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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 22, 1998
NEUROMEDICAL SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-26984 13-3526980
(State or other (Commission File No.) (I.R.S. Employer
jurisdiction Identification No.)
of incorporation
Two Executive Boulevard, Suite 306
Suffern, New York 10901-4164
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 368-3600
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ITEM 7. EXHIBITS
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On August 8, 1997, Neuromedical Systems, Inc. (the "Company") filed a Form 10-Q
with the Securities and Exchange Commission (the "Commission") with respect to
the quarterly period ended June 30, 1997, which included Exhibits 10.30 and
10.31. At the date of such filing, the Company had requested confidential
treatment with respect to certain provisions of such Exhibits, which were filed
in redacted form. The Commission declined to grant such treatment. At the
request of the Commission, the Company herewith re-files such Exhibits in
unredacted form.
Exhibit
Number Exhibit
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10.30 Restated Agreement between the Company and
Mark R. Rutenberg, dated June 29, 1997
10.31 Secured Non-Recourse Promissory Note between
the Company and Mark R. Rutenberg, dated July 9, 1997
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized in Suffern, New York on this 22nd day of
June, 1998.
NEUROMEDICAL SYSTEMS, INC.
By: /s/ Mark L. Smith
----------------------------------
Mark L. Smith
Vice President, Finance and
Administration and Chief Financial Officer
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Wuersch & Gering LLP
330 Madison Ave. 14th Floor
New York, NY 10017
(212) 856-0610
June 22, 1998
VIA EDGAR
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Securities and Exchange Commission
Attention: David Lynn, Special Counsel
Mail Stop 4-9
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: NEUROMEDICAL SYSTEMS, INC.
Current Report on Form 8-K
Registration Number 0-26984
Dear Mr. Lynn:
In response to your letter of June 10, 1998 to Neuromedical Systems,
Inc. and pursuant to our discussion of June 19, 1998, please find attached as
filed via EDGAR with the Securities and Exchange Commission a current report on
Form 8-K dated June 22, 1998, with Exhibits 10.30 and 10.31 attached in
unredacted form. In accordance with the General Instruction D of Form 8-K, all
items not required to be answered have been omitted and no references to such
items have been made in the report.
Any questions with respect to this filing may be addressed to the
undersigned at (212) 856-0610. Thank you very much.
Very truly yours,
/s/ Travis L. Gering
Travis L. Gering, Esq.
cc: Nasdaq National Market System (Via EDGAR)
Elise Ecanow, Esq., General Counsel, Neuromedical Systems, Inc.
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EXHIBIT 10.30
RESTATED
EMPLOYMENT AGREEMENT
RESTATED AGREEMENT, dated this 29th day of June, 1997, by and between
NEUROMEDICAL SYSTEMS, INC., a Delaware corporation with principal executive
offices at Two Executive Boulevard, Suffern, New York 10901-4114 ("NSI"), and
MARK R. RUTENBERG, residing at 20 Sophia Street, Monsey, New York 10952
("Rutenberg").
W I T N E S S E T H :
WHEREAS, Rutenberg has been employed by NSI as its President,
Chief Executive Officer and Chairman of the Board pursuant to an employment
agreement dated as of November 19, 1993, as amended October 25, 1995 (the
"Original Employment Agreement"); and
WHEREAS, by mutual agreement between NSI and Rutenberg,
Rutenberg has resigned from his positions as President and Chief Executive
Officer effective as of June 27, 1997 (the "Restatement Date"); and
WHEREAS, the parties desire to restate the Original Employment
Agreement to set forth the nature of their relationship and the compensation and
benefits to be provided to Rutenberg from the Restatement Date until the
expiration of the Restated Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto, intending to be legally bound,
agree as follows:
1. Employment.
NSI agrees to employ Rutenberg, and Rutenberg agrees to be
employed by NSI, upon the terms and subject to the conditions of this Restated
Agreement.
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2. Term.
The employment of Rutenberg by NSI as provided in Section 1
will be for the period from the Restatement Date until November 19, 1998 (the
"Term"). The Company and Rutenberg may mutually agree to extend the term. As
used herein, the word "Term" shall include any such extension. The Term shall
expire upon the termination of Rutenberg's employment as provided herein.
3. Duties; Best Efforts; Indemnification.
(a) Effective as of the Restatement Date, Rutenberg hereby
confirms his resignation from his positions as President and Chief Executive
Officer of the Company and hereby resigns, effective as of the Restatement Date,
as an employee, officer or director of each of its affiliates, except as
provided herein. From and after the Restatement Date and until NSI appoints a
new Chief Executive Officer and a new Chairman (which may be the same person),
Rutenberg shall serve as Chairman of the Board of Directors of NSI (the "Board")
and, upon such appointment of a new Chief Executive Officer and Chairman,
Rutenberg shall serve as Vice-Chairman of the Board. In each case, Rutenberg
shall serve as a non-executive employee and shall perform, under the supervision
and control of the Board or the Chief Executive Officer of NSI, only such
assignments as may reasonably and specifically be assigned to him by the Board
or the Chief Executive Officer of NSI from time to time. In addition, until such
time as the Board determines otherwise, Rutenberg shall serve as the Chairman of
the Board of Directors of Neuromedical Systems Israel, Ltd. ("NSIL").
(b) Rutenberg will remain as a member of the Board following
the Restatement Date and, provided Rutenberg's employment has not terminated for
any reason as of the date of the 1998 annual meeting of stockholders (the "1998
Meeting"), NSI agrees to renominate Rutenberg for election at the 1998 Meeting
for a three (3)
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year term. If Rutenberg voluntarily terminates his employment prior to the
expiration of the Term, he shall resign as a director of the Company.
(c) Rutenberg shall devote such portion of his business time,
attention and energies as may be necessary to perform his duties hereunder and
shall use his best efforts to advance the best interests of NSI and shall not
during the Term be actively engaged in any other business activity, which would
materially interfere with the performance of his duties hereunder, whether or
not such business activity is pursued for gain, profit or other pecuniary
advantage.
(d) Subject to the provisions of NSI's Certificate of
Incorporation and Bylaws, each as amended from time to time, NSI shall indemnify
Rutenberg to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as amended from time to time, for all amounts (including,
without limitation, judgments, fines, settlement payments, expenses and
attorney's fees) incurred or paid by Rutenberg in connection with any action,
suit, investigation or proceeding arising out of or relating to the performance
by Rutenberg of services for, or the acting by Rutenberg as a director, officer
or employee of, NSI, or any other person or enterprise at NSI's request;
provided, however, that NSI shall not be required to indemnify Rutenberg against
any liability resulting from conduct which is willful, intentional or grossly
negligent. NSI shall use its best efforts to obtain and maintain in full force
and effect during the Term directors' and officers' liability insurance policies
providing full and adequate protection to Rutenberg for his capacities, provided
that the Board shall have no obligation to purchase such insurance if, in its
opinion, coverage is available only on unreasonable terms.
4. Place of Performance.
In connection with his employment by NSI, during the Term,
Rutenberg shall be provided, at NSI's expense (which expense shall be approved
in advance by
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the Board) (a) at Rutenberg's election, with an office at NSI's New Jersey
facility or an office not located in any NSI facility or in the same building as
an NSI facility (an "Offsite Office"), provided that, if Rutenberg elects to
have an office at NSI's New Jersey facility, the Board may, at any time in its
discretion, require Rutenberg to have an Offsite Office, (b) with an office at
NSIL's facility in Israel and (c) the services of one (1) full-time assistant.
Rutenberg shall vacate NSI's principal executive offices within two (2) weeks of
the Restatement Date.
5. Compensation and Benefits.
(a) Base Salary. NSI shall pay to Rutenberg for his employment
during the Term a base salary (the "Base Salary") at a rate of $200,000 per
annum, payable in accordance with NSI's ordinary payroll practices as in effect
from time to time.
(b) Bonus. In addition to and separate from the Base Salary,
Rutenberg shall be eligible for an annual bonus in an amount to be determined in
the sole discretion of the Board and subject to performance objectives
established by the Board.
(c) Out-of-Pocket Expenses. NSI shall promptly pay to
Rutenberg the reasonable expenses (not in excess of $75,000 in any twelve (12)
month period) incurred by him in the performance of his duties hereunder,
including, without limitation, those incurred in connection with business
related travel or entertainment, or, if such expenses are paid directly by
Rutenberg, shall promptly reimburse him for such payment, provided that in
either case Rutenberg properly accounts therefor in accordance with NSI's
policy.
(d) Participation in Benefit Plans. During the Term, Rutenberg
shall be entitled to participate in or receive benefits under any pension plan,
profit sharing plan, health and accident plan or any other employee benefit plan
or arrangement made
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available in the future by NSI to its executives and key management employees,
subject to the terms and conditions applicable to employees generally.
(e) Vacation. Rutenberg shall be entitled to such paid
vacation days in each calendar year as determined by NSI from time to time, but
not less than four (4) weeks in any calendar year, prorated in any calendar year
during which Rutenberg is employed hereunder for less than an entire year in
accordance with the number of days in such year during which he is so employed.
Rutenberg shall also be entitled to all paid holidays given by NSI to its
executives and key management employees. Such vacation and holiday allowance
shall otherwise be subject to the policies and practices of NSI.
(f) Automobile. During the Term, NSI shall provide Rutenberg
with the use of an automobile suitable and typical for a person occupying his
position and similar to the automobile currently leased for Rutenberg by NSI and
shall pay the costs of insurance, repairs and maintenance thereon.
(g) Loan. Within ten (10) days after the Restatement Date, NSI
shall loan to Rutenberg, on a non-recourse basis, upon the execution of
appropriate documentation, an amount equal to $600,000 repayable by Rutenberg on
or before the earlier of November 30, 1999 or the date which is ten (10) days
after his termination of employment for any reason. Such loan shall be secured
by a pledge by Rutenberg of 100,000 shares of NSI common stock owned by
Rutenberg and shall bear interest at the Citibank prime rate as in effect from
time to time, which shall accrue and be payable upon the repayment of the
principal of the loan.
(h) NSI shall reimburse Rutenberg for properly documented
expenses (not in excess of $50,000) to relocate his family to Israel at any time
prior to November 1, 1998; provided, however, that, if Rutenberg voluntarily
terminates his employment with NSI, his entitlement to reimbursement under this
Section 5(h) shall cease on the date of such termination.
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6. Termination.
Rutenberg's employment hereunder shall be terminated upon
Rutenberg's death and may be terminated as follows:
(a) By NSI for "Cause." A termination for Cause is a
termination evidenced by a resolution adopted by a vote of the majority of the
members of the Board finding that Rutenberg has (i) willfully failed to comply
with any of the material terms of this Restated Agreement, (ii) willfully and
continually failed to perform his duties hereunder, (iii) willfully engaged in
misconduct materially injurious to NSI, or (iv) been convicted of a felony or a
crime of moral turpitude; provided, however, that Rutenberg shall receive thirty
(30) days' advance written notice that the Board intends to meet to consider
Rutenberg's termination for Cause and Rutenberg shall be given a reasonable
opportunity to be heard by the Board on the issue prior to the Board's vote on
the matter.
(b) By either party upon thirty (30) days' advance written
notice to the other.
7. Compensation Upon Termination.
(a) In the event of the termination of Rutenberg's employment
as a result of Rutenberg's death, NSI shall, within thirty (30) days after the
date of his death, pay to Rutenberg's estate (i) his Base Salary through the
date of his death and (ii) a lump sum of $598,000.
(b) In the event that Rutenberg terminates his employment
prior to November 19, 1998, or NSI terminates Rutenberg's employment for Cause,
NSI shall pay to Rutenberg his Base Salary through the date of his termination
and NSI shall, within ten (10) days after the termination of his employment, pay
Rutenberg a lump sum of $598,000.
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(c) In the event that Rutenberg's employment is terminated by
NSI other than for Cause, NSI shall, within ten (10) days after his termination
of employment, pay to Rutenberg, in a lump sum, the sum of (i) the amount of his
Base Salary which he would have received through November 19, 1998 and (ii)
$598,000.
(d) Within ten (10) days after the expiration of the Term
(including any extension thereof), if Rutenberg's employment has not previously
terminated for any reason, NSI shall pay to Rutenberg a lump sum of $598,000.
(e) Provided Rutenberg's employment has not terminated for any
reason prior to November 19, 1998, the term of each outstanding option to
purchase NSI stock held by Rutenberg as of such date shall, notwithstanding
Rutenberg's termination of employment thereafter, be extended so that it expires
eight and one-half (8 1/2) years after the expiration of the Term; provided,
however, that (i) the option granted to Rutenberg as of October 1, 1995 shall
not be vested and exercisable unless the conditions to such option being vested
and exercisable as set forth in the option agreement are satisfied during the
term of the option (as so extended), (ii) if Rutenberg's employment terminates
for any reason prior to November 19, 1998, his rights with respect to the
outstanding stock options shall be determined in accordance with the terms
thereof as in effect on the Restatement Date and (iii) if the options have been
extended pursuant to this Section 7(e) and thereafter Rutenberg materially
breaches his obligations under this Restated Agreement, including, without
limitation, those covenants contained in Sections 8, 9 and 10 of this Restated
Agreement, the options shall immediately terminate and Rutenberg shall have no
further rights in respect of the options.
(f) Rutenberg shall not be required to mitigate the amount of
the termination payment provided pursuant to this Section 7 nor will such
payment be reduced by reason of Rutenberg's securing other employment.
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(g) Notwithstanding anything contained in this Restated
Agreement to the contrary, to the extent that the payments and benefits provided
under this Restated Agreement and benefits provided to, or for the benefit of,
Rutenberg under any other NSI plan or agreement (such payments or benefits are
collectively referred to as the "Payments") would be subject to the excise tax
(the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), the Payments provided under this Agreement shall
be reduced (but not below zero) if and to the extent necessary so that no
Payment to be made or benefit to be provided to Rutenberg under this Agreement
shall be subject to the Excise Tax (such reduced amount is hereinafter referred
to as the "Limited Payment Amount"). Unless Rutenberg shall have given prior
written notice specifying a different order to NSI to effectuate the Limited
Payment Amount, NSI shall reduce or eliminate the Payments, by first reducing or
eliminating those payments or benefits which are not payable in cash and then by
reducing or eliminating cash payments, in each case in reverse order beginning
with payments or benefits which are to be paid the farthest in time from the
determination (as hereinafter defined). Any notice given by Rutenberg pursuant
to the preceding sentence shall take precedence over the provisions of any other
plan, arrangement or agreement governing Rutenberg's rights and entitlements to
any benefits or compensation. An initial determination as to whether the
Payments shall be reduced to the Limited Payment Amount pursuant to this
Agreement and the amount of such Limited Payment Amount shall be made by an
accounting firm at NSI's expense selected by NSI which is one of the five
largest accounting firms in the United States (the "Accounting Firm"). The
Accounting Firm shall provide its determination (the "Determination"), together
with detailed supporting calculations and documentation to NSI and Rutenberg
within five (5) days of the date of termination of Rutenberg's employment, if
applicable, or such other time as requested by NSI or by Rutenberg (provided
Rutenberg reasonably believes that any of the Payments may be subject to
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the Excise Tax) and if the Accounting Firm determines that no Excise Tax is
payable by Rutenberg with respect to a Payment or Payments, it shall furnish
Rutenberg with an opinion reasonably acceptable to Rutenberg that no Excise Tax
will be imposed with respect to any such Payment or Payments. Within ten (10)
days of the delivery of the Determination to Rutenberg, Rutenberg shall have the
right to dispute the Determination (the "Dispute"). If there is no Dispute, the
Determination shall be binding, final and conclusive upon NSI and Rutenberg
subject to the application of the remainder of this Section 7(g).
As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that the Payments to be made to, or
provided for the benefit of, Rutenberg either have been made or will not be made
by NSI which, in either case, will be inconsistent with the limitations provided
above in this Section 7(c) (hereinafter referred to as an "Excess Payment" or
"Underpayment," respectively). If it is established pursuant to a final
determination of a court or an Internal Revenue Service (the "IRS") proceeding,
which has been finally and conclusively resolved, that an excess payment has
been made, such Excess Payment shall be deemed for all purposes to be a loan to
Rutenberg made on the date Rutenberg received the Excess Payment, and Rutenberg
shall repay the Excess Payment to NSI on demand (but not less than ten (10) days
after written notice is received by Rutenberg) together with interest on the
Excess Payment at the "Applicable Federal Rate" (as defined in Section 1274(d)
of the Code) from the date of Rutenberg's receipt of such Excess Payment until
the date of such repayment. In the event that it is determined (i) by the
Accounting Firm, NSI (which shall include the position taken by NSI, or together
with its consolidated group, on its federal income tax return) or the IRS, (ii)
pursuant to a determination by a court, or (iii) upon the resolution to
Rutenberg's satisfaction of the Dispute, that an Underpayment has occurred, NSI
shall pay an amount equal to the Underpayment to Rutenberg within ten (10) days
of such determination or resolution
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together with interest on such amount at the Applicable Federal Rate from the
date such amount would have been paid to Rutenberg until the date of payment.
(h) This Section 7 sets forth the only obligations of NSI with
respect to the termination of Rutenberg's employment with NSI and Rutenberg
acknowledges that upon his termination of employment he shall not be entitled to
any payments or benefits which are not explicitly provided herein.
8. Covenant Regarding Inventions and Copyrights.
(a) Rutenberg shall disclose promptly to NSI any and all
inventions, discoveries, improvements, patentable or copyrightable works
initiated, conceived or made by him, either alone or in conjunction with others,
during the Term and related to the "Business of NSI" (as defined below) and he
assigns all of his interest therein to NSI or its nominee; whenever requested to
do so by NSI, Rutenberg shall execute any and all applications, assignments or
other instruments which NSI shall deem necessary to apply for and obtain letters
patent or copyrights of the United States or any foreign country or otherwise
protect NSI's interest therein. These obligations shall continue beyond the
conclusion of the Term with respect to inventions, discoveries, improvements,
patentable or copyrightable works initiated, conceived or made by Rutenberg
during the Term and shall be binding upon Rutenberg's assigns, executors,
administrators and other legal representatives. For purposes of this Agreement,
the "Business of NSI" shall be deemed to refer to the cytological, histological,
pathological, hematological or microbiological detection or diagnosis of
conditions, diseases or other abnormalities. Notwithstanding the foregoing, any
inventions, discoveries, improvements, patentable or copyrightable works
conceived by Rutenberg after the date hereof which are not communicated to any
third party during the Term, and which are not referred to in any patent
application or other application as having
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been invented, discovered or conceived during the Term, shall not be subject to
the provisions of this Section 8(a).
(b) If Rutenberg has a concept for an invention which is
within the Business of NSI, and Rutenberg wishes NSI to support such invention,
NSI will discuss the invention with Rutenberg in good faith, including
reasonable compensation therefor.
9. Protection of Confidential Information.
Rutenberg acknowledges that he has been and will be provided
with information about, and his employment by NSI will, throughout the Term,
bring him into close contact with, many confidential affairs of NSI and its
subsidiaries, including proprietary information about costs, profits, markets,
sales, products, key personnel, pricing policies, operational methods, technical
processes and other business affairs and methods, plans for future developments
and other information not readily available to the public, all of which are
highly confidential and proprietary and all of which were developed by NSI at
great effort and expense. Rutenberg further acknowledges that the services to be
performed by him under this Restated Agreement are of a special, unique,
unusual, extraordinary and intellectual character, that the business of NSI will
be conducted throughout the world (the "Territory"), that its products will be
marketed throughout the Territory, that NSI competes and will compete in nearly
all of its business activities with other organizations which are located in
nearly any part of the Territory and that the nature of the relationship of
Rutenberg with NSI is such that Rutenberg is capable of competing with NSI from
nearly any location in the Territory. In recognition of the foregoing, Rutenberg
covenants and agrees during the Term and for a period of five (5) years
thereafter:
(i) That he will keep secret all confidential
matters of NSI and not disclose them to anyone outside of NSI, either during or
after the Term, except
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with NSI's prior written consent or, if during the Term, in the performance of
his duties hereunder, Rutenberg makes a good faith determination that it is in
the best interest of NSI to disclose such matters;
(ii) That he will not make use of any of such
confidential matters for his own purposes or the benefit of anyone other than
NSI; and
(iii) That he will deliver promptly to NSI on
termination of this Restated Agreement, or at any time NSI may so request, all
confidential memoranda, notes, records, reports and other confidential documents
(and all copies thereof) relating to the business of NSI, which he may then
possess or have under his control.
10. Restriction on Competition, Interference and Solicitation.
In recognition of the considerations described in Section 9
hereof, Rutenberg covenants and agrees that, from the Restatement Date and until
the date that is two (2) years after (i) the date of his termination of
employment if NSI terminates Rutenberg without Cause or (ii) in all other
events, November 1998, Rutenberg will not, directly or indirectly, (A) enter
into the employ of, or render any services to, any person, firm or corporation
engaged in any business competitive with the Business of NSI in any part of the
Territory; (B) engage in any such business for his account; (C) become
interested in any such business as an individual, partner, shareholder,
creditor, director, officer, principal, agent, employee, trustee, consultant,
advisor, franchisee or in any other relationship or capacity; or (D) interfere
with NSI's relationship with, or endeavor to employ or entice away from NSI any
person, firm, corporation, governmental entity or other business organization
who or which is or was an employee, customer or supplier of, or maintained a
business relationship with, NSI at any time (whether before, during or after the
Term), or which NSI has solicited or prepared to solicit; provided, however,
that nothing contained in this Section 10 shall be deemed to prohibit Rutenberg
from acquiring or holding, solely for investment,
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publicly traded securities of any corporation all or a portion of the activities
of which are competitive with the Business of NSI so long as such securities do
not, in the aggregate, constitute more than five percent (5%) of any class or
series of outstanding securities of such corporation.
11. Specific Remedies.
For purposes of Sections 8, 9 and 10 of this Restated
Agreement, references to NSI shall include all current and future majority-owned
subsidiaries of NSI and all current and future joint ventures in which NSI may
from time to time be involved. It is understood by Rutenberg and NSI that the
covenants contained in this Section 11 and in Sections 8, 9 and 10 hereof are
essential elements of this Restated Agreement and that, but for the agreement of
Rutenberg to comply with such covenants, NSI would not have agreed to enter into
this Agreement. NSI and Rutenberg have independently consulted with their
respective counsel and have been advised concerning the reasonableness and
propriety of such covenants with specific regard to the nature of the business
conducted by NSI and the interests of NSI and its stockholders. Rutenberg agrees
that the covenants of Sections 8, 9 and 10 are reasonable and valid. If
Rutenberg commits a breach of any of the provisions of Sections 8, 9, or 10,
such breach shall be deemed to be grounds for termination for Cause. In
addition, Rutenberg acknowledges that NSI may have no adequate remedy at law if
he violates any of the terms hereof. Rutenberg therefore understands and agrees
that NSI shall have (i) the right to have such provisions specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed that
any such breach will cause irreparable injury to NSI and that money damages will
not provide an adequate remedy to NSI, and (ii) the right to require Rutenberg
to account for and pay over to NSI all compensation, profits, monies, accruals,
increments and other benefits (collectively, the "Benefits") derived or received
by Rutenberg as a result of any
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transaction constituting a breach of any of the provisions of Sections 8, 9 or
10 and Rutenberg hereby agrees to account for and pay over such Benefits to NSI.
12. Independence, Severability and Non-Exclusivity.
Each of the rights enumerated in Section 11 hereof shall be
independent of the others and shall be in addition to and not in lieu of any
other rights and remedies available to NSI at law or in equity. If any of the
covenants contained in Sections 8, 9 or 10, or any part of any of them, is
hereafter construed or adjudicated to be invalid or unenforceable, the same
shall not affect the remainder of the covenant or covenants or rights or
remedies which shall be given full effect without regard to the invalid
portions. The parties intend to and do hereby confer jurisdiction to enforce the
covenants contained in Sections 8, 9 or 10 and the remedies enumerated in
Section 11 upon the federal and state courts of New York sitting in New York
County. If any of the covenants contained in Sections 8, 9 or 10 is held to be
invalid or unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision and in
its reduced form said provision shall then be enforceable. No such holding of
invalidity or unenforceability in one jurisdiction shall bar or in any way
affect NSI's right to the relief provided in Section 11 or otherwise in the
courts of any other state or jurisdiction within the geographical scope of such
covenants as to breaches of such covenants in such other respective states of
jurisdictions, such covenants being, for this purpose, severable into diverse
and independent covenants.
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13. Disputes.
If NSI or Rutenberg shall dispute any termination of
Rutenberg's employment hereunder or if a dispute concerning any payment
hereunder shall exist:
(a) either party shall have the right (but not the
obligation), in addition to all other rights and remedies provided by law, to
compel arbitration of the dispute in the City of New York under the rules of the
American Arbitration Association by giving written notice of arbitration to the
other party within thirty (30) days after notice of such dispute has been
received by the party to whom notice has been given; and
(b) if such dispute (whether or not submitted to arbitration
pursuant to Section 13(a) hereof) results in a determination that (i) NSI did
not have the right to terminate Rutenberg's employment under the provisions of
this Restated Agreement or (ii) the position taken by Rutenberg concerning
payments to Rutenberg is correct, NSI shall promptly pay, or if theretofore paid
by Rutenberg, shall promptly reimburse Rutenberg for, all costs and expenses
(including attorney's fees) reasonably incurred by Rutenberg in connection with
such dispute.
14. Successors; Binding Agreement.
In the event of a future disposition by NSI (whether direct or
indirect, by sale of assets or stock, merger, consolidation or otherwise) of all
or substantially all of its business and/or assets in a transaction to which
Rutenberg consents, NSI will require any successor, by agreement in form and
substance satisfactory to Rutenberg, to expressly assume and agree to perform
this Restated Agreement in the same manner and to the same extent that NSI would
be required to perform if no such disposition had taken place.
This Restated Agreement and all rights of Rutenberg hereunder
shall inure to the benefit of, and be enforceable by, Rutenberg's personal or
legal
-15-
<PAGE>
representatives, executors, administrators, administrators c.t.a., successors,
heirs, distributees, devisees and legatees. Unless otherwise provided herein,
any amounts payable hereunder after Rutenberg's death shall be paid in
accordance with the terms of this Restated Agreement to Rutenberg's estate.
15. Notices.
All notices, consents or other communications required or
permitted to be given by any party hereunder shall be in writing (including
telecopy or other similar writing) and shall be given by personal delivery,
certified or registered mail, postage prepaid, or telecopy (or other similar
writing) as follows:
To NSI:
To each of the members of the Board at their
respective business addresses or at their
respective primary residential address with
a copy to the Secretary of NSI
To Rutenberg:
20 Sophia Street
Monsey, New York 10952
or at such other address or telecopy number (or other similar number) as either
party may from time to time specify to the other. Any notice, consent or other
communication required or permitted to be given hereunder shall be deemed to
have been given on the date of mailing, personal delivery or telecopy or other
similar means thereof (provided the appropriate answer back is received) and
shall be conclusively presumed to have been received on the second business day
following the date of mailing or, in the case of personal delivery or telecopy
or other similar means, the day of delivery thereof, except that a change of
address shall not be effective until actually received.
-16-
<PAGE>
16. Modifications and Waivers.
No term, provision or condition of this Restated Agreement may
be modified or discharged unless such modification or discharge is authorized by
the Board of Directors of NSI and is agreed to in writing and signed by
Rutenberg. No waiver by either party hereto of any breach by the other party
hereto of any term, provision or condition of this Restated Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
17. Entire Agreement.
This Restated Agreement constitutes the entire understanding
between the parties hereto relating to the subject matter hereof, superseding
all negotiations, prior discussions, preliminary agreements and agreements
relating to the subject matter hereof made prior to the date hereof.
18. Law Governing.
Except as otherwise explicitly noted, this Restated Agreement
shall be governed by and construed in accordance with the laws of the State of
New York (without giving effect to conflicts of law).
19. Invalidity.
Except as otherwise specified herein, the invalidity or
unenforceability of any term or terms of this Restated Agreement shall not
invalidate, make unenforceable or otherwise affect any other term of this
Restated Agreement which shall remain in full force and effect.
-17-
<PAGE>
20. Headings.
The headings contained in this Restated Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Restated Agreement.
21. Conduct.
As of and after the date hereof, (a) Rutenberg will not
publish or make any statement (except statements made by Rutenberg to his legal
counsel that are subject to the attorney client privilege and with respect to
which such privilege is not waived or lost) critical of NSI or any of its
subsidiaries or affiliates, or in any way maligning the business or reputation
of NSI or any of its subsidiaries or affiliates and (b) NSI shall use its best
efforts to cause its executive officers and directors not to publish or make any
statement (except statements made by any of them to NSI's or their legal counsel
that are subject to the attorney client privilege and with respect to which such
privilege is not waived or lost) critical of Rutenberg, or in any way maligning
the business reputation of Rutenberg; provided, however, that neither party
shall be deemed to have violated the provisions of this Section 21 by reason of
statements published or made that the party publishing or making the statement
reasonably believed were required by law to be published or made or otherwise
disclosed; and provided further, that either party shall, prior to publishing or
making any such statement, but only to the extent practicable, give notice to
the other party of its intention to publish or make any such statement.
22. Release.
Except as otherwise provided herein, effective as of the
Restatement Date, Rutenberg does hereby release, remise, acquit and forever
discharge NSI and its present and former officers, directors, executives,
agents, attorneys, employees, affiliated companies, divisions, subsidiaries,
successors, predecessors and assigns
-18-
<PAGE>
(collectively, the "Released Parties"), of and from any and all claims, actions,
causes of action, demands, rights, damages, debts, sums of money, accounts,
financial obligations, suits, expenses, attorneys' fees and liabilities of
whatever kind or nature in law, equity or otherwise, whether now known or
unknown, suspected or unsuspected, which Rutenberg, individually or as a member
of a class, now has, owns or holds, or has at any time heretofore had, owned or
held, against any Released Party arising out of or in any way connected with
Rutenberg's employment relationship with NSI, its subsidiaries, predecessors or
affiliated entities, or any event occurring or state of facts existing on or
before the Restatement Date, including, without limitation, any claims for
severance or vacation benefits, unpaid wages, salary or incentive payment,
breach of contract, wrongful discharge, impairment of economic opportunity,
intentional infliction of emotional harm or other tort, or employment
discrimination under any applicable federal, state or local statute, provision,
order or regulation including, but not limited to, any claim under Title VII of
the Civil Rights Act ("Title VII"), the Federal Age Discrimination in Employment
Act ("ADEA") and any similar or analogous state statute excepting only:
(a) those liabilities and obligations that this Restated
Agreement expressly creates or expressly provides which will continue in force
in accordance with this Restated Agreement; and
(b) any claims for benefits under any employee benefit plan of
the Company (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended).
Rutenberg acknowledges and agrees no provision of this
Restated Agreement is to be construed in any way as an admission of any
liability whatsoever by any Released Party under any federal or state statute or
the principles of common law, any such liability having been expressly denied.
-19-
<PAGE>
Rutenberg acknowledges and agrees that he has not, with
respect to any transaction or state of facts existing prior to the date of
execution of this Restated Agreement, filed any complaints, charges or lawsuits
against any of the Released Parties with any governmental agency or any court or
tribunal, and that he will not do so at any time hereafter.
23. Knowledge of Claims.
As of the date hereof, the executive officers and directors of
NSI do not have any actual knowledge of any claims, actions or causes of action
that NSI may have against Rutenberg.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year set forth above.
NEUROMEDICAL SYSTEMS, INC.
By:/s/ Uzi Ish-Hurwitz
----------------------------
Uzi Ish-Hurwitz
Executive Vice President
/s/ Mark R. Rutenberg
----------------------------
Mark R. Rutenberg
-20-
<PAGE>
EXHIBIT 10.31
SECURED NON-RECOURSE
PROMISSORY NOTE
$600,000.00 July 9, 1997
FOR VALUE RECEIVED, the undersigned, Mark R. Rutenberg (the
"Borrower"), hereby agrees and promises to pay to the order of Neuromedical
--------
Systems, Inc., a Delaware corporation, and its transferees, successors and
assigns (collectively, the "Lender"), the principal sum of Six Hundred Thousand
------
and No/100 Dollars ($600,000.00) in accordance with the terms and conditions set
forth below (including, without limitation, Section 8), together with interest
on the unpaid principal balance hereof from time to time at the rate and on the
dates set forth below.
1. Final Maturity. The Borrower shall pay the entire outstanding
--------------
principal balance of this Note, together with all accrued and unpaid interest
thereon, in full on November 30, 1999 (the "Maturity Date").
-------------
2. Mandatory Prepayments. If, as and when the Borrower's employment
---------------------
pursuant to the terms of that certain Restated Employment Agreement, dated June
29, 1997, between the Lender and the Borrower, is terminated for any reason,
prior to the Maturity Date, then the Borrower shall prepay this Note on or
before the date which is ten (10) days after such termination of employment (or
30 days, after such termination of employment in the case of the Borrower's
death).
3. Optional Prepayments. This Note may be prepaid at any time and
--------------------
from time to time at the discretion of the Borrower, in whole or in part,
without penalty or premium.
4. Interest Rate and Interest Payment Dates.
----------------------------------------
(a) Ordinary Interest. The Borrower shall pay interest on the
-----------------
unpaid principal amount of this Note from the date of this Note until
payment in full thereof at a rate equal to the prime rate of interest
of Citibank, N.A. in New York City as publicly announced and in effect
on the first day of each calendar month, from month to month (the
"Prime Rate"). Interest on this Note shall be due and payable in
arrears on the Maturity Date.
(b) Default Interest; Maximum Legal Rate. If the Borrower shall
------------------------------------
fail to pay any principal amount of this Note when due and payable
(whether at the Maturity Date, by acceleration or otherwise), such
principal amount shall thereafter bear interest, payable on demand
from time to time
-1-
<PAGE>
and upon payment in full of such overdue amount, until paid in full,
at a rate of equal to the Prime Rate, plus two points. In no event
shall the Borrower pay interest on this Note at a rate in excess of
that permitted by applicable law, any such excess payments being
deemed for all purposes a prepayment of principal.
(c) Calculation. Interest shall be calculated on the basis of
-----------
the actual number of days elapsed over a 365 day year.
5. Payments; Application to Interest and Principal. The Borrower
-----------------------------------------------
shall make all payments of principal and interest and other amounts payable
under this Note not later than 11:00 A.M., New York City time, on the date such
payment is due, in lawful money of the United States of America by wire transfer
of immediately available funds to the Lender's account (or by such other method
or at such other bank account) as may be designated in writing from time to time
by the Lender. Any prepayment pursuant to Sections 2 or 3 shall be applied to
reduce, first, the accrued and unpaid interest on the principal balance of this
Note and, then, the unpaid principal balance hereof, in each case outstanding at
the time of such prepayment.
6. Pledge of Collateral.
--------------------
6.1 Pledge. The Borrower hereby pledges, assigns and grants to
------
the Lender a security interest in the assets referred to in Section 6.2 (the
"Collateral") to secure the prompt payment and performance of the Borrower's
- -----------
obligations under this Note (the "Obligations").
-----------
6.2 Collateral. The Collateral consists of the following types
----------
or items of property:
(a) 100,000 shares of common stock, par value $.0001 per
share ("Common Stock"), of Neuromedical Systems, Inc., a Delaware
------------
corporation (the "Issuer"); and
------
(b) (i) the certificates or instruments, if any, representing
such securities, (ii) all dividends (cash, stock or otherwise), cash
instruments, rights to subscribe, purchase or sell and all other rights
and property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
securities, (iii) all replacements, additions to and substitutions for
any of the property referred to in this Section 6.2, and (iv) the
proceeds, interest, profits and other income of or on any of the
property referred to in this Section 6.2.
6.3 Transfer of Collateral. All certificates or instruments
----------------------
representing or evidencing any of the securities referred to in Section 6.2(a)
and all additional securities, if any, constituting Collateral (the "Pledged
-------
Securities") shall be delivered to and held pursuant hereto by the Lender and
- ----------
shall be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or
-2-
<PAGE>
assignment in blank. The Lender shall have the right, at any time during the
continuance of an Event of Default to transfer to or to register in the name of
the Lender or any of its nominees any or all of the Pledged Securities, subject
only to the revocable rights specified in the fourth sentence of Section 10.
6.4 Representations, Warranties and Agreements. The Borrower
------------------------------------------
represents and warrants to and agrees with the Lender that:
(a) Ownership of Collateral; Encumbrances. The Borrower is
-------------------------------------
the legal and beneficial owner of the Pledged Securities owned from
time to time by the Borrower free and clear of any adverse claim or
lien except for the security interest created by this Note, and the
Borrower has full right, power and authority to pledge, assign and
grant a security interest in the Collateral to the Lender.
(b) No Required Consent. No authorization, consent, approval
-------------------
or other action by, and no notice to or filing with, any governmental
authority is required for (i) the due execution, delivery and
performance by the Borrower of this Note, (ii) the grant by the
Borrower of the security interest granted by this Note, (iii) the
perfection of such security interest or (iv) the exercise by the Lender
of its rights and remedies under this Note except that filings may be
required to perfect such security interest (to the extent such security
interest cannot be perfected by possession) and sale of the Collateral
must be made in accordance with applicable law.
(c) Pledged Securities. The Pledged Securities have been
------------------
duly authorized and validly issued, and are fully paid and non-
assessable.
(d) First Priority Security Interest. The pledge of Pledged
--------------------------------
Securities pursuant to this Note creates a valid and perfected first
priority security interest in such Collateral, enforceable against the
Borrower and all third parties and securing payment of the Obligations.
(e) Sale, Disposition or Encumbrance of Collateral. The
----------------------------------------------
Borrower will not in any way encumber any of the Collateral (or permit
or suffer any of the Collateral to be encumbered) or sell, pledge,
assign, lend or otherwise dispose of or transfer any of the Collateral
to or in favor of any person or entity other than the Lender.
(f) Dividends or Distributions. So long as no Event of
--------------------------
Default shall have occurred and be continuing, the Borrower shall be
entitled to receive and retain any and all dividends and interest paid
in respect of the Collateral; provided, however, that any and all
-------- -------
(i) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property
received,
-3-
<PAGE>
receivable or otherwise distributed in respect of, or in exchange
for (including, without limitation, any certificate or share
purchased or exchanged in connection with a tender offer or
merger agreement), any Collateral,
(ii) dividends and other distributions paid or payable
in cash in respect of any Collateral in connection with total
liquidation or dissolution, and
(iii) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Collateral,
shall be, and shall be forthwith delivered to the Lender to hold as,
Collateral and shall, if received by the Borrower, be received in
trust for the benefit of the Lender, be segregated from the other
property or funds of the Borrower, and be forthwith delivered to the
Lender as Collateral in the same form as so received (with any
necessary endorsement).
Upon the occurrence and during the continuance of an Event of Default,
all rights of the Borrower to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to this clause (f) shall cease, and all such rights shall
thereupon become vested in the Lender who shall thereupon have the
sole right to receive and hold as Collateral such dividends and
interest payments, but the Lender shall have no duty to receive and
hold such dividends and interest payments and shall not be responsible
for any failure to do so or delay in so doing.
(g) Stock Powers. The Borrower shall furnish to the Lender
------------
such stock powers and other instruments as may be required by the
Lender to assure the transferability of the Collateral when and as
often as may be requested by the Lender.
(h) Voting and Other Consensual Rights. The Borrower shall
----------------------------------
be entitled to exercise any and all voting and other consensual rights
pertaining to the Collateral or any part thereof for any purpose not
inconsistent with the terms of this Note.
7. Events of Default. If any of the following events (each, an
-----------------
"Event of Default") shall occur and be continuing:
- -----------------
(i) the Borrower shall fail to pay any principal of, or interest
on, this Note when the same becomes due and payable in accordance with
the terms hereof;
-4-
<PAGE>
(ii) the Borrower shall fail to comply in any material respect
with any other agreement in this Note and such failure shall continue
for 30 days after notice from the Lender; or
(iii) the Borrower shall generally not pay his debts as such
debts become due, or shall admit in writing his inability to pay his
debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the
Borrower seeking to adjudicate him a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of him or his debts under any law
relating to bankruptcy, insolvency or relief or the appointment of a
receiver, trustee, or other similar official for him or for any
substantial part of his property;
then, and in any such event, the Lender may, by notice to the Borrower,
(a) Declare the entire unpaid principal amount of this Note and all
interest thereon to be forthwith due and payable, whereupon the entire
unpaid principal amount of this Note and all such interest shall become and
be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower.
(b) Sell, in one or more sales and in one or more parcels, or
otherwise dispose of any or all of the Collateral in any commercially
reasonable manner as the Lender may elect, in a public or private
transaction, at any location as deemed reasonable by the Lender either for
cash or credit or for future delivery at such price at the Lender may deem
fair, and (unless prohibited by the Uniform Commercial Code, as adopted in
any applicable jurisdiction, the "Code") the Lender may be the purchaser of
----
any or all Collateral so sold and may apply the purchase price therefor
against any Obligations secured hereby. Reasonable notification of the
time and place of any public sale of the Collateral, or reasonable
notification of the time after which any private sale or other intended
disposition of the Collateral is to be made, shall be sent to the Borrower
and to any other person or entity entitled to notice under the Code;
provided that, if any of the Collateral threatens to decline speedily in
value or is of the type customarily sold on a recognized market, the Lender
may sell or otherwise dispose of the Collateral without notification,
advertisement or other notice of any kind. Any such sale or transfer by
the Lender either to itself or to any other person or entity shall be
absolutely free from any claim of right by the Borrower, including any
equity or right of redemption, stay or appraisal which the Borrower has or
may have under any rule of law, regulation or statute now existing or
hereafter adopted. Upon any such sale or transfer, the Lender shall have
the right to deliver, assign and transfer to the purchaser or transferee
thereof the Collateral so sold or transferred. If the Lender deems it
advisable to do so, it may restrict the bidders or purchasers of any such
sale or transfer to persons or entities who will represent and agree that
they
-5-
<PAGE>
are purchasing the Collateral for their own account and not with the view
to the distribution or resale of any of the Collateral. The Borrower agrees
that private sales so made may be at prices and on other terms less
favorable to the seller than if the Collateral were sold at public sale,
and that the Lender has no obligation to delay the sale of the Collateral
for the period of time necessary to permit the registration of the
Collateral for public sale under the Securities Act of 1933 and under
applicable state securities or "blue sky" laws. The Borrower agrees that a
private sale or sales made under the foregoing circumstances shall be
deemed to have been made in a commercially reasonable manner. The Lender
may, at its discretion, provide for a public sale, and any such public sale
shall be held at such time or times within ordinary business hours and at
such place or places as the Lender may fix in the notice of such sale. The
Lender shall not be obligated to make any sale pursuant to any such notice.
The Lender may, without notice or publication, adjourn any public or
private sale by announcement at any time and place fixed for such sale, and
such sale may be made at any time or place to which the same may be so
adjourned. If only part of the Collateral is sold or transferred such that
the Obligations remain outstanding (in whole or in part), the Lender's
rights and remedies hereunder shall not be exhausted, waived or modified,
and the Lender is specifically empowered to make one or more successive
sales or transfers until all the Collateral shall be sold or transferred
and all the Obligations are paid. In the event that the Lender elects not
to sell the Collateral, the Lender retains its rights to dispose of or
utilize the Collateral or any part or parts thereof in any manner
authorized or permitted by law or in equity, and to apply the proceeds of
the same towards payment of the Obligations. Each and every method of
disposition of the Collateral described in this clause (b) shall constitute
disposition in a commercially reasonable manner.
(c) Apply proceeds of the disposition of the Collateral to the
Obligations in any manner elected by the Lender and permitted by the Code
or otherwise permitted by law or in equity.
(d) Appoint any person as agent to perform any act or acts necessary
or incident to any sale or transfer by the Lender of the Collateral.
(e) Exercise all other rights and remedies permitted by law or in
equity.
The Borrower hereby irrevocably appoints the Lender as the Borrower's
attorney-in-fact, with full authority in the place and stead of the Borrower and
in the name of the Borrower or otherwise, from time to time during the
continuance of an Event of Default to take any action and to execute any
assignment, certificate, financing statement, stock power, notification,
document or instrument which the Lender may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to the Lender
representing any dividend, interest payments or other distribution in respect of
the Collateral or any part thereof and to give full discharge for the same.
-6-
<PAGE>
If any applicable provision of any law requires the Lender to give
reasonable notice of any sale or disposition or other action, the Borrower
hereby agrees that fifteen days' prior written notice shall constitute
reasonable notice thereof. Such notice, in the case of public sale, shall state
the time and place fixed for such sale and, in the case of private sale, the
time after which such sale is to be made.
The Lender may enforce its rights hereunder without prior judicial
process or judicial hearing, and to the extent permitted by law the Borrower
expressly waives any and all legal rights which might otherwise require the
Lender to enforce its rights by judicial process.
8. No Personal Liability. Neither Borrower nor any of his heirs,
---------------------
legal representatives, successors or assigns shall have any personal liability
for the payment or performance of any of Borrower's obligations hereunder.
Lender may enforce its rights in, to, or against only the Collateral, and Lender
shall have full recourse to and the right to proceed against, only such
Collateral. In all events, no monetary or deficiency judgment shall be sought
or enforced against Borrower or any of his heirs, legal representatives,
successors or assigns.
9. Notices. All notices and other communications provided for
-------
hereunder shall be in writing (including telecopy communication) and mailed,
telecopied, or delivered
if to the Lender: Neuromedical Systems, Inc.
Two Executive Boulevard
Suffern, New York 10901-4164
Telecopy No.: (914) 368-3894
if to the Borrower: Mark R. Rutenberg
20 Sophia Street
Monsey, New York 10952
Telecopy No.: (914) 425-4210
or at such other address or telecopy number as shall be designated by a party in
a written notice to the other party.
10. No Waivers; Cumulative Remedies; Amendment; Survival of Covenants;
------------------------------------------------------------------
Headings; Governing Law; Submission to Jurisdiction; Express Waiver. No action,
- -------------------------------------------------------------------
delay or omission by the Lender shall constitute a waiver of any of the rights
or privileges of the Lender under this Note nor shall any single or partial
exercise of any such right or privilege preclude any other or further exercise
thereof or the exercise of any other right or privilege. Such rights are
cumulative and not exclusive of any rights provided by law. This Note may not
be amended or otherwise modified except by a written instrument signed by the
Lender. Upon the complete payment of the Obligations, the Lender will release,
reassign and transfer the Collateral to the Borrower and this Note shall be of
no further force or effect. Notwithstanding the foregoing, the provisions of
-7-
<PAGE>
Section 8 shall survive payment of the principal of, and interest on, this Note.
Section headings herein shall have no legal effect. THIS NOTE SHALL BE DEEMED
MADE UNDER, AND BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICT OF LAWS RULES. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-
EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN THE COUNTY AND STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
LIMIT THE RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE LENDER OR ANY AFFILIATE OF THE LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THE NOTE SHALL BE BROUGHT ONLY IN A COURT IN THE COUNTY AND STATE OR A FEDERAL
COURT IN SUCH COUNTY OF NEW YORK SO LONG AS SUCH COURT HAS PERSONAL
JURISDICTION. THE BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THE NOTE. Except as expressly provided in this Note, the
Borrower expressly waives diligence, presentment, demand for payment, any other
demand, protest, notice of dishonor, notice of presentment, notice of demand or
notice of protest and all other notices of any kind in connection with this Note
and any payment due hereunder.
-8-
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed this Note as of the date
first above written.
/s/ Mark R. Rutenberg
___________________________
Mark R. Rutenberg
Agreed and Accepted:
NEUROMEDICAL SYSTEMS, INC.
By: /s/ John B. Henneman, III
-------------------------
John B. Henneman, III
Vice President, Secretary and
General Counsel
-9-
