument.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to the conflicts of
laws provisions thereof.
- 25 -
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof.
Very truly yours,
Nitinol Medical Technologies, Inc.
By:_______________________________
Title:
Accepted: July __, 1996
J.P. Morgan Securities Inc.
CS First Boston Corporation
Jefferies & Company, Inc.
Acting severally on behalf
of themselves and the
several Underwriters listed
in Schedule I hereto.
By: J.P. Morgan Securities, Inc.
Acting on behalf of itself and the
several Underwriters listed in
Schedule I hereto.
By:
_______________________________
Title:
- 26 -
<PAGE>
Exhibit 4.1
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:TEN COM ? as tenants in common
TEN ENT ? as tenants by the entireties
JT TEN ? as joint tenants with right of
JT TEN ? survivorship and not as tenants
JT TEN ? in common
UNIF GIFT MIN ACT ? Custodian
(Cust) (Minor)
under Uniform Gifts to Minors
Act
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
<PAGE>
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
COMMON STOCK
COMMON STOCK
NITINOL MEDICAL TECHNOLOGIES, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
CUSIP 65476T 10 4
This Certifies that
is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE PER
SHARE, OF
NITINOL MEDICAL TECHNOLOGIES, INC.
(the `` Corporation''), subject to the provisions of the Certificate of
Incorporation and By-Laws of the Corporation and transferable only on the books
of the Corporation by the holder thereof, in person or by attorney upon
surrender of this Certificate properly endorsed.
The Corporation will furnish without charge to each shareholder who so
requests a full statement of the designations, relative rights, preferences and
limitations of the shares of each class of stock which the Corporation is
authorized to issue, of the designations, relative rights, preferences and
limitations of each series of preferred stock which the Corporation is
authorized to issue so far as such terms have been fixed, and of the authority
of the Board of Directors of the Corporation to designate and fix the relative
rights, preferences and limitations of any series of preferred stock which the
Corporation is authorized to issue.
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile Seal of the Corporation and the facsimile signatures
of its authorized officers.
Dated
SECRETARY
PRESIDENT
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR,
BY
AUTHORIZED SIGNATURE
<PAGE>
EXHIBIT 10.12
ASSET AND TECHNOLOGY DONATION AND
TRANSFER AGREEMENT
By and between:
C.R. Bard, Inc.
and
Children's Medical Center Corporation
May 12, 1995
LIB 18 10165893.16
<PAGE>
ARTICLE I
Definitions........................................ 1
1.1 Defined Terms............................................ 1
1.2 Other Definitional Matters............................... 3
ARTICLE II
Donation and Transfer of Assets.................... 4
2.1 Assets................................................... 4
2.2 Excluded Assets.......................................... 4
2.3 Transfer of Other Records................................ 4
2.4 Equipment at Georgia Tech................................ 5
2.5 Data to be Transferred to Hospital....................... 5
2.6 Grant of License......................................... 5
2.7 Instruments of Transfer.................................. 5
2.8 Assumption of Liabilities................................ 5
2.9 No Further Obligations to Make Devices Available......... 5
2.10 Acknowledgment of Receipt of Transferred Assets......... 6
ARTICLE III
The Closing........................................ 6
3.1 Closing.................................................. 6
3.2 Deliveries by Bard at the Closing........................ 6
3.3 Deliveries by Hospital at the Closing.................... 6
3.4 Execution and Delivery of Other Agreements............... 6
3.5 Delivery of Tangible Assets.............................. 6
ARTICLE IV
Representations and Warranties of Bard............. 6
4.1 Organization and Good Standing............................ 6
4.2 Authorization............................................ 7
4.3 Title to Properties: Absences of Liens and Encumbrances.. 7
4.4 Legal Compliance.......................................... 7
4.5 No Consents Necessary..................................... 7
4.6 Litigation Relating to Device............................ 8
4.7 The Subsidiary........................................... 8
(a) Subsidiary Shares.............................. 8
(b) Organization and Good Standing.................. 8
(c) Organizational Documents....................... 8
4.8 No Misrepresentation...................................... 8
ARTICLE V
Representations and Warranties of Hospital......... 8
5.1 Organization: Good Standing.............................. 9
5.2 Authorization............................................ 9
5.3 Capability to Assess Suitability of Device for
Implantation in Human Subjects.......................... 9
5.4 Subsidiary Shares........................................ 9
5.5 No Consents Necessary.................................... 10
5.6 No Misrepresentation..................................... 10
ARTICLE VI
Conditions Precedent To Closing.................... 10
6.1 Conditions to Obligations of Hospital................... 10
6.2 Conditions to Obligations of Bard....................... 10
<PAGE>
ARTICLE VII
Hospital's Acknowledgment of Development
Status of Device............................... 11
7.1 Device Not Fully Tested................................... 12
7.2 Limited Representations and Warranties By
Bard as to Intellectual Property........................ 12
(a) Prosecution of Occluder Patent Applications......... 12
(b) Infringement..........................................12
(c) Design. etc.......................................... 12
7.3 No Warranties as to Other Assets......................... 12
7.4 No Other Warranties...................................... 12
7.5 Limitation of Liability................................... 12
ARTICLE VIII
Indemnification and Insurance...................... 13
8.1 Execution of Indemnification Agreement................... 13
ARTICLE IX
Other Covenants and Agreements...................... 13
9.1 Confidential Data........................................ 13
9.2 Non-Disclosure............................................ 14
9.3 Legal Process............................................ 14
9.4 Covenant of Further Assurances........................... 14
9.5 Access to and Maintenance of Records..................... 14
9.6 Defense of Claims and Litigation......................... 15
9.7 International Distribution and Marketing Rights........... 15
ARTICLE X
Miscellaneous....................................... 15
10.1 Survival of Representations and Warranties.............. 15
10.2 Brokerage................................................ 15
10.3 Waivers and Amendments................................... 16
10.4 Notices................................................. 16
10.5 Expenses................................................ 16
10.6 Public Disclosure....................................... 16
10.7 Confidentiality......................................... 16
10.8 No Solicitation of Employees............................ 17
10.9 Transfer Taxes.......................................... 17
10.10 Entire Agreement....................................... 17
10.11 Binding Nature.......................................... 17
10.12 Governing Law........................................... 17
10.13 Severability........................................... 17
10.14 Exhibits............................................... 17
10.15 Counterparts............................................ 17
10.16 Headings................................................ 17
10.17 Assignment............................................. 18
10.18 Notices to Third Parties................................ 18
10.19 Termination............................................ 18
- ii -
<PAGE>
Execution Copy
ASSET AND TECHNOLOGY DONATION AND TRANSFER AGREEMENT
ASSET AND TECHNOLOGY DONATION AND TRANSFER AGREEMENT (Agreement") dated
as of May 12, 1995 between C.R. Bard, Inc., a New Jersey corporation
("Bard"), and Children's Medical Center Corporation, a Massachusetts
corporation (Hospital").
WHEREAS, Bard is engaged in the business of developing, manufacturing,
distributing and selling certain medical products; and
WHEREAS, Bard has been developing the Clamshell II Septal Occluder, a
medical device for the repair of atrial septal defects, as well as a
delivery system for its implantation, (together, as hereinafter defined,
the "Device); and
WHEREAS, in view of the anticipated medical benefits of the Device,
Bard is interested in seeing it receive governmental approval as soon as
possible; and
WHEREAS, Bard has determined that such governmental approval may be
expedited if further testing and development is undertaken by or on behalf
of Hospital; and
WHEREAS, Hospital is a charitable corporation under Section 501(c)(3)
of the Internal Revenue Code; and
WHEREAS, Hospital desires to develop a source of supplies of the Device
for the treatment of certain patients and is willing to complete or engage
others to complete the development and testing of, and take such further
actions as may be necessary to receive required approvals for, the Device
and to manufacture or engage others to manufacture the Device; and
WHEREAS, Bard desires to donate and transfer to Hospital certain
tangible assets and intellectual property rights, comprising substantially
all of Bard's assets relating specifically and solely to the Device;
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties agree as follows:
ARTICLE I
Definitions
-----------
1.1 Defined Terms. For the purposes of this Agreement, the terms listed
-------------
below shall have the following meanings:
<PAGE>
(a) Assets shall mean all those assets, both tangible and intangible,
to be transferred by Bard to Hospital on the Closing Date, as described in
Section 2.1 of this Agreement.
(b) "Bard shall mean C.R. Bard, Inc., a New Jersey corporation, and any
subsidiaries or divisions thereof.
(c) "Clamshell II Septal Occluder" or "Occluder" shall mean that
certain medical device being developed for the repair of atrial septal
defects which is described in Exhibit l.l(c) hereto.
--------------
(d) "Closing" shall have the meaning set forth in Section 3.1 of this
Agreement.
(e) "Closing Date" shall mean May __, 1995.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Confidential Data" shall have the meaning set forth in Section 9.1
of this Agreement.
(h) "Delivery System shall mean that certain device which is described
in Exhibit l.l(h).
--------------
(i) Device" shall mean the Clamshell II Septal Occluder and the
Delivery System.
(j) "Device-Related Product" shall mean each of the Device, any
individual component or part of the Device, and any and all successor or
derivative products to or of the Device or any such component or part.
(k) "EDA" shall mean the United States Food and Drug Administration.
(l) "Hospital shall have the meaning set forth in the introductory
paragraph of this Agreement.
(m) "IDE" shall mean an Investigational Device Exemption, as such term
is defined under the rules and regulations of the FDA.
(n) "Indemnification Agreement" shall have the meaning defined in
Section 8.1 hereof.
(o) Licensed Delivery System Know-How shall have the meaning defined in
the Patent and Know-How License Agreement.
(p) "Licensed Occluder Know-How" shall have the meaning defined in the
Patent and Know-How License Agreement.
(q) "Licensed Patent" shall have the meaning defined in the Patent and
Know-How License Agreement.
- 2 -
<PAGE>
(r) Licensed Technology" shall mean the Licensed Delivery System
Know-How, the Licensed Occluder Know-How, and the Licensed Patents.
(s) "Lock Agreement" shall mean that certain agreement dated as of
December 29, 1988 between USCI Angiographic Systems Division, a division of
Bard ("USCI"), and Dr. James Lock, as amended, pursuant to which, among
other things, Lock is to receive royalties with respect to the Clamshell II
Septal Occluder.
(t) "Occluder Patent Applications" shall mean those patent applications
relating to the Clamshell II Septal Occluder which are listed on Exhibit
-------
2.1(a).
------
(u) "Patent and Know-How License Agreement" shall mean that certain
Patent and Know-How License Agreement which is to be executed by Bard and
Hospital at the Closing.
(v) "Predecessor Device shall have the meaning set forth in Section 7.1
of this Agreement.
(w) Subsidiary" shall mean Clamshell Asset Corp., a Massachusetts
corporation which is a wholly-owned subsidiary of Bard.
(x) Subsidiary Shares" shall have the meaning set forth in Section 2.
l(f) of this Agreement.
(y) "Transferred Know-How" shall mean all proprietary knowledge,
formulas, specifications, techniques, processes, technical data and other
know-how of Bard which both
(1) are used in the development, design and manufacture of
the Clamshell II Septal Occluder, and
(2) are not also presently or potentially usable by Bard in
the manufacture, marketing, development or design of other
products or services.
(z) "Work in Process" shall have the meaning defined in Section 2.2(d)
hereof.
1.2 Other Definitional Matters. Terms defined in the singular shall
--------------------------
have a comparable meaning when used in the plural, and vice versa.
----------
ARTICLE II
Donation and Transfer of Assets
-------------------------------
2.1 Assets. Subject to the terms and conditions hereof, and upon the
agreements, representations and warranties contained herein, Bard shall
donate, transfer and assign to Hospital, and Hospital
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<PAGE>
shall accept and require from Bard, on the Closing Date, all of Bard's
right, title and interest in and to the following assets relating to the
Device ("Assets"):
------
(a) All rights with respect to the Occluder Patent Applications
listed on Exhibit 2.1(al;
(b) All rights of Bard in the Clamshell II Septal Occluder under
the Lock Agreement, attached hereto as Exhibit 2.1(b);
--------------
(c) All information and documents specific to the Device
(including the Device Master Record, the Device Master File, Design
Select Package, fact book, lab notebooks, test and clinical protocols
and prototype drawings) which are described on Exhibit 2. l(c);
(d) All Transferred Know-How (it being understood that certain of
such Transferred Know-How is also included in the information and
documents being transferred pursuant to Section 2.1(c));
(e) All rights with respect to those trademarks and trademark
applications relating to the Device and listed on Exhibit 2. l(e),
---------------
together with the related goodwill; and
(f) All of the issued and outstanding equity securities of the
Subsidiary (the "Subsidiary Shares), which Bard has formed to
-----------------
facilitate the transactions contemplated by this Agreement and to
which Bard has transferred, and which as of the Closing shall own the
machinery, equipment, fixtures, dyes, jigs, tooling, molds and other
equipment used by Bard in connection with the development, manufacture
or testing of the Device and listed on Exhibit 2.1(f).
--------------
2.2 Excluded Assets. None of the following are being donated,
---------------
transferred or assigned to Hospital hereunder:
(a) Cash, accounts receivable, tax prepayments and other prepaid
items of Bard;
(b) Licensed Technology;
(c) Any assets not listed or described in Section 2.1; and
(d) Work in process and partially or fully assembled Devices or
parts or components thereof ("Work in Process").
---------------
2.3 Transfer of Other Records. As soon as practicable after the
-------------------------
Closing, Bard shall also transfer to Hospital copies of (i) all Bard
submissions to FDA relating to the Device, and (ii) all written
communication between Bard and FDA relating to the Device.
- 4 -
<PAGE>
2.4 Equipment at Georgia Tech. Bard owns certain equipment, now
-------------------------
located at Georgia Tech, which has been used by Georgia Tech personnel
under contract with Bard to test certain components of the Device. This
equipment is not being transferred to the Hospital. Bard will not object to
requests by Hospital or its permitted assignee, licensee or transferee for
reasonable access to such equipment (to the extent such equipment is then
still at Georgia Tech) from time to time prior to December 31, 1999.
Hospital understands that it must make its own arrangements with Georgia
Tech and its technical staff to gain such access, and agrees to pay any
fees or charges assessed by Georgia Tech in connection with such access or
use.
2.5 Data to be Transferred to Hospital. Hospital understands that
----------------------------------
development of the Device involved, among other things, preparation of
thousands of photographs to evidence product testing and that some of such
photographs and other documentation may not have been preserved. However,
Bard has made a diligent effort to locate material to be provided pursuant
to this Agreement and believes that the material to be delivered to
Hospital hereunder comprises substantially all of the information in
written form which is in Bard's possession and that no data which is
material to an understanding of the Device and its development,
manufacture, testing and regulatory filings has been omitted from this
disclosure.
2.6 Grant of Licenses. Hospital and Bard shall execute, at the
-----------------
Closing, a Patent and Know-How License Agreement substantially in the form
of Exhibit 2.6, pursuant to which Bard will grant to Hospital certain
exclusive and non-exclusive licenses to use the Licensed Technology. The
Patent and Know-How License Agreement shall be effective from and after the
Closing.
2.7 Instruments of Transfer. The transfer of the Assets to Hospital on
-----------------------
the Closing Date shall be effected by assignments and such other
instruments of transfer as shall transfer to Hospital all of Bard's
interests in the Assets free and clear of all liens, mortgages, pledges,
conditional sales or other title retention agreements, leases, charges,
restrictions and encumbrances, provided, however, that Bard shall have no
obligation to take any action with respect to the Lock Agreement.
2.8 Assumption of Liabilities. At the Closing, Hospital shall assume,
-------------------------
and thereafter shall be solely responsible for, all of the liabilities and
obligations of Bard under the Lock Agreement. Such assumption shall be
effective as of the Closing.
2.9 No Further Obligations to Make Devices Available. Upon the
------------------------------------------------
execution of this Agreement, all obligations of Bard to supply Devices or
Predecessor Devices pursuant to any agreement between Bard and Hospital
shall automatically terminate and be of no further force or effect,
including but not limited to the letter agreement between Bard and Boston
Children's Hospital dated as of December 13, 1993 and agreed to by Boston
Children's Hospital as of January 15, 1994. Notwithstanding the foregoing,
all other
- 5 -
<PAGE>
obligations, including obligations of Hospital to provide indemnification,
contained in any other agreement between the parties, shall remain in
effect.
2.10 Acknowledgment of Receipt of Transferred Assets. At the Closing,
-----------------------------------------------
Hospital shall execute and deliver to Bard an acknowledgment of receipt of
the Assets in the form required by Section 170(f)(8) of the Code.
ARTICLE III
The Closing
-----------
3.1 Closing. The transfer and assignment of the Assets (the "Closing"
------- --------
shall be held at 10:00 a.m. at the offices of Foley, Hoag & Eliot, One Post
Office Square, Boston, Massachusetts 02109 on the Closing Date.
3.2 Deliveries by Bard at the Closing. At the Closing Bard shall
---------------------------------
deliver to Hospital:
(a) The Subsidiary Shares, duly endorsed in blank for transfer;
(b) Those assignments and instruments of transfer described in
Section 2.7; and
(c) Those instruments, documents and certificates described in
Section 6.1 hereof.
3.3 Deliveries by Hospital at the Closing. At the Closing Hospital
-------------------------------------
shall deliver to Bard those instruments, documents and certificates
described in Section 6.2 hereof.
3.4 Execution and Delivery of Other Agreements. At the Closing,
------------------------------------------
Hospital and Bard shall each execute and deliver the Indemnification
Agreement and the Patent and Know-How License Agreement.
3.5 Delivery of Tangible Assets. Upon the earlier to occur of (a)
---------------------------
September 1, 1995 or (b) the date which is 60 days after it has received a
request for shipment from Hospital or its permitted assignee, licensee or
transferee, Bard shall crate, box and ship all tangible Assets transferred
hereby to the place or places and by the carrier specified in such notice
and in accordance with procedures specified therein, at the expense of the
party giving such notice. Hospital shall bear all risk of loss with respect
to such tangible Assets from and after the Closing.
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<PAGE>
ARTICLE IV
Representations and Warranties of Bard
--------------------------------------
Bard represents and warrants to Hospital as follows:
4.1 Organization and Good Standing. Bard is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the
State of New Jersey and is qualified as a foreign corporation in The
Commonwealth of Massachusetts. Bard has full corporate power necessary to
own its properties, to conduct its business as now conducted and to
execute, deliver and perform this Agreement and the other documents
described herein to be executed, delivered and performed by Bard.
4.2 Authorization. The execution, delivery and performance by
-------------
Bard of this Agreement and the documents contemplated hereby which are to
be executed by Bard at the Closing and consummation by Bard of the
transactions contemplated hereby and thereby (a) have been duly authorized
by all necessary corporate action on the part of Bard, (b) do not, and will
not, conflict with any of the provisions contained in the certificate of
incorporation or by-laws of Bard, (c) do not, and will not, conflict with
any of the provisions contained in any other material instrument to which
Bard is a party or by which Bard or its property may be bound, (d) do not,
and will not, violate any material law, regulation, order or decree
applicable to Bard, and (e) do not, and will not, with or without the
passage of time or the giving of notice, violate or result in a material
breach or default in, or acceleration of material obligations under, any
agreement or instrument to which Bard is a party or by which Bard or its
property may be bound. This Agreement and the other documents contemplated
hereby which are to be executed by Bard evidence the legal, valid and
binding obligations of Bard, enforceable in accordance with their
respective terms.
4.3 Title to Properties: Absences of Liens and Encumbrances.
-------------------
Except as set forth in Exhibit 4.3, Bard is the lawful owner of and has
good title to all the Subsidiary Shares and the tangible Assets and, to the
best of Bard's knowledge, all of the Assets are free and clear of any
liens, mortgages, pledges, conditional sales or other title retention
agreements, leases, charges or restrictions against transfer or assignment
and encumbrances of any kind whatsoever.
4.4 Legal Compliance. Bard has neither completed what it
----------------
considers to be adequate testing of the Device nor completed the necessary
documentation and analysis thereof. The Hospital is the "sponsor" of an IDE
with respect to the Device and has filed an IDE application with the FDA,
but Bard makes no representations as to the status of such IDE or whether
FDA approval of such IDE is or will continue to be in effect. Bard intends
to submit to FDA a Master File relating to Bard's development and testing
of the Device (the "Bard Master Filen); however, no such Bard Master File
will be submitted prior to the Closing. The Bard Master File will be Bard's
final reporting activity with respect to the Device. Bard
- 7 -
<PAGE>
shall provide Hospital with copies of all material filed in connection with
the Bard Master File pursuant to Section 2.3 of this Agreement.
4.5 No Consents Necessary. Except as set forth in Exhibit 4.5, no
--------------------- -----------
consent or approval of, or other action by, any governmental body or
agency, or any other person, firm or corporation, is required in order to
permit Bard to execute, deliver and perform this Agreement and the other
documents and agreements described herein or the transactions provided for
herein or therein.
4.6 Litigation Relating to Device. There is no litigation pending
-----------------------------
or to Bard's knowledge threatened against Bard in respect of or arising out
of the development or manufacture of the Device.
4.7 The Subsidiary.
--------------
(a) Subsidiary Shares. The authorized capital stock of the
-----------------
Subsidiary consists of 100,000 shares of Common Stock, $0.01 par value per
share, of which 100 shares are issued and outstanding, and 1000 shares of
Preferred Stock, of which no shares are issued and outstanding. The
Subsidiary Shares represent all of the issued and outstanding equity
securities of, and all of Bard's ownership interest in, the Subsidiary. The
Subsidiary Shares transferred pursuant to this Agreement are validly
issued, fully paid and nonassessable. No bonds, debentures, notes or other
indebtedness of the Subsidiary having the right to vote (or convertible
into securities having the right to vote) on any matters on which
stockholders of the Subsidiary may vote are issued or outstanding. There
are no options, warrants, calls, rights or agreements to which Bard or the
Subsidiary is a party or by which either Bard or the Subsidiary is bound
obligating the Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or obligating the
Subsidiary to grant, extend or enter into any such option, warrant, call,
right or agreement.
(b) Organization and Good Standing. The Subsidiary is a
------------------------------
corporation duly organized, validly existing and in good standing under the
laws of The Commonwealth of Massachusetts. The Subsidiary has full
corporate power necessary to own the assets now owned by it.
(c) Organizational Documents. Bard has heretofore made available
------------------------
to Hospital a true, complete and correct copy of the Articles of
Organization and By-laws of the Subsidiary. Such Articles of Organization
and By-laws are in full force and effect.
(d) Limited Activities. The Subsidiary has been organized by Bard
------------------
for the sole purpose of receiving and holding the Assets listed in Exhibit
2. l(f). With the exception of receiving such Assets, the Subsidiary has
engaged in no activities, has entered into no contracts or commitments and
is not bound by any liabilities, contingent or otherwise.
- 8 -
<PAGE>
4.8 No Misrepresentation. Neither this Agreement nor any written
--------------------
statement, report or other document furnished or to be furnished by Bard
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of
material fact by Bard or omits or will omit to state a material fact
necessary to make the statements contained therein by Bard not misleading.
ARTICLE V
Representations and Warranties of Hospital
------------------------------------------
Hospital represents and warrants to Bard as follows:
5.1 Organization: Good Standing. Hospital is a corporation duly
---------------------------
organized, validly existing, and in good standing under the laws of The
Commonwealth of Massachusetts. Hospital has full corporate power to own its
properties, to conduct its business as now conducted and to execute,
deliver and perform this Agreement and the other documents described herein
to be executed, delivered and performed by Hospital. Hospital is a
charitable corporation under Massachusetts law, is duly qualified and in
good standing as a charitable corporation under (S)501(c)(3) of the Code
and meets the description set forth in (S)170(b)(1)(A) of the Code.
5.2 Authorization. The execution, delivery and performance by
-------------
Hospital of this Agreement and the documents contemplated hereby which are
to be executed by Hospital at the Closing and consummation by Hospital of
the transactions contemplated hereby and thereby (a) have been duly
authorized by all necessary corporate action on the part of Hospital, (b)
do not, and will not, conflict with any of the provisions contained in the
articles of organization or by-laws of Hospital, (c) do not, and will not,
conflict with any of the provisions contained in any other material
instrument to which Hospital is a party or by which Hospital or its
property may be bound, (d) do not, and will not, violate any material law,
regulation, order or decree applicable to Hospital, and (e) do not, and
will not, with or without the passage of time or the giving of notice,
violate or result in a material breach or default in, or acceleration of
material obligations under, any agreement or instrument to which Hospital
is a party or by which Hospital or its property may be bound. This
Agreement and the other documents contemplated hereby which are to be
executed by Hospital evidence the legal, valid and binding obligations of
Hospital, enforceable in accordance with their respective terms.
5.3 Capability to Assess Suitability of Device for Implantation
-----------------------------------------------------------
in Human Subjects. Hospital, either directly or through its permitted
-----------------
assignees, transferees, or licensees, has available to it the resources,
staff and expertise necessary to finish development of and to assess the
suitability of the Device for implantation in human subjects.
5.4 Subsidiary Shares. (a) Hospital is acquiring the Subsidiary
-----------------
Shares for its own account and not with a view to, or
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<PAGE>
for sale in connection with, any distribution thereof within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"), nor with any
present intention of distributing the same; and Hospital has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness
or commitment providing for the distribution thereof. Hospital does intend
to transfer the Subsidiary Shares to an assignee, licensee or transferee
permitted under Section 10.17, subject to the receipt of representations
and warranties of such permitted assignee, licensee or transferee
equivalent to those set forth in this Section 5.4.
(b) Hospital understands that the Subsidiary Shares being
transferred hereby have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or any state securities law, by
--------------
reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act and such laws, and that they must be
held indefinitely unless they are subsequently registered under the
Securities Act and such laws or a subsequent disposition thereof is exempt
from registration. The certificate for the Subsidiary Shares shall bear a
legend to such effect.
5.5 No Consents Necessary. No consent or approval of, filing
---------------------
with, or other action by, any governmental body or agency, or any other
person, firm or corporation, is required in connection with the execution,
delivery and performance by the Hospital of this Agreement and the other
documents and agreements described herein or the transactions provided for
herein or therein.
5.6 No Misrepresentation. Neither this Agreement nor any written
--------------------
statement, report or other document furnished or to be furnished by
Hospital pursuant to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of
material fact or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
ARTICLE VI
Conditions Precedent To Closing
-------------------------------
6.1 Conditions to Obligations of Hospital. The obligations of Hospital to
-------------------------------------
complete the transactions provided for herein are subject to the
satisfaction or written waiver by Hospital as of the Closing of the
following conditions:
(a) The representations and warranties of Bard contained herein
shall be true and correct on and as of the Closing Date;
(b) All the terms, covenants and conditions of this Agreement and
the other documents to be executed by Bard to be complied with or performed
by Bard on or before the Closing Date shall have been duly complied with
and performed;
- 10 -
<PAGE>
(c) Bard shall have furnished to Hospital a certificate signed by
a duly authorized officer, dated as of the Closing Date, confirming the
matters set forth in subsections (a) and (b) above;
(d) Hospital shall have received an opinion of Foley, Hoag &
Eliot, special counsel to Bard, dated as of the Closing Date, substantially
in the form set forth in Exhibit 6.1(d) to this Agreement; and
--------------
(e) There shall not be any pending or threatened governmental
action or any proceeding by or before any court or governmental body or
agency which shall seek to restrain, pro hibit or invalidate the
transactions contemplated by this Agreement or which will materially limit
the right of Hospital to own, use or control the Assets after the Closing
Date.
6.2 Conditions to Obligations of Bard. The obligations of Bard to
---------------------------------
complete the transactions provided for herein are subject to the
satisfaction or written waiver by Bard as of the Closing of the following
conditions:
(a) Hospital's representations and warranties contained in this
Agreement shall be true and correct on and as of the Closing Date;
(b) All the terms, covenants and conditions of this Agreement and
the other documents to be executed by Hospital to be complied with or
performed by Hospital on or before the Closing Date shall have been duly
complied with and performed;
(c) Hospital shall have furnished to Bard a certificate signed by
the General Counsel of Hospital, dated as of the Closing Date, confirming
the matters set forth in subsections (a) and (b) above;
(d) Bard shall have received written confirmation from James
Lock, M.D. (a) to the effect that neither Bard nor any of its subsidiaries
or representatives have or will have any obligation pursuant to the Lock
Agreement and (b) confirming timely notice from Bard of (and consenting to)
Bard's assignment of certain of its rights under the Lock Agreement
pursuant to Section 14 thereof.
(e) Hospital and Bard shall have entered into the Indemnification
Agreement, and such agreement shall be in full force and effect;
(f) Hospital shall have provided to Bard, and Bard shall have
approved of, the documentation required under this Agreement (including the
documentation required by Section 10.17 hereof) or the Patent and Know-How
License Agreement in connection with its contemplated license, assignment
or transfer of certain of the Assets by Hospital to Inner Ventions, Inc., a
Delaware corporation;
(g) Bard shall have received an opinion of Testa, Hurwitz &
Thibeault, special counsel to Hospital, dated as of the Closing
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<PAGE>
Date, substantially in the form attached hereto as Exhibit 6.2(g); and
--------------
(h) Bard shall have received from Hospital the acknowledgment of
receipt of the Assets in the form required by Section 170(f)(8) of the
Code.
(i) There shall not be any pending or threatened governmental
action or any proceeding by or before any court or governmental body or
agency which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which will affect the right
of Bard to deduct the value of the Assets as a charitable contribution
after the Closing Date.
ARTICLE VII
Hospital's Acknowledgment of Development Status of Device
---------------------------------------------------------
7.1 Device Not Fully Tested. Hospital has been involved with Bard's
-----------------------
efforts to develop the Device, and also has had experience with Clamshell I
(the "Predecessor Device"). Hospital understands that neither the Device
nor the Predecessor Device has been fully tested or approved by Bard, and
that the Device has been designed to address certain design and performance
issues raised by, and improve results obtained by, the Predecessor Device.
Hospital understands that Bard has not completed what it considers to be
adequate testing of the Device, that further substantive development of the
Device will be required and that all testing, design and suitability
analysis shall be the sole responsibility of Hospital or its designee.
Representatives of Hospital and Bard have discussed various design and
material concerns that have been observed by Bard during the testing which
has been completed to date.
7.2 Limited Representations and Warranties By Bard as to Intellectual
-----------------------------------------------------------------
Property.
--------
(a) Prosecution of Occluder Patent Applications. The Occluder
Patent Applications have been filed and are presently pending. No patent
has yet been issued. No representation or warranty is made by Bard that any
patent will finally be issued with respect to the Occluder Patent
Applications. From and after the Closing Hospital shall have the sole and
exclusive responsibility, at its cost and expense, to prosecute the
Occluder Patent Applications.
(b) Infringement. Except as set forth on Exhibit 7.2, no person
or entity has claimed in writing to Bard that Bard is violating or
infringing or has violated or infringed any patent, license, trade name,
trademark, service mark, copyright, know-how, formula or other proprietary
right or trade secret of any third party relating to the Device or included
as part of the Assets, and Bard knows of no violation of any of the
foregoing.
- 12 -
<PAGE>
(c) Design. etc. No REPRESENTATIONS OR WARRANTIES ARE MADE AS TO
THE DEVELOPMENT, DESIGN, OR MANUFACTURE OF THE DEVICE. Hospital
specifically represents and confirms that it has the expertise to assess
all issues relating to the adequacy of the development, design and
manufacture of the Device, has been given the opportunity to do so, and has
done so to its satisfaction, or will do so before it implants any Device in
a human.
7.3 No Warranties as to Other Assets. All other Assets (including
--------------------------------
without limitation, supplies, machinery, equipment and fixtures) being
transferred to Hospital hereunder are transferred "As-Is" and WITHOUT
WARRANTY OF ANY K=D.
7.4 No Other Warranties. THE WARRANTIES MADE IN SECTIONS 4.3 AND 4.6
-------------------
AND THIS ARTICLE VII ARE THE SOLE WARRANTIES MADE BY BARD WITH RESPECT TO
THE ASSETS AND ARE MADE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, BY WAY OF EXAMPLE AND NOT LIMITATION, WARRANTIES OF
DESIGN, MERCHANTABILITY, AND OF FITNESS FOR A PARTICULAR PURPOSE.
7.5 Limitation of Liability. HOSPITAL HEREBY AGREES THAT UNDER NO
-----------------------
CIRCUMSTANCES SHALL HOSPITAL OR ANY ASSIGNEE, LICENSEE OR TRANSFEREE OF
HOSPITAL BE ENTITLED TO RECOVER FROM BARD ANY DAMAGES, WHETHER D]RECT,
INCIDENTAL, CONSEQUENT[AL, INDIRECT, SPECIAL OR PUNITIVE IN NATURE, WHETHER
BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE), OR ANY OTHER CAUSE OF
ACTION RELATING TO THE ASSETS, ANY DEVICE-RELATED PRODUCT, THE LICENSED
TECHNOLOGY, THE SUBSIDIARY SHARES OR ANY OTHER MATERIALS OR RIGHTS
TRANSFERRED OR GRANTED HEREUNDER' OR OTHERWISE RELATING TO THIS AGREEMENT,
EVEN IF BARD HAS BEEN INFORMED OR SHOULD KNOW OF THE POSSIBILITY OF SUCH
DAMAGES. HOSPITAL AGREES TO INCLUDE IN ALL AGREEMENTS WITH THIRD PARTIES TO
WHOM THE ASSETS OR ANY PORTION THEREOF MAY BE ASSIGNED, LICENSED OR
TRANSFERRED COVENANTS PURSUANT TO WHICH SUCH ASSIGNEES, LICENSES AND
TRANSFEREES CONFIRM AND AGREE THAT BARD SHALL HAVE NO LIABILITY FOR DAMAGES
WITH RESPECT TO THE ASSETS, ANY DEVICE-RELATED PRODUCT, THE LICENSED
TECHNOLOGY, THE SUBSIDIARY SHARES OR ANY OTHER MATERIALS OR RIGHTS
TRANSFERRED OR GRANTED HEREUNDER' OR OTHERWISE RELATING TO THIS AGREEMENT.
ARTICLE VIII
Indemnification and Insurance
-----------------------------
8.1 Execution of Indemnification Agreement. As a precondition to the
--------------------------------------
Closing, Bard and Hospital shall have entered into an Indemnification
Agreement substantially in the form of Exhibit 8.1 to this Agreement
-----------
providing, among other things, indemnification and insurance to Bard and
various other parties. Hospital confirms that this is the Transfer
Agreement referred to in the Indemnification Agreement, and Hospital
specifically confirms its understanding that its willingness to undertake
the obligations contained in the Indemnification Agreement will serve as an
inducement to Bard to transfer the Assets to Hospital.
- 13 -
<PAGE>
ARTICLE IX
Other Covenants and Agreements
------------------------------
9.1 Confidential Data. As used in this Agreement the term
-----------------
"Confidential Data" shall mean all data or information (whether in oral,
------------------
written or physical form) which (a) relates to the Device or either party
and was heretofore or is hereafter furnished by one party (the "Disclosing
----------
Party") to the other (the "Recipient"), and (b) is identified by the
----- ---------
Disclosing Party as being proprietary or confidential. Confidential Data
shall also include all analyses, compilations, studies or other documents,
whether prepared by Hospital or others, which contain or reflect such
information. The term "Confidential Data" shall not include information
which (i) was or becomes generally available to the public other than as a
result of a disclosure by the Recipient or its directors, officers,
employees, agents, or advisors, or (ii) is established by the Recipient to
have been known to the Recipient at the time of disclosure by the
Disclosing Party, or (iii) was or becomes available to the Recipient on a
non-confidential basis through a source other than the Disclosing Party or
its advisors, provided that such disclosure was not in violation of a
confidentiality agreement of which the Recipient has or had knowledge. The
Patent and Know-How License Agreement shall govern the confidentiality
obligations of the parties with respect to the Licensed Technology.
9.2 Non-Disclosure. Each party agrees for a period of four years
--------------
from the date of this Agreement to use such reasonable efforts to prevent
disclosure or publication of the Confidential Data of the other party as it
uses to protect its own proprietary data of similar type or value. For
purposes of this Agreement any and all data or information included in the
transferred Assets, including the Transferred Know-How, relating to the
Device and which was treated by Bard as confidential prior to the Closing
shall become, as of the Closing, Confidential Data of Hospital.
Notwithstanding the foregoing, Hospital agrees to treat as Confidential
Data of Bard any information or data included in the Assets that relates to
business operations of Bard conducted prior to the Closing.
9.3 Legal Process. In the event a Recipient is required by legal
-------------
process to disclose any of the Confidential Data, Recipient shall provide
the Disclosing Party with prompt notice of such requirement so that the
Disclosing Party may seek a protective order or other appropriate remedy or
waive compliance with the provisions of this Agreement relating to the
protection of Confidential Data. In the event that a protective order or
other remedy is obtained, the Recipient shall use all reasonable efforts to
assure that all Confidential Data will be covered by such order or other
remedy. If such protective order or other remedy is not obtained or the
Disclosing Party waives compliance with the provisions of this Agreement
relating to the protection of Confidential Data, The Recipient may disclose
that portion of the Confidential Data which the Recipient is legally
required to disclose without liability hereunder.
- 14 -
<PAGE>
9.4 Covenant of Further Assurances. Each party shall, at any time
------------------------------
and from time to time after the Closing Date, following the request of the
other party, execute, acknowledge, seal and deliver all such instruments
and documents, and do all such further things, as such other party may
reasonably request to carry out the purposes of this Agreement. Without
limiting the generality of the foregoing, Hospital agrees to provide to
Bard, from time to time as Bard in its discretion deems necessary,
reasonable access to all books, documents, records, specifications and
other technical data, design, development, testing, and quality control
records and all other written information transferred to Hospital pursuant
to this Agreement for any reason relating to ongoing regulatory compliance
or other legal or business requirements of Bard (it being understood that
the foregoing shall not constitute a license to Bard to manufacture
products with the transferred Assets).
9.5 Access to and Maintenance of Records. Hospital acknowledges
------------------------------------
that Bard is delivering to Hospital its original copies of various
documents, including documents described in Section 2.1, and understands
that it is essential, for purposes of regulatory compliance and other legal
obligations, for Bard to have continued access to the Assets which provide
a record of Bard's activities relating to the development and testing of
the Device. Hospital shall maintain, or shall cause its permitted assignee,
transferee or licensee to maintain, all books, documents, records,
specifications and other technical data, design, development, testing, and
quality control records and all other written information transferred to
Hospital pursuant to this Agreement in accordance with Good Laboratory
Practices as set forth by the FDA.
9.6 Defense of Claims and Litigation. At all times from and after
--------------------------------
the Closing Date, and without charge except for reimbursement of out-of-
pocket expenses, each party agrees to consult, confer and cooperate in good
faith on a reasonable basis with the other party (including the making
available of witnesses and cooperation in discovery proceedings) in the
conduct or defense of any claim, litigation or proceeding against said
other party by any third party which relates to any Device-Related Product
or any matter which, directly or indirectly, arises therefrom, whether
known at the Closing Date or arising thereafter. The foregoing
notwithstanding, to the extent the indemnification provisions of any other
agreement delivered in connection with the transactions contemplated hereby
apply to any such defense, they shall control as to the payment of costs
and expenses.
9.7 International Distribution and Marketing Rights. Hospital and
-----------------------------------------------
any assignee, licensee or transferee of Hospital under this Agreement shall
provide Bard with written notice describing the nature and scope of any
proposed marketing or commercial distribution of any Device-Related Product
outside the United States ("International Distribution"). Hospital shall
--------------------------
provide such notice no later than 60 days before the first of the following
to occur: (i) any International Distribution or (ii) the commencement of
negotiations with any third party relating to International Distribution.
Bard shall advise the party giving such notice within
- 15 -
<PAGE>
30 days as to whether Bard wishes to make a proposal with respect to
participation in such International Distribution. Bard shall submit a
proposal no later than 30 days after so advising the party giving notice
hereunder. Hospital and any assignee, licensee or transferee of Hospital
under this Agreement shall be obligated to give fair and open consideration
to the merits of any proposal Bard may submit with respect to International
Distribution, and shall not enter into any International Distribution, or
any agreement with any third party relating to International Distribution,
before having done so.
ARTICLE X
Miscellaneous
10.1 Survival of Representations and Warranties. No action shall
------------------------------------------
be brought by or on behalf of either party with respect to a breach of the
representations or warranties contained in this Agreement or made in
connection with the Closing after the date which is one year after the
Closing. The covenants and limitations of liability contained in this
Agreement, including but not limited to any covenants with respect to
indemnification, shall continue in effect notwithstanding such-limitation.
10.2 Brokerage. Bard represents to Hospital, and Hospital
---------
represents to Bard, that there has been no intermediary or broker in
negotiations or discussions incident to the execution of this Agreement.
The sole exception to the foregoing representations in this Section 10.2 is
that Hospital has retained Fletcher, Spaght, Inc., at Hospital's sole
expense, to advise it in connection with this Agreement and the Device.
10.3 Waivers and Amendments. (a) This Agreement may be amended,
----------------------
modified or supplemented, and any obligation hereunder may be waived, only
by a written instrument executed by the parties hereto. The waiver by any
party hereto of a breach of any provision of this Agreement shall not
operate as a waiver of any subsequent breach.
(b) No failure on the part of any party to exercise, and no delay
in exercising, any right or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or
remedy by such party preclude any other or further exercise thereof or the
exercise of any other right or remedy. All rights and remedies hereunder
are cumulative and are not exclusive of any other rights and remedies
provided by law.
10.4 Notices. All notices, requests, demands and other
-------
communications which are required or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if
delivered by hand or sent by registered or certified mail, return receipt
requested, postage prepaid (a) if to Bard, to C.R. Bard, Inc., 730 Central
Avenue, Murray Hill, New Jersey 07974, Attention: Richard A. Flink, Vice
President, General Counsel and Secretary, with a copy to Peter W. Coogan,
Foley, Hoag & Eliot, One
- 16 -
<PAGE>
Post Office Square, Boston, Massachusetts 02109; (b) if to Hospital, to
Children's Medical Center Corporation, 300 Longwood Avenue, Boston,
Massachusetts 02115, Attention: Stuart J. Novick, Vice President and
General Counsel; with a copy to William B. Asher, Jr., Testa, Hurwitz &
Thibeault, Exchange Place, 53 State Street, Boston, Massachusetts 02109; or
to such other address as Bard or Hospital shall have specified by notice in
writing to the other.
10.5 Expenses. Except as otherwise specifically set forth in this
--------
Agreement or any other document delivered in connection with the Closing,
each party hereto shall pay its own expenses in connection with the
transactions- contemplated hereby, whether or not they are completed.
10.6 Public Disclosure. The parties will consult with respect to
-----------------
the appropriate public disclosure to be made with respect to the
transactions contemplated hereby, and each party agrees that it will make
no such disclosure, including any disclosure or other use of the name or
identity of the other party, prior to such consultation and consent of the
other party, except as may be required by law or by any stock exchange
listing agreements and except as may be agreed upon between the parties in
writing from time to time. Without limiting the generality of the
foregoing, neither Hospital nor any permitted assignee, licensee or
transferee shall name Bard as a developer of any Device-Related Product, or
otherwise associate Bard with the Device, in connection with any marketing
or promotional activities of Hospital or such permitted assignee, licensee
or transferee; provided, however, that a permitted assignee, licensee or
transferee of Hospital may state in any offering memorandum or prospectus
used solely for the purpose of raising capital for the development, testing
and manufacture of Device-Related Products that certain technology upon
which such Device Related Products are based was acquired from Bard.
10.7 Confidentiality. If for any reason the transactions
---------------
contemplated hereby shall not become effective, all written disclosures and
other information and all copies of material from the books and records of
either party theretofore furnished to the other party shall be returned
promptly to the party furnishing the same. All provisions contained in this
Agreement relating to Confidential Data shall survive any termination of
this Agreement.
10.8 No Solicitation of Employees. Hospital agrees not to solicit
----------------------------
for hire any employee of Bard who is or was involved with the development
or production of the Device, without the prior written consent of Bard, for
a period of one year from the date of this Agreement.
10.9 Transfer Taxes. Hospital shall furnish and pay for all such
--------------
revenue or excise stamps, and pay all such transfer taxes, and all such
sales taxes as may by law be required to be furnished or paid in connection
with the transfer of the Assets provided for herein.
- 17 -
<PAGE>
10.10 Entire Agreement. This Agreement (including all Exhibits
----------------
hereto), the Patent and Know-How License Agreement and the other documents
executed pursuant to this Agreement constitute the entire agreement between
the parties hereto with respect to the transfer of the Assets to Hospital
by Bard and supersede all prior agreements and understandings, whether
written or oral, between the parties relating to the transfer of the Assets
to Hospital as provided herein.
10.11 Binding Nature. This Agreement shall inure to the benefit
--------------
of, and be binding upon, the parties hereto and their respective legal
representatives, successors and permitted assignees, licensees and
transferees.
10.12 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the substantive laws of The
Commonwealth of Massachusetts, without giving effect to its conflicts of
laws principles.
10.13 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
10.14 Exhibits. All Exhibits mentioned in this Agreement are
--------
incorporated in this Agreement and shall form an integral part hereof. All
capitalized terms defined in this Agreement which are used in any Exhibit
shall, unless the context otherwise requires, have the same meaning therein
as given herein.
10.15 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed to be an original and all of
which together shall be
deemed to be one and the same instrument.
10.16 Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
10.17 Assignment. (a) Hospital shall not assign, transfer or
----------
license any of its rights or delegate any of its obligations hereunder
without the written consent of Bard, except as expressly set forth herein.
Bard agrees to consent to a proposed assignment, transfer or license after
Hospital has demonstrated that the following conditions have been
satisfied:
(1) Hospital shall have confirmed in writing to Bard that the
proposed assignment, license or transfer shall not in any way diminish or
affect Hospital's obligations hereunder;
(2) The proposed assignee, transferee, or licensee shall have
agreed in a document, which by its terms shall be enforceable by and for
the benefit of Bard, to be bound by the affirmative
- 18 -
<PAGE>
covenants of Hospital (including the affirmative covenants to protect
Confidential Data) contained in this Agreement and by the limitations on
Bard's liability hereunder, and shall have confirmed in such document its
understanding of, and consent to, the limitations on Bard's representations
and warranties contained in this Agreement. The form and content of such
document shall be subject to approval by Bard;
(3) The proposed assignee, transferee or licensee shall have
submitted to Bard proof of insurance of the type required by the
Indemnification Agreement, and Bard, in its sole discretion, shall have
approved of the form of policy, extent of coverage, and the carrier
providing such coverage;
(4) The proposed assignee, transferee or licensee shall have
become a party to (and shall be in full compliance with) the
Indemnification Agreement as a Third Party Assignee, as that term is
defined in the Indemnification Agreement, and shall have executed a
counterpart of the Indemnification Agreement and delivered a copy of such
counterpart to Bard;
(5) The proposed assignee, transferee, or licensee shall have
satisfied the preconditions to assignment of license rights set forth in
the Patent and Know-How License Agreement.
(b) Hospital may provide in any such agreement of assignment,
license or transfer that the assignee, licensee or transferee shall be
deemed to be a third party beneficiary of the rights of Hospital and
obligations of Bard hereunder, with full rights of substitution to enforce
such rights and obligations.
10.18 Notices to Third Parties. Notwithstanding any other
------------------------
provision of this Agreement, Bard shall have fulfilled any and all
obligations with respect to providing notification under this Agreement by
providing such notification to Hospital, even if Hospital shall have
assigned, licensed or transferred some or all of its rights hereunder to
third parties.
10.19 Termination. This Agreement may be terminated by any party
-----------
hereto upon written notice to the other parties if the Closing has not
occurred prior to May 23, 1995.
*****************
- 19 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and
delivered this Agreement as an agreement under seal as of the date first
above written.
BARD:
C.R. BARD, INC.
By: /s/ Richard Thomas
---------------------------------------
Its Group Vice President
HOSPITAL:
CHILDREN'S MEDICAL CENTER CORPORATION
By: _______________________
Its _______________________
- 20 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement as an agreement under seal as of the date first above
written.
BARD:
C.R. BARD, INC.
By: _________________________________
Its __________________________________
HOSPITAL:
CHILDREN'S MEDICAL CENTER CORPORATION
By: /s/ Stuart Novick
----------------------------------
Its Vice President and General Counsel
- 21 -
<PAGE>
EXHIBIT 10.13
STOCK TRANSFER AGREEMENT
------------------------
STOCK TRANSFER AGREEMENT (the "Agreement") dated as of June 19, 1995
between Children's Medical Center Corporation, a Massachusetts corporation
("Hospital") and InnerVentions, Inc., a Delaware corporation ("Transferee").
WHEREAS, Clamshell Asset Corp., a Massachusetts corporation all of the
outstanding capital stock of which is held by Hospital ("Clamshell"), owns
various tangible asses used in the development, testing and manufacture of the
Device, as hereinafter defined; and
WHEREAS, Hospital desires to develop a source of supplies of the Device and
wishes to enable a third party to complete the development and testing of, and
take such actions as may be necessary to receive required approvals for, the
Device and to manufacture the Device; and
WHEREAS, Transferee desires to complete the development and testing of, and
take such further actions as may be necessary to receive required approvals for
the Device, and to manufacture the Device; and
WHEREAS, Hospital is prepared to transfer all of the issued and outstanding
equity of Clamshell and certain trademark rights, and to license to Transferee
the rights and licenses necessary to complete the development and testing of and
to manufacture the Device;
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties agree as follows:
1. Definitions. For the purposes of this Agreement, the terms listed
-----------
below shall have the following meanings:
(a) "Assets" shall mean all those assets, both tangible and
------
intangible, transferred by Bard to Hospital as described in the Asset Agreement.
(b) "Asset Agreement" shall mean that certain Asset and Technology
---------------
Donation and Transfer Agreement between Hospital and Bard, dated as of May 12,
1995.
(c) "Bard" shall mean C.R. Bard, Inc., a New Jersey corporation.
----
(d) "Clamshell" shall have the meaning set forth in the WHEREAS
---------
clauses of this Agreement.
(e) "Clamshell II Septal Occluder" or "Occluder" shall mean that
---------------------------- --------
certain medical device being developed for the repair of atrial septal defects
which is described in Exhibit 1.1(c) to the Asset Agreement.
--------------
<PAGE>
(f) "Closing" shall have the meaning set forth in Section 3(a) of this
-------
Agreement.
(g) "Closing Date" shall have the meaning set forth in Section 3(a) of
------------
this Agreement.
(h) "Delivery System" shall mean that certain device which is
---------------
described in Exhibit 1.1(h) to the Asset Agreement.
---------------
(i) "Device" shall mean the Clamshell II Septal Occluder and the
------
Delivery System.
(j) "Device-Related Product" shall mean each of the Device, any
----------------------
individual component or part of the Device, and any and all successor or
derivative products to or of the Device or any such component or part.
(k) "Future Assignees" shall mean any other party to whom a Third
----------------
Party Assignee assigns, licenses or transfers the Assets or any portion thereof
or any Licensed Technology.
(l) "Hospital" shall have the meaning set forth in the introductory
--------
paragraph of this Agreement.
(m) "Indemnification Agreement" shall mean that certain
-------------------------
Indemnification Agreement between Hospital and Bard, dated as of May 12, 1995.
(n) "Indemnified Parties" shall have the meaning set forth in Section
-------------------
8(a) of this Agreement.
(o) "License Agreements" shall mean that certain License Agreement and
------------------
Sublicense Agreement each dated as of the date hereof which are being executed
simultaneously with this Agreement by Hospital and Transferee.
(p) "Licensed Delivery System Know-How" shall have the meaning defined
---------------------------------
in the Patent and Know-How License Agreement.
(q) "Licensed Occluder Know-How" shall have the meaning defined in the
--------------------------
Patent and Know-How License Agreement.
(r) "Licensed Patent" shall have the meaning defined in the Patent and
---------------
Know-How License Agreement.
(s) "Licensed Technology" shall mean the Licensed Delivery System
-------------------
Know-How, the Licensed Occluder Know-How, and the Licensed Patents.
- 2 -
<PAGE>
(t) "Patent and Know-How License Agreement" shall mean that certain
-------------------------------------
Patent and Know-How License Agreement between Hospital and Bard, dated as of
June 19, 1995.
(u) "Stock" shall have the meaning set forth in Section 2(a) of this
-----
Agreement.
(v) "Third Party Indemnification" shall have the meaning set forth in
---------------------------
Section 10 of this Agreement.
(w) "Third Party Assignee" shall have the meaning set forth in Section
--------------------
10 of this Agreement.
(x) "Trademark" shall have the meaning set forth in Section 2(a) of
---------
this Agreement.
(y) "Transferee" shall have the meaning set forth in the introductory
----------
paragraph of this Agreement.
(z) "Transferee Indemnified Losses" shall have the meaning set forth
-----------------------------
in Section 8(b) of this Agreement.
(aa) "Transferred Assets" shall mean the Stock and the Trademark.
------------------
(bb) "Transferred Know-How" shall have the meaning set forth in the
--------------------
Asset Agreement.
2. Transfer of the Transferred Assets.
----------------------------------
(a) Stock. Subject to the terms and conditions hereof, and upon the
-----
representations, warranties and agreements contained herein, Hospital shall
transfer and assign to Transferee, and Transferee shall accept and acquire from
Hospital, on the Closing Date:
(i) 100 shares of Common Stock, $0.01 par value, of Clamshell (the
"Stock"), which Stock represents all of the issued and outstanding capital stock
of, and all of Hospital's ownership interest in, Clamshell; and
(ii) all rights with respect to those trademarks and trademark
applications relating to the Device and listed on Schedule 2.1(a) (the
"Trademark"), together with the related goodwill.
(b) Grant of Licenses. Hospital and Transferee are executing
-----------------
simultaneously with the execution of this Agreement the License Agreements in
substantially the form as attached hereto as Exhibit 2.1(b) and Exhibit 2.1(c).
-------------- --------------
- 3 -
<PAGE>
(c) The transfer of the Transferred Assets to the Transferee on the
Closing Date shall be effected by assignments and such other instruments of
transfer as shall transfer to Transferee all of the Hospital's interests in the
Transferred Assets.
3. The Closing.
-----------
(a) Closing. The transfer and assignment of the Transferred Assets
-------
(the "Closing") shall be held at the offices of Testa, Hurwitz & Thibeault,
Exchange Place, 53 State Street, Boston, Massachusetts 02109 on June 19, 1995
(the "Closing Date"), or at any other time and place to which Hospital and
Transferee may mutually agree.
(b) Deliveries by Hospital at Closing. At the Closing, and upon
---------------------------------
execution and delivery of this Agreement, Hospital shall deliver to Transferee a
certificate or certificates representing the Stock, those assignments and
instruments of transfer described in Section 2(c), and those instruments,
documents and certificates described in Section 7 hereof.
(c) Deliveries by Transferee at Closing. At the Closing, Transferee
-----------------------------------
shall deliver to Hospital those instruments, documents and certificates
described in Section 6 hereof.
4. Representations and Warranties of Hospital. In connection with the
------------------------------------------
transfer and assignment of the Stock hereunder to Transferee, Hospital
represents, warrants and agrees as follows:
(a) Organization; Good Standing. Hospital is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts with corporate power to execute and deliver, and
perform its obligations under, this Agreement, the License Agreements and the
other documents described herein to be executed, delivered and performed by
Hospital.
(b) Authorization. The execution, delivery and performance by
-------------
Hospital of this Agreement, the License Agreements and the documents
contemplated hereby which are to be executed by Hospital at the Closing and
consummation by Hospital of the transactions contemplated hereby and thereby (i)
have been duly authorized by all necessary corporate action on the part of
Hospital, (ii) do not, and will not, conflict with any of the provisions
contained in the certificate of incorporation or by-laws of Hospital, (iii) do
not, and will not, conflict with any of the provisions contained in any other
material instrument to which Hospital is a party or by which Hospital or its
property may be bound, (iv) do not, and will not, violate any material law,
regulation, order or decree applicable to Hospital, and (v) do not, and will
not, with or without the passage of time or the giving of notice, violate or
result in a material breach or default in, or acceleration of material
obligations under, any agreement or instrument to which Hospital is a party or
by which Hospital or its property may be bound. This Agreement, the License
Agreements and the other documents contemplated hereby which are to be executed
by Hospital evidence the legal, valid and binding obligations of Hospital,
enforceable in accordance with their respective terms.
- 4 -
<PAGE>
(c) Technology. To the best knowledge of Hospital's Office of
----------
Technology Transfer, the Patent Rights and Know-How, as such terms are defined
in the License Agreement, together with the rights sublicensed to Transferee
under the Sublicense Agreement, include all technology, patent rights and know-
how owned or controlled by Hospital relating to the Occluder and the Delivery
System.
(d) Other Information. To the best knowledge of Hospital's Office of
-----------------
Technology Transfer, neither this Agreement nor the License Agreements contain
any untrue statement of material fact by Hospital or omit to state a material
fact necessary to make the statements contained therein by Hospital not
misleading. In no event, however, shall Hospital be deemed to make any
representation or warranty concerning the accuracy, completeness, sufficiency or
otherwise with respect to any documents, records, papers, data or other
information obtained by Hospital pursuant to the Asset Agreement, and by its
acceptance hereof, Transferee acknowledges and agrees that it has not relied
upon any such representation or warranty in entering into or performing this
Agreement or the License Agreements.
5. Representations and Warranties of Transferee. In connection with the
--------------------------------------------
transfer and assignment of the Stock hereunder from Hospital, Transferee
represents, warrants and agrees as follows:
(a) Organization; Good Standing. Transferee is a corporation duly
---------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware with full corporate power to execute and deliver, and perform its
obligations under, this Agreement, the License Agreements and the other
documents described herein to be executed, delivered and performed by
Transferee.
(b) Authorization. The execution, delivery and performance by
-------------
Transferee of this Agreement, the License Agreements and the other documents
contemplated hereby which are to be executed by Transferee at the Closing and
consummation by Transferee of the transactions contemplated hereby and thereby
(i) have been duly authorized by all necessary corporate action on the part of
Transferee, (ii) do not, and will not, conflict with any of the provisions
contained in the certificate of incorporation or by-laws of Transferee, (iii) do
not, and will not, conflict with any of the provisions contained in any other
material instrument to which Transferee is a party or by which Transferee or its
property may be bound, (iv) do not, and will not, violate any material law,
regulation, order or decree applicable to Transferee, and (v) do not, and will
not, with or without the passage of time or the giving of notice, violate or
result in a material breach or default in, or acceleration of material
obligations under, any agreement or instrument to which Transferee is a party or
by which Transferee or its property may be bound. This Agreement, the License
Agreements and the other documents contemplated hereby which are to be executed
by Transferee evidence the legal, valid and binding obligations of Transferee,
enforceable in accordance with their respective terms.
(c) Stock.
-----
- 5 -
<PAGE>
(i) Transferee is acquiring the Stock for its own account and not with
a view to, or for sale in connection with, any distribution thereof, nor with
any present intention of distributing the same; and Transferee has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for the distribution thereof.
(ii) Transferee understands that the Stock being transferred hereby
has not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law, by reason of its issuance in a
transaction exempt from the registration requirements of the Securities Act and
such laws, and that it must be held indefinitely unless it is subsequently
registered under the Securities Act and such laws or a subsequent disposition
thereof is exempt from registration. The certificate for the Stock shall bear a
legend to such effect.
(d) Capability to Assess Suitability of Device for Implantation in
--------------------------------------------------------------
Human Subjects. Transferee is capable of assessing the suitability of the
- --------------
Device for implantation in human subjects and intends to diligently take steps
toward the procurement of the resources, staff and expertise necessary to finish
development of the Device, in accordance with the terms and provisions of the
License Agreements.
(e) Other Information. Neither this Agreement, the License Agreements
-----------------
nor any written statement, report or other document furnished or to be furnished
by Transferee pursuant to this Agreement, the License Agreements or in
connection with the transactions contemplated hereby or thereby contains or will
contain any untrue statement of material fact by Transferee or omits or will
omit to state a material fact necessary to make the statements contained therein
by Transferee not misleading.
6. Conditions Precedent to the Obligations of Hospital. The obligations
---------------------------------------------------
of Hospital to complete the transactions provided for herein are subject to the
satisfaction or written waiver by Hospital as of the Closing of the following
conditions:
(a) The representations and warranties of Transferee contained herein
shall be true and correct on and as of the Closing Date;
(b) All the terms, covenants and conditions of this Agreement and the
other documents to be executed by Transferee to be complied with or performed by
Transferee on or before the Closing Date shall have been duly complied with and
performed;
(c) Transferee shall have furnished to Hospital a certificate signed
by an executive officer, dated as of the Closing Date, confirming the matters
set forth in subsections (a) and (b) above;
(d) Hospital shall have received an opinion of Palmer & Dodge; special
counsel to Transferee, dated as of the Closing Date, substantially in the form
set forth in Exhibit 6.1 to this Agreement;
-----------
- 6 -
<PAGE>
(e) Hospital shall have received copies of the following documents:
(i) Transferee's certificate of incorporation, as amended, certified as of a
recent date by the Secretary of State of the State of Delaware; (ii) a
certificate of said Secretary of State dated as of a recent date as to the due
incorporation and good standing of Transferee; and (iii) a certificate of the
Secretary or an Assistant Secretary of Transferee dated the Closing Date and
certifying: (A) that attached thereto is a true and complete copy of the by-laws
of Transferee; and (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors of Transferee authorizing the
execution, delivery and performance of this Agreement, the License Agreements,
and all transactions contemplated hereby or thereby;
(f) Transferee shall have executed and delivered the License
Agreements in substantially the form attached hereto as Exhibit 2.1(b) and
--------------
Exhibit 2.1(c);
- --------------
(g) Hospital shall have received the written consent of Bard to this
Agreement, the License Agreements, and the transactions contemplated hereby and
thereby;
(h) Transferee shall have become a party to (and shall be in full
compliance with) the Indemnification Agreement as a Third Party Assignee, as
that term is defined in the Indemnification Agreement, and shall have executed
and delivered an Agreement to Become Party to Indemnification Agreement to
Hospital and Bard;
(i) Transferee shall have submitted to Hospital and Bard proof of
insurance of the type required by the Indemnification Agreement and Section 9
hereunder, and Hospital and Bard shall have approved of the form of policy,
extent of coverage, and the carrier providing such coverage;
(j) There shall not be any pending or threatened governmental action
or any proceeding by or before any court or governmental body or agency which
shall seek to restrain, prohibit or invalidate the transactions contemplated by
this Agreement.
7. Conditions Precedent to the Obligations of Transferee. The obligations
-----------------------------------------------------
of Transferee to complete the transactions provided for herein are subject to
the satisfaction or written waiver by Transferee as of the Closing of the
following conditions:
(a) The representations and warranties of Hospital contained herein
shall be true and correct on and as of the Closing Date;
(b) All the terms, covenants and conditions of this Agreement and the
other documents to be executed by Hospital to be complied with or performed by
Hospital on or before the Closing Date shall have been duly complied with and
performed;
(c) Hospital shall have furnished to Transferee a certificate signed
by the General Counsel of Hospital, dated as of the Closing Date, confirming the
matters set forth in subsections (a) and (b) above;
- 7 -
<PAGE>
(d) Transferee shall have received an opinion of Testa, Hurwitz &
Thibeault, special counsel to Hospital, dated as of the Closing Date,
substantially in the form set forth in Exhibit 7.1 to this Agreement;
-----------
(e) Hospital shall have executed and delivered the License Agreements;
and
(f) There shall not be any pending or threatened governmental action
or any proceeding by or before any court or governmental body or agency which
shall seek to restrain, prohibit or invalidate the transactions contemplated by
this Agreement.
8. Indemnification by Transferee.
-----------------------------
(a) Transferee agrees to defend, indemnify and hold Hospital, is
subsidiaries, and each of is officers, trustees, directors, medical and
professional staff, employees, agents and representatives (collectively, the
"Indemnified Parties") harmless from and against any "Transferee Indemnified
Losses" as defined herein.
(b) The term "Transferee Indemnified Losses" shall mean and include
all loss, liability, damage, or expense (including reasonable attorneys' fees,
whether or not litigation be commenced, and costs of any government required
investigation, documentation or product recall program) suffered or incurred
from and after the Closing and in any way relating, directly or indirectly, to
any claim (including claims of product liability and personal injury, whether
brought in the form of tort, warranty or strict liability) or proceeding (i)
with respect to any of the Assets, any Device-Related Product, the Transferred
Assets or any Licensed Technology or (ii) relating to or arising out of the
design, manufacture, sale or use of any Device-Related Product (including any
Licensed Product or Licensed Process) made, used or sold pursuant to any right
or license granted under this Agreement or the License Agreements.
(c) Transferee's indemnification under (a) and (b) above shall not
apply to any liability, damage, loss or expense to the extent that it is
directly attributable to the negligent activities, reckless misconduct or
intentional misconduct of the Indemnified Parties.
(d) All indemnification payments required to be made pursuant to this
Section 8, including, without limitation, reimbursement for expenses incurred in
connection with the defense of third party actions (whether prior to or
following final disposition of any such action), shall be paid within thirty
(30) days of demand therefor.
(e) Transferee shall inform Hospital promptly of any data concerning
itself which Hospital may from time to time reasonably request.
(f) Transferee agrees, at its own expense, to provide attorneys
reasonably acceptable to Hospital to defend against any actions brought or filed
against any party indemnified hereunder with respect to the subject of indemnity
contained herein, whether or not such actions are rightfully brought.
- 8 -
<PAGE>
(g) Transferee hereby covenants to Hospital that Transferee will
comply with its obligations under the Indemnification Agreement including, but
not limited to, its obligations pursuant to Sections 3.1 and 3.2 thereof.
(h) This Section 8 shall survive expiration or termination of this
Agreement.
9. Maintenance of Adequate Insurance.
----------------------------------
(a) Transferee shall procure and maintain for the benefit of Hospital
at its expense insurance in accordance with the provisions of Section 3.2 of the
Indemnification Agreement, except that such commercial general liability
insurance will name the Indemnified Parties as additional insureds. Any
applicable insurance maintained by Hospital will be excess and non-contributing.
The minimum amounts of insurance required to be carried by this Section 9 shall
not be construed to create a limit on Transferee's liability with respect to its
indemnification under Section 8 of this Agreement.
(b) Transferee will provide Hospital with written evidence of such
insurance as a precondition to its entering into any agreement relating to any
of the Assets or the Licensed Technology and upon request from time to time, and
will provide Hospital with written notice at least forty-five (45) days prior to
any cancellation or non-renewal of, or reduction in coverage in, such insurance.
Moreover, Transferee will provide Hospital with written notice at least fifteen
(15) days prior to a material change in such insurance. If Transferee does not
obtain replacement insurance providing comparable coverage within such forty-
five (45) or fifteen (15) day period, respectively, Hospital shall have the
right to terminate this Agreement and the License Agreements effective at the
end of such forty-five (45) or fifteen (15) day period, respectively, without
notice of any additional waiting period. If such insurance is canceled or not
renewed, Transferee agrees to procure extended reporting period coverage. Such
coverage shall extend for a period of at least five (5) years after such
cancellation or non-renewal.
This Section 9 shall survive expiration or termination of this Agreement.
10. Obligations of Third Parties. Transferee agrees to cause each third
----------------------------
party to whom Transferee assigns, licenses or transfers the Assets or any
portion thereof or any Licensed Technology ("Third Party Assignee") to become a
party to the Indemnification Agreement and to undertake the obligations set
forth in Sections 8 and 9 of this Agreement. In addition, Transferee will
require as a condition of its granting any consent to any assignment, license,
sublicense, or transfer of the Assets or any portion thereof or any Licensed
Technology by any Third Party Assignee to any Future Assignee that such Future
Assignee become a party to the Indemnification Agreement and undertake the
obligations set forth in Sections 8 and 9 of this Agreement.
11. Consent to Limitations on Warranties. Transferee has reviewed the
------------------------------------
Asset Agreement, and understands, acknowledges and consents to the limitations
and disclosure set forth in Article VII and Section 2.5, as well as the
limitations on Bard's representations and
- 9 -
<PAGE>
warranties contained in the Asset Agreement. Transferee further understands
that the warranties made in Section 4 of this Agreement are the sole warranties
made by Hospital in connection with this Agreement, the License Agreements, the
Stock, the Assets, any Device Related Product or any Licensed Technology, and
are made in lieu of all other warranties, express or implied.
12. Option. If Transferee, a Third Party Assignee or a Future Assignee
------
breaches a material term or condition of this Agreement, the License Agreements
or any sublicense agreement thereunder resulting in the termination of the
License Agreements:
(a) Hospital shall have the option to purchase all the assets owned by
Clamshell as of the Closing Date for the exercise price of $1.00, and all the
other assets relating to the development, testing and manufacture of the Device
or Device-Related Products which Clamshell and/or Transferee has acquired
subsequent to the Closing Date, and which are dependent in whole or in part upon
the rights licensed to Transferee pursuant to the License Agreements, for an
exercise price equal to the fair market value of such assets. For purposes of
this Section 11(a), fair market value shall be determined on an independent
basis with no value being attributed to the Licensed Technology; and
(b) Transferee shall assign to Hospital all rights with respect to the
Trademark, together with the related goodwill.
This option is not transferable or assignable by Hospital and may be
exercised by a written notice to Transferee which states the election to
exercise this option
13. Other Covenants and Agreements.
------------------------------
(a) Affirmative Covenants. Transferee agrees, such agreement to be
---------------------
enforceable by and for the benefit of Bard, to be bound by the affirmative
covenants of Hospital (including the affirmative covenant to protect
Confidential Data as defined in the Asset Agreement) contained in the Asset
Agreement and by the limitations on the liability of Bard thereunder.
(b) Records. Transferee shall permit Hospital and Bard to have
-------
reasonable access to, and to make copies of the originals of, documents
described in Sections 2.1(c), 2.3 and 2.5 of the Asset Agreement to the extent
Hospital or Bard may be required to have access to such originals for any reason
relating to the business of Hospital or Bard, respectively. Transferee agrees
that it shall maintain all books, documents, records, specifications, and other
technical data, design, development, testing, and quality control records and
all other written information transferred to Transferee pursuant to this
Agreement and the License Agreement in accordance with Good Laboratory
Practices, as established by the United States Food and Drug Administration.
- 10 -
<PAGE>
(c) Confidential Data.
-----------------
(i) As used in this Agreement the term "Confidential Data" shall mean
any information or data included in the Assets that relates to business
operations of Bard conducted prior to the Closing. The License Agreements shall
govern the confidentiality obligations of the parties with respect to the
Licensed Patent, the Licensed Delivery System Know-How, the Licensed Occluder
Know-How and the Transferred Know-How. Confidential Data shall also include all
analyses, compilations, studies or other documents, whether prepared by
Transferee or others, which contain or reflect such information. The term
"Confidential Data" shall not include information which (A) was or becomes
generally available to the public other than as a result of a disclosure by
Transferee or its directors, officers, employees, agents, or advisors, or (B) is
established by Transferee to have been known to Transferee at the time of the
transfer of the Assets, or (C) was or becomes available to Transferee on a non-
confidential basis through a source other than Bard or its advisors, provided
that such disclosure was not in violation of a confidentiality agreement of
which Transferee has or had knowledge.
(ii) Each party agrees for a period of four years from the date of
this Agreement to use such reasonable efforts to prevent disclosure or
publications of the Confidential Data as it uses to protect its own proprietary
data of similar type or value.
(iii) In the event Transferee is required by legal process to disclose
any of the Confidential Data, Transferee shall provide Bard with prompt notice
of such requirement so that Bard may seek a protective order or other
appropriate remedy or waive compliance with the provisions of this Agreement
relating to the protection of Confidential Data. In the event that a protective
order or other remedy is obtained, Transferee shall use all reasonable efforts
to assure that all Confidential Data will be covered by such order or other
remedy. If such protective order or other remedy is not obtained or Bard waives
compliance with the provisions of this Agreement relating to the protection of
Confidential Data, Transferee may disclose that portion of the Confidential Data
which Transferee is legally required to disclose without liability hereunder.
(d) International Distribution and Marketing Rights. Transferee, and
-----------------------------------------------
any assignee, licensee or transferee of Transferee under this Agreement, shall
provide Bard with written notice describing the nature and scope of any proposed
marketing or commercial distribution of any Device-Related Products outside the
United States ("International Distribution"). Transferee, or any such assignee,
--------------------------
licensee or transferee, shall provide such notice no later than 60 days before
the first of the following to occur: (i) any International Distribution of
Device-Related Products or (ii) the commencement of negotiations with any third
party relating to International Distribution of Device-Related Products. Bard
shall advise the party giving such notice within 30 days as to whether it wishes
to make a proposal with respect to participation in such International
Distribution. Bard shall submit a proposal no later than 30 days after so
advising the party giving notice hereunder. Transferee, and any assignee,
licensee or transferee of Transferee under this Agreement, shall be obligated to
give fair and open consideration to the merits of any proposal Bard may submit
with respect to International
- 11 -
<PAGE>
Distribution, and shall not enter into any International Distribution, or any
agreement with any third party relating to International Distribution, before
having done so.
(e) Limitation of Liability. Transferee hereby agrees that under no
-----------------------
circumstances shall Transferee, any assignee, licensee or transferee of
Transferee be entitled to recover from Hospital any damages, whether direct,
incidental, consequential, indirect, special or punitive in nature, whether
based on contract, tort (including negligence), or any other cause of action
relating to the Assets, including without limitation any Device-Related Product,
the Licensed Technology, the Transferred Assets or any other materials or rights
transferred or granted hereunder or pursuant to the License Agreements, or
otherwise relating to this Agreement or the License Agreements, even if Hospital
has been informed or should know of the possibility of such damages. Transferee
agrees to include in all agreements with third parties to whom the Assets or any
portion thereof or the Licensed Technology may be assigned, licensed or
transferred covenants pursuant to which such assignees, licenses and transferees
confirm and agree that Hospital shall have no liability with respect to the
Assets, including without limitation any Device-Related Product, the Licensed
Technology, the Transferred Assets or any other materials or rights transferred
or granted hereunder or pursuant to the License Agreements, or otherwise
relating to this Agreement or the License Agreements.
(f) Third Party Beneficiary Rights. Hospital hereby agrees that
------------------------------
Transferee shall be deemed to be a third party beneficiary of the rights of
Hospital and obligations of Bard under the Asset Agreement, including the
representations and warranties of Bard under the Asset Agreement, with full
rights of substitution to enforce such rights and obligations.
14. Miscellaneous.
-------------
(a) Survival of Representations and Warranties. No action shall be
------------------------------------------
brought by or on behalf of either party with respect to a breach of the
representations or warranties contained in this Agreement or made in connection
with the Closing after the date which is one year after the Closing. The
covenants and limitations of liability contained herein, including but not
limited to the covenants with respect to indemnification and insurance set forth
in Sections 8 through 10, shall continue in effect notwithstanding such
limitation.
(b) Waivers and Amendments.
----------------------
(i) This Agreement may be amended, modified or supplemented, and any
obligation hereunder may be waived, only by a written instrument executed by the
parties hereto. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate as a waiver of any subsequent breach.
(ii) No failure on the part of any party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right or remedy. All rights and remedies
- 12 -
<PAGE>
hereunder are cumulative and are not exclusive of any other rights and remedies
provided by law.
(c) Notices. All notices, requests, demands and other communications
-------
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered by hand or sent by
registered or certified mail, return receipt requested, postage prepaid (i) if
to Hospital, to Children's Medical Center Corporation, 300 Longwood Avenue,
Boston, Massachusetts 02115, Attention: Stuart J. Novick, Vice President and
General Counsel; with a copy to William B. Asher, Jr., Testa, Hurwitz &
Thibeault, Exchange Place, 53 State Street, Boston, Massachusetts 02109; (ii) if
to Transferee, to InnerVentions, Inc., 222 Berkeley Street, Boston,
Massachusetts 02116-3761, Attention: David A. Chazanovitz, with a copy to
Michael Lytton, Palmer & Dodge, One Beacon Street, Boston, Massachusetts 02108;
or to such other address as Hospital or Transferee shall have specified by
notice in writing to the other.
(d) Expenses. Except as otherwise specifically set forth in this
--------
Agreement or any other document delivered in connection with the Closing, each
party hereto shall pay its own expenses in connection with the transactions
contemplated hereby, whether or not they are completed.
(e) Public Disclosure. The parties will consult with respect to the
-----------------
appropriate public disclosure to be made with respect to the transactions
contemplated hereby, and will make no such disclosure, including any disclosure
or other use of the name or identity of the other party, prior to such
consultation and consent of the other party, except as may be required by law or
by any stock exchange listing agreements and except as may be agreed upon
between the parties in writing from time to time. Without limiting the
generality of the foregoing, Transferee shall not name Hospital or Bard as a
developer of any Device-Related Product, or otherwise associate Hospital or Bard
with any Device-Related Product, in connection with any marketing or promotional
activities of Transferee; provided, however, that Transferee may state in an
offering memorandum or prospectus used solely for the purpose of raising capital
for the development, testing and manufacture of Device-Related Products that
certain technology upon which such Device-Related Products are based was
acquired from Hospital and Bard.
(f) Confidentiality. If for any reason the transactions contemplated
---------------
hereby shall not become effective, all written disclosures and other information
and all copies of material from the books and records of either party
theretofore furnished to the other party shall be returned promptly to the party
furnishing the same. All provisions contained in this Agreement relating to
Confidential Data shall survive any termination of this Agreement.
(g) Entire Agreement. This Agreement (including all Exhibits hereto),
----------------
the License Agreements and the other documents executed pursuant hereto or
thereto constitute the entire agreement between the parties hereto with respect
to the transfer of the Transferred Assets and Licensed Technology to Transferee
by Hospital and supercede all prior agreements
- 13 -
<PAGE>
and understandings, whether written or oral, between the parties relating to the
subject of these agreements.
(h) Binding Nature. This Agreement shall inure to the benefit of, and
--------------
be binding upon, the parties hereto and their respective legal representatives,
successors and permitted assignees, licensees and transferees and shall be
enforceable by and for the benefit of Bard.
(i) Governing Law. This Agreement shall be governed by, and construed
-------------
and enforced in accordance with, the substantive laws of the Commonwealth of
Massachusetts, without giving effect to its conflicts of laws principles.
(j) Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
(k) Exhibits. All Exhibits mentioned in this Agreement are
--------
incorporated in this Agreement and shall form an integral part hereof. All
capitalized terms defined in this Agreement which are used in any Exhibit shall,
unless the context otherwise requires, have the same meaning therein as given
herein.
(l) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
(m) Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(n) Assignment. Hospital may assign this Agreement and the License
----------
Agreements at any time to any corporate affiliate of Hospital without the prior
consent of Transferee. Transferee shall not assign, transfer or license any of
its rights or delegate any of its obligations hereunder or pursuant to the
License Agreements without the written consent of Hospital, except as expressly
set forth herein, and any attempt to do so shall be void. Hospital agrees to
consent to a proposed assignment, transfer or license after Transferee has
demonstrated that the following pre-conditions have been satisfied:
(i) Transferee shall have confirmed in writing to Hospital that the
proposed assignment, license or transfer shall not in any way diminish or affect
Transferee's obligations hereunder and under the License Agreements;
(ii) The proposed transferee, licensee or assignee shall have agreed
in a document, which by its terms shall be enforceable by and for the benefit of
Bard and Hospital, to be bound by the affirmative covenants of Transferee
contained in this Agreement and the License Agreements and by the limitations on
Hospital's liability hereunder and
- 14 -
<PAGE>
thereunder, and to be bound by the affirmative covenants of Hospital (including
the affirmative covenants to protect Confidential Data) contained in the Asset
Agreement and by the limitations on Bard's liability thereunder. Moreover, the
proposed transferee, licensee or assignee shall have confirmed in such document
its understanding of, and consent to, the limitations on Hospital's
representations and warranties contained in this Agreement and on Bard's
representations and warranties contained in the Asset Agreement. The form and
content of such document shall be subject to approval by Hospital;
(iii) The proposed transferee, licensee or assignee shall have
submitted to Hospital and Bard proof of insurance of the type required by the
Indemnification Agreement and Section 9 hereunder, and Hospital and Bard, in
their sole discretion, shall have approved of the form of policy, extent of
coverage, and the carrier providing such coverage;
(iv) The proposed assignee, transferee or licensee shall have become a
party to (and shall be in full compliance with) the Indemnification Agreement as
a Third Party Assignee, as that term is defined in the Indemnification
Agreement, and shall have executed and delivered an Agreement to Become Party to
Indemnification Agreement to Hospital and Bard;
(v) The proposed assignee, transferee or licensee shall be a reputable
entity with available resources and sufficient scientific, business and other
expertise to satisfy Transferee's obligations hereunder and under the License
Agreements;
(vi) Transferee is not then in breach of this Agreement, the License
Agreements or the Indemnification Agreement;
(vii) The proposed assignee, transferee or licensee has a net worth at
least equivalent to the net worth Transferee has as of the date of the
assignment, transfer or license;
(viii) Transferee provides written notice of the proposed assignment,
transfer or license to Hospital, together with documentation sufficient to
demonstrate the requirements set forth in subparagraphs (i) through (vii) above,
at least thirty (30) days prior to the proposed effective date of the
assignment, transfer or license; and
(ix) Hospital receives from the proposed assignee, transferee or
licensee, in writing, at least thirty (30) days prior to the proposed effective
date of the assignment, transfer or license reaffirmation by Transferee of the
terms of this Agreement and the License Agreements, an agreement from the
proposed assignee, transferee or licensee to be bound by the terms of this
Agreement and the License Agreements, and an agreement from the proposed
assignee, transferee or licensee to perform the obligations of Transferee under
this Agreement and the License Agreements.
- 15 -
<PAGE>
Provided, however, that Transferee's merger with, or acquisition by,
another entity or the sale of all or substantially all of the assets of
Transferee, shall be deemed an assignment for purposes of this Section 14(n).
(o) Termination. This Agreement may be terminated by any party hereto
-----------
upon written notice to the other parties if the Closing has not occurred on or
prior to June 30, 1995.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as an agreement under seal as of the date first above written.
HOSPITAL:
CHILDREN'S MEDICAL CENTER
CORPORATION
By /s/ Stuart Novick
-----------------------------------------
Its: Vice President and
General Counsel
TRANSFEREE:
INNERVENTIONS, INC.
By: /s/ David Chazanovitz
---------------------
Its: President and CEO
- 17 -
<PAGE>
EXHIBIT 10.15
SUBLICENSE AGREEMENT
--------------------
TABLE OF CONTENTS
-----------------
PREAMBLE
ARTICLES:
- ---------
I DEFINITIONS
II GRANT
III PATENT PROSECUTION AND INFRINGEMENT
IV INDEMNIFICATION AND INSURANCE
V EXPORT CONTROLS
VI NON-USE OF NAMES
VII ASSIGNMENTS
VIII DISPUTE RESOLUTION
IX TERMINATION
X NOTICES AND OTHER COMMUNICATIONS
XI THIRD PARTY BENEFICIARY
XII CONFIDENTIAL DATA
XIII MISCELLANEOUS PROVISIONS
This Agreement is made and entered into this 19th day of June, 1995 (the
effective Date), by and between CHILDREN'S MEDICAL CENTER CORPORATION, a
corporation duly organized and existing under the laws of the Commonwealth of
Massachusetts and having its principal office at 300 Longwood Avenue, Boston,
Massachusetts, 02115, U.S.A. (hereinafter referred to as CMCC), and
INNERVENTIONS, INC., a corporation duly organized under the laws of the State of
Delaware and having its principal office at 222 Berkeley Street, Boston, MA
02116-3761 (hereinafter referred to as SUBLICENSEE).
<PAGE>
WITNESSETH
----------
WHEREAS, CMCC has licensed to SUBLICENSEE certain patent rights and know-how
relating to the Clamshell II Septal Occluder pursuant to that certain License
Agreement by and among CMCC and SUBLICENSEE dated as of the date hereof (the
"License Agreement");
WHEREAS, CMCC is the licensee of certain Bard Licensed Technology relating to
the Clamshell II Septal Occluder and the Delivery System (as such terms are
defined below) and has the right to grant sublicenses under said Bard Licensed
Technology;
WHEREAS, CMCC is willing to grant such a sublicense under said Bard Licensed
Technology for the design, manufacture, use and sale of Devices and Device
Related Products;
WHEREAS, SUBLICENSEE desires to obtain such a sublicense to the Bard Licensed
Technology;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein, the parties hereto agree as follows:
ARTICLE I -- DEFINITIONS
------------------------
For the purpose of this Agreement, the following words and phrases shall have
the following meanings:
1.1 "Bard" shall mean C.R. Bard, Inc., a New Jersey corporation, and any
subsidiaries or divisions thereof.
1.2 "Bard/CMCC License Agreement. shall mean that certain Patent and
Know-How License Agreement, dated as of June 19, 1995 between Bard and
CMCC.
1.3 "Bard/CMCC Transfer Agreement" shall mean that certain Asset and
Technology Donation and Transfer Agreement, dated as of May 12, 1995
between Bard and CMCC.
1.4 "Bard/CMCC/Third Party Indemnification Agreement" shall mean that
certain Indemnification Agreement dated as of May 12, 1995, among
Bard, CMCC and SUBLICENSEE.
1.5 "Bard Licensed Delivery System Know-How" shall mean any and all
proprietary knowledge, formulas, specifications, techniques,
processes, technical data and other know-how, licensed from Bard to
CMCC under the Bard/CMCC License Agreement, which are used in the
development, design, testing and manufacture of the Delivery System.
Until such time as the Bard Licensed Patent has issued, the term "Bard
Licensed Delivery System Know-How" shall be deemed to include all
inventions claimed in all applications therefor. The term "Bard
<PAGE>
Licensed Delivery System Know-How" shall also include all proprietary
knowledge, formulas, specifications, techniques, processes, technical
data and other know-how included in any and all applications for the
Bard Licensed Patent but which are not then included within an allowed
claim in the Bard Licensed Patent.
1.6 "Bard Licensed Know-How" shall mean the Bard Licensed Delivery System
Know-How and the Bard Licensed Occluder Know-How.
1.7 "Bard Licensed Occluder Know-How" shall mean any and all proprietary
knowledge, formulas, specifications, techniques, processes, technical
data and other know-how, licensed from Bard to CMCC under the
Bard/CMCC License Agreement, which are used in the development,
design, testing and manufacture of the Occluder; provided, however,
-------- -------
that the Bard Licensed Occluder Know-How shall not include the
Transferred Know-How, as such term is defined in the Bard/CMCC
Transfer Agreement.
1.8 "Bard Licensed Patent" shall mean all of the following intellectual
property:
a. That certain patent application Number USSN 049,162, entitled
"System and Method for the Percutaneous Transluminal Front-End
Loading Delivery and Retrieval of a Prosthetic Occluder", a copy
of which has been provided to SUBLICENSEE, together with any
divisions, continuations-in-part, continuations, extensions,
revivals or reissues thereof;
b. Any United States and foreign patents issuing from the patent
applications described in (a);
c. Any division, continuation, continuation-in-part, extension,
revival or reissue of United States patents described in (b)
above, and all corresponding patents in other countries.
1.9 "Bard Licensed Technology" shall mean and include the Bard Licensed
KnowHow and the Bard Licensed Patent.
1.10 "Clamshell II Septal Occluder" or "Occluder" shall mean that certain
medical device which is described on Exhibit 1.5 to the License
------------
Agreement.
1.11 "Confidential Data" shall mean the Bard Licensed Delivery System Know-
How and the Bard Licensed Occluder Know-How. The term "Confidential
Data" shall also include all other data or information (whether in
oral, written or physical form) which is (i) furnished pursuant to
this Agreement to SUBLICENSEE or any assignee, transferee or
sublicensee of SUBLICENSEE by or on behalf of CMCC or Bard or any
affiliate of CMCC or Bard and (ii) is identified as being proprietary
or confidential. Confidential Data shall also include all analyses,
compilations, studies or other documents, whether prepared by
SUBLICENSEE or others, which contain or reflect such information. The
- 3 -
<PAGE>
term shall not include information which (i) was or becomes generally
available to the public other than as a result of a disclosure by
SUBLICENSEE or its directors, officers, employees, agents, or
advisors, or (ii) is demonstrated by SUBLICENSEE to have been known to
SUBLICENSEE at the time of disclosure by or on behalf of CMCC or Bard,
or (iii) was or becomes available to SUBLICENSEE, on a nonconfidential
basis through a source other than CMCC or Bard or its advisors,
provided, that such disclosure was not in violation of a
--------
confidentiality agreement of which SUBLICENSEE has or had knowledge.
1.12 "Delivery System" shall mean that certain device which is described in
Exhibit 1.1(h) to the Bard/CMCC Transfer Agreement.
--------------
1.13 "Device" shall mean the Occluder together with the Delivery System.
1.14 "Device Related Product" shall mean each of the Device, any individual
component or part of the Device, and any and all successor or
derivative products to or of the Device or any such component or part.
1.15 "Exclusive Field of Use" shall mean the repair of atrial septal
defects.
1.16 "Force Majeure" shall mean any act of God, any accident, explosion,
fire, storm, earthquake, flood, drought, peril of the sea, riot,
embargo, war or foreign, federal, state or municipal order of general
application, seizure, requisition or allocation, any failure or delay
of transportation, shortage of or inability to obtain supplies,
equipment, fuel or labor or any other circumstances or event beyond
the reasonable control of the Party relying upon such circumstance or
event.
1.17 "Non-Exclusive Field of Use" shall mean the repair of cardiovascular
defects, provided, however, that the Non-Exclusive Field of Use shall
-------- -------
not extend to, and no rights are granted pursuant to this Agreement
for manufacturing, sale or use of any Device Related Product for
patent ductus arteriosus applications.
1.18 "Stock Transfer Agreement" shall mean that certain Stock Transfer
Agreement dated as of even date herewith between CMCC and SUBLICENSEE.
1.19 "SUBLICENSEE" shall mean INNERVENTIONS, INC. and any Subsidiary of
INNERVENTIONS, INC.
1.20 "Subsidiary" shall mean any corporation, company or other entity more
than fifty percent (50%) of whose voting stock is owned or controlled
directly or indirectly by INNERVENTIONS, INC.
- 4 -
<PAGE>
ARTICLE II -- GRANTS
--------------------
2.1 CMCC hereby grants to SUBLICENSEE a royalty-free, paid-up, exclusive,
world-wide sublicense under the Bard Licensed Patent to manufacture,
use and sell Device Related Products in the Exclusive Field of Use,
and otherwise to use and practice the Bard Licensed Patent or any
claimed element thereof in the Exclusive Field of Use, during the life
of the Bard Licensed Patent;
2.2 CMCC hereby grants to SUBLICENSEE a royalty-free, paid-up, exclusive,
world-wide sublicense to use the Bard Licensed Know-How to
manufacture, use and sell Device Related Products in the Exclusive
Field of Use;
2.3 CMCC hereby grants to SUBLICENSEE a royalty-free, paid-up, non-
exclusive, world-wide sublicense under the Bard Licensed Patent to
manufacture, use and sell Device Related Products in the Non-Exclusive
Field of Use, and otherwise to use and practice the Bard Licensed
Patent or any claimed element thereof in the Non-Exclusive Field of
Use, during the life of the Bard Licensed Patent;
2.4 CMCC hereby grants to SUBLICENSEE a royalty-free, paid-up, non-
exclusive, world-wide sublicense to use the Bard Licensed Delivery
System Know-How to manufacture, use and sell Device Related Products
in the Non-Exclusive Field of Use; and
2.5 CMCC hereby grants to SUBLICENSEE a royalty-free, paid-up, non-
exclusive, world-wide sublicense to use the Bard Licensed Occluder
Know-How for all purposes, provided, however, that such sublicense
-------- -------
shall not extend to, and no rights are hereby granted with respect to
the use of any Bard Licensed Occluder Know-How for any patent ductus
arteriosus applications.
2.6 SUBLICENSEE understands that the Delivery System and the Occluder
together form an integral, single medical device. Notwithstanding any
other provision of this Agreement, no right or sublicense is granted
pursuant to this Agreement to manufacture, sell or use Delivery
Systems except together with and for use in connection with Occluders.
2.7 CMCC hereby agrees that it shall not grant during the period of time
in which this Agreement is in effect, any other license or sublicense
under the Bard Licensed Technology to manufacture, use or sell Device
Related Products for any purposes or otherwise to use and practice the
Bard Licensed Technology or any claimed element thereof for any
purposes. Notwithstanding the foregoing, CMCC may license Dr. James
Lock to practice individually or in collaboration with other
individual researchers the Bard Licensed Technology for noncommercial,
research purposes only.
- 5 -
<PAGE>
2.8 Notwithstanding the fact that the rights and licenses granted
hereunder are on a royalty-free, paid-up basis, SUBLICENSEE agrees and
acknowledges that such rights and licenses are conditioned upon
SUBLICENSEE's payment of the royalties and fees under the License
Agreement as provided in Article IV thereto, as well as the
performance of its other obligations under the License Agreement, the
Stock Transfer Agreement and the Bard/CMCC/Third Party Indemnification
Agreement.
2.9 SUBLICENSEE agrees that it will make reasonable attempts to the extent
that is based on sound business practice, to have the Device Related
Products that are leased or sold in the United States manufactured in
the United States.
2.10 SUBLICENSEE shall have the right to enter into sublicensing agreements
for the rights, privileges, and licenses granted hereunder upon the
prior written consent of CMCC. CMCC agrees to consent to a proposed
sublicense after SUBLICENSEE has demonstrated that the preconditions
set forth in Section 14(n)(i) through (ix) of the Stock Transfer
Agreement have been satisfied. Such sublicenses will expire upon the
expiration of SUBLICENSEE's rights granted herein.
2.11 SUBLICENSEE hereby agrees that every sublicensing agreement to which
it shall be a party and which shall relate to the rights, privileges
and license granted hereunder shall contain a statement setting forth
the date upon which SUBLICENSEE's exclusive rights, privileges and
license hereunder shall terminate.
2.12 SUBLICENSEE agrees that any sublicense granted by it shall provide
that the obligations to CMCC of Articles II, III, IV, V, VI, VIII, IX,
XII and XIII of this Agreement shall be binding upon the sublicensee
as if it were a party to this Agreement. SUBLICENSEE further agrees
to attach copies of these Articles to sublicense agreements.
2.13 SUBLICENSEE agrees to forward to CMCC a copy of any and all fully
executed sublicense agreements.
2.14 The sublicense granted hereunder shall not be construed to confer any
rights upon SUBLICENSEE by implication, estoppel or otherwise as to
any technology other than the Bard Licensed Technology.
ARTICLE III--PATENT PROSECUTION AND INFRINGEMENT
------------------------------------------------
3.1 Prosecution. CMCC shall notify SUBLICENSEE promptly in writing upon
-----------
receiving notification from Bard of Bard's determination to
discontinue the prosecution of the application for the Bard Licensed
Patent or the maintenance
- 6 -
<PAGE>
of any issued Bard Licensed Patent. If CMCC does not then elect to
undertake such prosecution or maintenance, as the case may be, CMCC
shall notify SUBLICENSEE accordingly and authorize SUBLICENSEE to
undertake such prosecution or maintenance at SUBLICENSEE's sole cost
and expense. CMCC shall provide SUBLICENSEE with any information it
receives from Bard as to filing deadlines in all jurisdictions
relevant to prosecutions of the application for the Bard Licensed
Patent, related applications, and the maintenance of a Bard Licensed
Patent.
3.2 Infringement. CMCC shall notify SUBLICENSEE promptly upon receiving
notification from Bard of Bard's intention not to defend any claim
that the Bard Licensed Technology infringes any patent or other
intellectual property right of any third party, or of its intention
not to assert any claim of infringement against any third party. If
CMCC determines not to defend or assert any such claim, CMCC shall
notify SUBLICENSEE, and SUBLICENSEE, or any permitted assignee,
transferee, or sublicensee of SUBLICENSEE may, at its own cost and
expense, assume the defense or prosecution of such claim.
ARTICLE IV -- INDEMNIFICATION AND INSURANCE
-------------------------------------------
SUBLICENSEE covenants with CMCC as part of this Agreement that it will
comply with the indemnification and insurance terms and obligations set forth in
Sections 3.1 and 3.2 of the Bard/CMCC/Third Party Indemnification Agreement, as
well as those set forth in Sections 8, 9 and 10 of the Stock Transfer Agreement.
ARTICLE V -- EXPORT CONTROLS
----------------------------
It is understood that CMCC is subject to United States laws and regulations
controlling the export of technical data, computer software, laboratory
prototypes and other commodities (including the Arms Export Control Act, as
amended and the Export Administration Act of 1979), and that its obligations
hereunder are contingent on compliance with applicable United States export laws
and regulations. The transfer of certain technical data and commodities may
require a license from the cognizant agency of the United States Government
and/or written assurances by SUBLICENSEE that SUBLICENSEE shall not export data
or commodities to certain foreign countries without prior approval of such
agency. CMCC neither represents that a license shall not be required nor that,
if required, it shall be issued.
ARTICLE VI-- NON-USE OF NAMES
-----------------------------
SUBLICENSEE shall not use the names of CMCC nor of any of its employees,
nor any adaptation thereof, in any advertising, promotional or sales literature
without prior written consent obtained from CMCC in each case except that
SUBLICENSEE may state that it is
- 7 -
<PAGE>
licensed by CMCC under one or more of the patents and/or applications comprising
the Patent Rights, and SUBLICENSEE may comply with disclosure requirements of
all applicable laws relating to its business, including United States and state
securities laws.
ARTICLE VII -- ASSIGNMENT
-------------------------
7.1 Except as otherwise provided herein, this Agreement is not assignable
in whole or in part, and any attempt to do so shall be void.
7.2 CMCC may assign this Agreement at any time to any corporate affiliate
of CMCC without the prior consent of SUBLICENSEE.
7.3 SUBLICENSEE may assign this agreement to another entity only with the
prior written consent of CMCC. CMCC agrees to consent to a proposed
assignment after SUBLICENSEE has demonstrated that the preconditions
set forth in Section 14(n)(i) through (ix) of the Stock Transfer
Agreement have been satisfied. SUBLICENSEE's merger with, or
acquisition by, another entity or the sale of all or substantially all
of the assets of SUBLICENSEE shall be deemed an assignment for
purposes of this Article VII.
7.4 Any assignment in violation of this section 7 shall be null and void
and of no force or effect.
ARTICLE VIII -- DISPUTE RESOLUTION
----------------------------------
8.1 Either party may give the other written notice of any dispute arising
out of or relating to this Agreement which is not resolved in the
ordinary course of business within a three (3) month period. Within
fifteen (15) days of receipt of said notice, the parties shall meet at
a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to exchange relevant information and to
attempt to settle the dispute. If the matter has not been resolved
within thirty (30) days of receipt of the notice provided above, or in
the event the parties fail to meet within twenty (20) days of the
receipt of said notice, either party may request in writing that the
matter be submitted to mediation in accordance with section 8.2 below.
8.2 Within fifteen (15) days of receipt of a request of mediation as
described above, the parties agree to commence mediation in the City
of Boston, Commonwealth of Massachusetts in accordance with the
policies and procedures of Endispute, Inc. ("Endispute"). The
parties shall select a mediator acceptable to both the CMCC and
SUBLICENSEE from a list provided by Endispute. The parties agree to
cooperate in good faith in said mediator's efforts to assist the
parties to resolve the dispute. Each party agrees to pay fifty
percent (50%) of the costs of said mediation. If the matter has nor
been resolved within thirty (30) days
- 8 -
<PAGE>
of the commencement of mediation, either party may request in writing
that the matter be submitted to arbitration in accordance with Section
8.3 below.
8.3 Any dispute arising under this Agreement which is not resolved in
accordance with either section 8.1 or 8.2 above, shall be determined
by arbitration in the City of Boston, Commonwealth of Massachusetts,
in accordance with the rules and regulations of the American
Arbitration Association ("AAA"). Any such arbitration shall be
conducted before a single arbitrator agreed upon by the parties, or,
if the parties are unable to agree upon a mutually acceptable
arbitrator, an arbitrator shall be chosen in accordance with AAA rules
and regulations. The arbitrator's determination may be filed with the
clerk of a court of competent jurisdiction as a final adjudication of
the matter at issue, or application may be made to such court for
judicial acceptance of the ward and an order of enforcement, as the
case may be.
8.4 Nothing herein shall restrict the right of either party to institute a
legal proceeding to enable such party to obtain provisional injunctive
relief during the pendency of any such arbitration.
ARTICLE IX -- TERMINATION
-------------------------
9.1 Except as otherwise provided herein and unless sooner terminated as
set forth in this Article IX, the Agreement and the licenses and
rights granted hereunder shall remain in full force and effect until
the expiration of the last to expire Bard Licensed Patent, at which
time SUBLICENSEE shall have a fully paid-up, perpetual, non-cancelable
license.
9.2 This Agreement shall terminate (a) upon termination pursuant to
Section 5.7 of the Bard/CMCC License Agreement of the rights and
licenses granted thereunder or (b) upon notice by CMCC if: (i)
SUBLICENSEE shall cease to carry on its business, (ii) SUBLICENSEE
shall have breached its obligations under the Stock Transfer Agreement
or the Bard/CMCC/Third Party Indemnification Agreement, which breach
has not been remedied within 15 days following written notice thereof
from CMCC, or (iii) upon termination of the License Agreement as
provided therein.
9.3 Upon any material breach or default of this Agreement by SUBLICENSEE,
other than those occurrences set out in Paragraphs 9.2 hereinabove,
which shall always take precedence over any material breach or default
referred to in this Paragraph 9.3, CMCC shall have the right to
terminate this Agreement and the rights, privileges and license
granted hereunder by one hundred twenty (120) days' notice to
SUBLICENSEE. Such termination shall become effective unless
SUBLICENSEE shall have cured any such breach or default prior to the
expiration of the one hundred twenty (120) day period.
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<PAGE>
9.4 SUBLICENSEE shall have the right to terminate this Agreement at any
time on six (6) months' notice to CMCC.
9.5 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that
matured prior to the effective date of such termination. Upon
termination of this Agreement for any reason other than by reason of
any provision of Section 5.7 of the Bard/CMCC License Agreement,
SUBLICENSEE and any sublicensee thereof may, after the effective date
of such termination, sell all Device Related Products, and complete
Device Related Products in the process of manufacture at the time of
such termination and sell the same.
9.6 Upon termination of this Agreement for any reason prior to the
expiration of the last to expire Bard Licensed Patent, any sublicensee
not then in default shall have the right to seek a sublicense from
CMCC, provided that CMCC has the right to grant such a sublicense upon
--------
such termination.
ARTICLE X -- NOTICES, AND OTHER COMMUNICATIONS
-----------------------------------------------
10.1 CMCC agrees to notify SUBLICENSEE of any notification received by CMCC
from C.R. Bard, Inc., or any affiliates thereof, in any way relating
to the rights granted pursuant to this Agreement, within fifteen (15)
days of receipt of such notification.
10.2 Any notice or other communication pursuant to this Agreement shall be
sufficiently made or given on the date of the mailing if sent to such
party by certified first class mail, postage prepaid, addressed to it
at its address below or as it shall designate by written notice given
to the other party:
In the case of CMCC: In case of SUBLICENSEE
Technology Transfer Manager InnerVentions, Inc.
Office of Research Administration c/o Fletcher Spaght, Inc.
The Children's Hospital 222 Berkeley Street
300 Longwood Avenue Boston, MA 02116-3761
Boston, MA 02115 Attn: David A. Chazanovitz
ARTICLE XI -- THIRD PARTY BENEFICIARY
-------------------------------------
Pursuant to Section 5.6(b) of the Bard/CMCC License Agreement, CMCC
hereby provides that SUBLICENSEE is a third party beneficiary of the rights of
CMCC and obligations of Bard thereunder, with full rights of substitution to
enforce such rights and obligations.
- 10 -
<PAGE>
ARTICLE XII--CONFIDENTIAL DATA
------------------------------
12.1 Non-Disclosure. SUBLICENSEE shall hold in confidence any Confidential
--------------
Data disclosed by CMCC or Bard or otherwise obtained by SUBLICENSEE as
a result of activities contemplated by this Agreement, and shall
protect the confidentiality thereof with the same degree of care that
it exercises with respect to its own information of a like nature, but
in no event less than reasonable care. Access to Confidential Data
must be restricted to SUBLICENSEE's employees or permitted assigns and
licensees (as determined in accordance with Article VII), who, in each
case, need to have access to carry out a permitted use and are bound
in writing to maintain the confidentiality of such Confidential Data.
The Confidential Data, and all copies of part or all thereof, shall be
and remain the exclusive property of CMCC or Bard, respectively, and
SUBLICENSEE shall acquire only such rights as are expressly set forth
under the terms and conditions of this Agreement and only for so long
as such rights are in effect.
12.2 Legal Process. In the event SUBLICENSEE is required by legal process
-------------
to disclose any of the Confidential Data, SUBLICENSEE shall provide
CMCC or Bard (as appropriate) with prompt notice of such requirement
so that CMCC or Bard may seek a protective order or other appropriate
remedy or waive compliance with the provisions of this Agreement
relating to the protection of Confidential Data. In the event that a
protective order or other remedy is obtained, SUBLICENSEE shall use
all reasonable efforts to assure that all Confidential Data will be
covered by such order or other remedy. If such protective order or
other remedy is not obtained or CMCC or Bard waives compliance with
the provisions of this Agreement relating to the protection of
Confidential Data, SUBLICENSEE may disclose that portion of the
Confidential Data which SUBLICENSEE is legally required to disclose
without liability hereunder.
ARTICLE XIII -- MISCELLANEOUS PROVISIONS
----------------------------------------
13.1 SUBLICENSEE agrees, which agreement shall be enforceable by and for
the benefit of BARD, to be bound by the affirmative covenants of CMCC
contained in the Bard/CMCC License Agreement (including the
affirmative covenant to protect Confidential Data as defined in such
agreement) and by the limitations on Bard's liability set forth in the
Bard/CMCC License Agreement, and SUBLICENSEE hereby confirms its
understanding of, and consents to, the limitations on Bard's
representations and warranties contained in the Bard/CMCC License
Agreement.
13.2 This Agreement shall be construed, governed, interpreted and applied
in accordance with the laws of the Commonwealth of Massachusetts,
U.S.A.,
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<PAGE>
except that questions affecting the construction and effect of any
patent shall be determined by the law of the country in which the
patent was granted.
13.3 CMCC and LICENSEE shall each be excused for any failure or delay in
performing any of its respective obligations under this Agreement, if
such failure or delay is caused by Force Majeure, for such period of
tine as the event of Force Majeure exists.
13.4 The parties hereto acknowledge that this Agreement sets forth the
entire Agreement and understanding of the parties hereto as to the
subject matter hereof, and shall not be subject to any change or
modification except by the execution of a written instrument
subscribed to by the parties hereto.
13.5 The provisions of this Agreement are severable, and in the event that
any provisions of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of law, such invalidly or
unenforceability shall not in any way affect the validity or
enforceability of the remaining provisions hereof.
13.6 SUBLICENSEE agrees to mark the Delivery Systems sold in the United
States with all applicable United States patent numbers. All Delivery
Systems shipped to or sold in other countries shall be marked in such
a manner as to conform with the patent laws and practice of the
country of manufacture or sale.
13.7 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together
shall be deemed to be one and the same instrument.
13.8 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent
failure to perform any such term or condition by the other party.
* * * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and
duly executed this Sublicense Agreement as of June 19, 1995.
CHILDREN'S MEDICAL CENTER CORPORATION
By: /s/ Stuart J. Novick
---------------------------------
Name: Stuart J. Novick
Title: Vice President and General Counsel
INNERVENTIONS, INC.
By: /s/ David A. Chazanovitz
---------------------------------
Name: David A. Chazanovitz
Title: President
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<PAGE>
EXHIBIT 10.16
ASSIGNMENT AGREEMENT
This Assignment Agreement is made and entered into this 30th day of June,
1994, by and between Nitinol Medical Technologies, Inc., a Delaware corporation
("NMT") and The Beth Israel Hospital Association ("BIH").
RECITALS
A. BIH claims ownership of the following patent applications:
(i) U.S. Serial No. 07/878,184, entitled A STENT, Filed May 1, 1991, Morris
Simon et al.;
(ii) U.S. Serial No. 08/167/,661, entitled A STENT, Filed December 16,
1993, Morris Simon et al.; and
(iii) International Application No. PCT/US93/11441 entitled A STENT, Filed
November 24, 1993 Beth Israel Hospital;
(collectively referred to as the "Patent Applications").
B. NMT desires to acquire clear title to the Patent Applications and all letters
patent that may be obtained thereof, and BIH desires to assign the Patent
Applications to NMT and both parties desire to resolve the dispute between them
over title thereto as hereinafter set forth.
C. BIH and a partnership predecessor of NMT (hereinafter all references to NMT
shall include said partnership) entered into an agreement in 1984 providing,
among other things, for research by BIH to be reimbursed by NMT. Said agreement
(hereinafter referred to as "the 1984 Agreement") provided, among other things,
that "any New Technology or Filter developed by [BIH] under this Agreement with
[NMT] funds shall be the property of [NMT]".
D. NMT considers that the inventions covered by the Patent Applications are New
Technology developed by BIH with NMT funds and are therefore the property of
NMT. NMT acknowledges that BIH does not consider the matter free from doubt.
NOW, THEREFORE, for and in consideration of premises and the agreements
hereinafter set forth, NMT and BIH hereby agree as follows:
1. BIH agrees to assign the Patent Applications to NMT by assignment in the
form of Schedule 1, which is attached hereto and incorporated herein by
reference and made a part hereof.
2. NMT agrees to pay BIH for the assignment as follows:
(a). Upon execution and delivery of this agreement and of the assignment in form
of Schedule 1, NMT shall pay BIH:
<PAGE>
(i) out-of-pocket expenses for legal and filing fees and miscellaneous
expenses incurred in connection with the Patent Applications, of $31,979; and
(ii) $37,500.
(b). When as and if a U.S. patent issues pursuant to either of the two U.S.
Patent Applications, NMT will, within 30 days after receiving from BIH a copy of
the first to issue of these U.S. Patents or alternatively within 30 days after
receiving the issued patent directly from the U.S. Patent and Trademark Office,
pay BIH an additional, final, one-time payment of $37,500.
3. BIH represents to NMT that the execution and delivery of this Agreement
and the assignment contemplated hereby is duly authorized by all requisite
corporate action. Except for the representation in the foregoing sentence, BIH
makes no representations or warranties express or implied of any kind whatsoever
to NMT in connection with the sale and assignment to NMT contemplated hereby.
4. NMT represents to BIH that the execution and delivery of this Agreement
is duly authorized by all requisite corporate action. Except for the
representation in the foregoing sentence, NMT makes no representations or
warranties express or implied of any kind whatsoever to BIH in connection with
the sale and assignment to NMT contemplated hereby.
5. The consummation of this Agreement and the transaction contemplated
hereby shall constitute a final resolution of all claims by NMT of any nature
whatsoever under or pursuant to the 1984 Agreement.
6. This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof and supersedes any prior or contemporaneous
agreements and understandings in connection therewith. This Agreement may be
amended, modified or revoked only by a written instrument executed by all of the
parties hereto.
7. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
8. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal in triplicate originals as of the date first written above.
THE BETH ISRAEL HOSPITAL ASSOCIATION
By:/s/ Mitchell T. Rabkin, M.D.
-----------------------------------------------
President
NITINOL MEDICAL TECHNOLOGIES, INC.
By:/s/ C. Leonard Gordon
-----------------------------------------------
Chief Executive Officer
- 3 -
<PAGE>
EXHIBIT 10.31
NITINOL MEDICAL TECHNOLOGIES, INC.
REGISTRATION RIGHTS AGREEMENT
Agreement dated as of February 16, 1996, between Junewicz & Co., Inc. (the
"Holder") and Nitinol Medical Technologies, Inc. (the "Company")
WHEREAS, the Holder is a holder of a Warrant to purchase 189,355 shares (the
"Shares") of the common stock, par value $.001 per share, of the Company
("Common Stock");
WHEREAS, the Holder desires to have certain registration rights for the Shares
under the securities laws, and the Company desires that the Holder have such
registration rights;
NOW, THEREFORE, in consideration of the mutual agreements contained herein and
other good and valuable consideration, the parties hereby agree as follows:
1. If, at any time during the period commencing after the effective date
of the initial public offering of the Company's securities pursuant to a
registration statement under the Securities Act of 1933, as amended (the "Act")
and terminating on the date on which the Shares become saleable under Rule
144(k) (or any successor provision) promulgated under the Act, the Company shall
determine to file any registration statement, or any post-effective amendment to
a registration statement, under the Act, covering equity securities of the
Company (other than registration statements on Form S-8 or S-4 or any other form
not generally available for the registration of securities for sale to the
<PAGE>
public) for its own account or for the account of others, the Company shall
advise the Holder, by written notice at least 10 business days prior to any
filing, and shall, upon the request of the Holder, and at the expense of the
Company, include in any such registration statement, or any such post-effective
amendment to a registration statement, all of the Registrable Securities (as
hereinafter defined) that the Holder has requested in writing to be registered,
provided that such written request is delivered to the Company within seven
business days of the Holder's receipt of notice from the Company. As used in
this Agreement, Registrable Securities shall mean (i) the Shares and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any convertible security, option, warrant right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of any of the Shares. All costs and expenses of
such registration statement shall be borne by the Company, except underwriting
discounts or commissions applicable to any of the Registrable Securities sold by
the Holder and any counsel to the Holder. The Company shall not be required to
register securities of the Holder on more than three occasions; provided that if
the Holder has been prevented from selling all of the Shares Holder wished to
sell because of limitations imposed under paragraph (c) of this Section 1, then
the Holder shall be entitled to include the Shares in one or more additional
registration statements under the terms of this Section 1 until the Holder has
been able to sell all of the Shares the Holder wishes to sell.
(a) The Company shall supply prospectuses and such other documents as
the Holder may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities, use its reasonable best efforts
to register and qualify any of the Registrable Securities for sale in
- 2 -
<PAGE>
a reasonable number of states and do any and all other acts and things which may
be necessary or desirable to enable the Holder to consummate the public sale or
other disposition of the Registrable Securities subject to the rights of others
with similar rights.
(b) The Company shall also furnish indemnification in the manner
provided in Section 2 hereof, except that the maximum amount of such
indemnification shall be limited to the amount of proceeds received by the
Holder from the sale of the Registrable Securities. The Holder shall furnish
information and indemnification as set forth in Section 2 hereof, except that
the maximum amount which may be recovered from the Holder shall be limited to
the amount of proceeds received by the Holder from the sale of the Registrable
Securities.
(c) In connection with any offering involving an underwriting of
shares of the Company's Common Stock, the Company shall not be required under
Section 1 hereof to include any of the Holder's securities in such underwriting
unless the Holder accepts the terms of the underwriting as agreed upon between
the Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize or limit the success of
the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities to be sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable
- 3 -
<PAGE>
Securities, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata, subject to prior existing rights, among the selling
stockholders according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as shall
mutually be agreed to by such selling stockholders).
2. (a) Whenever pursuant to Section 1, a registration statement
relating to any of the Registrable Securities is filed under the Act, amended or
supplemented, the Company shall, to the extent permitted by law, indemnify and
hold harmless the Holder against such losses, claims, damages, liabilities or
actions, joint or several, to which the Holder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions in
respect thereof, arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such registration
statement or any preliminary prospectus or final prospectus constituting a part
thereof or any amendment or supplement thereto, or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and shall reimburse
the Holder for any legal or other expenses reasonably incurred by Holder in
connection with investigating or defending any such losses, claims, damages,
liabilities or actions; provided, however, that the Company will not be liable
in any such case to the extent that any such losses, claims, damages,
liabilities or actions arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final prospectus or
said amendment or supplement in reliance upon and in conformity with written
- 4 -
<PAGE>
information furnished by Holder or any underwriter, for use in the preparation
thereof.
(b) The Holder shall indemnify and hold harmless the Company, each of
its directors, each of its officers and each person, if any, who controls the
Company within the meaning of the Act against any losses, claims, damages,
liabilities or actions, to which the Company or any such director, officer or
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages, liabilities or actions arise out of or are based
upon any untrue or alleged untrue statement of any preliminary prospectus, said
final prospectus, or said amendment or supplement, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in said registration statement, said preliminary prospectus, said final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished by such Holder for use in the preparation
thereof; and shall reimburse the Company or any such director, officer or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such losses, claims, damages,
liabilities or actions.
(c) Promptly after receipt by an indemnified party under this Section
2 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against any indemnifying party, give
the indemnifying party notice of the commencement
- 5 -
<PAGE>
thereof; but the omission to so notify the indemnifying party shall not relieve
it from any liability which it may have to an indemnified party otherwise than
under this Section 2.
(d) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party, the indemnifying party shall not be liable to such
indemnified party under this Section 2 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation.
(e) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under this Section 2 to the extent permitted by law, provided that (i) no
contribution shall be made under circumstances where the indemnifying party
would not have been liable for indemnification under the fault standards set
forth in this Section 2, (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation and (iii) contribution by
the Holder shall be limited in amount to the net amount of proceeds received by
- 6 -
<PAGE>
him from the sale of the Registrable Securities pursuant to such Registration
Statement or prospectus.
3. The Holder agrees that, during the period of duration (not to exceed
180 days) specified by the Company and an underwriter of Common Stock or other
securities of the Company, following the effective date of a registration
statement of the Company filed under the Act, it shall not, to the extent
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period except Registrable Securities included in such
registration.
4. (a) Any notice required to be given hereunder shall be sufficient if
in writing, and sent by facsimile transmission and by courier service (with
proof of service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to the Holder: If to the Company:
Junewicz & Co., Inc. Nitinol Medical Technologies, Inc.
575 Madison Avenue 263 Summer Street
New York, NY 10022 Boston, MA 02210
Fax: (212) 891-6033 Fax: (617) 737-0924
Attn: J. Mark Junewicz Attn: Thomas Tully, CEO
- 7 -
<PAGE>
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to its rules of conflict
of laws.
5. The Holder may assign its rights and obligations under this
Registration Rights Agreement to any stockholder, employee or consultant of the
Holder to whom the Holder distributes the Registrable Securities.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
/s/ Thomas Tully
- ----------------------------------------
By: Thomas Tully
Title: President and Chief Executive Officer
JUNEWICZ & CO., INC.
- --------------------
By: /s/ J. Mark Junewicz
------------------------------------
Name: J. Mark Junewicz
- 9 -
<PAGE>
EXHIBIT 10.32
NITINOL MEDICAL TECHNOLOGIES, INC.
REGISTRATION RIGHTS AGREEMENT
Agreement dated as of February 16, 1996, between Furman Selz LLC (the "Holder")
and Nitinol Medical Technologies, Inc. (the "Company")
WHEREAS, the Holder is a holder of a Warrant to purchase 123,081 shares (the
"Shares") of the common stock, par value $.001 per share, of the Company
("Common Stock");
WHEREAS, the Holder desires to have certain registration rights for the Shares
under the securities laws, and the Company desires that the Holder have such
registration rights;
NOW, THEREFORE, in consideration of the mutual agreements contained herein and
other good and valuable consideration, the parties hereby agree as follows:
1. If, at any time during the period commencing after the effective date
of the initial public offering of the Company's securities pursuant to a
registration statement under the Securities Act of 1933, as amended (the "Act")
and terminating on the date on which the Shares become saleable under Rule
144(k) (or any successor provision) promulgated under the Act, the Company shall
determine to file any registration statement, or any post-effective amendment to
a registration statement, under the Act, covering equity securities of the
Company (other than registration statements on Form S-8 or S-4 or any other form
not generally available for the registration of securities for sale to the
<PAGE>
public) for its own account or for the account of others, the Company shall
advise the Holder, by written notice at least 10 business days prior to any
filing, and shall, upon the request of the Holder, and at the expense of the
Company, include in any such registration statement, or any such post-effective
amendment to a registration statement, all of the Registrable Securities (as
hereinafter defined) that the Holder has requested in writing to be registered,
provided that such written request is delivered to the Company within seven
business days of the Holder's receipt of notice from the Company. As used in
this Agreement, Registrable Securities shall mean (i) the Shares and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any convertible security, option, warrant right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of any of the Shares. All costs and expenses of
such registration statement shall be borne by the Company, except underwriting
discounts or commissions applicable to any of the Registrable Securities sold by
the Holder and any counsel to the Holder. The Company shall not be required to
register securities of the Holder on more than three occasions; provided that if
the Holder has been prevented from selling all of the Shares Holder wished to
sell because of limitations imposed under paragraph (c) of this Section 1, then
the Holder shall be entitled to include the Shares in one or more additional
registration statements under the terms of this Section 1 until the Holder has
been able to sell all of the Shares the Holder wishes to sell.
(a) The Company shall supply prospectuses and such other documents as
the Holder may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities, use its reasonable best efforts
to register and qualify any of the Registrable Securities for sale in
- 2 -
<PAGE>
a reasonable number of states and do any and all other acts and things which may
be necessary or desirable to enable the Holder to consummate the public sale or
other disposition of the Registrable Securities subject to the rights of others
with similar rights.
(b) The Company shall also furnish indemnification in the manner
provided in Section 2 hereof, except that the maximum amount of such
indemnification shall be limited to the amount of proceeds received by the
Holder from the sale of the Registrable Securities. The Holder shall furnish
information and indemnification as set forth in Section 2 hereof, except that
the maximum amount which may be recovered from the Holder shall be limited to
the amount of proceeds received by the Holder from the sale of the Registrable
Securities.
(c) In connection with any offering involving an underwriting of
shares of the Company's Common Stock, the Company shall not be required under
Section 1 hereof to include any of the Holder's securities in such underwriting
unless the Holder accepts the terms of the underwriting as agreed upon between
the Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize or limit the success of
the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities to be sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable
- 3 -
<PAGE>
Securities, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata, subject to prior existing rights, among the selling
stockholders according to the total amount of securities entitled to be included
therein owned by each selling stockholder or in such other proportions as shall
mutually be agreed to by such selling stockholders).
2. (a) Whenever pursuant to Section 1, a registration statement
relating to any of the Registrable Securities is filed under the Act, amended or
supplemented, the Company shall, to the extent permitted by law, indemnify and
hold harmless the Holder against such losses, claims, damages, liabilities or
actions, joint or several, to which the Holder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions in
respect thereof, arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such registration
statement or any preliminary prospectus or final prospectus constituting a part
thereof or any amendment or supplement thereto, or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and shall reimburse
the Holder for any legal or other expenses reasonably incurred by Holder in
connection with investigating or defending any such losses, claims, damages,
liabilities or actions; provided, however, that the Company will not be liable
in any such case to the extent that any such losses, claims, damages,
liabilities or actions arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final prospectus or
said amendment or supplement in reliance upon and in conformity with written
- 4 -
<PAGE>
information furnished by Holder or any underwriter, for use in the preparation
thereof.
(b) The Holder shall indemnify and hold harmless the Company, each of
its directors, each of its officers and each person, if any, who controls the
Company within the meaning of the Act against any losses, claims, damages,
liabilities or actions, to which the Company or any such director, officer or
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages, liabilities or actions arise out of or are based
upon any untrue or alleged untrue statement of any preliminary prospectus, said
final prospectus, or said amendment or supplement, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in said registration statement, said preliminary prospectus, said final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished by such Holder for use in the preparation
thereof; and shall reimburse the Company or any such director, officer or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such losses, claims, damages,
liabilities or actions.
(c) Promptly after receipt by an indemnified party under this Section
2 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against any indemnifying party, give
the indemnifying party notice of the commencement
- 5 -
<PAGE>
thereof; but the omission to so notify the indemnifying party shall not relieve
it from any liability which it may have to an indemnified party otherwise than
under this Section 2.
(d) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party, the indemnifying party shall not be liable to such
indemnified party under this Section 2 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation.
(e) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under this Section 2 to the extent permitted by law, provided that (i) no
contribution shall be made under circumstances where the indemnifying party
would not have been liable for indemnification under the fault standards set
forth in this Section 2, (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation and (iii) contribution by
the Holder shall be limited in amount to the net amount of proceeds received by
- 6 -
<PAGE>
him from the sale of the Registrable Securities pursuant to such Registration
Statement or prospectus.
3. The Holder agrees that, during the period of duration (not to exceed
180 days) specified by the Company and an underwriter of Common Stock or other
securities of the Company, following the effective date of a registration
statement of the Company filed under the Act, it shall not, to the extent
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period except Registrable Securities included in such
registration.
4. (a) Any notice required to be given hereunder shall be sufficient if
in writing, and sent by facsimile transmission and by courier service (with
proof of service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to the Holder: If to the Company:
Furman Selz, LLC Nitinol Medical Technologies, Inc.
230 Park Avenue 263 Summer Street
New York, NY 10169 Boston, MA 02210
Fax: (212) 692-9608 Fax: (617) 737-0924
Attn: Ronald W. Gerber Attn: Thomas Tully, CEO
- 7 -
<PAGE>
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to its rules of conflict
of laws.
5. The Holder may assign its rights and obligations under this
Registration Rights Agreement to any stockholder, employee or consultant of the
Holder to whom the Holder distributes the Registrable Securities.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
/s/ Thomas Tully
- ----------------------------------
By: Thomas Tully
Title: President and Chief Executive Officer
FURMAN SELZ LLC
- ---------------
By: /s/ Ronald W. Gerber
------------------------------
Name: Ronald W. Gerber
- 9 -
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated March 21, 1996 (except with respect to the matters discussed in Note 9,
as to which the date is July 9, 1996) and to all references to our firm
included in or made part of this Registration Statement.
Boston, Massachusetts
July 11, 1996
<PAGE>
EXHIBIT 23.3
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-1) and related
Prospectus of Nitinol Medical Technologies, Inc. for the registration of
shares of its Common Stock.
Sixbey, Friedman, Leedman & Ferguson
McLean, Virginia
