<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ______
Commission file number: 0-21001
Nitinol Medical Technologies, Inc.
----------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-4090463
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
27 Wormwood Street, Boston, Massachusetts 02210
- ----------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
617-737-0930
------------
(Registrant's Telephone Number, Including Area Code)
N/A
---
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
As of May 11, 1999, there were 10,766,141 shares of Common Stock, $.001
par value per share, outstanding.
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Part 1. Financial Information Page Number
--------------------- -----------
<S> <C> <C>
Item 1. Financial Statements 3
Consolidated Balance Sheets at March 31, 1999
and December 31, 1998 3
Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 24
Part II. Other Information 25
-----------------
Item 2. Changes in Securities and Use of Proceeds 25
Item 3. Defaults Upon Senior Securities 25
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 26
</TABLE>
2
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Part I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
AT AT
MARCH 31, DECEMBER 31,
1999 1998
------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,972,868 $ 4,007,014
Marketable securities 5,102,630 5,113,537
Accounts receivable, net of allowances for doubtful accounts
of $1,193,000 and $946,000 as of March 31, 1999 and
December 31, 1998, respectively 10,598,662 11,785,861
Inventories 11,688,720 10,848,432
Prepaid expenses and other current assets 3,495,477 3,516,610
-----------------------------------
Total current assets 33,858,357 35,271,454
-----------------------------------
Property, plant and equipment, at cost:
Land and Buildings 4,650,000 4,650,000
Laboratory and computer equipment 2,595,207 2,621,211
Office furniture and equipment 2,344,645 2,299,589
Leasehold improvements 4,199,156 4,429,235
Equipment under capital lease 1,144,982 1,144,982
-----------------------------------
14,933,990 15,145,017
Less- Accumulated depreciation and amortization 2,281,897 1,961,869
-----------------------------------
12,652,093 13,183,148
-----------------------------------
Long-term investments in marketable securities 506,595 1,009,401
Notes receivable from Image Technologies Corporation 1,566,769 1,600,898
Goodwill and other intangible assets, net 13,254,432 13,478,010
Other assets 1,547,178 1,640,218
-----------------------------------
$ 63,385,424 $ 66,183,129
===================================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 5,442,692 $ 6,619,190
Accrued expenses 5,099,435 5,219,500
Current portion of debt obligations 383,953 386,248
-----------------------------------
Total current liabilities 10,926,080 12,224,938
-----------------------------------
Long-term debt obligations, net of current portion 17,803,468 17,798,743
Deferred tax liability 1,959,108 1,990,808
Stockholders' equity
Preferred stock, $.001 par value-
Authorized-3,000,000 shares
Issued and outstanding-none -- --
Common stock, $.001 par value-
Authorized-30,000,000 shares
Issued and outstanding-10,745,905 and 10,680,117 shares
at March 31, 1999 and December 31, 1998, respectively 10,746 10,681
Addditional paid-in capital 41,074,210 40,999,277
Cumulative translation adjustment (325,000) 687,000
Accumulated deficit (8,063,188) (7,528,318)
-----------------------------------
Total stockholders' equity 32,696,768 34,168,640
-----------------------------------
$ 63,385,424 $ 66,183,129
===================================
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
3
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
1999 1998
----------------------------------
<S> <C> <C>
Revenues:
Product sales $10,571,459 $ 2,608,885
License fees 450,000 768,299
Product development 245 1,453
----------------------------------
11,021,704 3,378,637
----------------------------------
Expenses:
Cost of product sales 4,305,961 1,019,679
Research and development 1,106,988 764,435
General and administrative 2,683,938 647,647
Selling and marketing 2,969,375 320,897
----------------------------------
11,066,262 2,752,658
----------------------------------
Income from operations (44,558) 625,979
----------------------------------
Equity in net loss of Image Technologies Corporation (134,129) --
Currency transaction gain (loss) 200,762 (32,554)
Interest expense (817,252) (15,727)
Interest income 184,607 398,605
----------------------------------
(566,012) 350,324
----------------------------------
Income (loss) before provision for
income taxes (610,570) 976,303
Provision (benefit) for income taxes (75,700) 332,000
----------------------------------
Net income (loss) $ (534,870) $ 644,303
==================================
Basic net income (loss) per common share $ (0.05) $ 0.07
==================================
Basic weighted average common shares outstanding 10,683,775 9,823,186
==================================
Diluted net income (loss) per common share $ (0.05) $ 0.06
==================================
Diluted weighted average common shares outstanding 10,683,775 10,952,494
==================================
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
4
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
1999 1998
----------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (534,870) $ 644,303
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities-
Equity in loss of Image Technologies Corporation 134,129 --
Depreciation and amortization 548,598 131,994
Noncash tax provision 96,000 --
Noncash interest expense 163,676 --
Increase in accounts receivables reserves 247,000 20,000
Changes in assets and liabilities-
Accounts receivable (2,195,345) (279,117)
Inventories (1,118,406) (133,217)
Prepaid expenses and other current assets (68,641) (87,086)
Accounts payable 1,337,907 379,414
Accrued expenses 91,936 (126,416)
Deferred revenue -- (300,000)
----------------------------------
Net cash provided by (used in) operating activities (1,298,016) 249,875
----------------------------------
Cash flows from investing activities:
Maturities of marketable securities 513,667 389,453
Purchases of property, plant and equipment (262,609) (37,038)
Increase in investment in Image Technologies Corporation (100,000)
Increase in other assets (519) (58,080)
----------------------------------
Net cash provided by investing activities 150,539 294,335
----------------------------------
Cash flows from financing activities:
Payments of capital lease obligations (54,247) (43,380)
Proceeds from issuance of common stock 74,998 --
Payments of senior debt (44,000) --
----------------------------------
Net cash used in financing activities (23,249) (43,380)
----------------------------------
Effect of exchange rate changes on cash 136,580 --
----------------------------------
Net increase (decrease) in cash and cash equivalents (1,034,146) 500,830
Cash and cash equivalents, beginning of period 4,007,014 5,561,445
----------------------------------
Cash and cash equivalents, end of period $ 2,972,868 $ 6,062,275
==================================
Supplemental disclosure of cash flow information:
Cash paid during the period for-
Interest $ 613,576 $ 15,727
==================================
Taxes $ 13,148 $ 7,824
==================================
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
5
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Operations
Nitinol Medical Technologies, Inc., together with its subsidiaries, (the
Company) designs, develops and markets innovative medical devices that
utilize advanced technologies 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 (the
CardioSeal Septal Occluder). The Company's stents have been commercially
launched in Europe and in the United States (U.S.) for certain indications,
its vena cava filters are marketed in the U.S. and abroad and the
CardioSEAL Septal Occluder is in the clinical trials stage in the U.S. and
is sold commercially in Europe and other international markets. As a result
of the Company's acquisition on July 8, 1998 of the neurosurgical
instruments business (ENI) of Elekta AB (PUBL), a Swedish corporation,
which the Company operates through its NMT Neurosciences division, the
Company also develops, manufactures, markets, and sells specialty implants
and instruments for neurosurgery including cerebral spinal fluid shunts,
the Selector(R) Ultrasonic Aspirator, Ruggles(TM) Surgical Instruments, the
Spetzler(TM) Titanium Aneurysm Clip and endoscopes and instrumentation for
minimally invasive surgery.
As of March 31, 1999, the Company was not in compliance with one of the
debt covenants contained in the subordinated note agreement, as amended. On
April 14, 1999, the Company negotiated a waiver of default with the
noteholder, which is an affiliate of one of the Company's principal
stockholders. See Note 4 for additional terms and conditions of the waiver
of default and the amendment to the covenants.
2. Interim Financial Statements
The accompanying Consolidated Financial Statements as of March 31, 1999 and
for the three month period then ended are unaudited. In management's
opinion, these unaudited Consolidated Financial Statements have been
prepared on the same basis as the audited Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, as filed with the Securities and Exchange Commission on
on April 15, 1999, and include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the results for
such interim periods.
6
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. Interim Financial Statements--(continued)
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results expected for the fiscal year ending
December 31, 1999.
3. Acquisition of Elekta Neurosurgical Instruments
On July 8, 1998 the Company acquired Elekta Neurosurgical Instruments
(ENI), the neurosurgical instruments business of Elekta AB (PUBL), a
Swedish corporation, and financed this transaction with $13 million of the
Company's cash, plus approximately $2.6 million of acquisition costs and
$20 million of subordinated debt borrowed from an affiliate of a
significant stockholder of the Company.
The following table presents selected unaudited financial information of
the Company and the neurosurgical division of Elekta AB, assuming the
companies had combined on January 1, 1998. The unaudited pro forma results
are not necessarily indicative of either the actual results that would have
occurred had the acquisition been consummated on January 1, 1998, or of
future results:
For the three months ended March 31, 1999 1998
---- ----
(Actual) (Pro forma)
Net revenues $ 11,021,704 $ 11,789,000
============ ============
Net loss $ (534,870) $ (792,000)
============ ============
Basic and diluted weighted
average common shares
outstanding 10,683,775 10,498,186
============ ============
Basic and diluted net loss
per common share $ (.05) $ (.08)
============ ============
4. Subordinated Note Payable
The Company financed a significant portion of the acquisition of ENI (see
Note 3) with $20 million of subordinated debt borrowed from an affiliate of
a significant stockholder of the Company. The subordinated note, which is
secured by substantially all of the assets of the Company, is due September
30, 2003 with quarterly interest payable at 10.101% per annum and contains
certain restrictive covenants as defined by the subordinated note
agreement, as amended. As of March 31, 1999, the Company was not in
compliance with one of the covenants contained in the subordinated note
relating to the Company's cash position.
7
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4. Subordinated Note Payable--(continued)
The Company negotiated a waiver of the default with the noteholder and, in
connection with such waiver, the covenants were amended to be more
restrictive (including monthly financial covenants in some cases). In
addition, the Company issued to the noteholder warrants to purchase 25,000
shares of Common Stock at $3.41 per share. Although the Company believes
that it will be able to satisfy the covenants, as modified, the Company's
failure to meet its financial plan in any given month could result in a
breach of certain of the covenants by the Company. If the Company breaches
any of the covenants under the subordinated loan agreement and is not
successful in obtaining a waiver, the noteholder could demand repayment of
the note, and the interest rate of the note would be increased to 12.101%
per annum until the default is cured or waived. The Company is currently
seeking to refinance this debt. There can be no assurance that the Company
will be able to refinance this debt on acceptable terms.
5. Reclassifications
Certain prior period amounts have been reclassified to conform to the
current period's presentation.
6. Cash and Cash Equivalents, Marketable Securities, and Long-Term Investments
in Marketable Securities
The Company considers all investments with maturities of 90 days or less
from the date of purchase to be cash equivalents and all investments with
original maturity dates greater than 90 days to be marketable securities.
Marketable securities are classified as current or long term based on their
remaining maturity as of the balance sheet date.
In accordance with Statement of Financial Accounting Standards (SFAS) No.
115, Accounting for Certain Investments in Debt and Equity Securities, the
Company has classified certain of its marketable securities as
held-to-maturity and available-for-sale and its long-term investments in
marketable securities as held-to-maturity. Held-to-maturity securities
represent those securities for which the Company has the intent and ability
to hold to maturity and are reported at amortized cost.
8
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. Cash and Cash Equivalents, Marketable Securities, and Long-Term Investments
in Marketable Securities--(continued)
Available-for-sale securities represent those securities that do not meet
the classification of held-to-maturity, are not actively traded and are
reported at fair market value with unrealized gains and losses included in
stockholders' equity. There were no unrealized gains or losses for the
three months ended March 31, 1999 or 1998.
Cash and cash equivalents, which are carried at cost and approximate market
value, consist of the following at:
March 31, December 31,
1999 1998
---- ----
Cash $2,972,868 $3,995,112
Cash equivalents--
Money market -- 11,902
---------- ----------
$2,972,868 $4,007,014
========== ==========
Marketable securities, with a weighted average maturity of approximately 6
months and 7 1/2 months at March 31, 1999 and December 31, 1998,
respectively, are carried at cost which approximates market value and
consist of the following at:
March 31, December 31,
1999 1998
---- ----
Held-to-maturity--
Eurodollar bonds $3,301,159 $3,310,627
Medium-term notes 1,001,471 500,847
Corporate debt securities -- 502,063
---------- ----------
4,302,630 4,313,537
Available-for-sale--
Taxable auction securities 800,000 800,000
---------- -----------
$5,102,630 $ 5,113,537
========== ===========
There were no realized gains or losses on the sale of available-for-sale
securities during the three months ended March 31, 1999 and 1998.
9
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. Cash and Cash Equivalents, Marketable Securities, and Long-Term Investments
in Marketable Securities--(continued)
Long-term investments, with a weighted average maturity of approximately 13
1/2 months and 15 months at March 31, 1999 and December 31, 1998,
respectively, are carried at cost which approximates market value. As of
March 31, 1999 and December 31, 1998, long-term investments were $506,596
and $1,009,401, respectively, and consisted of medium-term notes.
In addition, the following amounts of interest receivable generated from
the Company's cash and cash equivalents, marketable securities, and
long-term investments are included in prepaid expenses and other current
assets and in other assets in the accompanying balance sheets at:
March 31, December 31,
1999 1998
---- ----
Short-term interest receivable $ 154,668 $ 117,687
Long-term interest receivable 13,031 12,985
--------- ---------
$ 167,699 $ 130,672
========= =========
7. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
value and consist of the following:
March 31, December 31,
1999 1998
---- ----
Components $ 4,760,334 $ 3,117,848
Finished Goods 6,927,978 7,730,584
----------- -----------
$11,688,720 $10,848,432
=========== ===========
8. Net Income (Loss) per Common and Common Equivalent Share
The Company applies SFAS No. 128, Earnings per Share. SFAS No. 128
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common
stock. In accordance with Staff Accounting Bulletin (SAB) No. 98, the
Company has determined that there were no nominal issuances of common stock
or potential common stock in the periods prior to the Company's initial
public offering.
10
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
8. Net Income (Loss) per Common and Common Equivalent Share--(continued)
Diluted loss per share is the same as basic loss per share for the three
months ended March 31, 1999 as the effects of the Company's potential
common stock (646,229 shares for the three months ended March 31, 1999) are
antidilutive. Calculations of basic and diluted net income (loss) per share
are as follows:
For the three months
ended March 31,
1999 1998
---- ----
Net income (loss) available to
common stockholders $ (534,870) $ 644,303
========== ===========
Weighted average common shares
outstanding 10,683,775 9,823,186
Potential common stock pursuant to
stock options -- 1,129,308
---------- -----------
Diluted weighted average common
shares outstanding 10,683,775 10,952,494
========== ===========
Basic net income (loss) per common share $ (.05) $ .07
========== ===========
Diluted net income (loss) per common share $ (.05) $ .06
========== ===========
9. Foreign Currency
The accounts of the Company's subsidiaries are translated in accordance
with SFAS No. 52, Foreign Currency Translation. Accordingly, the accounts
of the Company's foreign subsidiaries are translated from their local
currency, which is the functional currency, into U.S. dollars, the
reporting currency, using the exchange rate at the balance sheet date.
Income and expense accounts are translated using an average rate of
exchange during the period. Cumulative foreign currency translation gains
or losses are reflected as a component of consolidated stockholders'
equity and amounted to a loss of $325,000 as of March 31, 1999. There
were no foreign currency translation gains or losses as of March 31, 1998.
Additionally, the Company had a foreign currency exchange transaction gain
of approximately $201,000 for the three month period ended March 31, 1999
and a foreign currency exchange loss of approximately $34,000 for the
three month period ended March 31, 1998.
Foreign currency transaction gains and losses result from differences in
exchange rates between the functional currency and the currency in which a
transaction is denominated and are included in the consolidated statement
of operations in the period in which the exchange rate changes.
10. Comprehensive Income
The Company applies the provisions of SFAS No. 130, Reporting Comprehensive
Income which establishes standards for reporting and displaying
comprehensive income and its components in the consolidated financial
statements. Comprehensive income is defined as the change in equity of a
business enterprise during a period as a result of transactions and other
events and circumstances attributable to non-owner sources. The adoption of
this standard did not have a material effect on the Company's financial
statements, as the only element of comprehensive income related to the
Company is the foreign currency translation adjustment which is presented
separately on the balance sheet as required. If presented on the statement
of operations for the three month period ended March 31, 1999,
comprehensive loss would have extended the reported net loss by $1,012,000.
There were no differences in reported net income and comprehensive net
income for the three month period ended March 31, 1998.
11
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
11. Investment in Image Technologies Corporation
On May 29, 1997 the Company entered into an agreement to invest $2.3
million in Image Technologies Corporation (ITC) in exchange for 345,722
shares of ITC's $.01 par value redeemable convertible preferred stock,
representing a 23% ownership interest in ITC. Under the terms of this
agreement, the Company has also extended to ITC a credit line, subject to
an annual interest rate of 10%, of up to $2 million of senior debt,
exchangeable for convertible preferred stock at the option of the Company
and equivalent to up to an additional 20% ownership share of ITC. As of
March 31, 1999 ITC borrowed $2 million under this agreement and owes the
Company accrued interest of approximately $121,000. On December 30, 1998
and February 3, 1999, the Company entered into a revolving credit note
agreement with ITC for an additional $50,000 and $100,000, respectively,
under which ITC borrowed $38,043 and $100,000 as of March 31, 1999. These
notes accrue interest at 10% per annum, are subject to the same terms as
the $2 million credit line agreement, and are payable in full at the option
of the Company. In connection with the issuance of the $100,000 note, ITC
granted a warrant to the Company to purchase 10,030 shares of ITC Series A
preferred stock at $9.97 per share. On March 30, 1999, ITC entered into a
finance agreement with a third party whereby the third party purchased
120,361 shares of ITC's common stock at $9.97 per share. The Company was
issued an additional 39,151 shares of ITC Series A preferred stock in
conjunction with this financing in order to maintain its 23% ownership
interest in ITC. A portion of the proceeds from this financing was used to
repay certain bridge financing, including approximately $38,000 borrowed
from the Company in December 1998. The Company has an option to purchase
the remaining 57% of ITC for $24.5 million, of which up to $7.84 million
may be payable in cash. The option expires on May 29, 1999 and may be
extended to November 30, 1999 under certain terms. The Company intends to
extend its option until November 30, 1999.
12
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
12. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following at:
March 31, December 31,
1999 1998
---- ----
Refundable and deferred income taxes $ 993,749 $ 753,749
Value added tax receivable 811,966 156,593
Interest 355,463 754,850
Equipment deposit 99,662 543,327
Advances to suppliers -- 247,000
Commissions 99,000 193,000
Insurance 79,277 178,804
Royalties 227,000 --
Maintenance 145,000 --
Other prepaid expenses 684,360 689,287
---------- ----------
$3,495,477 $3,516,610
========== ==========
13. Accrued Expenses
Accrued expenses consist of the following at:
March 31, December 31,
1999 1998
---- ----
Payroll and payroll related $1,782,550 $1,803,859
Severance and relocation costs 225,000 --
Income taxes 340,858 275,600
Sales taxes 733,000 753,000
Professional fees 578,776 566,776
Inventory 568,623 493,059
Royalties 209,804 265,331
Interest 97,000 106,000
Insurance 44,065 103,081
Other accrued expenses 519,759 852,794
---------- ----------
$5,099,435 $5,219,500
========== ==========
13
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
14. Segment Reporting
The Company applies the provisions of SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131 established
standards for reporting information about operating segments in annual
financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
established standards for related disclosures about products and services
and geographic areas. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker or decision
making group, in deciding how to allocate resources and in assessing
performance. The Company's chief operating decision making group is the
Chief Executive Officer, members of Senior Management, and the Board of
Directors. The operating segments are managed separately because each
represents specific types of medical devices for specific markets -- the
core technologies segment includes minimally-invasive medical devices that
were the primary products of the Company prior to the acquisition of ENI
while the neurosurgical segment includes primarily neurosurgical medical
devices that were the primary products of ENI.
The Company's operating segments include the core technologies product line
and the neurosurgical product line. Revenues for the core technologies
product line are derived from sales of the Simon Nitinol Filter (SNF) and
the CardioSEAL Septal Occluder, as well as from licensing revenues from the
Company's self-expanding stents. Revenues for the neurosurgical product
line are derived from sales of cerebral spinal fluid shunts, the
Selector(R) Ultrasonic Aspirator, Ruggles(TM) Surgical Instruments, the
Spetzler(TM) Titanium Aneurysm Clip and endoscopes and instrumentation for
minimally invasive surgery.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on stand-alone operating segment net income. Revenues are
attributed to geographic area based on where the customer is located. The
Company operated in only one operating segment, core technologies products,
during the three month periods ended March 31, 1998. Segment information is
presented as follows:
14
<PAGE>
NITINOL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
14. Segment Reporting--(continued)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
1999 1998
---- ----
<S> <C> <C>
Segment Revenues:
Core technologies products $ 3,010,704 $ 3,378,637
Neurosurgical products 8,011,000 --
------------ ------------
Total revenues $ 11,021,704 $ 3,378,637
============ ============
Segment Interest Income:
Core technologies products $ 167,607 $ 398,605
Neurosurgical products 17,000 --
------------ ------------
Total $ 184,607 $ 398,605
============ ============
Segment Interest Expense:
Core technologies products $ (219,202) $ (15,727)
Neurosurgical products (598,050) --
------------ ------------
Total $ (817,252) $ (15,727)
============ ============
Segment Income Tax Provision (Benefit):
Core technologies products $ (49,980) $ 332,000
Neurosurgical products (25,720) --
------------ ------------
Total $ (75,700) $ 332,000
============ ============
Segment Depreciation and Amortization:
Core technologies products $ 324,598 $ 131,994
Neurosurgical products 224,000 --
------------ ------------
Total $ 548,598 $ 131,994
============ ============
Segment Equity in Net Loss of Investee:
Core technologies products $ (134,129) $ --
Neurosurgical products -- --
------------ ------------
Total $ (134,129) $ --
============ ============
Segment Income (Loss):
Core technologies products $ (771,840) $ 644,303
Neurosurgical products 236,970 --
------------ ------------
Total net income $ (534,870) $ 644,303
============ ============
Segment Expenditures for Long-Lived
Assets:
Core technologies products $ 32,973 $ 37,038
Neurosurgical products 229,636 --
------------ ------------
Total $ 262,609 $ 37,038
============ ============
</TABLE>
15
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-Q, other than the historical financial
information, contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements involve known and unknown risks, uncertainties or other factors which
may cause actual results, performance or achievement of the Company to be
materially different from any future results, performance, or achievement
expressed or implied by such forward-looking statements. Factors that might
cause such a difference include uncertainties in market demand and acceptance,
government regulation and approvals, and intellectual property rights and
litigation; the impact of healthcare reform programs and competitive products
and pricing; risks associated with technology and product development and
commercialization, potential product liability, management of growth,
dependence on significant corporate relationships and other risks detailed in
the Company's Annual Report on Form 10-K as of December 31, 1998 filed with the
Securities and Exchange Commission on April 15, 1999.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1998
Revenues. Revenues for the three months ended March 31, 1999 increased to $11.0
million from $3.4 million for the three months ended March 31, 1998. The
increase is primarily attributable to the Company's acquisition of the
neurosurgical instruments business (ENI) of Elekta AB (PUBL), a Swedish
corporation, on July 8, 1998. This acquisition was accounted for as a purchase
and accordingly ENI's results of operations, including product revenues of $8.0
million for the three month period ended March 31, 1999 are included with those
of the Company. Additionally, the Company had increased unit sales of CardioSEAL
Septal Occluders during the three months ended March 31, 1999 as compared with
the three months ended March 31, 1998, offset by lower unit sales of vena cava
filters during the three months ended March 31, 1999, as compared with the three
months ended March 31, 1998. License fees for the three months ended March 31,
1999 amounted to $450,000 and consist of royalty payments of $375,000 and
cost-sharing payments from Boston Scientific of approximately $75,000. License
fees for the three months ended March 31, 1998 amounted to $768,000, consisting
of milestone payments of $300,000, royalty payments of $375,000 and cost-sharing
payments from Boston Scientific Corp. of approximately $93,000.
16
<PAGE>
Cost of Product Sales. Cost of product sales increased to $4.3 million for the
three months ended March 31, 1999 from $1.0 million for the three months ended
March 31, 1998. The increase was primarily due to the Company's acquisition of
ENI, as a result of which ENI's cost of product sales of $3.4 million are
included with those of the Company for the three months ended March 31, 1999.
Additionally, the Company experienced increased unit sales of CardioSEAL Septal
Occluders in the three months ended March 31, 1999, as compared with the three
months ended March 31, 1998. Cost of product sales, as a percent of product
sales, increased to 39% for the three months ended March 31, 1999 from 38% for
the three months ended March 31, 1998. This increase is due to the inclusion of
ENI's products which have a higher cost of product sales as a percent of sales
than do the vena cava filter and CardioSEAL Septal Occluder; the above increase
is partially offset by increased sales of the CardioSEAL Septal Occluder which
has a lower cost of product sales as a percent of sales than does the vena cava
filter.
Research and Development. Research and development expense increased to $1.1
million for the three months ended March 31, 1999 from $764,000 for the three
months ended March 31, 1998. The increase is primarily attributable to the
Company's acquisition of ENI, as a result of which ENI's research and
development expenses of $284,000 are included with those of the Company for the
three months ended March 31, 1999. Additionally, the increase reflects increased
regulatory and clinical trial expenses relating to clinical trials of the
CardioSEAL Septal Occluder that commenced in September 1996, as well as for
clinical trials related to the closure of patent foramen ovales (PFO's) and
increased activity in the Company's development programs for vena cava filters
and other products under development.
General and Administrative. General and administrative expenses increased to
$2.7 million for the three months ended March 31, 1999 from $648,000 for the
three months ended March 31, 1998. The increase is primarily attributable to the
inclusion of ENI's general and administrative expenses of $1.5 million for the
three months ended March 31, 1999 and to the amortization of goodwill related to
the acquisition of ENI. Additionally, the Company recorded $100,000 of expenses
pertaining to the Company's negotiations related to noncompliance with and
amendment to certain of its debt covenants as of March 31, 1999. See "Liquidity
and Capital Resources." In the three months ended March 31, 1999, the Company
also recorded an additional $200,000 of expenses consisting of legal,
accounting, and employee relocation costs.
Selling and Marketing. Selling and marketing expenses increased to $3.0 million
for the three months ended March 31, 1999 from $321,000 for the three months
ended March 31, 1998. The increase is primarily attributable to the inclusion of
ENI's selling and marketing expenses of $2.2 million for the three months ended
March 31, 1999 and to increased marketing activities related to the CardioSEAL
Septal Occluder in connection with the promotion of commercial sales that
commenced in Europe and other international markets in June 1997.
17
<PAGE>
Additionally, in the three months ended March 31, 1999, the Company recorded
$400,000 of expenses in conjunction with the termination and replacement of
certain individuals in the sales and product management departments of the
Company and for related legal and consulting costs.
Interest Expense. Interest expense was $817,000 for the three months ended March
31, 1999 as compared to $16,000 for the three months ended March 31, 1998. The
increase was primarily the result of the Company's acquisition of ENI for which
the Company borrowed $20 million of subordinated debt which accrues interest at
10.101% per annum. In connection with the Company's renegotiation of its debt
covenants as of March 31, 1999 (see "Liquidity and Capital Resources"), the
Company recorded $50,000 of interest expense related to the issuance of warrants
to the holder of the note. In addition, the amortization of original issue
discount related to the subordinated note of $41,000 is included in the
statement of operations for the three months ended March 31, 1999.
Interest Income. Interest income was $185,000 for the three months ended March
31, 1999 as compared to $399,000 for the three months ended March 31, 1998. The
decrease was due to the Company's lower cash balances as a result of its
financing the acquisition of ENI with cash of $13.0 million, plus approximately
$2.6 million of acquisition costs.
Provision (Benefit) for Income Taxes. The Company had a benefit for income taxes
of $76,000 for the three months ended March 31, 1999 based on an operating loss
before nondeductible items and an estimated effective tax rate of approximately
40%. The Company had a provision for income taxes of $332,000 for the three
months ended March 31, 1998 based on an operating income of $976,000 for the
respective periods and an estimated effective tax rate of 40%.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents and marketable securities equal to
$8.1 million at March 31, 1999 as compared to $9.1 million at December 31, 1998.
During the three months ended March 31, 1999, the Company's operations utilized
cash of approximately $1.3 million, which consists of approximately $605,000 of
cash generated by operations prior to approximately $1.1 million of noncash
charges and before changes in working capital items.
In July 1998, the Company financed a portion of the acquisition of ENI with $13
million of the Company's cash, plus approximately $2.6 million of acquisition
costs and a $20 million subordinated note issued to an affiliate of a
significant stockholder of the Company. The subordinated note, which is secured
by all of the assets of the Company, is due September 30, 2003 with quarterly
interest payable at 10.101% per annum. The Company anticipates repaying the
subordinated debt from its cash flows, including the operations of ENI, or from
debt or equity financing. The subordinated debt includes certain restrictive
covenants relating to maintenance of certain ratios
18
<PAGE>
and cash levels. As of March 31, 1999, the Company was not in compliance with
one of the covenants contained in the subordinated note, as amended, relating to
the Company's cash position. The Company negotiated a waiver of default with the
noteholder and, in connection with such waiver, the covenants were amended to be
more restrictive (including monthly financial covenants in some cases), and the
Company issued to the noteholder warrants to purchase 25,000 shares of Common
Stock at $3.41 per share. Although the Company believes that it will be able to
satisfy the covenants as modified, the Company's failure to meet its financial
plan in any given month could result in a breach of certain of the covenants by
the Company. If the Company breaches any of the covenants under the subordinated
loan agreement and is not successful in obtaining a waiver, the noteholder
could demand repayment of the note. In addition, in the event of a breach
of certain of the covenants, including the financial covenants, the interest
rate of the note will be increased to 12.101% per annum until the default is
cured or waived. The Company is currently seeking to refinance this debt. There
can be no assurance that the Company will be able to refinance this debt on
acceptable terms.
Purchases and capitalized leases of property and equipment for use in the
Company's research and development and general and administrative activities
amounted to $263,000 for the three months ended March 31, 1999. The Company
anticipates that it will spend approximately $1.5 million on purchases of
property and equipment in 1999, consisting primarily of purchases made in
connection with the Company's implementation of a new ERP system. See "Year 2000
Readiness".
In connection with the Company's investment in ITC, the Company extended to ITC
a credit line of up to $2.0 million of senior debt under a loan agreement (the
"loan agreement") that bears interest at 10% per annum. The note is convertible
into equity at the rate of one percent of ownership per $100,000 borrowed.
During the second quarter of 1998, ITC began to make borrowings against this
line in order to fund its operations and, as of March 31, 1999, owes the Company
$2.0 million, plus accrued interest of approximately $119,000. In addition, in
19
<PAGE>
December 1998 and February 1999 the Company amended its loan agreement with ITC
to provide ITC with an additional $50,000 and $100,000, respectively, of
financing under the same terms and conditions as the $2.0 million senior debt
financing. In connection with the February 1999 amendment, ITC issued to the
Company a warrant to purchase 10,030 shares of ITC's Series A Preferred Stock at
an exercise price of $9.97 per share. As of March 31, 1999, ITC had borrowed
$138,034 under this facility. The Company has not recorded interest income on
the note receivable from ITC because interest is not due until the earlier of
(i) the closing of any debt or equity financing by ITC resulting in at least
$4.0 million in gross proceeds to ITC, (ii) the merger or consolidation, or
other combination, of ITC into or with another corporation or the sale of all or
substantially all of the assets of ITC or (iii) thirty months following November
30, 1999 or following the date upon which the Company exercises its option to
purchase all of the outstanding capital stock of ITC. In addition, under the
loan agreement, the payment of all interest will be waived if the Company
exercises its option to convert its senior debt into additional equity. This
option to convert expires May 29, 1999 but may be extended until no later than
November 30, 1999 under certain conditions. The Company intends to extend this
option to exercise until November 30, 1999 and believes that the amount due from
ITC will be collectible from ITC's future cash flows or from independent
financing. During the three months ended March 31, 1999, the Company recorded
$134,000 as its equity in the loss of ITC, and reduced the carrying value of the
note receivable by such amount. The Company believes that the carrying value of
the note, approximately $1.6 million as of March 31, 1999, is fully realizable.
During the three months ended March 31, 1999, ITC generated approximately
$217,000 of product revenues and expects product revenues to increase
significantly during 1999.
On March 30, 1999, ITC entered into an agreement for the issuance and sale of
120,361 shares of common stock to a third party at a purchase price of $9.97
per share to a third party. The agreement provides for the issuance of
additional shares of common stock to the purchaser if ITC does not reach certain
milestones as set forth in the agreement. In connection with this issuance, ITC
issued 39,159 shares of Series A redeemable convertible preferred stock to NMT
in order for NMT to maintain its 23 percent ownership interest in ITC. A portion
of the proceeds from this financing was used to repay certain bridge financing,
including approximately $38,000 borrowed from the Company in December 1998, plus
accrued interest thereon.
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 as additional
personnel are retained. The Company also has committed to purchase certain
minimum quantities of the vena cava filter from a supplier through June 2001.
See Note 10 of Notes to the Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K as filed with the Securities and
20
<PAGE>
Exchange Commission on April 15, 1999. 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 may require additional funds 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 additional 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 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 collaborative, licensing and other similar
arrangements that the Company may establish.
Year 2000 Readiness
Prior to the Company's acquisition of ENI, the Company had reviewed its internal
computer systems and their capabilities of recognizing the year 2000 and years
thereafter. At that time, the Company believed that it was Year 2000 compliant
in all material respects.
In addition, prior to the acquisition of ENI by the Company, management of ENI
had determined that its financial and operational systems needed modification or
replacement not only to be year 2000 compliant but to (a) improve functionality,
(b) facilitate euro currency compliance, (c) provide more meaningful information
and (d) integrate the various companies within ENI onto a world-class Enterprise
Reporting System (ERP). ENI management had developed a plan for implementing the
new system, including selecting the system and related providers of
implementation assistance, but the decision to proceed was postponed until the
closing of the acquisition.
After the closing of the acquisition, the Company authorized the plan described
above in August 1998, and began work to implement a new ERP system for its
NMT Neurosciences Division. The new system is scheduled to be operational by the
end of the third quarter of 1999 at an estimated total project cost of $2.0
million, of which approximately $1.3 million will be for computer hardware and
other capital expenditures. The Company anticipates financing the capital
component and expects to fund the remainder from operating cash flows.
21
<PAGE>
While the Company currently does not have a contingency plan in the event a
particular system is not Year 2000 compliant, such a plan will be developed if
it becomes clear that the Company is not going to achieve its scheduled
readiness objectives. Because the Company is completely replacing the systems at
its Neurosciences Division with a commercially available and tested ERP product,
it is believed that this project will proceed more efficiently than had the
Company chosen to modify its existing systems. Currently, the project is
slightly behind schedule due to a delayed start. However, target dates for
project completion have remained unchanged as the Company believes they
continue to be realistic.
Because the Company interfaces with its major customers and suppliers via
telephone and fax, the Company does not expect to incur significant losses in
the event that either the Company or its customers and suppliers are not ready
for the Year 2000. The Company has been informed by its major customers and
suppliers that they are Year 2000 compliant. However, the Company has not
verified the content of Year 2000 statements of these third parties. The Company
believes that its products are ready for the Year 2000.
The costs of the project and the date on which the Company believes it will
complete the implementation of its ERP system are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated.
Euro Conversion
On January 1, 1999, eleven of the fifteen member countries of the European Union
adopted the "euro" as their national currency unit and irrevocably established
fixed conversion rates between their existing sovereign currencies and the euro.
During the three year transition period between January 1, 1999 and January 1,
2002, the euro will be a "cashless" currency, existing only as a unit of
account. Payments made to accounts in these member states may be made either in
the denominated legacy currency unit of the account or in euros. Beginning on
January 1, 2002, euro banknotes and coins will be introduced, and legacy
currency banknotes and coins will be withdrawn from circulation. No later than
July 1, 2002, the euro will be the sole national currency unit in these member
states, and the legacy currency banknotes and coins will no longer be accepted
as legal tender.
The Company, including its Neurosciences Division, conducts a substantial
portion of its business within the member countries of the European Union, and
accordingly, its existing systems are generally capable of accommodating
multiple currencies, including the euro. The new ERP system described above will
also assure continued euro currency compliance.
22
<PAGE>
The Company has formed a task force and has begun to assess the potential impact
to the Company that may result from the euro conversion. In addition to tax and
accounting considerations, the Company is assessing the potential impact from
the euro conversion in a number of areas, including the following: (1) the
competitive impact of cross-border price transparency, which may make it more
difficult for businesses to charge different prices for the same products on a
country-by-country basis; (2) the impact on currency exchange costs and currency
exchange rate risk; and (3) the impact on existing contracts.
At this early stage of its assessment, the Company cannot yet predict the
anticipated impact of the euro conversion on the Company.
23
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
-----------------------------------------------------------
The Company is subject to market risk in the form of interest rate risk and
foreign currency risk. Interest rate risk is immaterial to the Company. As an
international concern, the Company faces exposure to adverse movements in
foreign currency exchange rates. These exposures may change over time and could
have a material adverse impact on the Company's financial condition and results
of operations. The Company's most significant foreign currency exposures relate
to the United Kingdom and France, as a result of its manufacturing activities
and assets in those countries. The accounts of the Company's foreign
subsidiaries are translated in accordance with SFAS No. 52, Foreign Currency
Translation. In translating the accounts of the foreign subsidiaries into U.S.
dollars, assets and liabilities are translated at the rate of exchange in effect
at year-end, while stockholders' equity is translated at historical rates.
Revenue and expense accounts are translated using the weighted average exchange
rate in effect during the year. The Company's foreign currency transaction gains
or losses are included in the accompanying consolidated statements of operations
since the functional currency is the U.S. dollar. The adoption of the euro by
certain members of the European Union occurred on January 1, 1999. In light of
the recent adoption of the euro, the Company cannot yet predict what impact, if
any, the euro will have on its foreign exchange exposure.
24
<PAGE>
Part II -- Other Information
- ----------------------------
Item 2. Changes in Securities and Use of Proceeds.
------------------------------------------
(d) Uses of Proceeds from Registered Securities. There has been no change
-------------------------------------------
to the information previously provided by the Company on its Quarterly Report on
Form 10-Q for the period ended September 30, 1998, as amended, relating to
securities sold by the Company pursuant to its Registration Statement on
Form S-1 (Registration No. 333-06463), which was declared effective on
September 27, 1996.
The Company financed a significant portion of the acquisition of ENI
with $20 million of subordinated debt borrowed from an affiliate of a
significant stockholder of the Company. The subordinated note agreement dated
July 8, 1998 contains working capital restrictions and limitations upon the
payment of dividends. The subordinated note agreement, as amended to date, is
filed as an exhibit to the Company's Current Report on Form 8-K dated July 8,
1998 and Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
Item 3. Defaults Upon Senior Securities.
(a) Material Default with Respect to Indebtedness. As of March 31, 1999,
-------- ------------ ---------- ------------
the Company was not in compliance with one of the restrictive covenants
contained in its subordinated note agreement relating to the Company's cash
position. The Company negotiated a waiver of the default with the noteholder.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources, and Note 4 of the Notes to the
Company's Consolidated Financial Statements for the quarter ended March 31,
1999.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits.
--------
10.1 Employment Agreement dated as of January 1, 1999
Between the Company and Thomas M. Tully.
10.2 Employment Agreement dated as of July 1, 1998 between
the Company and David A.Chazanovitz.
10.3 Registration Rights Agreement dated as of March 30,
1999 By and Among the Company and the individuals
listed on Schedule A thereto.
10.4 Amended and Restated Stockholders' Option Agreement dated
as of March 30, 1999 By and Among the Company, ITC and the
Stockholders listed at Schedule A thereto.
10.5 Amendment No. 1 dated April 14, 1999 to Subordinated Note
and Common Stock Purchase Agreement of July 8, 1998 by and
among the Company, Whitney Subordinated Debt Fund, L.P.
and, for certain purposes J.H. Whitney & Co.
10.6 Waiver No. 1 dated April 14, 1999 by and among the Company
and Whitney Subordinated Debt Fund, L.P.
10.7 Amendment dated May 12, 1999 to Waiver No. 1 dated
April 14, 1999 by and among the Company and Whitney
Subordinated Debt Fund, L.P.
10.8 Amendment No. 2 dated November 9, 1998 to Purchase
Agreement between the Company and Elekta AB (Publ.) of May
8, 1998.
10.9 Amendment No. 2 dated as of February 3, 1999 to the Loan
and Security Agreement of May 29, 1997 between Image
Technologies Corporation and the Company.
10.10 Amendment No. 1 dated as of March 30, 1999 to Registration
Rights Agreement among the Company, Whitney Equity
Partners, Boston Scientific Corporation, David J. Morrison
and Corporate Decisions, Inc. of February 16, 1996.
10.11 Amendment No. 1 dated as of March 30, 1999 to Registration
Rights Agreement among the Company, Whitney Subordinated
Debt Fund, L.P. and J.H. Whitney & Co. of July 8, 1998.
27.1 Financial Data Schedule
(b) Reports on Form 8-K. None.
-------------------
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NITINOL MEDICAL TECHNOLOGIES, INC.
Date: May 13, 1999 By: /s/ Thomas M. Tully
_________________________________
Thomas M. Tully
President and Chief Executive
Officer
Date: May 13, 1999 By: /s/ William J. Knight
_________________________________
William J. Knight
Vice President of Finance
and Administration
and Chief Financial Officer
26
<PAGE>
EXHIBIT INDEX
Exhibits
--------
10.1 Employment Agreement dated as of January 1, 1999
Between the Company and Thomas M. Tully.
10.2 Employment Agreement dated as of July 1, 1998 between
the Company and David A.Chazanovitz.
10.3 Registration Rights Agreement dated as of March 30,
1999 By and Among the Company and the individuals
listed on Schedule A thereto.
10.4 Amended and Restated Stockholders' Option Agreement dated
as of March 30, 1999 By and Among the Company, ITC and the
Stockholders listed at Schedule A thereto.
10.5 Amendment No. 1 dated April 14, 1999 to Subordinated Note
and Common Stock Purchase Agreement of July 8, 1998 by and
among the Company, Whitney Subordinated Debt Fund, L.P.
and, for certain purposes J.H. Whitney & Co.
10.6 Waiver No. 1 dated April 14, 1999 by and among the Company
and Whitney Subordinated Debt Fund, L.P.
10.7 Amendment dated May 12, 1999 to Waiver No. 1 dated
April 14, 1999 by and among the Company and Whitney
Subordinated Debt Fund, L.P.
10.8 Amendment No. 2 dated November 9, 1998 to Purchase
Agreement between the Company and Elekta AB (Publ.) of May
8, 1998.
10.9 Amendment No. 2 dated as of February 3, 1999 to the Loan
and Security Agreement of May 29, 1997 between Image
Technologies Corporation and the Company.
10.10 Amendment No. 1 dated as of March 30, 1999 to Registration
Rights Agreement among the Company, Whitney Equity
Partners, Boston Scientific Corporation, David J. Morrison
and Corporate Decisions, Inc. of February 16, 1996.
10.11 Amendment No. 1 dated as of March 30, 1999 to Registration
Rights Agreement among the Company, Whitney Subordinated
Debt Fund, L.P. and J.H. Whitney & Co. of July 8, 1998.
27.1 Financial Data Schedule
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement is effective as of the 1st day of January, 1999, by and
between Thomas M. Tully (the "Executive") and Nitinol Medical Technologies,
Inc., a Delaware corporation (the "Company").
WHEREAS, the Company wishes to employ the Executive as the President and
Chief Executive Officer of the Company under the terms and conditions set forth
below; and
WHEREAS, the Executive wishes to accept such employment under those terms
and conditions;
NOW, THEREFORE, in consideration of the provisions and mutual covenants
contained in this agreement and for other good and valuable consideration, the
Company and the Executive (the "Parties") agree as follows:
1. TERM OF EMPLOYMENT.
------------------
The Company agrees to employ the Executive, and the Executive agrees to
serve, on the terms and conditions of this Agreement, for a period commencing on
January 1, 1999 (the "Effective Date") and ending on December 31, 2001, or such
shorter period as may be provided for herein. If the Executive is employed by
the Company on October 1, 2001, the term of the Executive's employment shall
automatically be extended until December 31, 2002, provided that either the
Company or the Executive may limit such renewal by giving at least three months
notice to the other in writing that the employment term is to end on a date on
or after December 31, 2001 and before December 31, 2002. (The employment term
described above is hereinafter referred to as the "Employment Term").
2. POSITION, DUTIES, RESPONSIBILITIES.
----------------------------------
During the Employment Term, the Executive shall serve as President and
Chief Executive Officer of the Company. In such capacity, the Executive shall
report to the Chairman of the Board and the Board of Directors of the Company
and shall perform such duties and have such responsibilities of an executive
nature as are customarily performed by a person holding such office, it being
recognized that the Executive's duties and responsibilities, consistent with his
titles hereunder, may be changed by the Board of Directors of the Company from
time to time. The Executive shall devote his full business time and attention
to the performance of his duties under this Agreement. The Executive shall
serve without additional compensation as a director of the Company and on any
committees of the Board of Directors, if requested.
<PAGE>
3. SALARY.
------
During the Employment Term, the Executive shall be paid a base salary
("Salary"), as follows:
(a) From January 1, 1999 until December 31, 1999 - $292,200 per
year;
(b) From January 1, 2000 until December 31, 2000 - $303,600 per year;
(c) From January 1, 2001 until December 31, 2001 - $315,456 per year.
The Executive's Salary shall be payable in accordance with the Company's
standard payroll practice. Consideration of any additional Salary increases
must be made annually by the Board of Directors, upon the anniversary of this
Agreement, provided however that any actual additional Salary increases shall be
in the sole discretion of the Board of Directors. The Executive shall be
entitled to receive bonuses in the sole discretion of the Board of Directors,
determined upon the achievement of goals as the Executive and the Board of
Directors of the Company shall agree.
In addition, the Executive shall receive a lump sum payment of $11,666 upon
signing of this Agreement.
4. STOCK OPTIONS.
-------------
On or after the Effective Date, the Executive shall be issued stock options
to purchase an aggregate of 100,000 shares of the Company's Common Stock, par
value $.001 per share, (the "Options") under the Company's 1998 Stock Incentive
Plan. The exercise price for the Options shall be the closing price ($4.50) of
the Company's Common Stock on the date of grant (January 19, 1999). The Options
shall, to the maximum extent permissible under Section 422 of the Internal
Revenue Code of 1986, as amended, constitute incentive stock options, with any
balance of the Options to be treated as non-statutory stock options. The
Options shall vest in four equal annual installments on the first, second, third
and fourth anniversaries of the date of grant. Once exercisable, all Options
shall remain exercisable for a period of ten (10) years from the date of grant
(the "Final Exercise Date"). Notwithstanding the above, all of the Options
shall become immediately exercisable in the event of a change of control of the
Company. For purposes of this Agreement, a "change of control of the Company"
shall be deemed to have occurred upon (1) any merger, consolidation or
reorganization of the Company in which the Company is not the continuing or
surviving entity, or (2) the sale, lease, exchange or transfer of all or
substantially all of the Company's assets, other than a sale, lease, exchange or
transfer to an entity of
-2-
<PAGE>
which the holders of the Company's Common Stock hold
more than 50% of the capital stock of such entity.
5. EMPLOYEE BENEFITS.
-----------------
(a) Benefit Programs. During the Employment Term, the Company shall
----------------
provide the Executive and eligible family members with medical, dental, and
disability insurance and such other benefits and perquisites as are provided in
the Company's applicable plans and programs to its employees generally;
provided, that the Executive meets the qualifications therefor ("Benefits").
(b) Life Insurance. During the Employment Term, the Company shall
--------------
provide the Executive with basic term life insurance providing death benefits in
the amount of $1,000,000, or any plan or arrangement providing benefits of equal
value.
(c) Vacation. During each twelve month period of the Employment
--------
Term, Executive shall be entitled to no less than four weeks of vacation;
provided, however, that any vacation time not taken during any year shall be
forfeited. The Executive shall also be entitled to all paid holidays given by
the Company to its officers and employees.
6. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE.
-----------------------------------------------
The Executive represents and warrants to the Company that the Executive is
under no contractual or other restriction or obligation which is inconsistent
with the execution of this Agreement, the performance of his duties hereunder,
or the other rights of the Company hereunder.
7. NON-COMPETITION; NON-SOLICITATION.
---------------------------------
In view of the unique and valuable services it is expected Executive will
render to the Company, Executive's knowledge of the customers, trade secrets,
and other proprietary information relating to the business of the Company and
its customers and suppliers and similar knowledge regarding the Company it is
expected Executive will obtain, and in consideration of the compensation to be
received hereunder, Executive agrees that he will not, during the period he is
employed by the Company under this Agreement or otherwise, and for a period of
one year after he ceases to be employed by the Company under this Agreement or
otherwise, compete with or be engaged in, or Participate In (as defined below)
any other business or organization (which shall not include a university,
hospital, or other non-profit organization) which during such one year period is
or as a result of the Executive's engagement or participation would become
competitive with the Company's business of designing, developing, manufacturing,
marketing and selling
-3-
<PAGE>
neurosurgical devices, vena cava filters, stents, septal repair devices or other
medical devices designed and manufactured using nitinol, with respect to any
product or service sold or activity engaged in by the Company up to the time of
such cessation; provided, however that the provisions of this Section 7 shall
not be deemed breached merely because the Executive owns less than 1% of the
outstanding common stock of a corporation, if, at the time of its acquisition by
the Executive such stock is listed on a national securities exchange. The term
"Participate In" shall mean: "directly or indirectly, for his own benefit or
for, with, or through any other person (including the Executive's immediate
family), firm, or corporation, own, manage, operate, control, loan money to, or
participate in the ownership, management, operation, or control of, or be
connected as a director, officer, employee, partner, consultant, agent,
independent contractor, or otherwise with, or acquiesce in the use of his name
in."
The Executive will not, directly or indirectly, solicit or interfere with,
or endeavor to entice away from the Company any of its suppliers, customers, or
employees. The Executive will not directly or indirectly employ any person who
was an employee of the Company within a period of one year after such person
leaves the employ of the Company.
If any restriction contained in this Section 7 shall be deemed to be
invalid, illegal, or unenforceable by reason of the extent, duration, or
geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope, or other provisions hereof, and in its reduced form such restriction
shall then be enforceable in the manner contemplated hereby.
8. INTELLECTUAL PROPERTY RIGHTS.
----------------------------
Any interest in patents, patent applications, inventions, technological
innovations, copyrights, copyrightable works, developments, discoveries,
designs, and processes which the Executive during the period he is employed by
the Company under this Agreement or otherwise may acquire, conceive of or
develop, either alone or in conjunction with others, utilizing the time,
material, facilities, or information of the Company ("Inventions") shall belong
to the Company; as soon as the Executive owns, conceives of, or develops any
Invention, he agrees immediately to communicate such fact in writing to the
Chairman of the Company, and without further compensation, but at the Company's
expense, forthwith upon request of the Company, the Executive shall execute all
such assignments and other documents (including applications for patents,
copyrights, trademarks, and assignments thereof) and take all such other action
as the Company may reasonably request in order (a) to vest in the Company all of
the Executive's right, title, and interest in and to such Inventions, free and
clear of liens, mortgages, security interests, pledges, charges, and
encumbrances and (b), if patentable or copyrightable, to obtain patents or
copyrights
-4-
<PAGE>
(including extensions and renewals) therefor in any and all countries in such
name as the Company shall determine.
9. NONDISCLOSURE.
-------------
The Employee Nondisclosure and Secrecy Agreement dated as of September 1,
1995 between the Company and the Executive shall remain in full force and
effect.
10. INJUNCTIVE RELIEF.
-----------------
Since a breach of the provisions of Section 7 or 8 could not adequately be
compensated by money damages, the Company shall be entitled, in addition to any
other right and remedy available to it, to an injunction restraining such breach
or a threatened breach, and in either case no bond or other security shall be
required in connection therewith. The Executive agrees that the provisions of
Sections 7 and 8 are necessary and reasonable to protect the Company in the
conduct of its business.
11. TERMINATION OF THE EXECUTIVE UPON DEATH OR DISABILITY.
-----------------------------------------------------
(a) The term of the Executive's employment shall terminate
automatically upon his death. In addition, the Company shall have the right to
terminate the Term of Employment upon the Disability (as defined below) of the
Executive. If the Executive's employment is terminated by the Company due to
the Executive's death or due to the Disability of the Executive, then the
Executive, his guardian or his estate, as applicable, shall be entitled to:
(i) Salary and Benefits earned to the date of termination of
employment;
(ii) other benefits as are provided under the applicable plans
and programs of the Company as then in effect.
(b) In addition, if the Executive's employment is terminated due to
his death or disability prior to the Final Exercise Date, and the Company has
not terminated the Executive's employment for cause pursuant to Section 13
below, the Options shall remain exercisable to the extent that the Options were
exercisable on the date of the Executive's death or disability for a period of
one year following termination of employment pursuant to this Section, and shall
thereafter expire.
(c) For purposes of this Agreement, "Disability" shall mean any
physical or mental disability or incapacity that renders the Executive incapable
of performing his duties hereunder for a period of 180 consecutive calendar days
or for shorter periods aggregating 210 calendar days during any consecutive
twelve-month period.
-5-
<PAGE>
12. TERMINATION BY THE COMPANY WITHOUT CAUSE.
----------------------------------------
If the Company terminates the Executive's employment at any time without
Cause (as defined below), the Executive shall be entitled to:
(i) Salary and Benefits earned to the date of termination of
employment; and
(ii) Continued Salary for a period of one year from the date of
termination of employment.
In addition, all exercisable Options shall expire 90 days after the
termination of employment.
13. TERMINATION BY THE COMPANY FOR CAUSE.
------------------------------------
(a) GENERAL.
-------
The Company shall have the right to terminate the Executive's employment
for Cause, as defined in subsection (b) below; and the Executive shall be
entitled only to Salary and Benefits earned to the date of termination of
employment.
In addition, all exercisable Options shall expire 90 days after termination
of employment.
(b) CAUSE.
-----
For purposes of this Agreement, "Cause" means:
(i) fraud, embezzlement or gross insubordination on the part
of the Executive;
(ii) conviction of or the entry of a plea of nolo contendere by
---------------
the Executive to any felony or crime of moral turpitude;
(iii) a material breach of, or the willful failure or refusal by
the Executive to perform and discharge, his duties,
responsibilities or obligations under this Agreement that
is not corrected within 20 days following written notice
thereof to the Executive by the Company, such notice to
state with specificity the nature of the breach, failure
or refusal; provided, that if such breach, failure or
refusal cannot reasonably be corrected within 20 days of
written notice thereof, correction shall be commenced by
the
-6-
<PAGE>
Executive within such period and shall be corrected as
soon as practicable thereafter; or
(iv) any act of willful misconduct by the Executive which is
intended to result in substantial personal enrichment of
the Executive at the expense of the Company or any of its
subsidiaries or affiliates.
14. WITHHOLDING.
-----------
Anything to the contrary notwithstanding, all payments required to be made
by the Company under this Agreement to the Executive, his spouse, his estate or
beneficiaries, shall be subject to withholding of such amounts relating to taxes
as the Company may reasonably determine it should withhold pursuant to any
applicable law or regulation. In addition, in the event that the Company
reasonably determines that it is required to make any payments of withholding
taxes as a result of Executive's receipt of any other income pursuant to the
terms of this Agreement, the Company may, as a condition to such receipt,
require that the Executive provide the Company with an amount of cash sufficient
to enable the Company to pay such withholding taxes.
15. LOCK-UP AGREEMENT.
------------------
In the event that the Company seeks to consummate a public offering of its
securities during the Employment Term, the Executive shall execute an agreement
in form and substance satisfactory to the managing underwriter or underwriters
of the Company's securities, not to sell, pledge, contract to sell, grant any
option or otherwise dispose of any shares of stock owned or acquired by the
Executive for such period of time as requested by such underwriter of all other
executive officers of the Company.
16. ASSIGNABILITY; BINDING NATURE.
-----------------------------
This Agreement and all rights of the Executive shall inure to the benefit
of and be enforceable by the Executive's personal or legal representatives,
estates, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive hereunder shall be paid, in the event of the
Executive's death, to the Executive's estate, heirs and representatives. This
Agreement shall inure to the benefit of, be binding upon, and be enforceable by,
any successor, surviving or resulting Company or other entity to which all or
substantially all of the Company's business and assets shall be transferred.
This Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company.
-7-
<PAGE>
17. ENTIRE AGREEMENT.
----------------
This Agreement, together with the Employee Nondisclosure and Secrecy
Agreement, contains the entire agreement between the Parties concerning the
subject matter hereof and supersedes all prior agreements, understandings,
discussions, negotiations, and undertakings, whether written or oral, between
the Parties with respect thereto.
18. AMENDMENTS AND WAIVERS.
----------------------
This Agreement may not be modified or amended except by a writing signed by
both Parties. A Party may waive compliance by the other Party with any term or
provision of this Agreement, or any part thereof, provided that the term or
provision, or part thereof, is for the benefit of the waiving Party. Any waiver
will be limited to the facts or circumstances giving rise to the noncompliance
and will not be deemed either a general waiver or modification with respect to
the term or provision, or part thereof, being waived, or as to any other term or
provision of this Agreement, nor will it be deemed a waiver of compliance with
respect to any other facts or circumstances then or thereafter occurring.
19. NOTICE.
------
Any notice given under this Agreement shall be in writing and shall be
deemed given when delivered personally or by courier, or five days after being
mailed, certified or registered mail, duly addressed to the Party concerned at
the address indicated below or at such other address as such Party may
subsequently provide, in accordance with the notice and delivery provisions of
this Section 19:
To the Company: Nitinol Medical Technologies, Inc.
27 Wormwood Street
South Boston, MA 02210
ATTN.: Chairman
with a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109-1803
Attn: Steven D. Singer, Esq.
To the Executive: Thomas M. Tully
712 High Street
Dedham, MA 02026
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<PAGE>
20. SEVERABILITY.
------------
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, the remaining
provisions or portions of this Agreement will be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
21. SURVIVORSHIP.
------------
The respective rights and obligations of the Parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
22. REFERENCES.
----------
In the event of the Executive's death or a judicial determination of his
incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his legal representative or, where appropriate,
to his beneficiary or beneficiaries.
23. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the Commonwealth of Massachusetts without reference
to the principles of conflicts of law.
24. HEADINGS.
--------
The headings of sections contained in this Agreement are for convenience
only and shall not be deemed to control or affect the meaning or construction of
any provision of this Agreement.
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<PAGE>
THE UNDERSIGNED have executed this Agreement effective as of the date first
written above.
NITINOL MEDICAL TECHNOLOGIES,
INC.
By: /s/ Jeffrey R. Jay, M.D.
-----------------------------------
Name: Jeffrey R. Jay, M.D.
Title: Chairman of the Board of
Directors
/s/ Thomas M. Tully
-----------------------------------
Thomas M. Tully
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<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement"), made as of this 1st day of
July, 1998, is entered into by and between Nitinol Medical Technologies, Inc., a
Delaware corporation (the "Company"), and David Chazanovitz (the "Employee").
INTRODUCTION
------------
The Company desires to employ the Employee upon the terms and conditions
set forth herein and the Employee desires to be employed by the Company on the
terms and conditions of this Agreement. In consideration of the mutual
covenants and promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, the Company and the Employee hereby agree as set forth
below. All dollar amounts are in U.S. dollars.
1. Term of Employment. The Company hereby agrees to employ the Employee,
------------------
and the Employee hereby accepts employment with the Company, upon the terms set
forth in this Agreement, for the period commencing on July 1, 1998 (the
"Commencement Date") and ending on July 1, 2000 (such period, as it may be
extended by an agreement in writing between the parties, the "Employment
Period"), unless sooner terminated in accordance with the provisions of
Section 4.
2. Title; Capacity. The Employee shall serve as President of the
---------------
Company's NMT Neurosciences Division (the "Neurosciences Division"). In such
capacity, the Employee shall report to the Chief Executive Officer of the
Company (the "CEO") and shall perform such duties and have such responsibilities
as are commensurate with such position, it being understood that the Employee's
duties and responsibilities may be changed by the CEO from time to time. The
Employee shall be based at the Company's offices in Biot, France; provided,
however, it is currently expected that the Employee will devote approximately
(i) 25% of his entire business time at the Neurosciences Division officer in
Andover, England and (ii) 25% of his entire business time at the Neurosciences
Division offices in Atlanta, Georgia.
The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and
responsibilities as the Board shall from time to time reasonably assign to him.
The Employee agrees to devote his entire business time, attention and energies
to the business and interests of the Company during the Employment Period. The
Employee agrees to abide by the rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein which may be
adopted from
<PAGE>
time to time by the Company. The Employee acknowledges receipt of copies of all
such rules and policies committed to writing as of the date of this Agreement.
3. Compensation and Benefits.
-------------------------
3.1 Salary and Cost of Living Differential. The Company shall pay
--------------------------------------
the Employee, in accordance with the Company's standard payroll practices, an
annual base salary as follows:
(a) From July 1, 1998 until December 31, 1999 -- $200,000 per
year; and
(b) From January 1, 1999 until July 1, 2000 -- $205,000 per
year.
Such salary shall be subject to adjustment as determined by the Board. In
addition, while the Employee is based in France, the Company shall pay the
Employee an annual cost of living differential equal to $15,500 per calendar
year commencing on the Commencement Date. The Employee's base salary and cost
of living differential shall be paid in U.S. dollars by direct deposit into a
bank account (or accounts) specified by the Employee. At the Employee's
request, the Company shall exchange the Employee's salary and cost of living
differential into French francs ("FF") at the applicable exchange rate on the
date of exchange, provided that, if during any given year the exchange rate is
less than 6FF per U.S. dollar, the Company shall exchange up to $72,000 per year
of such salary and cost of living differential at an exchange rate of not less
than 6FF per U.S. dollar.
3.2 Vacation. While the Employee is based in France, the Employee
--------
shall be entitled to six weeks paid vacation per year. In the event that the
Employee is based in a country other than France, the Employee shall be entitled
to four weeks paid vacation per year. In any event, any vacation shall be taken
at times selected by the Employee and reasonably acceptable to the Board or its
designee.
3.3 Relocation. The Company shall reimburse the Employee for up to
----------
$15,000 of the expenses incurred or paid by the Employee for the physical
relocation of his and his family's household goods from his present home in New
Hampshire to Biot, France at the commencement of the Employment Period, and
shall reimburse the Employee for all expenses reasonably incurred or paid by the
Employee for the physical relocation of his and his family's household goods
from France to New Hampshire at the termination of the Employment Period (or
prior to such time in the event personal or business reasons make it necessary,
in the discretion of the Company, for the Employee to return to the U.S.
permanently), unless such termination is pursuant to Section 4.2 hereof or if
the Employee voluntarily terminates his employment pursuant to Section 4.4
hereof, in which cases the Company shall not be obligated to reimburse the
Employee for such expenses, in
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<PAGE>
each case upon presentation by the Employee of documentation, receipts and/or
such other supporting information as the Company may request.
3.4 Housing Allowance; Home Management Fee. The Company shall
--------------------------------------
provide the Employee with a housing allowance, including taxes and utilities, of
up to 20,000FF per calendar month, upon presentation by the Employee of
documentation, receipts and/or such other supporting information as the Company
may request; provided, however, that the Employee shall use diligent efforts to
-------- -------
rent his house in New Hampshire and the housing allowance payable to the
Employee hereunder shall be reduced by the amount of net proceeds received by
the Employee therefrom. The housing allowance will be increased annually to
account for increased rental costs to the Employee. In addition, the Company
shall provide the Employee with a home management fee of up to $10,000 per
calendar year.
3.5 Car Allowance. The Company shall provide the Employee with a car
-------------
and will pay for the costs associated with the business and personal use of the
car, including without limitation insurance and taxes, upon presentation by the
Employee of documentation, receipts and/or such other supporting information as
the Company may request.
3.6 Tuition. The Company shall reimburse the Employee for the
-------
tuition incurred or paid by the Employee for his children to attend school in
France, upon presentation by the Employee of documentation, receipts and/or such
other supporting information as the Company may request, up to 140,000FF per
year. For purposes of this Section 3.5, "year" shall mean the school year.
3.7 Airfare. The Company shall provide (or reimburse the Employee
-------
for the expense of) airline tickets for the Employee and his immediate family
members for (i) coach class travel from New Hampshire to France at the
commencement of the Employment Period, (ii) coach class travel from France to
New Hampshire at the termination of the Employment Period (or prior to such time
in the event personal or business reasons make it necessary, in the discretion
of the Company, for the Employee to return to the U.S. permanently), unless such
termination is pursuant to Section 4.2 hereof, in which case the Company shall
not be obligated to provide or reimburse the Employee for such airfare and (iii)
round-trip coach class travel between New Hampshire and France twice each year.
3.8 Relocation Allowance. The Company shall pay the Employee a one
--------------------
time bonus of US $25,000 upon his relocation to Biot, France.
3.9 Other Fringe Benefits. The Employee shall be entitled to
---------------------
participate, at the Company's expense, in all fringe benefit programs that the
Company establishes and makes available to its employees from time to time, to
the extent that the Employee's position, tenure, salary, age, health and other
qualifications make him eligible to participate.
-3-
<PAGE>
3.10 Reimbursement of Expenses. The Company shall reimburse the
-------------------------
Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, upon presentation by
the Employee of documentation, expense statements, vouchers and/or such other
supporting information as the Company may request, provided, however, that the
-------- -------
amount available for such travel, entertainment and other expenses may be fixed
in advance by the Board.
3.11 Income Tax Payment. The purpose of this Section is to ensure
------------------
that the Employee does not suffer any additional tax liability or benefit as a
result of Employee's assignment in France and to provide assistance to the
Employee to ensure compliance with U.S., United Kingdom and French tax laws. In
this regard, the Company will make a gross-up payment (the "Gross-Up Payment")
to the Employee in such amount as is necessary to enable the Employee to receive
the same after-tax amount in respect of all compensation (exclusive of U.S.
income attributable to the grant or exercise of options to acquire stock of the
Company) paid to the Employee as the Employee would have received with respect
to his compensation had he been performing services in Massachusetts, United
States, instead of on assignment in France and the United Kingdom. Computation
of the amount of the Gross-Up Payment shall take into account all French, the
United Kingdom and U.S. income, withholding, social security and similar taxes
actually imposed upon the amounts (including the Gross-Up payment) received by
the Employee, giving full effect to the availability of any foreign tax credits
and exclusions from gross income in respect of foreign earned income and housing
costs. The Company shall provide tax preparation assistance to the Employee to
ensure compliance with U.S., United Kingdom and French tax laws until such time
as the Employee's employment in France (or the United Kingdom) has no tax
implication for the Employee.
4. Employment Termination. The employment of the Employee by the Company
----------------------
pursuant to this Agreement shall terminate upon the occurrence of any of the
following:
4.1 Expiration of the Employment Period in accordance with
Section 1;
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Employee. For the purposes of this Section
4.2, cause for termination shall be deemed to exist upon (a) a good faith
finding by the Company of failure of the Employee to perform his assigned duties
for the Company, dishonesty, fraud, acts of moral turpitude, gross negligence or
misconduct, or (b) the
-4-
<PAGE>
conviction of the Employee of, or the entry of a pleading of guilty or nolo
contendere by the Employee to, any crime involving moral turpitude or any
felony;
4.3 The death of the Employee or, at the option of the Company, upon
the determination that the Employee has a disability. As used in this
Agreement, the term "disability" shall mean any physical or mental disability or
incapacity that renders the Employee incapable of performing his duties
hereunder for a period of 180 consecutive calendar days or, for shorter periods
aggregating 210 calendar days during any consecutive twelve-month period;
4.4 At the election of the Employee, upon not less than six months'
prior written notice of termination, or at the election of the Company, upon
written notice of termination.
5. Effect of Termination.
---------------------
5.1 Termination for Cause or at Election of the Employee. In the
----------------------------------------------------
event the Employee's employment is terminated for cause pursuant to Section 4.2,
or at the election of the Employee pursuant to Section 4.4, the Company shall
pay to the Employee the compensation and benefits otherwise payable to him under
Section 3 through the last day of his actual employment by the Company.
5.2 Termination for Death or Disability. If the Employee's
-----------------------------------
employment is terminated by death or because of disability pursuant to Section
4.3, the Company shall pay to the estate of the Employee or to the Employee, as
the case may be, the compensation which would otherwise be payable to the
Employee up to the date of termination of his employment.
5.3 Termination at Election of the Company. In the event the
--------------------------------------
Employee's employment is terminated at the election of the Company pursuant to
Section 4.4, the Company shall pay to the Employee the salary and benefits
earned to the date of termination of employment and the salary otherwise payable
to him under Section 3 for a period of six months from the date of termination
of employment.
5.4 Survival. The provisions of Sections 6 and 7 shall survive the
--------
termination of this Agreement.
6. Inventions, Proprietary Information and Non-Competition.
-------------------------------------------------------
6.1 Inventions.
----------
(a) All inventions, discoveries, computer programs, data, technology,
designs, innovations and improvements (whether or not patentable and whether or
not copyrightable) ("Inventions") related to the business of the Company
-5-
<PAGE>
which are made, conceived, reduced to practice, created, written, designed or
developed by the Employee, solely or jointly with others and whether during
normal business hours or otherwise, during the Employment Period (and/or
thereafter if resulting or directly derived from Proprietary Information (as
defined below)), shall be the sole property of the Company. The Employee hereby
assigns to the Company all Inventions and any and all related patents,
copyrights, trademarks, trade names, and other industrial and intellectual
property rights and applications therefor, in the United States and elsewhere
and appoints any officer of the Company as his duly authorized attorney to
execute, file, prosecute and protect the same before any government agency,
court or authority. Upon the request of the Company and at the Company's
expense, the Employee shall execute such further assignments, documents and
other instruments as may be necessary or desirable to fully and completely
assign all Inventions to the Company and to assist the Company in applying for,
obtaining and enforcing patents or copyrights or other rights in the United
States and in any foreign country with respect to any Invention.
(b) The Employee shall promptly disclose to the Company all Inventions
and will maintain adequate and current written records (in the form of notes,
sketches, drawings and as may be specified by the Company) to document the
conception and/or first actual reduction to practice of any Invention. Such
written records shall be available to and remain the sole property of the
Company at all times.
6.2 Confidential and Proprietary Information.
----------------------------------------
(a) The Employee acknowledges that his relationship with the Company
is one of high trust and confidence and that in the course of his service to the
Company he will have access to and contact with confidential and proprietary
information ("Proprietary Information"). The Employee agrees that he will not,
during the Employment Period or at any time thereafter, disclose to others, or
use for his benefit or the benefit of others, any Proprietary Information or
Invention.
(b) For purposes of this Agreement, Proprietary Information shall
mean, by way of illustration and not limitation, all information (whether or not
patentable and whether or not copyrightable) owned, possessed or used by the
Company, including, without limitation, any Invention, formula, vendor
information, customer information, apparatus, equipment, trade secret, process,
research, report, technical data, know-how, computer program, software, software
documentation, hardware design, technology, marketing or business plan,
forecast, unpublished financial statement, budget, license, price, cost and
employee list that is communicated to, learned of, developed or otherwise
acquired by the Employee in the course of his service as an employee of the
Company.
-6-
<PAGE>
(c) The Employee's obligations under this Section shall not apply to
any information that (i) is or becomes known to the general public under
circumstances involving no breach by the Employee or others of the terms of this
Section, (ii) is generally disclosed to third parties by the Company without
restriction on such third parties, or (iii) is approved for release by written
authorization of the Board of Directors of the Company.
(d) Upon termination of this Agreement or at any other time upon
request by the Company, the Employee shall promptly deliver to the Company all
records, files, memoranda, notes, designs, data, reports, price lists, customer
lists, drawings, plans, computer programs, software, software documentation,
sketches, laboratory and research notebooks and other documents (and all copies
or reproductions of such materials) relating to the business of the Company.
(e) The Employee represents that his employment with the Company and
his performance under this Agreement does not, and shall not, breach any
agreement that obligates him to keep in confidence any trade secrets or
confidential or proprietary information of his or of any other party or to
refrain from competing, directly or indirectly, with the business of any other
party. The Employee shall not disclose to the Company any trade secrets or
confidential or proprietary information of any other party.
(f) The Employee acknowledges that the Company from time to time may
have agreements with other persons or with the U.S. Government, or agencies
thereof, that impose obligations or restrictions on the Company regarding
inventions made during the course of work under such agreements or regarding the
confidential nature of such work. The Employee agrees to be bound by all such
obligations and restrictions that are known to him and to take all action
necessary to discharge the obligations of the Company under such agreements.
6.3. Non-Compete.
-----------
(a) During the Employment Period and for a period of [one year] after
the termination or expiration thereof, the Employee will not directly or
indirectly:
(i) as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, consultant or in any other
capacity whatsoever (other than as the holder of not more than one percent (1%)
of the total outstanding stock of a publicly held company), engage in the
business of developing, producing, marketing or selling products of the kind or
type developed or being developed, produced, marketed or sold by the Company
while the Employee was employed by the Company; or
-7-
<PAGE>
(ii) recruit, solicit or induce, or attempt to induce, any
employee or employees of the Company to terminate their employment with, or
otherwise cease their relationship with, the Company; or
(iii) solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts of the Company which
were contacted, solicited or served by the Employee while employed by the
Company.
(b) If any restriction set forth in this Section 6 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
(c) The restrictions contained in this Section 6 are necessary for the
protection of the business and goodwill of the Company and are considered by the
Employee to be reasonable for such purpose. The Employee agrees that any breach
of this Section 6 will cause the Company substantial and irrevocable damage and
therefore, in the event of any such breach, in addition to such other remedies
which may be available, the Company shall have the right to seek specific
performance and injunctive relief.
7. Notices. All notices or other communications required or permitted
-------
under this Agreement shall be in writing and shall be sufficiently given if
delivered personally or sent by fax, a nationally recognized overnight courier
service, registered or certified mail, postage prepaid, addressed as follows or
to such other address of which the parties may have given notice:
To the Company: Nitinol Medical Technologies, Inc.
27 Wormwood Street
Boston, MA 02210-1625
Attention: President
With a copy (which shall
not constitute notice) to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Steven D. Singer, Esq.
To the Employee: Mr. David Chazanovitz
c/o NMT Neurosciences Implants S.A.
2905, Route Des Dolines
06921 Sophia Antipolis Cedex
France
-8-
<PAGE>
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally, (b) on the
date faxed, if faxed prior to 5:00 p.m. at the place received, and otherwise on
the next following business day, (c) two business days after delivery to a
nationally recognized overnight courier service for domestic delivery or (d)
five business days after being sent, if sent by registered or certified mail or
international courier.
8. Assignment. At any time during the Employment Period, the Company
----------
may, in its sole discretion, assign all of its rights and delegate all of its
obligations under this Agreement to any affiliate or subsidiary of the Company.
This Agreement shall inure to the benefit of and be binding upon such successors
or assigns of the Company. If this Agreement is assigned in accordance with the
foregoing provisions, all references herein to the Company shall likewise be
deemed to be references to the successor or assignee. The Employee may not
transfer, assign or otherwise convey this Agreement or any part of the
Employee's interest herein.
9. Entire Agreement. This Agreement, the Employee Nondisclosure and
----------------
Secrecy Agreement between the Company and the Employee dated as of January 1,
1996 and Sections 4 and 21 of the Employment Agreement between the Company and
the Employee dated as of February 13, 1996, as amended by Amendment No. 1 dated
June 15, 1996 and the Amendment dated as of July 9, 1996 (the "1996 Employment
Agreement") constitute the entire understanding between the parties and
supersede all prior agreements or understandings, whether oral or written,
relating to the subject matter of this Agreement, including the 1996 Employment
Agreement.
10. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Employee.
11. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Massachusetts,
without reference to the conflict of law provisions thereof.
12. Miscellaneous.
-------------
12.1. No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
12.2. In the event any provision of this Agreement or any portion
thereof shall be held invalid, illegal or otherwise unenforceable, the validity,
legality or enforceability of the remaining provisions or any portion thereof
shall in no way be affected or impaired thereby.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Thomas M. Tully
------------------------------------------
Name:
Title: CEO
/s/ David Chazanovitz
---------------------------------------------
David Chazanovitz
-10-
<PAGE>
EXHIBIT 10.3
================================================================================
REGISTRATION RIGHTS AGREEMENT
among
NITINOL MEDICAL TECHNOLOGIES, INC.,
and
the Individuals and Entities Listed on
Schedule A attached hereto
-----------------------------------
Dated as of March 30, 1999
-----------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
====
<S> <C>
1. Definitions 1
2. Securities Subject to this Agreement 3
(a) Registrable Securities 3
(b) Holders of Registrable Securities 3
3. Demand Registration 3
(a) Request for Demand Registration 3
(b) Effective Demand Registration 4
(c) Expenses 4
(d) Underwriting Procedures 4
(e) Selection of Underwriters 5
(f) Limitations on Demand Registrations. 5
4. Piggy-Back Registration 6
(a) Piggy-Back Rights 6
(b) Priority of Registrations 7
(c) Expenses 7
(d) Conditions and Limitations on Piggy-Back Registrations 7
5. Holdback Agreements 8
(a) Restrictions on Public Sale by Holders 8
(b) Restrictions on Public Sale by the Company 8
6. Registration Procedures 8
(a) Obligations of the Company 8
(b) Seller Information 11
(c) Notice to Discontinue 11
7. Registration Expenses 12
8. Indemnification; Contribution 12
(a) Indemnification by the Company 12
(b) Indemnification by Holders 13
(c) Conduct of Indemnification Proceedings 13
(d) Contribution 14
9. Rule 144; Other Exemptions 14
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
====
<S> <C>
10. Certain Limitations on Registration Rights 15
11. Miscellaneous. 15
(a) Recapitalizations, Exchanges, etc 15
(b) Remedies 15
(c) Amendments and Waivers 15
(d) Notices 15
(e) Assignment of Rights 16
(f) Counterparts 16
(g) Headings 16
(h) Governing Law 17
(i) Jurisdiction 17
(j) Severability 17
(k) Rules of Construction 17
(l) Entire Agreement 17
(m) Further Assurances 17
</TABLE>
-ii-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of March 30, 1999, among
NITINOL MEDICAL TECHNOLOGIES, INC., a Delaware corporation (the Company"), and
the individuals and entities listed on Schedule A attached hereto (the "ITC
----------
Shareholders").
WHEREAS, the Company, Image Technologies Corporation, a Delaware
corporation ("ITC"), and the ITC Shareholders have entered into an Amended and
---
Restated Stockholders' Option Agreement of even date herewith (the "Option
------
Agreement") pursuant to which each of the ITC Shareholders has granted to the
- ---------
Company an option (the "Option") to purchase all shares of common stock, par
value $.01 per share (the "Shares"), of ITC owned by such ITC Shareholders;
WHEREAS, a portion of the purchase price to be paid for such Shares
upon exercise of the Option shall be paid in shares of common stock, par value
$.001 per share, of the Company and the Company has agreed to provide
registration rights with respect to such Shares as set forth in this Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, and unless the context
-----------
requires a different meaning, the following terms have the meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the rules
---
and regulations of the SEC promulgated hereunder.
"Approved Underwriter" has the meaning assigned such term in
--------------------
Section 3(e).
"Approved Underwriter Amount" has the meaning assigned such term
---------------------------
in Section 3(d).
"Business Day" means any day other than a Saturday, Sunday or
------------
other day on which commercial banks in the City of Boston are authorized or
required by law or executive order to close.
"Common Stock" means the Common Stock, $0.001 par value, of the
------------
Company, or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Company Underwriter" has the meaning assigned such term in
-------------------
Section 4(a).
-1-
<PAGE>
"Demand Registration" has the meaning assigned such term in
-------------------
Section 3(a).
"Exchange Act" means the Securities and Exchange Act of 1934, as
------------
amended, and the rules and regulations of the SEC thereunder.
"Holder" has the meaning assigned such term in Section 2(b).
------
"Holders' Counsel" means (a) with respect to any Demand Registration
----------------
that has been requested pursuant to Section 3, the one counsel selected by the
Initiating Holders holding a majority of the Registrable Securities held by all
Initiating Holders being registered in such registration, and (b) with respect
to a request for registration of Registrable Securities pursuant to Section 4,
the one counsel selected by the Holders holding a majority of the Registrable
Securities being registered in such registration.
"Indemnified Party" has the meaning assigned such term in
-----------------
Section 8(c).
"Indemnifying Party" has the meaning assigned such term in
------------------
Section 8(c).
"Initiating Holders" has the meaning assigned to such term in
------------------
Section 3(a).
"Inspector" has the meaning assigned such term in Section 6(a)(viii).
---------
"NASD" has the meaning assigned such term in Section 6(a)(xv).
----
"NMT Shares" means the Common Stock, any class of common stock of the
----------
Company authorized after the date of this Agreement, or any other class of stock
resulting from successive changes or reclassifications of the NMT Shares.
"Other Investors" means holders of the Common Stock of the Company not
---------------
entitled to distribute such shares of Common Stock to the public pursuant to
Rule 144(k) (or any successor provision then in effect) under the Act.
"Person" means any individual, firm, corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind, and shall include any successor (by merger or otherwise) of any such
entity.
"Registrable Securities" means, subject to Section 2(a), each of the
----------------------
following: (a) any shares of Common Stock of the Company acquired by the Holder
in consideration for the Company's exercise of its option under the Option
Agreement and (b) any shares of Common Stock issued or issuable in respect of
shares of Common Stock
-2-
<PAGE>
issued pursuant to clause (a) above by way of a stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.
"Registration Expenses" has the meaning assigned such term in
---------------------
Section 7.
"SEC" means the Securities and Exchange Commission.
---
"Total Securities" has the meaning assigned such term in
----------------
Section 4(a).
"Underwriters" has the meaning assigned such term in Section 6(d).
------------
"Valid Business Reason" has the meaning assigned such term in
---------------------
Section 3(f).
2. Securities Subject to this Agreement.
------------------------------------
(a) Registrable Securities. For the purposes of this Agreement,
----------------------
Registrable Securities will cease to be Registrable Securities when (i) a
registration statement covering such Registrable Securities has been declared
effective under the Act by the SEC and such Registrable Securities have been
disposed of pursuant to such effective registration statement or (ii)
Registrable Securities proposed to be sold in a single sale are or, in the
opinion of counsel satisfactory to the Company and the Holder, each in their
reasonable judgment, may, be distributed to the public pursuant to Rule 144 in
compliance with the requirements of paragraphs (c), (e), (f) and (g) of Rule 144
(notwithstanding the provisions of paragraph (k) of such Rule) (or any successor
provision then in effect) under the Act.
(b) Holders of Registrable Securities. Each ITC Shareholder
---------------------------------
shall be deemed a holder of Registrable Securities (a "Holder"). If the Company
------
receives conflicting instructions, notices or elections from two or more persons
with respect to the same Registrable Securities, the Company may act upon the
basis of the instructions, notice or election received from the registered owner
of such Registrable Securities.
3. Demand Registration.
-------------------
(a) Request for Demand Registration. Subject to Section 3(f)
-------------------------------
below, at any time beginning six (6) months after the closing of the purchase of
the Shares by the Company pursuant to the Option Agreement the Holders holding
at least 25% of the Registrable Securities held by all of the Holders (the
"Initiating Holders") may request in writing the registration of Registrable
------------------
Securities under the Act, and under the securities or blue sky laws of any
jurisdictions designated by such holder or holders (a registration under this
Section 3(a) that satisfies the requirements set forth in Section 3(b) is
referred to herein as a "Demand Registration"). Notwithstanding the foregoing,
-------------------
in no event shall the Company
-3-
<PAGE>
be required to effect more than one Demand Registration. The request for a
Demand Registration by the Initiating Holders in respect thereof shall specify
the amount of the Registrable Securities proposed to be sold, the intended
method of disposition thereof and the jurisdictions in which registration is
desired. Upon a request for a Demand Registration, the Company shall promptly
take such steps as are necessary or appropriate to prepare for the registration
of the Registrable Securities to be registered. Within fifteen (15) days after
the receipt of such request, the Company shall give written notice thereof to
all other Holders and include in such registration all Registrable Securities
held by a Holder from whom the Company has received a written request for
inclusion therein at least ten (10) days prior to the filing of the registration
statement. Such request will also specify the number of Registrable Securities
to be registered, the intended method of disposition thereof and the
jurisdictions in which registration is desired. Subject to Section 3(d), the
Company shall be entitled to include in any registration statement and offering
made pursuant to a Demand Registration, authorized but unissued shares of Common
Stock, shares of Common Stock held by the Company as treasury shares or shares
of Common Stock held by Stockholders other than the Holders; provided, that such
inclusion shall be permitted only to the extent that it is pursuant to and
subject to the terms of the underwriting agreement or arrangements, if any,
entered into by the Initiating Holders exercising the Demand Registration
rights.
(b) Effective Demand Registration. The Company shall use its
-----------------------------
best efforts to cause such Demand Registration to become effective not later
than ninety (90) days after it receives a request under Section 3(a). A
registration requested pursuant to Section 3(a) hereof shall not count as a
demand to which the Holders are entitled thereunder unless such registration
statement is declared effective and remains effective for at least ninety
(90) days.
(c) Expenses. In any registration initiated as a Demand
--------
Registration, the Company shall pay all Registration Expenses in connection
therewith, whether or not such requested Demand Registration becomes effective.
(d) Underwriting Procedures. If the Initiating Holders holding a
-----------------------
majority of the Registrable Securities held by all Initiating Holders so elect,
the offering of such Registrable Securities pursuant to such requested Demand
Registration shall be in the form of a firm commitment underwritten offering and
the managing underwriter or underwriters selected for such offering shall be the
Approved Underwriter selected in accordance with Section 3(e). In such event,
if the Approved Underwriter advises the Company in writing that, in its opinion,
the aggregate amount of such Registrable Securities requested to be included in
such offering (including those securities requested by the Company to be
included in such registration) is sufficiently large to have an adverse effect
on the success of such offering, then the Company shall include in such
registration only the aggregate amount of Registrable Securities that in the
opinion of the Approved Underwriter may be sold without any such effect on the
success of such offering (the "Approved Underwriter Amount"), and (i) each
---------------------------
Holder shall be entitled to have included in such registration Registrable
Securities equal to its pro rata portion of the Approved Underwriter
-4-
<PAGE>
Amount, as based on the amounts of Registrable Securities sought to be
registered by the Holders in their requests for participation in the Demand
Registration and (ii) to the extent that the number of Registrable Securities to
be included by the Holders is less than the Approved Underwriter Amount,
securities that the Company proposes to register shall also be included.
If, as a result of the proration provision of this Section 3(d), any
Holder shall not be entitled to include all Registrable Securities in a
registration that such Holder has requested to be included, such Holder may
elect to withdraw his request to include Registrable Securities in such
registration or may reduce the number requested to be included; provided,
however, that (x) such request must be made in writing prior to the earlier of
the execution of the underwriting agreement or the execution of the custody
agreement with respect to such registration and (y) such withdrawal or reduction
shall be irrevocable.
(e) Selection of Underwriters. If any requested Demand
-------------------------
Registration is in the form of an underwritten offering, the Initiating Holders
holding a majority of the Registrable Securities held by all Initiating Holders
to be included in the requested Demand Registration shall select and obtain an
investment banking firm of national reputation to act as the managing
underwriter of the offering (the "Approved Underwriter"); provided, that such
--------------------
underwriter shall be reasonably satisfactory to the Company.
(f) Limitations on Demand Registrations. The Demand Registration
-----------------------------------
rights granted to the Holders in Section 3(a) are subject to the following
limitations: (i) the Demand Registration must include Registrable Securities
having an aggregate market value of at least $5,000,000.00, which market value
shall be determined by multiplying the number of Registrable Securities to be
included in the Demand Registration by the proposed per share offering price
(provided that the limitation set forth in this clause (i) shall not be in
effect at any time the Holders' Registrable Securities are not able to be sold
under Rule 144 under the Act because of the Company's failure to comply with the
information requirements thereunder, unless at such time, the Company's outside
counsel (which shall be reasonably acceptable to the Holders requesting such
registration) delivers a written opinion of counsel to such Holders to the
effect that such Holders' Registrable Securities may be publicly offered and
sold without registration under the Act); and (ii) if the Board of Directors of
the Company, in its good faith judgment, determines that any registration of
Registrable Securities should not be made or continued because it would
materially interfere with any material financing, acquisition, corporate
reorganization or merger or other transaction involving the Company or any of
its subsidiaries (a "Valid Business Reason"), the Company may (x) postpone
---------------------
filing a registration statement relating to a Demand Registration until such
Valid Business Reason no longer exists, but in no event for more than ninety
(90) days, and, (y) in case a registration statement has been filed relating to
a Demand Registration, if the Valid Business Reason has not resulted from
actions taken by the Company, the Company, upon the approval of a majority of
the Company's Board of Directors, may cause such registration statement to be
withdrawn and its effectiveness terminated or may postpone amending or
supplementing such registration statement; the Company shall give written notice
-5-
<PAGE>
of its determination to postpone or withdraw a registration statement and of the
fact that the Valid Business Reason for such postponement or withdrawal no
longer exists, in each case, promptly after the occurrence thereof.
Notwithstanding anything to the contrary contained herein, the Company may not
postpone or withdraw a filing under Section 3(f)(ii) hereof more than once in
any twelve-month period.
Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company that the Company has determined to withdraw any
registration statement pursuant to clause (ii) above, such Holder will
discontinue its disposition of Registrable Securities pursuant to such
registration statement and, if so directed by the Company, will deliver to the
Company (at the Company's expenses) all copies, other than permanent file
copies, then in such Holder's possession, of the prospectus covering such
Registrable Securities that was in effect at the time of receipt of such notice.
If the Company shall give any notice of postponement or withdrawal of a
registration statement, the Company shall, at such time as the Valid Business
Reason that caused such postponement or withdrawal no longer exists (but in no
event no later than ninety (90) days after the date of the postponement), use
its best efforts to promptly effect the registration under the Act of the
Registrable Securities covered by the postponed or withdrawn registration
statement in accordance with this Section 3 (unless the Holder(s) delivering the
Demand Registration request shall have withdrawn such request, in which case the
Company shall not be considered to have effected an effective registration for
the purposes of this Agreement), and such registration shall not be postponed or
withdrawn pursuant to clause (ii) above.
4. Piggy-Back Registration.
-----------------------
(a) Piggy-Back Rights. Beginning six (6) months after the
-----------------
closing of the purchase of the Shares by the Company pursuant to the Option
Agreement, if the Company proposes to file a registration statement under the
Act with respect to an offering by the Company for its own account of any class
of security (other than a registration statement on Form S-4 or S-8 (or any
successor form thereto)) under the Act, then the Company shall give written
notice of such proposed filing to each of the Holders at least twenty (20) days
before the anticipated filing date, and such notice shall describe in detail the
proposed registration and distribution (including those jurisdictions where
registration under the securities or blue sky laws is intended) and offer such
Holders the opportunity to register the number of Registrable Securities as each
such Holder may request (a "Piggy-Back Registration"). The Company shall use its
best efforts (within ten (10) days of the notice provided for in the preceding
sentence) to permit the Holders who have requested to participate in the
registration for such offering to include such Registrable Securities in such
offering on the same terms and conditions as the securities of the Company
included therein. Notwithstanding the foregoing, in no event shall the Company
be required to effect more than one Piggy-Back Registration. Notwithstanding the
foregoing, if such registration involves an underwritten offering and the
managing underwriters or underwriters (the "Company Underwriter") shall advise
-------------------
the Holders of Registrable Securities in writing that, in its opinion, the total
amount of securities requested to be included in such offering (the "Total
-----
-6-
<PAGE>
Securities") is sufficiently large so as to have an adverse effect on the
- ----------
success of the distribution of the Total Securities, then the Company shall
include in such registration, to the extent of the number of Registrable
Securities which the Company is so advised can be sold in (or during the time
of) such offering, first, all Common Stock or securities convertible into, or
-----
exchangeable or exercisable for, Common Stock that the Company proposed to
register for its own account, second, all securities proposed to be registered
------
by Stockholders of the Company other than the Holders pursuant to any
registration rights agreements entered into by the Company prior to the date of
this Agreement, third, all securities proposed to be registered by all Holders,
-----
pro rata among such Holders, fourth, all securities proposed to be registered by
------
Other Investors, pro rata among such Other Investors and fifth, all other
-----
securities proposed to be registered.
(b) Priority of Registrations. Subject to the provisions of
-------------------------
Section 3(f)(ii), if the Company proposes to register securities pursuant to
Section 4(a) hereof on the same day that the Holders request a registration
pursuant to Section 3(a) hereof, then the Demand Registration requested pursuant
to Section 3(a) hereof shall be given priority.
(c) Expenses. The Company shall bear all Registration Expenses
--------
in connection with a registration pursuant to this Section 4.
(d) Conditions and Limitations on Piggy-Back Registrations. If,
------------------------------------------------------
at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to all Holders of record
of Registrable Securities and (i) in the case of a determination not to
register, shall be relieved of its obligation to register the Registrable
Securities in connection with such abandoned registration, without prejudice,
however, to the rights of Holders under Sections 5, 3 and 4 and (ii) in the case
of a determination to delay the registration of its securities, shall be
permitted to delay the registration of such Registrable Securities for the same
period as the delay in registering such other equity securities.
Any Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration statement pursuant
to this Section 4 by giving written notice to the Company of its request to
withdraw; provided, however, that (i) such request must be made in writing prior
to the earlier of the execution of the underwriting agreement or the execution
of the custody agreement with respect to such registration and (ii) such
withdrawal shall be irrevocable and, after making such withdrawal, a Holder
shall no longer have any right to include Registrable Securities in the
registration as to which such withdrawal was made.
-7-
<PAGE>
5. Holdback Agreements.
-------------------
(a) Restrictions on Public Sale by Holders. To the extent not
--------------------------------------
inconsistent with applicable law, each Holder agrees not to effect any public
sale or distribution of any Registrable Securities being registered or of any
securities convertible into or exchangeable or exercisable for such Registrable
Securities, including a sale pursuant to Rule 144 under the Act, during the
ninety (90) day period beginning on the effective date of such Demand
Registration or Piggy-Back Registration or other underwritten offering (except
as part of such registration), if and to the extent requested by the Company
Underwriter, in the case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company. The Company
------------------------------------------
agrees not to effect any public sale or distribution of any of its securities
for its own account (except pursuant to registrations on Form S-4 or S-8 (or any
successor form thereto) under the Act) during the ninety (90) day period
beginning on the effective date of any registration statement in which the
Holders are participating.
6. Registration Procedures.
-----------------------
(a) Obligations of the Company. Whenever registration of
--------------------------
Registrable Securities has been requested pursuant to Section 3 or 4 of this
Agreement, the Company shall use its best efforts to effect the registration and
sale of such Registrable Securities in accordance with the intended method of
distribution thereof as quickly as practicable, and in connection with any such
request, the Company shall, as expeditiously as possible:
(i) prepare and file with the SEC (in any event not later
than sixty (60) Business Days after receipt of a request to file a registration
statement with respect to Registrable Securities) a registration statement on
any form on which registration is requested for which the Company then
qualifies, which counsel for the Company and Holders' Counsel shall deem
appropriate and which shall be available for the sale of such Registrable
Securities in accordance with the intended method of distribution thereof, and
use its best efforts to cause such registration statement to become effective;
provided, however, that before filing a registration statement or prospectus or
- -------- -------
any amendments or supplements thereto, the Company shall (A) provide Holders'
Counsel with an adequate and appropriate opportunity to participate in the
preparation of such registration statement and each prospectus included therein
(and each amendment or supplement thereto) to be filed with the SEC, which
documents shall be subject to the review of Holders' Counsel, and (B) notify
Holders' Counsel and each seller of Registrable Securities pursuant to such
registration statement of any stop order issued or threatened by the SEC and
take all reasonable action required to prevent the entry of such stop order or
to remove it if entered;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as
-8-
<PAGE>
may be necessary to keep such registration statement effective and to comply
with the provisions of the Act with respect to the disposition of all
Registrable Securities covered by such registration statement until the earlier
of (a) such time as all of such Registrable Securities and other securities have
been disposed of in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement and (b) 180 days after
the effective date of such registration statement, except with respect to any
such registration statement filed pursuant to Rule 415 (or any successor Rule)
under the Act if the Company is eligible to file a registration statement on
Form S-3, in which case such period shall be two (2) years;
(iii) as soon as reasonably possible, furnish to each
seller of Registrable Securities, prior to filing a registration statement,
copies of such registration statement as it is proposed to be filed, and
thereafter such number of copies of such registration statement, each amendment
and supplement thereto (in each case including all exhibits thereto), the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as each such seller may reasonably request
in order to facilitate the disposition of the Registrable Securities owned by
such seller;
(iv) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller of Registrable Securities may request, and to
continue such qualification in effect in each such jurisdiction for as long as
is permissible pursuant to the laws of such jurisdiction, or for as long as any
such seller requests or until all of such Registrable Securities are sold,
whichever is shortest, and do any and all other acts and things which may be
reasonably necessary or advisable to enable any such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller; provided, however, that the Company shall not be required to (A) qualify
- ------ --------
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 6(a)(iv), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of process
in any such jurisdiction;
(v) use its best efforts to obtain all other approvals,
covenants, exemptions or authorizations from such governmental agencies or
authorities as may be necessary to enable the sellers of such Registrable
Securities to consummate the disposition of such Registrable Securities;
(vi) notify each seller of Registrable Securities at any
time when a prospectus relating thereto is required to be delivered under the
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, and the Company shall
promptly prepare a supplement or amendment to such prospectus and furnish to
each such seller a reasonable number of copies of a supplement to or amendment
of such prospectus as may be necessary so that, after delivery to the purchasers
of such Registrable Securities, such
-9-
<PAGE>
prospectus shall not contain an 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 in light of the circumstances under which they
were made;
(vii) enter into and perform customary agreements
(including an underwriting agreement in customary form with the Approved
Underwriter or Company Underwriter, if any, selected as provided in Section 3 or
4; provided, that the underwriting agreement, if any, shall be reasonably
satisfactory in form and substance to the Company) and take such other actions
as are reasonably required in order to expedite or facilitate the disposition of
such Registrable Securities;
(viii) make available for inspection by any seller of
Registrable Securities, any managing underwriter participating in any
disposition pursuant to such registration statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter (each, an "Inspector" and, collectively, the "Inspectors"), all
---------- ----------
financial and other records, pertinent corporate documents and properties of the
Company and any subsidiaries thereof as may be in existence at such time
(collectively, the "Records") as shall be reasonably necessary to enable them to
-------
exercise their due diligence responsibility, and cause the Company's and any
subsidiaries' officers, directors and employees, and the independent public
accountants of the Company, to supply all information reasonably requested by
any such Inspector in connection with such registration statement; provided,
that such Inspector agrees to keep all such information confidential.
(ix) obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters, as Holders' Counsel or
the managing underwriter reasonably request;
(x) furnish, at the request of any seller of Registrable
Securities on the date such securities are delivered to the underwriters for
sale pursuant to such registration or, if such securities are not being sold
through underwriters, on the date the registration statement with respect to
such securities becomes effective, an opinion, dated such date, of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and to the seller making such request, covering such legal
matters with respect to the registration in respect of which such opinion is
being given as such seller may reasonably request and as are customarily
included in such opinions;
(xi) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable but no later than fifteen (15) months
after the effective date of the registration statement, an earnings statement
covering a period of twelve (12) months beginning after the effective date of
the registration statement, in a manner which satisfies the provisions of
Section 11(a) of the Act;
-10-
<PAGE>
(xii) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed (if any) if the listing of such Registrable Securities is then
permitted under the rules of such exchange or, if no similar securities are then
so listed, cause all such Registrable Securities to be listed on an exchange on
which the Initiating Holders request that such Registrable Securities be listed,
subject to the satisfaction of the applicable listing requirements of each such
exchange;
(xiii) keep each seller of Registrable Securities advised
in writing as to the initiation and progress of any registration under Section 3
or 4 hereunder;
(iv) provide officers' certificates and other customary
closing documents;
(xv) cooperate with each seller of Registrable Securities
and each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers, Inc. (the
"NASD"); and
----
(xvi) use its best efforts to take all other steps necessary
to effect the registration of the Registrable Securities contemplated hereby.
(b) Seller Information. The Company may require as a condition
------------------
precedent of the Company's obligations under this Section 6 that each seller of
Registrable Securities as to which any registration is being effected furnish to
the Company such information regarding such seller and the distribution of such
securities as the Company may from time to time reasonably request in writing.
(c) Notice to Discontinue. Each Holder agrees that, upon receipt
---------------------
of any notice from the Company of the happening of any event of the kind
described in Section 6(a)(vi), such Holder shall forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 6(a)(vi) and,
if so directed by the Company, such Holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
which is current at the time of receipt of such notice. If the Company shall
give any such notice, the Company shall extend the period during which such
registration statement shall be maintained effective pursuant to this Agreement
(including, without limitation, the period referred to in Section 6(a)(ii)) by
the number of days during the period from and including the date of the giving
of such notice pursuant to Section 6(a)(vi) to and including the date when the
Holder shall have received the copies of the supplemented or amended prospectus
contemplated by and meeting the requirements of Section 6(a)(vi).
-11-
<PAGE>
7. Registration Expenses. The Company shall pay all expenses
---------------------
(other than underwriting discounts and commissions) arising from or incident to
the performance of, or compliance with, this Agreement, including, without
limitation, (a) SEC, stock exchange and NASD registration and filing fees,
(b) all fees and expenses incurred in complying with securities or blue sky
laws (including, without limitation, reasonable fees, charges and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities), (c) all printing, messenger and delivery expenses, (d) the fees,
charges and disbursements of counsel to the Company and of its independent
public accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including, without limitation, any expenses arising
from any special audits incident to or required by any registration or
qualification) and (e) the reasonable fees, charges and expenses of any special
experts retained by the Company in connection with a requested Demand
Registration or Piggy-Back Registration pursuant to the terms of this Agreement,
regardless of whether the registration statement filed in connection with such
registration is declared effective. In connection with each registration
hereunder, the Company shall reimburse the Holders of Registrable Securities
being registered in such registration for the reasonable fees, charges and
disbursements of not more than one Holders' Counsel. All of the expenses
described in this Section 7 are referred to in this Agreement as "Registration
------------
Expenses." Notwithstanding the foregoing provisions of this Section 7, in
- --------
connection with any registration hereunder, each Holder of Registrable
Securities being registered shall pay all underwriting discounts and commissions
and any capital gains, income or transfer taxes, if any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
--- ----
discounts and commissions in accordance with the number of shares sold in the
offering.
8. Indemnification; Contribution.
-----------------------------
(a) Indemnification by the Company. In the event of any proposed
------------------------------
registration of securities of the Company pursuant to Section 3 or Section 4,
the Company agrees to indemnify and hold harmless each Holder, its directors,
officers, partners, employees, advisors and agents, and each Person who controls
(within the meaning of the Act or the Exchange Act) such Holder, to the extent
permitted by law, from and against any and all losses, claims, damages, expenses
(including, without limitation, reasonable costs of investigation and fees,
disbursements and other charges of counsel) or other liabilities resulting from
or arising out of or based upon any untrue, or alleged untrue, statement of a
material fact contained in any registration statement, prospectus or preliminary
prospectus or notification or offering circular (as amended or supplemented if
the Company shall have furnished any amendments or supplements thereto) or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by or on behalf of such Holder
expressly for use therein. The Company shall also indemnify any underwriters of
the Registrable Securities, their officers, directors and employees, and each
Person who controls any such underwriter (within
-12-
<PAGE>
the meaning of the Act and the Exchange Act) to the same extent as provided
above with respect to the indemnification of the Holders of Registrable
Securities.
(b) Indemnification by Holders. In connection with any proposed
--------------------------
registration in which a Holder is participating pursuant to Section 3 or 4
hereof, each such Holder shall furnish to the Company in writing such
information with respect to such Holder as the Company may reasonably request or
as may be required by law for use in connection with any registration statement
or prospectus to be used in connection with such registration and each Holder
agrees to indemnify and hold harmless the Company, any underwriter retained by
the Company and their respective directors, officers, employees and each Person
who controls (within the meaning of the Act and the Exchange Act) the Company or
such underwriter to the same extent as the foregoing indemnity from the Company
to the Holders (subject to the proviso to this sentence and applicable law), but
only with respect to any such information furnished in writing by or on behalf
of such Holder expressly for use therein; provided, however, that the liability
-------- -------
of any Holder under this Section 8(b) shall be limited to the amount of the net
proceeds received by such Holder in the offering giving rise to such liability.
(c) Conduct of Indemnification Proceedings. Any Person entitled
--------------------------------------
to indemnification hereunder (the "Indemnified Party") agrees to give prompt
-----------------
written notice to the indemnifying party (the "Indemnifying Party") after the
------------------
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; provided, that, the failure so to notify the
-------- ----
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder. If notice of commencement
of any such action is given to the Indemnifying Party as above provided, the
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the Indemnified Party unless
(i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party
fails to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment, (iii) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that either (A) representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable standards of
professional conduct or (B) there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnifying
Party; provided, however, that the Indemnifying Party shall only have to pay the
fees and expenses of one firm of counsel for all Indemnified Parties in each
jurisdiction, except to the extent representation of all Indemnified Parties by
the same counsel is inappropriate under applicable standards of professional
conduct. In either of such cases the Indemnifying Party shall not have the
right to assume the defense of such action on behalf
-13-
<PAGE>
of such Indemnified Party. No Indemnifying Party shall be liable for any
settlement entered into without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the written consent
of the Indemnified Party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the Indemnified Party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment
(A) includes an unconditional release of the Indemnified Party from all
liability arising out of such action or claim and (B) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any Indemnified Party. The rights accorded to any Indemnified Party
hereunder shall be in addition to any rights that such Indemnified Party may
have at common law, by separate agreement or otherwise.
(d) Contribution. If the indemnification provided for in
------------
Section 8(a) from the Indemnifying Party is unavailable to an Indemnified Party
in respect of any losses, claims, damages, expenses or other liabilities
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, expenses or other
liabilities in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and Indemnified Party in connection with the actions
which resulted in such losses, claims, damages, expenses or other liabilities,
as well as any other relevant equitable considerations. The relative faults of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, was made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the Indemnifying Party's and
Indemnified Party's relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, expenses or other liabilities
referred to above shall be deemed to include, subject to the limitations set
forth in Section 8(a), 8(b) and 8(c), any legal or other fees, charges or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution pursuant to this Section
8(d).
9. Rule 144; Other Exemptions; Legend Removal. (a) The Company
------------------------------------------
covenants that it shall file any reports required to be filed by it under the
Exchange Act and the rules and regulations adopted by the SEC thereunder, and
that it shall take such further action as each Holder may reasonably request
(including, but not limited to, providing any information necessary to comply
with Rules 144 and 144A under the Act), all to the extent
-14-
<PAGE>
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Act within the limitation of the exemptions
provided by (i) Rule 144 or Rule 144A under the Act, as such rules may be
amended from time to time, or (ii) any other rules or regulations now existing
or hereafter adopted by the SEC. The Company shall, upon the request of any
Holder, deliver to such Holder a written statement as to whether the Company has
complied with such requirements.
(b) The Company agrees to remove relevant restrictive
legends from stock certificates representing Registrable Shares, at the request
of the Holder thereof, at such time as such Registrable Shares become eligible
for resale pursuant to Rule 144(k) under the Act.
10. Certain Limitations on Registration Rights. In the case of a
------------------------------------------
registration under Section 4 if the Company has determined to enter into an
underwriting agreement in connection therewith, no person may participate in
such registration unless such person (a) agrees to sell such person's securities
on the basis provided therein and (b) completes and executes all questionnaires,
powers of attorney, indemnities, lock-up agreements, underwriting agreements and
other documents reasonably required under the terms of such underwriting
agreements.
11. Miscellaneous.
-------------
(a) Recapitalizations, Exchanges, etc. The provisions of this
---------------------------------
Agreement shall apply, to the full extent set forth herein with respect to the
NMT Shares, to any and all shares of capital stock of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in exchange for or in
substitution of, the NMT Shares and shall be appropriately adjusted for any
stock dividends, splits, reverse splits, combinations, recapitalizations and the
like occurring after the date hereof.
(b) Remedies. The Holders, in addition to being entitled to
--------
exercise all rights granted by law, including recovery of damages, shall be
entitled to specific performance of their rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive in any action for specific performance the defense
that a remedy at law would be adequate.
(c) Amendments and Waivers. Except as otherwise provided herein,
----------------------
the provisions of this Agreement may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions of such section may
not be given unless the Company has obtained the prior written consent of the
Holders holding at least a majority of the Registrable Securities.
(d) Notices. All notices, demands and other communications
-------
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
-15-
<PAGE>
(i) if to the Company:
Nitinol Medical Technologies, Inc.
27 Wormwood Street
South Boston, Massachusetts 02210
Telecopier No.: (617) 737-0924
Attention: Chief Executive Officer
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telecopier No.: (617) 526-5000
Attention: Steven D. Singer, Esquire
(ii) if to a Holder:
To such Holder at his or her address set forth on
Schedule A attached hereto.
----------
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
(e) Assignment of Rights. The rights and obligations of each
--------------------
Holder under this Agreement may only be assigned by such Holder to any person or
entity which is a partner, stockholder or affiliate of such Holder, and such
transferee shall be deemed a "Holder" for purposes of this Agreement; provided
that each such transferee agrees in a written instrument delivered to the
Company to be bound by the provisions of this Agreement.
(f) Counterparts. This Agreement may be executed in any number
------------
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
-16-
<PAGE>
(h) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law of such State.
(i) Jurisdiction. Each party to this Agreement hereby
------------
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
may be brought in the courts of the Commonwealth of Massachusetts and hereby
expressly submits to the personal jurisdiction and venue of such courts for the
purposes thereof and expressly waives any claim of improper venue and any claim
that such courts are an inconvenient forum. Each party hereby irrevocably
consents to the service of process of any of the aforementioned courts in any
such suit, action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to the address set forth in Section 10(e),
such service to become effective 10 days after such mailing.
(j) Severability. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, it being intended that all
of the rights and privileges of the Holders shall be enforceable to the fullest
extent permitted by law.
(k) Rules of Construction. Unless the context otherwise
---------------------
requires, "or" is not exclusive, and references to sections or subsections refer
to sections or subsections of this Agreement.
(l) Entire Agreement. This Agreement is intended by the parties
----------------
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings in respect of the subject matter contained
herein, other than those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(m) Further Assurances. Each of the parties shall execute such
------------------
documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
-17-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed and delivered by their respective officers hereunto duly authorized on
the date first above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ William J. Knight
-------------------------------------------------
Name: William J. Knight
Title: Vice President of Finance and
Administration and Chief Financial Officer
/s/ James C. Torraco
-------------------------------------------------
James C. Torraco
-------------------------------------------------
Dean Witter f/b/o William L. Clayborn
-------------------------------------------------
William L. Clayborn
/s/ Lisa L. Williams
-------------------------------------------------
Lisa L. Williams
/s/ Ryan G. Williams
-------------------------------------------------
Ryan G. Williams
/s/ Joseph A. Staley
-------------------------------------------------
Joseph A. Staley
-------------------------------------------------
Ken A. Cornelius
-18-
<PAGE>
-------------------------------------------------
William R. Ross
/s/ Ronald G. Williams
-------------------------------------------------
Ronald G. Williams
-------------------------------------------------
Laura Ann and James Robertson
-------------------------------------------------
Bjorn R. Koritz
-------------------------------------------------
Robert Lee Thompson, Jr.
-------------------------------------------------
Michael Meyers
-------------------------------------------------
Evan Ratner
-------------------------------------------------
Herb Feldman
-------------------------------------------------
Steven Kantor
-------------------------------------------------
Mark Von Kreuter
-------------------------------------------------
J. Mark Junewicz
-19-
<PAGE>
-------------------------------------------------
J. Mark Junewicz c/o Christian J. Junewicz
-------------------------------------------------
Peter Green
THE DEVER FAMILY TRUST
By:
---------------------------------------------
Name:
Title:
ROBERTSON OIL CO., INC.
By:
---------------------------------------------
Name:
Title:
RICHARD S. RUTKOWSKI REVOCABLE TRUST
By:
---------------------------------------------
Name:
Title:
WAYBURN RAY SMITH REVOCABLE TRUSTS
By:
---------------------------------------------
Name:
Title:
-20-
<PAGE>
MARILYN JOANNE SMITH REVOCABLE TRUSTS
By: /s/ Marilyn J. Smith
---------------------------------------------
Name:
Title:
CURRAN PARTNERS, L.P.
By:
---------------------------------------------
Name:
Title:
DELAWARE GUARANTY & TRUST, F/B/O JOHN P. CURRAN IRA
By:
---------------------------------------------
Name:
Title:
--------------------------------------
Walter E. Rockwell
--------------------------------------
Gene Niswander
--------------------------------------
Martin Ruzicka
PINOTAGE, LLC
By: /s/ Robert Lee Thompson
----------------------------------
Name: Robert Lee Thompson
Title: President
-21-
<PAGE>
JUNEWICZ & CO., INC.
By:
----------------------------------
Name:
Title:
______________________________________
Marc Van Lith
ARGO CAPITAL PARTNERS I, L.P.
By: /s/ Bernard V. Carrico, Jr.
----------------------------------
Name:
Title:
-22-
<PAGE>
Schedule A
----------
<TABLE>
<CAPTION>
Name and Address of Number of Stockholder
Stockholder Shares/1/
- ------------------------ ---------------------
<S> <C>
James C. Torraco 188,036
3 Sewell Court
Medfield, MA 025052
Dean Witter f/b/o 200,000
William L. Clayborn
P.O. Box 610167
Dallas, Texas 75261
William L. Clayborn 24,563
P.O. Box 610167
Dallas, TX 75261
Lisa L. Williams 16,666
123 Seminole Drive
Trophy Club, TX 76262
Ryan G. Williams 16,666
123 Seminole Drive
Trophy Club, TX 76262
Joseph A. Staley 50,000
104 Forest Hill Drive
Trophy Club, TX 76262
Ken A. Cornelius 5,556
2501 Kensington Place
Collegeville, TX 76034
William R. Ross 5,556
1008 Trophy Club Drive
Trophy Club, TX 76262
</TABLE>
- -----------------
/1/ Represents shares of Common Stock of the Company unless otherwise
indicated.
-23-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Ronald G. Williams, President 16,668
Instramed Surgical Associates, Inc.
602 Front Street
Roanoke, TX 76261
Laura Ann and James Robertson 25,000
11710 Pleasant Ridge Terrace
Apt. 1411
Little Rock, AR 72212
Bjorn R. Koritz 29,249
48 Old Mill Road
Greenwich, CT 06831
Robert Lee Thompson, Jr. 25,000
8334 Dogwood Lane
Rogers, AR 72756
Michael Meyers 10,571
215 East 68th Street
Apt. 11K
New York, NY 10021
Evan Ratner 3,571
105 Giordano Drive
West Orange, NJ 07052
Herb Feldman 7,142
215 East 68th Street
Apt. 29C
New York, NY 10021
Steven Kantor 7,142
175 East 74th Street, Apt. 11C
New York, NY 10021
Mark Von Kreuter 3,571
124 Goodwives River Road
Darien, CT 06820
J. Mark Junewicz 11,071
Junewicz & Co., Inc.
45 Rockefellar Plaza
Suite 2000
New York, NY 10111
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
J. Mark Junewicz c/o 1,313; Warrant to purchase
Christian J. Junewicz 17,737 shares of Common
Junewicz & Company Stock/2/
45 Rockefeller Plaza
Suite 2000
New York, NY 10111
Peter Green 15,000
5 Mallard Street
London, England
Dever Family Trust 13,888
c/o The Dever Family Trust
2941 Oakland Zion Road
Fayetteville, Arkansas 72701
Robertson Oil Co., Inc. 12,776
123 N. Block Street, Suite A
Fayetteville, Arkansas 72701
Richard S. Rutkowski 11,250
Revocable Trust
133 Pomeroy Avenue
Pittsfield, Massachusetts 01201
Wayburn Ray Smith Revocable 3,571
Trust
[address]
Marilyn Joanne Smith 3,571
Revocable Trust
[address]
</TABLE>
- -----------------
/2/ In the event the Purchaser converts the principal amount borrowed by the
Company under the Loan and Security Agreement into additional shares of
Series A Preferred, Junewicz & Company shall be entitled to receive a
warrant to purchase a number of shares of Common Stock equal to 5% of the
number of additional share of Series A Preferred issued to the Purchaser.
If the principal amount of the loan equals $2,000,000 and such principal
amount is converted into additional shares of Series A Preferred, Junewicz
shall be entitled to receive a warrant to purchase 27,405 shares of Common
Stock of the Company.
-25-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Curran Partners, L.P. 30,063
Curran Management
237 Park Avenue, Suite 900
New York, New York 10017
Delaware Guaranty & Trust, 15,031
f/b/o John P. Curran IRA
Curran Management
237 Park Avenue, Suite 900
New York, New York 10017
Walter E. Rockwell 1,500
9737 Mast Boulevard
Santee, California 92071
Gene Niswander 1,000
1909 Central Drive, Suite 300
Bedford, Texas 76021
Martin Ruzicka 5,000
142 Stawell Street
Burnley, Victoria, Australia
3121
Pinotage, LLC 384,689
19308 Pinecrest Trail
Rogers, Arizona 72756
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Junewicz & Co., Inc. Warrants to purchase 76
45 Rockefellar Plaza shares of Common Stock/3/
Suite 2000
New York, New York 10111
Marc Van Lith Warrants to purchase
525 West 22nd Street 10,735 shares of Common
Apt. 5(f) Stock.
New York, New York 10011
Argo Capital Partners I L.P. 120,361/4/
8080 North Central
Expressway, Suite 1600
Dallas, Texas 75206-1819
Total: 1,265,041 shares of
Common Stock and
warrants to purchase
28,548 shares of Common
Stock.
</TABLE>
- -----------------
/3/ In the event the Purchaser converts the principal amount borrowed by the
Company under the Loan and Security Agreement into additional shares of
Series A Preferred, Junewicz & Company shall be entitled to receive a
warrant to purchase a number of shares of Common Stock equal to 5% of the
number of additional share of Series A Preferred issued to the Purchaser.
If the principal amount of the loan equals $2,000,000 and such principal
amount is converted into additional shares of Series A Preferred, Junewicz
shall be entitled to receive a warrant to purchase 27,405 shares of Common
Stock of the Company.
/4/ Subject to adjustment as provided in the Stock Purchase Agreement of even
date herewith by and among ITC, Robert Lee Thompson, James C. Torraco, the
Company and Argo Capital Partners I L.P.
-27-
<PAGE>
EXHIBIT 10.4
AMENDED AND RESTATED STOCKHOLDERS' OPTION AGREEMENT
This Amended and Restated Stockholders' Option Agreement (the "Agreement")
is made this 30th day of March, 1999, by and among Nitinol Medical Technologies,
Inc., a Delaware corporation (the "Purchaser"), Image Technologies Corporation,
a Delaware corporation (the "Company"), and the holders (the "Stockholders") of
(1) the shares of common stock, $.01 par value per share ("Common Stock") and
(2) the warrants to purchase shares of Common Stock ("Warrants"), of the Company
listed on Schedule A hereto. All such shares of Common Stock, together with the
----------
Warrants, are collectively referred to as the "Shares."
Recitals:
--------
WHEREAS, (a) the Purchaser and the Company entered into a Series A
Preferred Stock Purchase Agreement dated as of May 29, 1997 (the "Series A
Purchase Agreement"), pursuant to which the Purchaser purchased an aggregate of
345,722 shares of the Company's Series A Convertible Preferred Stock, $.01 par
value per share (the "Series A Preferred"), and (b) in connection with the
execution and delivery of the Series A Purchase Agreement, the Company, the
Purchaser and certain of the Stockholders entered into a Stockholders' Option
Agreement (the "Option Agreement") of even date therewith, and as subsequently
amended, providing the Purchaser with an option to purchase all Shares owned by
such Stockholders;
WHEREAS, the Company and Argo Capital Partners I L.P., a Delaware limited
partnership ("Argo Capital") entered into a Stock Purchase Agreement of even
date herewith (the "Purchase Agreement"), pursuant to which Argo Capital
purchased an aggregate of 120,361 shares of Common Stock and pursuant to which
39,159 shares of Series A Convertible Preferred Stock of the Company were issued
to the Purchaser;
WHEREAS, the parties wish to amend and restate the Option Agreement to,
among other things, (a) consent to any transfers of Shares made by Stockholders
prior to the date hereof and (b) include Argo Capital as a "Stockholder" and the
Common Stock issued or to be issued to Argo Capital as "Shares" for all purposes
under the Option Agreement.
In consideration of the mutual covenants contained herein and for other
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
<PAGE>
ARTICLE I
STOCK OPTION
Section 1.1 Grant of Stock Option. Each of the Stockholders hereby grants
---------------------
to the Purchaser an irrevocable option (the "Option") to purchase all Shares
currently owned by such Stockholder as set forth on Schedule A hereto and any
----------
additional Shares acquired by such Stockholder (whether by purchase, dividend,
stock split, recapitalization or otherwise) after the date of this Agreement
(all such Shares being referred to as the "Stockholder's Shares" and,
collectively, as the "Stockholder Shares"). The aggregate purchase price payable
by the Purchaser for the Stockholder Shares is $24,500,000, to be paid pro rata
per Stockholder Share, thirty-two percent (32%) of which shall be paid in cash
and the balance of which shall be paid in shares of common stock, $.001 par
value per share, of the Purchaser (the "Purchaser Common Stock") (as it may be
adjusted pursuant to Section 1.6, collectively, the "Purchase Price"). For
purposes of the foregoing, the Purchaser Common Stock shall be valued at the
average of the closing prices of Purchaser Common Stock as reported by the
Nasdaq National Market System on each of the last ten trading days ending five
business days prior to the Closing (as defined below).
Section 1.2 Exercise of Option.
------------------
(a) The Option may be exercised by the Purchaser, in whole but not in
part, at any time after the date hereof and prior to the Option Extension
Deadline (as defined below), subject to extension as provided in this paragraph
(a). No later than April 30, 1999, the Company shall provide the Purchaser with
a certificate (the "Certificate") signed by its President certifying as to the
Company's cumulative pre-tax losses ("Pre-Tax Losses") for the period from April
1, 1997 through March 31, 1999. In the event such Pre-Tax Losses are in excess
of $2,171,000, the Purchaser, in its sole discretion, shall have 30 days
following receipt of the Certificate (the end of such 30-day period being
referred to herein as the "Option Extension Deadline") to elect to extend the
option exercise period for an additional six-month period. For purposes of the
foregoing, any amounts accrued by the Company for the payment of bonuses
pursuant to Section 3 of the employment agreements of even date herewith between
the Company and each of Robert Lee Thompson and James C. Torraco, and any
accrued interest on borrowings of the Company under that certain Loan and
Security Agreement (the "Loan and Security Agreement") of even date herewith
between the Purchaser and the Company, shall not be included in any calculation
of Pre-Tax Losses. In the event the Purchaser elects to extend the option
exercise period it shall provide written notice to such effect to each of the
Stockholders on or before the Option Extension Deadline.
-2-
<PAGE>
(b) In the event the Purchaser wishes to exercise the Option for the
Stockholder Shares, the Purchaser shall send a written notice (the "Exercise
Notice") to the Stockholders specifying the place, the date (not more than 120
days from the date of the Exercise Notice), and the time for the closing of such
purchase. The closing of the purchase of Stockholder Shares pursuant to this
Section 1.2(b) (the "Closing") shall occur at the place, on the date and at the
time designated by the Purchaser in its Exercise Notice, provided that if, at
the date of the Closing herein provided for, the conditions set forth in
Sections 1.4 and 1.5 shall not have been satisfied (or waived), the Purchaser
may postpone the Closing until a date within five business days after such
conditions are satisfied. Any such postponement shall not relieve the
Stockholders of any liability for failure to meet the conditions specified in
Section 1.5 hereof.
(c) The Purchaser shall not be under any obligation to deliver an
Exercise Notice and may allow the Option to terminate without purchasing any
Stockholder Shares hereunder; provided, however, that once the Purchaser has
delivered to the Stockholders an Exercise Notice, subject to the terms and
conditions of this Agreement and the satisfaction of the provisions of Section
1.5 hereof, the Purchaser shall be bound to effect the purchase as described in
such Exercise Notice.
Section 1.3 Closing. At the Closing, (a) each Stockholder shall deliver to
-------
the Purchaser (in accordance with the Purchaser's instructions) a certificate or
certificates (the "Certificates") representing the number of such Stockholder's
Shares to be purchased at such Closing, duly endorsed or accompanied by stock
powers duly executed in blank and (b) the Purchaser shall deliver to such
Stockholder (i) a certified or bank cashier's check or checks payable to or upon
the order of such Stockholder in the amount set forth opposite such
Stockholder's name on Schedule A hereto and (ii) a certificate representing
----------
shares of Purchaser Common Stock valued in accordance with Section 1.1.
Section 1.4 Stockholder Conditions. The obligation of each Stockholder to
----------------------
sell Stockholder Shares at the Closing is subject to the following conditions:
(i) The representations and warranties of the Purchaser contained in
Article IV shall be true and correct in all material respects on the date
thereof as if made on such date.
(ii) All waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act") applicable to the exercise of the
Option shall have expired or been terminated.
(iii) There shall be no preliminary or permanent injunction or other
order, decree or ruling issued by a
-3-
<PAGE>
court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, nor any statute, rule, regulation or
order promulgated or enacted by any governmental authority, prohibiting or
otherwise restraining the purchase of the Stockholder Shares pursuant to
the exercise of the Option.
(iv) All Stockholder Shares are purchased at the Closing.
Section 1.5 Purchaser's Conditions. The obligation of the Purchaser to
----------------------
purchase the Stockholder Shares at the Closing is subject to the following
conditions:
(i) The representations and warranties of the Stockholders and the
Company contained in Article II and Article Ill, respectively, shall be
true and correct in all material respects on the date thereof as if made on
such date.
(ii) All waiting periods under the HSR Act applicable to the exercise
of the Option shall have expired or been terminated.
(iii) There shall be no preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, nor any
statute, rule, regulation or order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining the purchase
of the Stockholder Shares pursuant to the exercise of the Option.
(iv) The Company shall have complied with its covenants in Article VI
of this Agreement.
Section 1.6 Adjustment Upon Changes in Capitalization or Merger.
---------------------------------------------------
In the event of any change in the Company's capital stock by reason of
stock dividends, stock splits, mergers, consolidations, recapitalizations,
combinations, conversions, exchanges of shares, extraordinary or liquidating
dividends, or other changes in the corporate or capital structure of the Company
which would have the effect of diluting or changing the Purchaser's rights
hereunder, the number and kind of shares or securities subject to the Option and
the Purchase Price per Stockholder Share (but not the total Purchase Price)
shall be appropriately and equitably adjusted so that the Purchaser shall
receive upon exercise of the Option the number and class of shares or other
securities or property that the Purchaser would have received in respect of the
Stockholder Shares purchasable upon exercise of the Option if the Option had
been exercised immediately prior to such event. Each Stockholder shall take such
steps in connection with such consolidation, merger, liquidation or other such
action as may be necessary to assure that the provisions hereof shall thereafter
apply as nearly as possible to any securities or property thereafter deliverable
upon exercise of the Option.
-4-
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders severally represents and warrants to the Purchaser
as follows:
Section 2.1 Title to Shares. Such Stockholder has good and marketable
----------------
title to the Stockholder's Shares free and clear of any and all covenants,
conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever. Schedule A
----------
attached hereto sets forth a true and correct description of all shares of (and
rights to acquire) capital stock of the Company owned by such Stockholder.
Schedule B attached hereto is a true and complete list of the stockholders,
- ----------
optionholders, warrantholders and other security holders of the Company showing
(i) the number of shares of Common Stock, Preferred Stock or other securities or
rights of the Company held by each Stockholder as of the date of this Agreement
and the consideration paid to the Company, if any, therefore, and (ii) the fully
diluted percentage interest in the Company held by each Stockholder, after
giving effect to the transactions contemplated hereby and the exercise of all
options, warrants or other rights or securities convertible into or exchangeable
or exercisable for Common Stock or other securities of the Company (including
shares issued or issuable under the Company's 1997 Stock Option Plan and shares
issuable upon exercise of any warrants issued or issuable to Junewicz & Company
("Junewicz," and any such warrants referred to collectively as the "Junewicz
Warrants") pursuant to that certain engagement letter dated May 23, 1997 between
the Company and Junewicz (the "Junewicz Agreement") and (iii) the number of
shares of Common Stock or other securities of the Company issuable upon the
exercise of options, warrants or other rights held by each optionholder,
warrantholder or rights holder as of the date of this Agreement, together with
the grant date, exercise price, vesting schedule and expiration date of each
outstanding option, warrant or other right. Except as set forth on Schedule B,
----------
there are no shares of Common Stock, preferred stock or other securities or
capital stock of the Company issued or outstanding. Except as set forth on
Schedule B attached hereto (i) no subscription, warrant, option, convertible
- ----------
security or other right (contingent or otherwise) to purchase or acquire any
shares of capital stock of the Company is authorized or outstanding, (ii) the
Company has no obligation (contingent or otherwise) to issue any subscription,
warrant, option, convertible security or other such right or to issue or
distribute to holders of any shares of its capital stock any evidences of
indebtedness or assets of the Company and (iii) the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any shares of
its capital stock or any interest therein or to pay any dividend or make any
other distribution in respect thereof.
-5-
<PAGE>
Section 2.2 Authority. Such Stockholder has the full right, power and
---------
authority to enter into this Agreement and to transfer, convey and sell to the
Purchaser at the Closing the Stockholder's Shares to be sold by such Stockholder
hereunder and, upon consummation of the purchase contemplated hereby, the
Purchaser will acquire from such Stockholder good and marketable title to such
Stockholder's Shares, free and clear of all covenants, conditions, restrictions,
voting trust arrangements, liens, charges, encumbrances, options and adverse
claims or rights whatsoever. Such Stockholder has duly executed and delivered
this Agreement and this Agreement constitutes the valid and binding obligation
of such Stockholder enforceable against such Stockholder in accordance with its
terms. The execution of and performance of the transactions contemplated by this
Agreement and compliance with its provisions by such Stockholder will not
violate any provision of law and will not conflict with or result in any breach
of any of the terms, conditions or provisions of, or constitute a default under,
or require a consent or waiver under, the Certificate of Incorporation or By-
Laws of the Company (each as amended to date) or any agreement or instrument to
which such Stockholder is a party or by which he or any of his properties is
bound, or any decree, judgment, order, statute, rule or regulation applicable to
such Stockholder.
Section 2.3 Government Consents. No consent, approval, order or
-------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of such
Stockholder or the Company in connection with the execution and delivery of this
Agreement or the transactions to be consummated at the Closing, as contemplated
by this Agreement (except that the pre-merger notification provisions of the HSR
Act may apply).
Section 2.4 Litigation. Such Stockholder is not a party to, subject to or
----------
bound by any agreement or any judgment, order, writ, prohibition, injunction or
decree of any court or other government body, and there is no action, suit or
proceeding or governmental inquiry or investigation pending which would prevent
the execution or delivery of this Agreement by such Stockholder or the transfer,
conveyance and sale of the Stockholder's Shares to be sold by such Stockholder
to the Purchaser pursuant to the terms hereof.
Section 2.5 Brokers. No broker or finder has acted for such Stockholder in
--------
connection with this agreement or the transactions contemplated hereby, except
that, pursuant to the Junewicz Agreement, a true and correct copy of which is
attached hereto as Schedule C, the Company has retained Junewicz in connection
----------
with the transactions contemplated by this Agreement and, except for
compensation due to Junewicz, no broker or finder is entitled to any brokerage
or finder's fee or other commissions in respect of such transactions based upon
agreements, arrangements or understandings made by or on behalf of such
Stockholder.
-6-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows:
Section 3.1 Authority. The execution, delivery and performance by the
---------
Company of this Agreement, and the consummation by the Company of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company
enforceable in accordance with its terms. The execution of and performance of
the transactions contemplated by this Agreement and compliance with its
provisions by the Company will not violate any provision of law and will not
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or require a consent or waiver
under, its Certificate of Incorporation or By-Laws (each as amended to date) or
any indenture, lease, agreement or other instrument to which the Company is a
party or by which it or any of its properties is bound, or any decree, judgment,
order, statute, rule or regulation applicable to the Company.
Section 3.2 Capitalization. The authorized capital stock of the Company
--------------
(immediately prior to the Closing) consists of 5,000,000 shares of common stock,
$0.01 par value per share (the "Common Stock"), of which 1,146,196 shares are
issued and outstanding, and 1,000,000 shares of Preferred Stock, $0.01 par value
per share, all of which 1,000,000 shares have been designated as Series A
Preferred, of which 345,722 shares are issued and outstanding. All of the
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. The total number of shares
of Common Stock that may be issued under the 1997 Stock Option Plan is 200,000,
of which 134,200 shares are issuable pursuant to outstanding stock options. No
options to be issued pursuant to the 1997 Stock Option Plan will vest or become
exercisable prior to the expiration of the Option. Except as set forth in
Exhibit B hereto, (i) no subscription, warrant, option, convertible security or
- ---------
other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) the Company has
no obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right or to issue or distribute to
holders of any shares of its capital stock any evidences of indebtedness or
assets of the Company, and (iii) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
-7-
<PAGE>
Section 3.3 Government Consents. No consent, approval, order or
-------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement, or the
transactions to be consummated at the Closing, as contemplated by this
Agreement, except such filings as shall have been made prior to and shall be
effective on and as of the Closing (except that the pre-merger notification
provisions of the HSR Act may apply).
Section 3.4 Litigation. There is no action, suit or proceeding, or
----------
inquiry or investigation, pending, or, to the best of the Company's knowledge,
any basis therefor or threat thereof, against the Company, which questions the
validity of this Agreement or the right of the Company to enter into it.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to each of the Stockholders that the
Purchaser has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance by the Purchaser of this Agreement and the consummation by the
Purchaser of the transactions contemplated hereby (i) have been duly authorized
by the Board of Directors of the Purchaser and no other corporate action on the
part of the Purchaser is necessary to authorize the execution, delivery or
performance by the Purchaser of this Agreement and the consummation by the
Purchaser of the transactions contemplated hereby and (ii) will not result in a
violation of any order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser (except that the pre-merger notification
requirements of the HSR Act may apply). This Agreement has been duly executed
and delivered by the Purchaser and is a valid and binding agreement of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally.
ARTICLE V
COVENANTS OF THE STOCKHOLDERS
Each of the Stockholders hereby covenants and agrees that:
Section 5.1 No Proxies for or Encumbrances on Stockholder Shares. Except
----------------------------------------------------
as provided in this Agreement, such Stockholder shall not during the term of
this Agreement, without the prior written consent of the Purchaser, directly or
indirectly, (i) grant any proxies or enter into any voting trust or other
agreement or arrangement with respect to the voting of any Stockholder Shares or
(ii) sell, assign, transfer,
-8-
<PAGE>
encumber or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the direct or indirect sale,
assignment, transfer, encumbrance or other disposition of, any Shares. Such
Stockholder shall not seek or solicit any such sale, assignment, transfer,
encumbrance or other disposition or any such contract, option or other
arrangement or assignment or understanding and agrees to notify the Purchaser
promptly and to provide all details requested by the Purchaser if such
Stockholder shall be approached or solicited, directly or indirectly, by any
person with respect to any of the foregoing. Notwithstanding the foregoing, the
Purchaser hereby consents to the transfers, sales or other dispositions by
Stockholders of Stockholder Shares which have occurred between the period
beginning on May 29, 1997 and ending on the date of this Agreement and which are
reflected on the Schedule of Stockholder Shares on Schedule A hereto, and waives
any claims for breach of contract that it might have with respect to such
dispositions of Stockholder Shares made in violation of Section 5.1 of the
Option Agreement.
Section 5.2 No Shop. Such Stockholder shall not directly or indirectly
-------
(i) solicit, initiate or encourage (or authorize any person to solicit, initiate
or encourage) any inquiry, proposal or offer from any person to acquire the
business, property or capital stock of the Company or any direct or indirect
subsidiary thereof, or any acquisition of a substantial equity interest in, or a
substantial amount of the assets of, the Company or any direct or indirect
subsidiary thereof, whether by merger, purchase of assets, tender offer or other
transaction or (ii) participate in any discussion or negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or participate in, facilitate or encourage any effort
or attempt by any other person to do or seek any of the foregoing. Such
Stockholder shall promptly advise the Purchaser of the terms of any
communications it may receive relating to any of the foregoing.
Section 5.3 Conduct of Stockholders. Such Stockholder will not (i) take,
-----------------------
agree or commit to take any action that would make any representation and
warranty of such Stockholder hereunder inaccurate in any respect as of any time
prior to the termination of this Agreement or (ii) omit, or agree or commit to
omit, to take any action necessary to prevent any such representation or
warranty from being inaccurate in any respect at any such time.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees that during the term of this
Agreement, the Company shall not, without the prior written consent of the
Purchaser:
-9-
<PAGE>
(a) authorize or issue, or enter into any agreement for the issuance
of, any shares of any class or series of stock of the Company or any rights,
options or warrants to subscribe for, purchase or otherwise acquire Common Stock
or any capital stock or other capital stock or securities of the Company or any
evidence of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable or exercisable for Common Stock of the Company
other than (i) up to an aggregate of 200,000 shares of Common Stock issued
pursuant to the Company's 1997 Stock Option Plan as in effect on the date
hereof, (ii) shares of Series A Preferred (and shares of Common Stock of the
Company issuable upon conversion thereof) issuable pursuant to the Series A
Purchase Agreement, (iii) shares of Series A Preferred (and shares of Common
Stock of the Company issuable upon conversion thereof) issued pursuant to the
Loan and Security Agreement and (iv) the Junewicz Warrants and shares of Common
Stock issuable upon exercise of the Junewicz Warrants;
(b) grant or award any option pursuant to the 1997 Stock Option Plan
that vests or becomes exercisable prior to the expiration of the Option or
accelerate the vesting of any such option prior to the expiration of the Option;
(c) grant or award any option pursuant to the 1997 Stock Option Plan
to either of Robert Lee Thompson or James C. Torraco;
(d) create, incur, assume, guarantee or become liable, contingently or
otherwise with respect to any indebtedness or obligation, other than pursuant to
the Loan and Security Agreement or in the ordinary course of business consistent
with past practice;
(e) create, incur or allow to be created or exist any lien,
encumbrance, mortgage, pledge or other security interest of any kind upon any of
its assets except (i) liens securing the obligations of the Company under the
Loan and Security Agreement, (ii) liens securing taxes or governmental charges
not yet due, or (iii) liens described on Schedule D hereto; or
----------
(f) enter into any agreement or arrangement relating to the patents,
patent applications, trademarks, service marks, trademark and service mark
applications, trade names, copyright registrations and licenses or other product
rights necessary for the conduct of the Company's business as conducted and as
proposed to be conducted which could adversely affect the Company's ownership
interest or rights therein.
-10-
<PAGE>
ARTICLE VII
PURCHASER RIGHT OF FIRST REFUSAL
(a) In the event the Purchaser does not exercise the Option, then, in
such event, during the 12-month period commencing on the date of expiration of
the Option, the Company shall not enter into any agreement for the (i) sale of
all or substantially all of the capital stock of the Company, (ii) merger of the
Company with or into, or the consolidation of the Company with, any other
corporation, or any similar combination with any other corporation or (iii)
sale, lease or disposition of all or substantially all of the Company's
properties or assets (any such transaction referred to as a "Purchase
Transaction"), unless in each such case the Company shall have first complied
with this Agreement. The Company shall deliver to the Purchaser a written
notice of any proposed or intended Purchase Transaction (the "Offer"), which
Offer shall (i) identify and describe in reasonable detail the terms of the
proposed Purchase Transaction, (ii) describe in reasonable detail the price and
other terms of the proposed Purchase Transaction, (iii) identify by name the
persons or entities that will be parties to the proposed Purchase Transaction,
and (iv) offer to enter into an agreement with the Purchaser on the same terms
and conditions as the proposed Purchase Transaction. The Purchaser shall have
the right, for a period of sixty (60) days following receipt of such Offer, to
exercise its right to enter into an agreement with the Company on the same terms
and conditions specified in the Offer. The Offer by its term shall remain open
and irrevocable for such 60-day period.
(b) To accept the Offer, the Purchaser must deliver a written notice
to the Company, prior to the end of the 60-day period, setting forth its desire
to enter into an agreement with the Company at the price and upon the other
terms specified in the Offer.
(c) The obligation of the Purchaser to enter into an agreement with
the Company pursuant to the provisions of this Article VII is subject in all
cases to the preparation, execution and delivery by the Company and the
Purchaser of definitive agreements relating to such transaction reasonably
satisfactory in form and substance to the Purchaser and its counsel. Each party
agrees to negotiate diligently and in good faith to enter into such definitive
agreements.
(d) The rights of the Purchaser under this Article VII shall only
apply in the event that the proposed Purchase Transaction is related to, results
from or follows any change, modification or amendment of, or waiver of rights
under, the License Agreement of even date herewith by and between the Company
and Robert Lee Thompson.
-11-
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Expenses. All costs and expenses incurred in connection with
--------
this Agreement shall be paid by the party incurring such cost or expense;
provided, however, that Argo Capital's reasonable costs and expenses incurred in
connection with this Agreement shall be paid by the Company.
Section 8.2 Further Assurances. The Purchaser and the Stockholders will
------------------
each execute and deliver or cause to be executed and delivered all further
documents and instruments and use their respective best efforts to secure such
consents and take all such further action as may be reasonably necessary in
order to consummate the transactions contemplated hereby or to enable the
Purchaser and any assignee to exercise and enjoy all benefits and rights of the
Stockholders with respect to the Option and the Stockholder Shares.
Section 8.3 Additional Agreements. Subject to the terms and conditions
---------------------
of this Agreement, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations and which may be required under any agreements, contracts,
commitments, instruments, understandings, arrangements or restrictions of any
kind to which such party is a party or by which such party is governed or bound,
to consummate and make effective the transactions contemplated by this
Agreement.
Section 8.4 Remedies. The parties hereto agree that the Purchaser may be
--------
irreparably damaged if for any reason any Stockholder fails to sell such
Stockholder's Shares (or other securities deliverable pursuant to Section 1.6)
upon exercise of the Option or to perform any of its other obligations under
this Agreement, or if the Company fails to perform any of its obligations under
Article VII of this Agreement, and that the Purchaser would not have any
adequate remedy at law for money damages in such event. Accordingly, the
Purchaser shall be entitled to specific performance and injunctive and other
equitable relief to enforce the performance of this Agreement by each
Stockholder and to enforce the performance of Article VII of this Agreement by
the Company. This provision is without prejudice to any other rights that the
Purchaser may have against any Stockholder for any failure to perform its
obligations under this Agreement. If the Purchaser breaches its obligation to
effect the purchase of the Stockholder Shares after delivery of its Exercise
Notice, subject to the terms and conditions of the Agreement and the
satisfaction of Section 1.5 hereof, the Stockholders will be entitled to pursue
usual and customary legal, equitable and other remedies.
-12-
<PAGE>
Section 8.5 Notices. All notices, requests, consents and other
-------
communications under this Agreement shall be in writing and shall be delivered
by hand, sent by fax or nationally recognized overnight courier or mailed by
first class certified or registered mail, return receipt requested, postage
prepaid:
If to the Company, at 27 Wormwood Street, Boston, Massachusetts 02210,
Attention: President, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchaser with a copy to Peter B.
Finn, Esq., Rubin and Rudman LLP, 50 Rowes Wharf, Boston, Massachusetts 02110;
If to a Stockholder, at his address set forth on Schedule A to this
----------
Agreement or at such other address or addresses as may have been furnished in
writing by such Stockholder to the Purchaser, with a copy to Peter B. Finn,
Esq., Rubin and Rudman LLP, 50 Rowes Wharf, Boston, Massachusetts 02110; or
If to the Purchaser, at Nitinol Medical Technologies, Inc., 27 Wormwood
Street, Boston, Massachusetts 02210, or at such other address as may have been
furnished to the Company and the Stockholders in writing by the Purchaser, with
a copy to Steven D. Singer, Esq., Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109.
Notices provided in accordance with this Section 8.5 shall be deemed given
(1) when received, if sent by hand, (2) when received, if sent by fax prior to
5:00 p.m. local time at the place received (otherwise on the next following
business day), (3) one business day after delivery to a nationally recognized
overnight courier service, and (4) three business days after deposit in the U.S.
mail, first class certified or registered, postage prepaid.
Section 8.6 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Stockholder Shares.
Section 8.7 Amendments; Termination. Any term of this Agreement,
-----------------------
including the allocation of the Purchase Price between cash and Purchaser Common
Stock set forth in Section 1.1, may be amended or modified and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactivity or prospectively), with the written consent of
the Purchaser, the Company and Stockholders holding at least a majority of the
Shares. Any amendment, modification or waiver effected in accordance with this
Section 8.7 shall be binding upon each Stockholder, the Company and the
Purchaser. This Agreement may be terminated upon written consent of the parties
hereto.
Section 8.8 Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective
-13-
<PAGE>
successors and assigns, provided that the Purchaser may assign its rights and
obligations to any affiliate of the Purchaser and provided, further, that no
Stockholder may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the Purchaser.
Section 8.9 Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the laws of the Commonwealth of Massachusetts
without giving effect to the principles of conflicts of laws thereof.
Section 8.10 Counterparts; Effectiveness. This Agreement may be signed
---------------------------
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instruments.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
Section 8.11 Obligations Separate. The obligations of the Stockholders
--------------------
hereunder are several and not joint.
Section 8.12 Publicity. The Company (represented by James C. Torraco),
---------
on the one hand, and the Purchaser, on the other hand, will consult with each
other and obtain the prior approval of the other party before issuing any press
release or other public statements with respect to the transactions consummated
pursuant to the Purchase Agreement and any related agreements, as well as the
operations of the Company generally, and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by applicable law.
* * * Remainder of page intentionally left blank * * *
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PURCHASER:
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Thomas M. Tully
------------------------------------
Name: Thomas M. Tully
Title: President
COMPANY:
IMAGE TECHNOLOGIES CORPORATION
By: /s/ James C. Torraco
------------------------------------
Name: James C. Torraco
Title: President
STOCKHOLDERS:
/s/ James C. Torraco
---------------------------------------
James C. Torraco
---------------------------------------
Dean Witter f/b/o William L. Clayborn
---------------------------------------
William L. Clayborn
---------------------------------------
Lisa L. Williams
---------------------------------------
Ryan G. Williams
-15-
<PAGE>
---------------------------------------
Joseph A. Staley
---------------------------------------
Ken A. Cornelius
---------------------------------------
William R. Ross
---------------------------------------
Ronald G. Williams
---------------------------------------
Laura Ann and James Robertson
---------------------------------------
Bjorn R. Koritz
---------------------------------------
Robert Lee Thompson, Jr.
---------------------------------------
Michael Meyers
---------------------------------------
Evan Ratner
---------------------------------------
Herb Feldman
---------------------------------------
Steven Kantor
-16-
<PAGE>
---------------------------------------
Mark Von Kreuter
---------------------------------------
J. Mark Junewicz
---------------------------------------
J. Mark Junewicz c/o Christian J. Junewicz
---------------------------------------
Peter Green
THE DEVER FAMILY TRUST
By:
-------------------------------------
Name:
Title:
ROBERTSON OIL CO., INC.
By:
-------------------------------------
Name:
Title:
RICHARD S. RUTKOWSKI REVOCABLE TRUST
By:
-------------------------------------
Name:
Title:
-17-
<PAGE>
WAYBURN RAY SMITH REVOCABLE TRUSTS
By:
-------------------------------------
Name:
Title:
MARILYN JOANNE SMITH REVOCABLE TRUSTS
By:
-------------------------------------
Name:
Title:
CURRAN PARTNERS, L.P.
By:
-------------------------------------
Name:
Title:
DELAWARE GUARANTY & TRUST,
F/B/O JOHN P. CURRAN IRA
By:
-------------------------------------
Name:
Title:
---------------------------------------
Walter E. Rockwell
---------------------------------------
Gene Niswander
-18-
<PAGE>
---------------------------------------
Martin Ruzicka
PINOTAGE, LLC
By: /s/ Robert Lee Thompson
------------------------------------
Name: Robert Lee Thompson
Title: President
JUNEWICZ & CO., INC.
By:
------------------------------------
Name:
Title:
---------------------------------------
Marc Van Lith
ARGO CAPITAL PARTNERS I L.P.
By: Argo Funding Company L.L.C., its general
partner
By: /s/ Bernard V. Carrico, Jr.
------------------------------------
Name:
Title:
-19-
<PAGE>
Schedule A
----------
<TABLE>
<CAPTION>
Name and Address of Number of Stockholder
Stockholder Shares/1/
- -------------------- ---------------------
<S> <C>
James C. Torraco 188,036
3 Sewell Court
Medfield, MA 025052
Dean Witter f/b/o 200,000
William L. Clayborn
P.O. Box 610167
Dallas, Texas 75261
William L. Clayborn 24,563
P.O. Box 610167
Dallas, TX 75261
Lisa L. Williams 16,666
123 Seminole Drive
Trophy Club, TX 76262
Ryan G. Williams 16,666
123 Seminole Drive
Trophy Club, TX 76262
Joseph A. Staley 50,000
104 Forest Hill Drive
Trophy Club, TX 76262
Ken A. Cornelius 5,556
2501 Kensington Place
Collegeville, TX 76034
William R. Ross 5,556
1008 Trophy Club Drive
Trophy Club, TX 76262
</TABLE>
- ---------------------
/1/ Represents shares of Common Stock of the Company unless otherwise indicated.
-20-
<PAGE>
<TABLE>
<S> <C>
Ronald G. Williams, 16,668
President
Instramed Surgical
Associates, Inc.
602 Front Street
Roanoke, TX 76261
Laura Ann and James 25,000
Robertson
11710 Pleasant Ridge Terrace
Apt. 1411
Little Rock, AR 72212
Bjorn R. Koritz 29,249
48 Old Mill Road
Greenwich, CT 06831
Robert Lee Thompson, Jr. 25,000
8334 Dogwood Lane
Rogers, AR 72756
Michael Meyers 10,571
215 East 68th Street
Apt. 11K
New York, NY 10021
Evan Ratner 3,571
105 Giordano Drive
West Orange, NJ 07052
Herb Feldman 7,142
215 East 68th Street
Apt. 29C
New York, NY 10021
Steven Kantor 7,142
175 East 74th Street, Apt. 11C
New York, NY 10021
Mark Von Kreuter 3,571
124 Goodwives River Road
Darien, CT 06820
</TABLE>
-21-
<PAGE>
<TABLE>
<S> <C>
J. Mark Junewicz 11,071
Junewicz & Co., Inc.
45 Rockefeller Plaza
Suite 2000
New York, NY 10111
J. Mark Junewicz c/o 1,313; Warrant to
Christian J. Junewicz purchase 17,737 shares
Junewicz & Company of Common Stock/2/
45 Rockefeller Plaza
Suite 2000
New York, NY 10111
Peter Green 15,000
5 Mallard Street
London, England
Dever Family Trust 13,888
c/o The Dever Family Trust
2941 Oakland Zion Road
Fayetteville, Arkansas 72701
Robertson Oil Co., Inc. 12,776
123 N. Block Street, Suite A
Fayetteville, Arkansas 72701
Richard S. Rutkowski 11,250
Revocable Trust
133 Pomeroy Avenue
Pittsfield, Massachusetts
01201
Wayburn Ray Smith 3,571
Revocable Trust
[address]
</TABLE>
- ---------------------
/2/ [In the event the Purchaser converts the principal amount borrowed by the
Company under the Loan and Security Agreement into additional shares of Series A
Preferred, Junewicz & Company shall be entitled to receive a warrant to purchase
a number of shares of Common Stock equal to 5% of the number of additional
shares of Series A Preferred issued to the Purchaser. If the principal amount of
the loan equals $2,000,000 and such principal amount is converted into
additional shares of Series A Preferred, Junewicz shall be entitled to receive a
warrant to purchase 27,405 shares of Common Stock of the Company.]
-22-
<PAGE>
<TABLE>
<S> <C>
Marilyn Joanne Smith 3,571
Revocable Trust
[address]
Curran Partners, L.P. 30,063
Curran Management
237 Park Avenue, Suite 900
New York, New York 10017
Delaware Guaranty & Trust, 15,031
f/b/o John P. Curran IRA
Curran Management
237 Park Avenue, Suite 900
New York, New York 10017
Walter E. Rockwell 1,500
9737 Mast Boulevard
Santee, California 92071
Gene Niswander 1,000
1909 Central Drive, Suite 300
Bedford, Texas 76021
Martin Ruzicka 5,000
142 Stawell Street
Burnley, Victoria, Australia
3121
Pinotage, LLC 384,689
19308 Pinecrest Trail
Rogers, Arizona 72756
Junewicz & Co., Inc. Warrant to purchase 76
45 Rockefellar Plaza shares of Common
Suite 2000 Stock/3/
New York, New York 10111
</TABLE>
- ---------------------
/3/ In the event the Purchaser converts the principal amount borrowed by the
Company under the Loan and Security Agreement into additional shares of Series A
Preferred, Junewicz & Company shall be entitled to receive a warrant to purchase
a number of shares of Common Stock equal to 5% of the number of additional share
of Series A Preferred issued to the Purchaser. If the principal amount of the
loan equals $2,000,000 and such principal amount is converted into additional
shares of Series A Preferrred, Junewicz shall be entitled to receive a warrant
to purchase 27,405 shares of Common Stock of the Company.
-23-
<PAGE>
<TABLE>
<S> <C>
Marc Van Lith Warrants to purchase
525 West 22nd Street 10,735 shares of
Apt. 5(f) Common Stock.
New York, New York 10011
Argo Capital Partners I L.P. 120,361/4/
8080 North Central
Expressway, Suite 1600
Dallas, Texas 75206-1819
Total: 1,266,557 shares of
Common Stock and
warrants to purchase
28,548 shares of
Common Stock.
</TABLE>
- ---------------
/4/ Refers to Shares subject to adjustment pursuant to (S) 1.2 of the
Purchase Agreement.
-24-
<PAGE>
Schedule B
----------
Summary of Outstanding and Pro Forma Common and
Series A Preferred Stock and Warrants and Other
Convertible Securities to Acquire Common Stock of
Image Technologies Corporation
<TABLE>
<CAPTION>
Total Common Pro Forma
No. Shares/ Cert No. and Common Diluted
Recordholder Warrants Price/Share (C-) Equivalent Shares Ownership %
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock:
Pinotage, LLC 384,689 -- 55 384,689 22.63
Dean Witter F/B/O and
Clayborn, William L. 224,563 $1.00 3; 37 224,563 13.21
Torraco, James C. 188,036 -- 54 188,036 11.06
Staley, Joseph A. 50,000 3.19 7 50,000 2.94
Delaware, Guaranty &
Trust F/B/O Curran,
John P. IRA; Curran
Partners L.P. 45,094 6.65 19; 20 45,094 2.65
Koritz, Bjorn 29,249 -- 34; 47 29,249 1.72
Robertson, Laura Ann
& James 25,000 3.19 11 25,000 1.47
Thompson, Robert Lee Jr. 25,000 3.19 13 25,000 1.47
Williams, Ronald G. 16,668 3.19 10 16,668 0.98
Williams, Lisa L. 16,666 3.19 5 16,666 0.98
Williams, Ryan G. 16,666 3.19 6 16,666 0.98
Green, Peter 15,000 -- 24; 30; 35 15,000 0.88
Denver Family Trust 13,888 18.00 52; 53 13,888 0.82
Robertson Oil Co., Inc. 12,776 18.00 50; 51 12,776 0.75
21; 25; 28;
31; 33; 36
Junewicz, J. Mark and c/o
Junewicz, Christian J. 12,384 -- 31; 33; 36 12,384 0.73
Rutkowski, Richard S.
Revocable Trust 11,250 -- 27; 32 11,250 0.66
Meyers, Michael 10,571 7.00 14 10,571 0.62
Smith Revocable Trusts 7,142 -- 38; 39 7,142 0.42
Kantor, Steven 7,142 7.00 16 7,142 0.42
Feldman, Herb 7,142 7.00 17 7,142 0.42
Cornelius, Ken A. 5,556 3.19 8 5,556 0.33
Ross, William R. 5,556 3.19 9 5,556 0.33
Ruzicka, Martin 5,000 -- 43; 45 5,000 0.29
Ratner, Evan 3,571 7.00 15 3,571 0.21
Von Kreuter, Mark 3,571 7.00 18 3,571 0.21
Nitinol Medical
Technologies, Inc. 1,516 -- 48 1,516 0.09
Rockwell, Walter E. 1,500 -- 40 1,500 0.09
Niswander, Gene 1,000 -- 46 1,000 0.06
Argo Capital Partners I
L.P. (1) 120,361 9.97 120,361 7.08
Series A Preferred:
Nitinol Medical
Technologies, Inc. (2) 384,881 6.65 P-1; P-2 384,881 22.64
Warrants and Other
Convertible Securities:
Junewicz, J. Mark c/o
Junewicz, Christian J.
and Junewicz & Co. (3) 17,813 6.65 J-1; J-1A 17,813 1.05
Van Lith, Mark 10,735 11.55 W-3 10,735 0.63
Nitinol Note No. 3 and
Series A Preferred Stock
Purchase Warrant -- 9.97 NMT-1 20,060 1.18
------ ----
Total Common and
Common Equivalent
Shares 1,700,046 100.00%
========= =======
</TABLE>
- ------------------
(1) Subject to adjustment pursuant to Section 1.2 of this Agreement.
(2) Subject to adjustment pursuant to Section 1.2 of this Agreement. In
addition, Nitinol may at its option convert into shares of Series A
Preferred the principal amount outstanding, aggregating $2,150,000,
pursuant to a Loan and Security Agreement dated May 29,1997, as amended
by Amendment No. 1 to Loan and Security Agreement dated December 30,
1998 and Amendment No. 2 to Loan and Security Agreement dated
February 3, 1999.
(3) In the event Nitinol converts the principal amount borrowed by the
Company under the Loan and Security Agreement into additional shares of
Series A Preferred, Junewicz & Company shall be entitled to receive a
warrant to purchase a number of shares of Common Stock equal to 5% of
the number of additional shares of Series A Preferred issued to Nitinol.
If the principal amount of the Loan equals $2,000,000 and such principal
amount is converted into additional shares of Series A Preferred,
Junewicz shall be entitled to receive a warrant to purchase 27,405
shares of Common Stock of the Company.
Summary of Nitinol Common Share Equivalents
-------------------------------------------
Common Stock issued 3/10/98 1,516
Series A Preferred issued 5/27/97 345,722
Series A Preferred issued at Closing 39,159
Common Stock issuable upon conversion of
Nitinol Note No. 3 and related Series A
Preferred Stock Purchase Warrant 20,060
-------
406,457*
=======
Summary of Outstanding Stock Options
------------------------------------
Exercise
Employee Options Price
- -------- ------- --------
James B. Lemci, R & D Manager 12,000 $6.65
Patrick O'Connor, Mechanical Engineer 4,500 6.65
Mark Antonucci, Electrical Engineer 3,000 6.65
Ranga Krishnamarthl, Software Engineer 4,000 6.65
Lunn Sawyer, Quality Manager 3,000 6.65
Thomas Tully, Chief Executive Officer 50,000 6.65
Michael Myers, Director 2,000 6.65
C. Leonard Gordon, Director 2,000 6.65
Brian P. Kelly, Electrical Technician 2,000 6.65
Thomas Sheehan, Director Sales & Marketing 20,000 6.65
10,000/1/
Todd Zive 1,700 6.65
Robert Segerstan, Sales 20,000 6.65
-------
Total 122,500
- -------------------
/1/ If sales forecast is achieved.
* Equal to 23.91% of total Common and Common Equivalent Shares.
-25-
<PAGE>
Schedule C
----------
JUNEWICZ & CO., INC.
- --------------------------------------------------------------------------------
Suite 2000
45 Rockefeller Plaza
New York, NY 10111
Tel (212) 332-7160
Fax (212) 332-7161
May 23, 1997
Image Technologies Corporation
1909 Central Drive, Suite 302
Bedford, TX 76021
Attention: Mr. R. Lee Thompson
President and CEO
Gentlemen:
This letter agreement (the "Agreement") will confirm the arrangement
under which Junewicz & Co., Inc. ("Junewicz") has been engaged by Image
Technologies Corporation (the "Company") to act as its exclusive financial
advisor in connection with the transactions being contemplated with Nitinol
Medical Technologies, Inc. ("Nitinol").
As the Company's financial advisor, Junewicz has introduced the Company
and other investors to Nitinol and has assisted the Company in structuring and
negotiating the transactions being contemplated with Nitinol.
The Company and Junewicz further agree as follows:
1. Transactions Contemplated with Nitinol
--------------------------------------
The transactions being contemplated between the Company, R. Lee
Thompson ("Thompson"), James C. Torraco ("Torraco") and Nitinol, Curran
Capital Management and John P. Curran (collectively, "Curran") are as
follows:
At the first closing, the following transactions will occur:
a) Nitinol will purchase $2.3 million of Series A Preferred Stock
("Preferred Stock") from the Company ("Transaction 1a");
b) Curran will purchase $300,000 of Common Stock ("Common Stock")
from the Company ("Transaction 1b"); and
-26-
<PAGE>
Image Technologies Corporation
May 23, 1997
Page 2
c) The Company will purchase $300,000 of Common Stock from Thompson
and Torraco ("Transaction 1c").
Subsequent to the first closing, the following transactions may occur:
d) Nitinol will provide a credit line to the Company of up to $2.0
million of senior debt (the "Revolving Credit Loan"). Nitinol
will have the right to convert all or any portion of the amount
drawn down under the Revolving Credit Line into additional shares
of Preferred Stock of the Company. Nitinol may also, at any time
during the Option Period (defined as the period during which
Nitinol may exercise its option to purchase all of the
outstanding capital stock of the Company pursuant to the
Stockholders Option Agreement (the "Purchase Option")), convert
all or any portion of any undrawn amounts under the Revolving
Credit Loan into additional shares of Preferred Stock of the
Company ("Transaction 1d").
e) Nitinol will have the option to purchase all remaining shares of
the Company for an additional $24.5 million at any time during
the Option Period ("Transaction 1e").
2. Fees and Expenses
-----------------
In consideration for its services hereunder, Junewicz shall receive
7,500 shares of the Company's Common Stock as a retainer payment. Such shares
shall be issued on or before the closing of Transactions 1a, 1b and 1c. In
addition, Junewicz shall be entitled to receive the following indicated
compensation from the indicated obligators at the closing of the respective
transactions:
a) The Company shall pay to Junewicz a cash fee equal to 5% of the
gross proceeds of any sale of Preferred Stock by the Company to
Nitinol. In addition, the Company shall issue to Junewicz an
amount of warrants equal to 5% of the number of shares of
Preferred Stock sold by the Company to Nitinol, less the number
of shares of Common Stock redeemed by the Company from Thompson
and Torraco in Transaction 1c. (Transactions 1a and 1d).
b) The Company shall pay to Junewicz a cash fee equal to 6% of the
gross proceeds of any sale of Common Stock by the Company to
Curran or other investors originated by Junewicz. In addition,
the Company shall issue to Junewicz an amount of warrants equal
to 6% of the number of
<PAGE>
Image Technologies Corporation
May 23, 1997
Page 3
shares of Common Stock sold by the Company to Curran or other
investors originated by Junewicz. (Transaction 1b)
c) If Nitinol purchases the remaining shares of the Company, the
Company agrees to pay Junewicz an additional cash transaction fee
equal to 2.0% of the Aggregate Consideration paid to the
Company's shareholders up to $25 million, and 1.5% of the
Aggregate Consideration on the portion greater than $25 million.
(Transaction 1e)
The warrants (to purchase Common Stock) issued to Junewicz under
Transactions 1a, 1b and 1d shall have an exercise price equal to the price paid
for the Preferred Stock or Common Stock by Nitinol, Curran or other investors
originated by Junewicz and shall be exercisable at any time for a period of five
years from the date of the respective transactions. In the event of (i) an
initial public offering by the Company, or (ii) a reorganization, merger or sale
of the Company, the Company shall permit the "cashless exercise" of any warrants
granted to Junewicz in this Paragraph (i.e., the exercise of the warrants
without payment of the exercise price in cash with the result that Junewicz
receives upon exercise cash representing the difference between the exercise
price of the warrants and the initial public offering or sale price of the
Common Stock without requiring Junewicz to pay the exercise price in cash).
For purposes of this agreement, the term "Aggregate Consideration"
shall mean the total fair market value (on the date of payment) of all
consideration (including cash, securities, property, all remaining debt on the
Company's financial statements and other indebtedness and obligations assumed by
Nitinol and any other form of consideration) paid or payable, or otherwise
distributed, directly or indirectly, to the Company or its security holders in
connection with Transaction 1e. In addition to the foregoing compensation, the
Company shall reimburse Junewicz, promptly upon request, for its reasonable
out-of-pocket expenses, which may include fees and disbursements of its legal
counsel.
3. Indemnification
---------------
The Company jointly and severally agree to indemnify Junewicz in
accordance with the indemnification provisions (the "Indemnification
Provisions") as set forth in Annex A to this Agreement, which is incorporated by
reference into this Agreement.
<PAGE>
Image Technologies Corporation
May 23, 1997
Page 4
4. Prior Representation of Nitinol by Junewicz
-------------------------------------------
The Company has been advised that Junewicz has performed investment
banking services for Nitinol within the past two years and has a continuing
personal and business relationship with Nitinol, its executive officers and J.H.
Whitney & Co., a major shareholder of Nitinol. In addition, the Company was
advised after the engagement of Junewicz but before the execution of any
definitive agreements relating to the transactions discussed herein that
Junewicz holds 99,660 warrants in Nitinol. The Company hereby expressly consents
to Junewicz's representation of the Company notwithstanding the information set
forth in this Paragraph. In particular, the information that is set forth in
this Paragraph shall not constitute gross negligence or willful misconduct by
Junewicz within the meaning set forth in Annex A.
5. Governing Law and Other Matters
-------------------------------
This agreement shall be governed by and construed in accordance with
the Laws of the State of New York without regard to the conflict of laws
principles thereof.
Neither this Agreement nor any written advice (written or oral)
rendered by Junewicz in connection with this Agreement may be disclosed to any
third party or circulated or referred to publicly without the prior written
consent of Junewicz.
Please confirm that the foregoing is in accordance with your
understanding by signing and returning the enclosed duplicate copy of this
Agreement, which shall thereupon constitute a binding agreement as of the date
set forth above.
Very truly yours,
JUNEWICZ & CO., INC.
By: /s/ J. Mark Junewicz
------------------------------
J. Mark Junewicz
Confirmed and Agreed to this 23 day of May, 1997:
IMAGE TECHNOLOGIES CORPORATION
By: /s/ R. Lee Thompson
-------------------------------
R. Lee Thompson
President & Chief Executive Officer
<PAGE>
Image Technologies Corporation
May 23, 1997
Page 5
Annex A
In the event that Junewicz becomes involved in any capacity in any action,
proceeding or investigation brought by or against any person, including
stockholders of the Company, in connection with any matter referred to in this
Agreement, the Company periodically will reimburse Junewicz for its legal and
other expenses (including the cost of any investigation and preparation)
incurred in connection therewith. The Company also will indemnify and hold
harmless against any losses, claims, damages, expenses or liabilities to any
such person in connection with any matter referred to in this Agreement, except
to the extent that any loss, claim, damage or liability is judicially determined
to have resulted primarily from the gross negligence or willful misconduct of
Junewicz in performing the services that are the subject of this Agreement. If
for any reason the foregoing indemnification is unavailable to Junewicz or
insufficient to hold it harmless, then the Company shall contribute to the
amount paid or payable by Junewicz as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative benefits
of the Company and the other stockholders on one hand and Junewicz on the other
hand in the matters contemplated by this Agreement, as well as the relative
fault of the Company on the one hand and Junewicz on the other hand with respect
to such loss, claim, damage or liability and any other relevant equitable
considerations. The reimbursement, indemnity and contribution obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, including, without limitation, any liability which
the Company may have to Junewicz pursuant to the Agreement and shall extend upon
the same terms and conditions to the controlling person of Junewicz, and shall
be binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, Junewicz, any such affiliate and any
such person. The Company also agrees that neither Junewicz nor its control
person shall have any liability to the Company or the stockholders of the
Company for or in connection with any matter referred to in this Agreement
except to the extent that any losses, claims, damages, liabilities or expenses
incurred by the Company are judicially determined to have resulted primarily
from the gross negligence or willful misconduct of Junewicz in performing the
services that are subject to this Agreement. The foregoing provisions shall
survive any termination or completion of the engagement provided by this
Agreement and this Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to the conflict of laws
principles thereof. The Company agrees that they will not settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder unless such settlement, compromise or consent includes an
unconditional release of
<PAGE>
Image Technologies Corporation
May 23, 1997
Page 6
Junewicz and the controlling person of Junewicz from all liability arising out
of such claim, action, suit or proceeding.
<PAGE>
Schedule D
----------
NONE, except for $102,808.00 due at the closing to individual lenders, including
$15,000.00 due to Robert Lee Thompson.
-27-
<PAGE>
EXHIBIT 10.5
AMENDMENT NO. 1
TO
SUBORDINATED NOTE
AND
COMMON STOCK PURCHASE AGREEMENT
by and among
NITINOL MEDICAL TECHNOLOGIES, INC.,
WHITNEY SUBORDINATED DEBT FUND, L.P.
and, for certain purposes
J.H. WHITNEY & CO.
__________________
April 14, 1999
__________________
<PAGE>
AMENDMENT NO. 1 TO
SUBORDINATED NOTE AND COMMON STOCK
PURCHASE AGREEMENT
AMENDMENT NO. 1 SUBORDINATED NOTE AND COMMON STOCK PURCHASE AGREEMENT
(this "Amendment"), dated as of April 14, 1999, by and among Nitinol Medical
---------
Technologies, Inc., a Delaware corporation, Whitney Subordinated Debt Fund,
L.P., and J.H. Whitney & Co.
WHEREAS, on July 8, 1998, the parties hereto entered into the
Subordinated Note and Common Stock Purchase Agreement (the "Initial Agreement")
-----------------
that is being amended hereby;
WHEREAS, the Company has requested that the Purchaser waive compliance
with certain of the covenants contained in the Initial Agreement;
WHEREAS, in connection with the waiver referred to above the parties
to the Initial Agreement desire to amend and restate Section 9.8 of the Initial
Agreement in its entirety to modify the financial covenants contained therein as
well as include an additional financial covenant and make certain other
amendments to the Initial Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration (including the
issuance of certain stock purchase warrants concurrently herewith), the receipt
and adequacy of which is acknowledged, the parties to the Initial Agreement
mutually agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise
-----------
defined have the same meanings attributed to them in the Initial Agreement.
<PAGE>
2
2. Amendment to Section 8.1(f) of the Initial Agreement. The second
----------------------------------------------------
sentence of Section 8.1(f) of the Initial Agreement is hereby amended and
restated as follows:
"As soon as available and in any event within thirty (30) days after
the end of the fiscal year of the Company, the Company shall deliver a plan of
operation covering the current and next two succeeding fiscal years of the
Company, prepared on a monthly basis for the current fiscal year and on a
quarterly basis for the two succeeding fiscal years, and otherwise in form and
substance reasonably satisfactory to the Purchaser."
3. Amendment to Section 9.8 of the Initial Agreement. Section 9.8
-------------------------------------------------
of the Initial Agreement is hereby amended and restated as set forth below;
provided, however, that notwithstanding such amendment and restatement,
- -------- -------
compliance by the Company with the financial covenants contained in the Initial
Agreement as of March 31, 1999 shall be determined without giving effect to this
amendment and restatement:
9.8 Financial Covenants. The Company covenants and agrees that until
-------------------
payment in full of all Indebtedness hereunder and under the Note, the Company
shall comply with and shall cause each of its Subsidiaries to comply with all
covenants in this Section 9.8 applicable to such Person.
(a) Interest Coverage. The Company shall not permit Interest
Coverage for any twelve (12) month period ending on the last business day of a
month during any of the periods set forth below, to be less than the ratio set
forth below for such period:
<TABLE>
<CAPTION>
Period Ratio
------------------------------- ---------
<S> <C>
April, 1999 3.42:1.00
May, 1999 3.17:1.00
June, 1999 3.69:1.00
July, 1999 3.50:1.00
August, 1999 3.43:1.00
September, 1999 4.03:1.00
October, 1999 4.47:1.00
November, 1999 4.21:1.00
December, 1999 and thereafter 5.00:1.00
</TABLE>
"Interest Coverage" will be calculated as illustrated on Exhibit H.
---------
Notwithstanding anything to the contrary contained herein or in Exhibit H
---------
hereto, the determination of
<PAGE>
3
Interest Coverage for the periods ended April 30, 1999 and May 31, 1999 shall
not be calculated for a twelve month period, but rather shall be calculated for
the 10 month and 11 month periods, respectively, ending on the last day of each
such month.
(b) Total Leverage Test. The Company shall not permit the ratio of
Net Funded Indebtedness as of the last business day of any month during any of
the periods set forth below to Adjusted Operating Cash Flow for the twelve (12)
month period ending on the last day of such month to be greater than the ratio
set forth below for such period:
<TABLE>
<CAPTION>
Period Ratio
------------------------------- ---------
<S> <C>
April, 1999 5.76:1.00
May, 1999 6.23:1.00
June, 1999 4.88:1.00
July, 1999 5.01:1.00
August, 1999 4.99:1.00
September, 1999 3.87:1.00
October, 1999 3.42:1.00
November, 1999 3.64:1.00
December, 1999 and thereafter 3.00:1.00
</TABLE>
"Net Funded Indebtedness" and "Adjusted Operating Cash Flow" will be calculated
as illustrated on Exhibit H. Notwithstanding anything contained herein or in
---------
Exhibit H hereto, (x)(i) the determination of EBITDA for the period ended April
- ---------
30, 1999 shall be calculated by multiplying the EBITDA of the Company and its
Subsidiaries for the ten months then ended by 1.2; and (ii) the determination of
EBITDA for the period ended May 30, 1999 shall be calculated by multiplying the
EBITDA of the Company and its Subsidiaries for the eleven months then ended by
1.0909 and (y) any calculation of this covenant requiring reference to the
Adjusted Operating Cash Flow of the Company for any of the periods ended on or
before June 30, 1999, shall be calculated assuming that the Capital Expenditures
of the Company for the relevant period are equal to the lesser of the actual
annualized Unfinanced Capital Expenditures for such period or $2,300,000.
(c) Fixed Charge Coverage. The Company shall not permit Fixed Charge
Coverage for any twelve (12) month period ending on the last business day of a
month during any of the periods set forth below to be less than the ratio set
forth below for such period:
<TABLE>
<CAPTION>
Period Ratio
------------------------------- ---------
<S> <C>
April, 1999 1.85:1.00
May, 1999 1.81:1.00
June, 1999 1.92:1.00
July, 1999 1.81:1.00
August, 1999 1.90:1.00
September, 1999 1.84:1.00
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
Period Ratio
------------------------------- ---------
<S> <C>
October, 1999 1.98:1.00
November, 1999 1.83:1.00
December, 1999 and thereafter 1.95:1.00
</TABLE>
"Fixed Charge Coverage" will be calculated as illustrated on Exhibit H.
---------
Notwithstanding anything to the contrary contained herein or in Exhibit H
---------
hereto, the determination of Fixed Charge Coverage for the periods ended April
30, 1999 and May 31, 1999 shall not be calculated for a twelve month period, but
rather shall be calculated for the 10 month and 11 month periods, respectively,
ending on the last day of each such month.
(d) Capital Expenditures. The Company shall not permit Capital
Expenditures in any fiscal period to exceed the amounts set forth below for each
corresponding period.
<TABLE>
<CAPTION>
Period Amount
----------------------------------------------- ----------
<S> <C>
July 1, 1998 through June 30, 1999 $2,300,000
July 1, 1999 through June 30, 2000 $1,900,000
July 1 through June 30 for each annual period
commencing July 1, 2000 and thereafter $1,000,000
</TABLE>
(e) Funded Debt to Cash and Cash Equivalents. The Company shall not
permit the ratio of Funded Debt of the Company and its Subsidiaries on a
consolidated basis to the sum of the cash and Cash Equivalents of the Company
and its Subsidiaries on a consolidated basis to be greater than the ratio set
forth below for the corresponding period; provided, however, that this Section
-------- -------
9.8(e) shall be of no further force or effect at such time as (x) the ratio of
Net Funded Indebtedness to Adjusted Operating Cash Flow, as determined in
accordance with Section 9.8(b) of this Agreement without regard to the last
sentence thereof, is less than 3.0:1 for four consecutive fiscal quarters and
(y) no default under Section 6 of the Note shall have occurred within the
preceding period of 12 months.
<TABLE>
<CAPTION>
Period Ratio
------------------------------- ---------
<S> <C>
April, 1999 2.60:1.00
May, 1999 2.61:1.00
June, 1999 2.63:1.00
July, 1999 2.84:1.00
August, 1999 2.71:1.00
September, 1999 2.53:1.00
October, 1999 2.65:1.00
November, 1999 2.49:1.00
December, 1999 and thereafter 2.05:1.00
</TABLE>
(f) Current Ratio. The Company shall not permit the ratio of Current
Assets less cash and Cash Equivalents to Current Liabilities as of the last
business day of any calendar quarter during any of the periods set forth below
to be
<PAGE>
5
less than the ratio set forth below for such period; provided, however,
-------- -------
that this Section 9.8(f) shall be of no further force or effect at such time as
the ratio of Net Funded Indebtedness to Adjusted Operating Cash Flow, as
determined in accordance with Section 9.8(b) of this Agreement without regard to
the last sentence thereof, is less than 4.0:1.0 for four consecutive fiscal
quarters.
<TABLE>
<CAPTION>
Period Ratio
- ------------------------------------------------------- ---------
<S> <C>
September 30, 1998 to and including December 31, 1999 1.50:1:00
March 31, 2000 and thereafter 1.75:1:00
</TABLE>
(g) Cumulative EBITDA. The Company shall not permit the EBITDA of
the Company and its Subsidiaries for any twelve month period ending on the last
business day of a month during any of the periods set forth below, to be less
than the amount set forth below for such period:
<TABLE>
<CAPTION>
Period Amount
------------------------------- ----------
<S> <C>
April, 1999 $4,483,000
May, 1999 $4,593,000
June, 1999 $5,870,000
July, 1999 $5,748,000
August, 1999 $5,679,000
September, 1999 $6,802,000
October, 1999 $7,574,000
November, 1999 $7,120,000
December, 1999 and thereafter $8,500,000
</TABLE>
Notwithstanding anything to the contrary contained herein, the determination of
EBITDA for the periods ended April 30, 1999 and May 31, 1999 shall not be
calculated for a twelve month period, but rather shall be calculated for the 10
month and 11 month periods, respectively, ending on the last day of each such
month.
4. Amendment to Exhibit H of the Initial Agreement. Exhibit H,
-----------------------------------------------
Financial Covenant Calculations, Calculation of Interest Coverage as set forth
in Section 9.8(a) of the Initial Agreement, is hereby amended and restated as
set forth below; provided, however, that notwithstanding such amendment and
-------- -------
restatement, compliance by the Company with the Financial Covenant Calculations
contained in the Initial Agreement as of March 31, 1999 shall be determined
without giving effect to this amendment and restatement:
<PAGE>
6
1. Calculation of Interest Coverage as set forth in Section 9.8(a).
---------------------------------------------------------------
EBITDA:
<TABLE>
<S> <C>
Net income (or loss) of the Company and its Subsidiaries, for the period in
question, on a consolidated basis determined in accordance with GAAP, but
excluding: (a) the income (or loss) of any Person (other than Subsidiaries of
the Company) in which the Company or any of its Subsidiaries has an ownership
interest, unless received by the Company or its Subsidiaries in a cash
distribution; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of the Company or is merged into or consolidated with
the Company; and (c) any extraordinary gains and any insurance proceeds
received by the Company or any of its Subsidiaries. $__________
Plus: Any provision for (or less any benefit from) income and franchise Taxes
included in the determination of net income __________
Interest Expense (as defined in the Agreement) net of interest income,
deducted in the determination of net income __________
Depreciation deducted in the determination of net income __________
Amortization deducted in determining net income __________
Losses (or less gains) from Asset Dispositions (as defined in the
Agreement) or other non-cash items included in the determination of net
income (excluding sales, expenses or losses related to current assets) __________
Expenses of the transactions completed pursuant to the Transaction
Documents and the Acquisition Documents included in the determination
of net income provided that such expenses were included in the Pro
Forma Balance Sheet, or disclosed in the notes thereto __________
Expenses, which must be approved in advance by Whitney, related to any
write-down of the Company's investment in ITC __________
One time charges consistent in nature with those set forth on Schedule H,
and previously approved by Whitney, reflecting certain one time charges
to be taken by the Company in the 12 months following the consummation of
the Acquisition and in an amount not to exceed $650,000 in the aggregate __________
Less: Extraordinary gains without duplication, as defined under GAAP.
EBITDA $__________
Interest Coverage:
Interest Expense (as defined in the Agreement), net of interest income, included
in the determination of net income of the Company and its Subsidiaries on a
consolidated basis __________
Less: Amortization of capitalized fees and expenses incurred with respect to the
Transaction Documents and the Acquisition Documents included in interest
expense __________
</TABLE>
<PAGE>
7
<TABLE>
<S> <C>
Interest paid in kind (PIK) and included in interest expense __________
Interest Expenses $__________
Actual Interest Coverage (EBITDA divided by Interest Expense) __________
Required Interest Coverage __________
In Compliance __________
Yes/No
</TABLE>
[The remainder of this page is intentionally left blank]
<PAGE>
8
5. Security Interests. The Company hereby acknowledges and agrees
------------------
that it has not completed the filing of security interests in certain patents
and licenses in three previously identified countries. These filings are
required by the terms of the Guarantee and Collateral Agreement and the failure
to complete these filings before April 30, 1999 will result in an Event of
Default under Section 6(a)(iv) of the Notes. Accordingly, the Company hereby
covenants and agrees to complete such filings before April 30, 1999. In
addition, the Company acknowledges and agrees that the Purchaser may in the
future, at its option, require the Company to make additional security interest
filings.
6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS OF SUCH STATE.
7. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8. Continuing Effect. Except as expressly amended by this
-----------------
Amendment, the Initial Agreement shall continue in full force and effect in
accordance with the terms thereof.
9. No Presumption Against Drafter. Each of the parties hereto has
------------------------------
jointly participated in the negotiation and drafting of this Amendment. In the
event of any ambiguity or a question of intent or interpretation arises, this
Amendment shall
<PAGE>
9
be construed as if drafted jointly by all of the parties hereto and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Amendment.
10. Certain Expenses. The Company will pay all expenses of the
----------------
Purchaser (including, without limitation, reasonable fees, charges and
disbursements of counsel) in connection with this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be signed by their respective duly authorized officers as of the date first
above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Thomas M. Tully
----------------------------------
Name: Thomas M. Tully
Title: President and CEO
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ Daniel J. O'Brien
----------------------------------
Name: Daniel J. O'Brien
Title: A General Partner
J.H. WHITNEY & CO.
By: Daniel J. O'Brien
----------------------------------
Name: Daniel J. O'Brien
Title: A General Partner
<PAGE>
EXHIBIT 10.6
WAIVER NO. 1
------------
This Waiver No. 1, made as of April 14, 1999 (this "Waiver"), is by
and among Nitinol Medical Technologies, Inc. (the "Company"), on the one hand,
and Whitney Subordinated Debt Fund, L.P., on the other hand. Capitalized terms
used herein and not otherwise defined have the meanings assigned to such terms
in the Purchase Agreement (as defined below).
W I T N E S S E T H
-------------------
WHEREAS, the Company and the Purchaser are parties to the Subordinated
Note and Common Stock Purchase Agreement, dated as of July 8, 1998 (the
"Purchase Agreement"), regarding the Company's $20,000,000 subordinated notes
due September 30, 2003;
WHEREAS, the Company has requested the Purchaser to waive compliance
with certain covenants contained in the Purchase Agreement for the fiscal
quarter ended March 31, 1999.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. The Purchaser hereby waives compliance by the Company with the
provisions of Section 9.8(e) of the Purchase Agreement solely with respect to
the fiscal quarter ended March 31, 1999 and waives compliance by the Company
with the provisions of Sections 8.1(a) and 8.1(c) of the Purchase Agreement
through the date hereof; provided, however, that such waiver shall only become
-------- -------
effective upon execution by the Company of Amendment No. 1 to the Purchase
Agreement in the form attached hereto as Exhibit A.
---------
2. As consideration in respect of this Waiver, the Company hereby
covenants and agrees that it shall issue to the Purchaser, promptly after the
date hereof, a stock purchase warrant exercisable for the purchase of 25,000
shares of the common stock of the Company. Such warrant shall contain weighted
average antidilution protection and the strike price of such warrant shall be
equal to the closing price of the common stock of the Company on the date
hereof.
3. This Waiver may be signed in counterparts, and by the various
parties on separate counterparts. Each set of counterparts which contains the
signature of each of the parties shall constitute a single instrument with the
same effect as if the signature thereto were upon the same instrument. The
parties hereto agree that each
<PAGE>
party shall accept facsimile signatures as legally sufficient, binding and
admissible evidence of the execution of this Waiver.
4. Except as expressly modified by this Waiver, all of the terms and
provisions of the Purchase Agreement (including as the same shall be amended by
that certain Amendment No. 1 in the form attached hereto as Exhibit A) and the
---------
Notes shall continue in full force and effect and all parties hereto shall be
entitled to the benefits thereof.
5. If the financial statements and operating results as reported in
the Company's 10-Q for the quarter ended March 31, 1999 are materially better,
as determined in the Purchaser's sole discretion, than reported by the Company
in its April 13, 1999 revised 1999 consolidated budget for the aforementioned
quarter, the Purchaser shall have the right to revise the covenant levels
included in Amendment No. 1 in the form attached hereto as Exhibit A to reflect
---------
the Company's improved performance.
6. The Company agrees to engage RAS Management Advisors, Inc. no
later than April 16, 1999 to review and perform an analysis, as reasonably
directed by the Purchaser, of the Company's working capital accounts and
practices.
7. This Waiver shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the principals of conflict
of laws of such state.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
signed by their respective duly authorized officers as of the date first written
above.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Thomas M. Tully
--------------------------------------
Name: Thomas M. Tully
Title: President and CEO
WHITNEY SUBORDINATED DEBT FUND, LP
By: /s/ Daniel J. O'Brien
--------------------------------------
Name:
A General Partner
-2-
<PAGE>
EXHIBIT 10.7
AMENDMENT
TO
WAIVER NO. 1
------------
This Amendment, made as of May 12, 1999 (this "Amendment"), to Waiver No. 1
is by and between Nitinol Medical Technologies, Inc. (the "Company") and
Whitney Subordinated Debt Fund, L.P. (the "Purchaser"). Capitalized terms used
herein and not otherwise defined have the meanings assigned to such terms in the
Purchase Agreement (as defined below).
W I T N E S S E T H:
--------------------
WHEREAS, the Company and the Purchaser are parties to the Subordinated Note
and Common Stock Purchase Agreement, dated as of July 8, 1998, as amended by
Amendment No. 1, dated April 14, 1999, by and among the Company, the Purchaser,
and, for certain purposes, J.H. Whitney & Co. (the "Purchase Agreement"),
regarding the Company's $20,000,000 subordinated notes due September 30, 2003;
WHEREAS, pursuant to Waiver No. 1, made as of April 14, 1999, by and among
the Company and the Purchaser ("Waiver No. 1"), the Purchaser waived compliance
with certain covenants contained in the Purchase Agreement for the fiscal
quarter ended March 31, 1999;
WHEREAS, by memorandum, dated May 7, 1999, addressed to Jeff Thompson of
J.H. Whitney & Co., the Company has requested the Purchaser to amend Waiver No.
1 in order to include a waiver of the total leverage covenant contained in the
Purchase Agreement for the fiscal quarter ended March 31, 1999.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Waiver No. 1 is hereby amended by replacing the reference to "Section
9.8(e)" appearing in paragraph 1 thereof with a reference to "Sections 9.8(b)
and 9.8(e)."
2. This Amendment may be signed in counterparts, and by the various parties
on separate counterparts. Each set of counterparts which contains the signature
of each of the parties shall constitute a single instrument with the same effect
as if the signature thereto were upon the same instrument. The parties hereto
agree that each party shall accept facsimile signatures as legally sufficient,
binding and admissible evidence of the execution of this Amendment.
3. Except as expressly modified by this Amendment, all of the terms and
provisions of Waiver No. 1 shall continue in full force and effect and all
parties hereto shall be entitled to the benefits thereof.
4. This Amendment shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the principles of conflict of
laws of such state.
IN WITNESS WHEREAS, the parties hereto have caused this Amendment to be
signed by their respective duly authorized officers as of the date first written
above.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Thomas M. Tully
----------------------------------
Name: Thomas M. Tully
Title: Chief Executive Officer
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ James H. Fordyce
----------------------------------
Name: James H. Fordyce
A General Partner
<PAGE>
EXHIBIT 10.8
AMENDMENT NO. 2
TO
PURCHASE AGREEMENT
This Amendment No. 2 to the Purchase Agreement dated May 8, 1998 by and
between Elekta AB (Publ), a corporation organized and existing under the laws of
Sweden (the "Seller") and Nitinol Medical Technologies, Inc., a corporation
organized under the laws of the State of Delaware (the "Buyer"), as amended by
that certain Amendment No. 1 to Purchase Agreement dated as of July 8, 1998, is
entered into as of November __, 1998 by and between the Seller and the Buyer.
WHEREAS, the Buyer and the Seller have agreed to amend the Purchase
Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. All capitalized terms used herein shall have the meanings assigned to them
in the Purchase Agreement.
2. Section 5.6 of the Purchase Agreement is hereby amended by deleting it in
its entirety and inserting the following in lieu thereof:
"5.6 Intercompany Debt.
-----------------
5.6.1 Between the Effective Date and the date of
Amendment No. 2 to Purchase Agreement, the Acquired Companies shall have paid to
(or Buyer shall have caused the Acquired Companies to pay to) or offset with
Seller and its Affiliates (other than the Acquired Companies) a total amount
equivalent to SEK 4,806,000 on account of trade accounts payable owed as of the
Effective Date by the Acquired Companies to Seller and its Affiliates (other
than the Acquired Companies) (the "Acquired Companies' Payables to Group"). The
term 'Acquired Companies' Payables to Group' shall not include the account
payable owned by EIL to Seller as of the Effective Date totaling SEK 3,866,070
relating to the Birmingham Surgiscope and the account payable from ESRL to
Seller as of the Effective Date totaling SEK 1,723,962.50 relating to the
Marseilles Leksell Gamma Plan and payments with respect to these accounts shall
not be included in, or be a part of, the SEK 4,806,000 amount referred to in
this Subsection 5.6.1.
5.6.2 Between the Effective Date and the date of
Amendment No. 2 to Purchase Agreement, Seller and its Affiliates (other than the
Acquired Companies) shall have paid to (or offset with) the Acquired Companies a
total amount equivalent to SEK 4,733,000 on account of trade accounts payable
owed as of the Effective Date by Seller and its Affiliates (other than the
Acquired
<PAGE>
Companies) to the Acquired Companies (the 'Group's Payables to the Acquired
Companies')."
3. The Schedule of Assets to the Purchase Agreement is hereby amended by
deleting paragraph (12) therefrom and inserting the following in lieu thereof:
"(12) Promissory note executed by CIS in favor of Elekta holdings U.S.,
Inc. in the amount of USD $75,000.
(13) Account receivable owed by EISA to Seller in the amount of
SEK 3,556,000.
(14) Account receivable owed by EISA to Elekta Instrument AB in the
amount of SEK 298,000."
4. Seller shall cause the promissory note and account rights referred to in
paragraphs (12), (13) and (14) of the Schedule of Assets to be transferred to
Purchaser (or any Affiliate of Purchaser designated by Purchaser) not later than
the date of Amendment No. 2 to Purchase Agreement.
5. The two documents entitled "Assignment of Accounts Receivable" which
were executed by Seller at the Closing on July 8, 1998 shall be deemed cancelled
and of no force and effect.
6. The Purchase Price Allocation agreed to at the closing and executed by
Seller and Buyer on July 8, 1998, pursuant to Section 2.2(c) of the Purchase
Agreement, is hereby amended by deleting Schedule A therefrom and inserting in
lieu thereof a new Schedule A in the form attached to this Amendment No. 2.
7. Except as set forth above, the Purchase Agreement is hereby ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the Buyer and the Seller have each caused this
amendment to be duly executed in its corporate name and by a duly authorized
representative as of the date first above written.
SELLER:
ELEKTA AB (PURL)
/s/ Laurent Leksell, /s/ Hans Ekelot
--------------------------------------
By: Laurent Leksell Hans Ekelot
-----------------------------------
Title: CEO VP
--------------------------------
2
<PAGE>
BUYER:
NITINOL MEDICAL TECHNOLOGIES, INC.
/s/ William J. Knight VP & CFO
-------------------------------------
By: William J. Knight
----------------------------------
Title: VP & CFO
-------------------------------
3
<PAGE>
Schedule A
----------
Purchase Price Allocation
Shares Millions of
------ -----------
USD(Approx)
-----------
Elekta Instruments Ltd., UK Group 4.04
Elekta Holdings SA, France, Group 2.00
Elekta Instruments NV, Belgium 0.40
Elekta Instrument BV, Holland 0.80
CIS 0
----
Subtotal 7.24
Assets
------
Net assets in the US 6.80
Net assets in Sweden 3.00
Net assets in Hong Kong 0
Promissory notes listed in paragraph (11) of
the Schedule of Assets 14.35
Promissory note listed in paragraph (12) of
the Schedule of Assets 0.875
Account receivable listed in paragraph (13)
of the Schedule of Assets 0.460
Account receivable listed in paragraph (14)
of the Schedule of Assets 0.039
-----
Subtotal 25.52
=====
TOTAL 32.76
4
<PAGE>
EXHIBIT 10.9
AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT
Dated as of February 3, 1999
between
Nitinol Medical Technologies, Inc. (the "Lender")
and
Image Technologies Corporation (the "Borrower")
This Amendment No. 2 (the "Amendment") to that certain Loan and Security
Agreement dated as of May 29, 1997, as amended, (the "Loan Agreement") by and
among Nitinol Medical Technologies, Inc. (the "Lender") and Image Technologies
Corporation (the "Borrower"). All capitalized terms used therein and not
otherwise defined shall have the meanings ascribed to such terms in the
Agreement.
WHEREAS, the Company has entered into a Revolving Credit Note No. 3 with
the Lender of even date herewith under which the Purchaser will lend to the
Company the sum of $100,000.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Amendment of Article I. The definition of "Revolving Credit
-----------------------
Commitment" is deleted and replaced with the following language: 'Revolving
Credit Commitment' means the obligation of Lender to make Revolving Loans to
Borrower in an aggregate amount not to exceed $2,150,000, less the principal
amount of any Loan that has been converted into shares of Series A Preferred
pursuant to Article IX of this Agreement."
2. Miscellaneous.
-------------
2.1 Governing Law. This Amendment shall be governed by and
-------------
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts without giving effect to the principles of conflicts of laws
thereof.
2.2 Remaining Agreement. Except as amended hereby, the Loan
-------------------
Agreement, as amended, shall remain in full force and effect in all
respects.
2.3 Counterparts; Effectiveness. This Amendment may be signed in
---------------------------
any number of counterparts, all of which taken together shall constitute
one agreement, and any of the parties hereto may execute this Agreement by
signing any such counterpart. This Amendment shall become effective when
executed by the Borrower and the Lender.
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 2 to the Loan Agreement is hereby
executed as of the date first above written pursuant to Section 8.2 of the Loan
Agreement by (i) the Borrower and (ii) the Lender.
BORROWER:
IMAGE TECHNOLOGIES CORPORATION
By: /s/ James C. Torraco
----------------------------------
Name: James C. Torraco
Title: President
LENDER:
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ Thomas M. Tully
----------------------------------
Name: Thomas M. Tully
Title: President
-2-
<PAGE>
EXHIBIT 10.10
AMENDMENT NO. 1 TO
REGISTRATION RIGHTS AGREEMENT AMONG
NITINOL MEDICAL TECHNOLOGIES, INC., WHITNEY EQUITY PARTNERS, L.P.,
BOSTON SCIENTIFIC CORPORATION, DAVID J. MORRISON AND
CORPORATE DECISIONS, INC. DATED AS OF FEBRUARY 16, 1996
This Amendment No. 1 to the Registration Rights Agreement (the "Amendment
No. 1") dated as of March 30, 1999 is entered into between Nitinol Medical
Technologies, Inc., a Delaware corporation (the "Company") and Whitney Equity
Partners, L.P., a Delaware limited partnership ("Whitney Equity Partners").
WHEREAS, the Company and Whitney Equity Partners entered into a
Registration Rights Agreement dated as of February 16, 1996 (the "Registration
Rights Agreement") in connection with the issuance by the Company of 3,787,104
shares of Convertible Preferred Stock, $.001 par value per share, of the
Company.
NOW THEREFORE, the parties hereto agree as follows:
1. Amendment to Section 4(a).
-------------------------
The first sentence of Section 4(a) of the Agreement is hereby amended
in its entirety to read as follows:
"If the Company proposes to file a registration statement under the
Act with respect to an offering by the Company for its own account or for
the account of any of its stockholders pursuant to a registration filed
pursuant to Section 3 of that certain Registration Rights Agreement of even
date herewith among the Company and the individuals and entities listed on
Schedule A thereto, of any class of security (other than a registration
statement on Form S-4 or S-8 (or any successor form thereto)) under the
Act, then the Company shall give written notice of such proposed filing to
each of the Holders at least twenty (20) days before the anticipated filing
date, and such notice shall describe in detail the proposed registration
and distribution (including those jurisdictions where registration under
the Securities or blue sky laws is intended) and offer such Holders the
opportunity to register the number of Registerable Securities as each such
Holder may request."
2. Miscellaneous.
-------------
(a) Governing Law. This Amendment No. 1 shall be governed by and
-------------
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts without giving effect to the principles of conflicts of laws
thereof.
(b) Remaining Agreement. Except as amended hereby, the Registration
-------------------
Rights Agreement shall remain in full force and effect in all respects.
(c) Counterparts; Effectiveness. This Amendment No. 1 may be signed
---------------------------
in any number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Amendment No. 1 by
signing any such counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
as of the date first written above.
NITINOL:
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ William J. Knight
---------------------------------------------
William J. Knight
Vice President of Finance and Administration
and Chief Financial Officer
WHITNEY EQUITY PARTNERS, L.P.
By: J.H. WHITNEY EQUITY PARTNERS LLC
Its General Partner
By: /s/ Jeffrey R. Jay, M.D.
---------------------------------------------
Name: Jeffrey R. Jay, M.D.
A Member
2
<PAGE>
EXHIBIT 10.11
AMENDMENT NO. 1 TO
REGISTRATION RIGHTS AGREEMENT AMONG
NITINOL MEDICAL TECHNOLOGIES, INC.,
WHITNEY SUBORDINATED DEBT FUND, L.P., AND
J.H. WHITNEY & CO. AS OF JULY 8, 1998
This Amendment No. 1 to the Registration Rights Agreement (the "Amendment
No. 1") dated as of March 30, 1999 is entered into between Nitinol Medical
Technologies, Inc., a Delaware corporation (the "Company"), Whitney Subordinated
Debt Fund, L.P., a Delaware limited partnership ("WSDF") and J.H. Whitney & Co.
("Whitney").
WHEREAS, the Company, WSDF and Whitney have entered into a Registration
Rights Agreement dated as of July 8, 1998 (the "Registration Rights Agreement")
in connection with the issuance by the Company of 561,207 shares of common stock
of the Company, par value $.001 per share (the "Common Stock"), to WSDF and
113,793 shares of the Common Stock to Whitney.
NOW THEREFORE, the parties hereto agree as follows:
1. Amendment to Section 4(a).
-------------------------
The first sentence of Section 4(a) of the Agreement is hereby amended
in its entirety to read as follows:
"If the Company proposes to file a registration statement under the
Act with respect to an offering by the Company for its own account or for
the account of any of its stockholders pursuant to a registration filed
pursuant to Section 3 of that certain Registration Rights Agreement of even
date herewith among the Company and the individuals and entities listed on
Schedule A thereto, of any class of security (other than a registration
statement on Form S-4 or S-8 (or any successor form thereto)) under the
Act, then the Company shall give written notice of such proposed filing to
each of the Holders at least twenty (20) days before the anticipated filing
date, and such notice shall describe in detail the proposed registration
and distribution (including those jurisdictions where registration under
the Securities or blue sky laws is intended) and offer such Holders the
opportunity to register the number of Registerable Securities as each such
Holder may request."
2. Miscellaneous.
-------------
(a) Governing Law. This Amendment No. 1 shall be governed by and
-------------
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts without giving effect to the principles of conflicts of laws
thereof.
(b) Remaining Agreement. Except as amended hereby, the Registration
-------------------
Rights Agreement shall remain in full force and effect in all respects.
<PAGE>
(c) Counterparts; Effectiveness. This Amendment No. 1 may be signed
---------------------------
in any number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Amendment No. 1 by
signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
as of the date first written above.
NITINOL:
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ William J. Knight
--------------------------------------------
William J. Knight
Vice President of Finance and Administration
and Chief Financial Officer
WHITNEY SUBORDINATED DEBT FUND
By: Jeffrey R. Jay
--------------------------------------------
Name: Jeffrey R. Jay
Title: A General Partner
J.H. WHITNEY & CO.
By: Jeffrey R. Jay
--------------------------------------------
Name: Jeffrey R. Jay
Title: A General Partner
-2-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 1999 AND FOR THE THREE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,972,868
<SECURITIES> 5,102,630
<RECEIVABLES> 11,791,662
<ALLOWANCES> 1,993,000
<INVENTORY> 11,688,720
<CURRENT-ASSETS> 33,858,357
<PP&E> 14,933,990
<DEPRECIATION> 2,281,897
<TOTAL-ASSETS> 63,385,424
<CURRENT-LIABILITIES> 10,926,080
<BONDS> 0
0
0
<COMMON> 10,746
<OTHER-SE> 32,686,022
<TOTAL-LIABILITY-AND-EQUITY> 63,385,424
<SALES> 10,571,459
<TOTAL-REVENUES> 11,021,704
<CGS> 4,305,961
<TOTAL-COSTS> 6,760,301
<OTHER-EXPENSES> (66,633)
<LOSS-PROVISION> 247,000
<INTEREST-EXPENSE> 632,645
<INCOME-PRETAX> (610,570)
<INCOME-TAX> (75,700)
<INCOME-CONTINUING> (534,870)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (534,870)
<EPS-PRIMARY> ($.05)
<EPS-DILUTED> ($.05)
</TABLE>
