EXHIBIT 10.12
DATED 1998
(1) FREEMEDIC PLC
(2) CARDIOTECH INTERNATIONAL LIMITED
AND
(3) CARDIOTECH INTERNATIONAL INC
LOAN AND
OPTION AGREEMENT
XXXXX & PARTNERS
XXXXXXXXX XXXXX
XXXXXXXX XXXXXX
XXXXXXX
XX0 0XX
REF: IV.CAR51.2
THIS DEED is made the day of 1998
BETWEEN:
(1) FREEMEDIC PLC (registered number 2776963) whose registered office is at The
Royal Free Hospital School of Medicine, University of London, Xxxxxxx Xxxx
Xxxxxx, Xxxxxx, XX0 0XX ("Freemedic");
(2) CARDIOTECH INTERNATIONAL LIMITED (registered number 3198267) whose
registered office is situate at 0/0 Xxxxxxxxx Xxxxx, Xxxxxxxx Xxxxxx,
Xxxxxxx, XX0 0XX ("the Company"); and
(3) CARDIOTECH INTERNATIONAL INC. a U.S. Corporation incorporated under the
laws of the State of Massachusetts and whose principal place of business is
00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, 00000 ("the Parent").
WHEREAS:
(A) The Company is a private company limited by shares incorporated in England
and Wales with registered number 3198267 and is the wholly owned subsidiary
of the Parent.
(B) The Parent is a Massachusetts corporation with a capitalisation as at the
date hereof of 20,000,000 shares of common stock each with a par value of
$0.01 per share of which 4,272,916 are issued (excluding any common stock
to be issued under a 7% Convertible Senior Note between the Parent and the
third party investor referred to in Clause 2.1) and 5,000,000 shares of
preferred stock each with a par value of $0.01 per share none of which are
issued.
(C) In accordance with the terms of the Research Agreement, the Medical School
(each as defined) and the Company have agreed to carry out certain research
and development work as detailed therein.
(D) In order inter alia to fund the aforementioned work Freemedic is to advance
certain monies to the Company subject to the repayment provisions set out
below.
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(E) As security for their respective compliance with the terms of this
Agreement, the Company has granted a debenture over certain of its assets
and the Parent has given a guarantee.
(F) As a further term of such Agreement, the parties hereto have agreed to the
granting of an option over the shares of the Parent in the form set out
below.
NOW THIS DEED WITNESSES AND IT IS HEREBY AGREED as follows:-
1. INTERPRETATION
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1.1. DEFINITIONS
-----------
"Account" the Company's designated deposit account set
up pursuant to Clause 3.3;
"the Act" the Companies Xxx 0000 (as amended or
updated);
"AMEX" the American Stock Exchange;
"business day" a day (other than a Saturday or a Sunday) on
which banks are open for business in London);
"Call Notice" a notice served pursuant to Clause 6.1;
"Call Option" the option more particularly set out in
Clause 6;
"Call Option Period" the period more particularly specified in
Clause 6.2;
"Common Stock" the common stock of the Parent referred to in
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Recital B.
"the Company's Solicitors" Messrs Xxxxx & Partners, Xxxxxxxxx
Xxxxx, Xxxxxxxx Xxxxxx, Xxxxxxx, XX0
0XX;
"Debenture" the fixed and floating charge in the
form set out in Schedule 2;
"Effective Date" the date of completion of this Agreement
in accordance with Clause 2;
"Market Price" the closing price of the Common Stock
quoted on AMEX (or such other national
securities exchange or automated
quotation system on which the Common
Stock is then listed) on the relevant
day;
"Medical School" the Royal Free Hospital School of
Medicine, x/x Xxxxxxxxxx xx Xxxxxx,
Xxxxxxx Xxxx Xxxxxx, Xxxxxx XX0 0XX;
"Minimum Period" shall have the meaning given to it in
Clause 2.2 of the Research Agreement.
"Option Completion Date" the date on which either the Put Option
or Call Option is completed in
accordance with the terms of this
Agreement;
"Option Monies" all monies (including any accrued
interest thereon) calculated as due and
owing from the Company to Freemedic
hereunder and more particularly detailed
in Schedule 1 hereof as at the Option
Completion Date.
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"Option Shares" the number of shares of Common Stock in
the capital of the Parent calculated
pursuant to Clause 12.1 and more
particularly detailed in Clause 12.
"Parent Guarantee" the guarantee to be entered into by the
Parent in favour of Freemedic and in the
form set out in Schedule 3;
"Put Notice" a notice served pursuant to Clause 7.1;
"Put Option" the option more particularly set out in
Clause 7;
"Put Option Period" the period more particularly specified
in Clause 7.2;
"Repayment Notice" a notice served by the Company pursuant
to Clause 8.1;
"Repayment Option" the option more particularly set out in
Clause 8;
"Repayment Period" the period more particularly specified
in Clause 8.2.
"the Research Agreement" the Research Agreement of even date
between (1) the Company; and (2) the
Medical School;
"SEC" the US Securities and Exchange
Commission.
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"the Securities Act" the US Securities Xxx 0000 (as amended).
"the Freemedic Letter" the letter from Freemedic in the form
---------
set out in Schedule 5.
1.2. Words and expressions defined in the Research Agreement shall unless
the context otherwise requires, or save as expressly defined herein,
have the same meanings in this Agreement.
1.3. The headings in this Agreement are for convenience or reference only
and shall not affect the interpretation hereof.
1.4. Reference to the masculine gender shall include references to the
feminine and neuter genders and vice versa and words importing the
singular meaning shall include the plural meaning and vice versa.
2. COMPLETION
----------
2.1. Completion shall take place at the premises of the Company (or such
other place as the parties may previously agree) upon the Effective
Date (being the date of this Agreement or the date on which Freemedic
receives written notification from the Parent that the Parent has
received the sum of (Pounds)1.5 million by way of third party
investment, whichever is the later. At such completion the following
matters shall take place:-
2.1.1. Freemedic shall advance (or otherwise agree to advance at a
time and manner satisfactory to the Company) to the Company or
the Company's Solicitors in cleared funds those monies more
particularly set out in Clause 3.1, to be held to the order of
Freemedic pending delivery of those documents set out in
Clause 2.1.2 below, duly executed.
2.1.2. Immediately upon receipt by the Company of such monies in full
in cleared funds a Board meeting of the Company shall be held
at which:-
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2.1.2.1. the Company shall execute the Debenture and deliver
the same to Freemedic.
2.1.2.2. the Parent shall execute the Parent Guarantee and
deliver the same to Freemedic; and
2.1.2.3. the Company and the Medical School shall enter into
the Research Agreement.
2.1.3. Immediately thereafter Freemedic will execute the Freemedic
Letter and deliver the same to the Parent.
2.2. Immediately thereafter, Freemedic shall provide (or otherwise agree to
provide at a time and manner satisfactory to the Company) to the
Company the sum of (Pounds)21,000 in cleared funds to be applied for
the purpose of the acquisition of the Capital Equipment in accordance
with Clause 4 or shall produce details of the Capital Equipment
already acquired along with evidence of the respective costs thereof
and the amount payable pursuant to this Clause 2.2 shall be reduced
accordingly.
2.3. Completion shall be deemed to have taken place upon the happening of
all those matters set out in Clauses 2.1 and 2.2 above.
2.4. If all the events referred to in Clause 2.1 and 2.2 above shall not
have taken place by 5 pm on the Effective Date, then save as agreed in
writing by the parties hereto, this Agreement shall have no effect and
none of the parties shall have any claim against or liability to any
other hereunder other than for breach of its obligations under Clause
2.1 or 2.2.
2.5. Save for those particulars in respect of the Debenture, which shall be
filed by Freemedic, the Company shall procure that all other necessary
filings are made at Companies House within the requisite time limits
to give effect to the above and
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shall produce such evidence to Freemedic as it may reasonably require
to evidence the same, and shall write up the statutory books of the
Company where relevant.
3. REPAYMENT PROVISIONS
--------------------
3.1. In accordance with the provisions of Clause 2.1.1, Freemedic shall
provide to the Company the sum of (Pounds)252,942, being the monies
required for the Experimental Work and detailed in the Budget
Costings, in cleared funds upon Completion .
3.2. Those monies referred to in Clause 3.1 above shall be by way of loan
to the Company, subject to the interest and repayment terms more
particularly detailed or referred to in Schedule 1 and shall be
secured by the Debenture and be subject to the Parent Guarantee.
3.3. The monies received by the Company pursuant to Clauses 2.1.1 and 2.2
(if any) above shall be transferred by the Company into a separate
designated deposit account with the Company's bankers for which the
Company will account to the Committee at each quarterly meeting
thereof.
3.4. Any interest credited to the said Account shall accrue for the
benefit of the Company and may be transferred out of the Account at
any time upon the request to the Bank by the Managing Director of the
Company.
3.5. Save as aforesaid, payment out of the Account shall only be made
pursuant to the provisions of Clause 4 of the Research Agreement.
3.6. Any interest standing to the credit of the Account upon termination
of this Agreement shall for the avoidance of doubt become the
property of the Company.
3.7. Details of the Account and the authorised signatories thereof are set
out in Schedule 4.
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4. CAPITAL EXPENDITURE
-------------------
4.1. It is hereby agreed that the Capital Equipment required in connection
with the Experimental Work shall be acquired from capital standing to
the credit of the Account in accordance with the Budget Costings save
that (Pounds)21,000 of the cost shall be funded directly by Freemedic
as provided for in Clause 2.2.
4.2. Title to the Capital Equipment shall vest in Freemedic (or as it may
direct), which shall make available or procure that there is made
available such equipment for the Experimental Work at all times
during the continuance of this Agreement.
4.3. Freemedic will further procure that such equipment is kept safe and
in good working order free from any material defect or any liens,
charges or other encumbrances and that it is insured to its full
reinstatement value with a reputable insurer.
5. OPTION CONDITIONS PRECEDENT
---------------------------
5.1. This clause sets out the conditions precedent to the exercise by
Freemedic of the Call Option:
5.1.1. that Freemedic shall not be in breach of its obligations
hereunder.
5.1.2. that the Company shall not prior to the date of service of
such Call Notice have served a Repayment Notice.
5.1.3. that such Call Option is exercised only in accordance with
the provisions of this Agreement and shall relate to all (and
not some only) of the Option Monies.
5.2. This clause sets out the conditions precedent to the exercise by the
Parent of the Put Option:-
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5.2.1. that neither of the Parent nor the Company shall be in breach
of its obligations hereunder;
5.2.2. that such Put Option is exercised only in accordance with the
provisions of this Agreement and shall relate to all (and not
some only) of the Option Monies.
6. CALL OPTION
-----------
6.1. Freemedic shall be entitled at any time during the Call Option Period
to serve a Call Notice on the Parent, such notice to be in writing
informing the Parent that Freemedic is exercising the Call Option and
will be applying for the Option Shares in accordance with the terms
hereof. A Call Notice, once given, may be withdrawn by Freemedic at
any time prior to completion of such Call Option on written
notification to the Parent.
6.2. For the purposes of this Agreement, the Call Option Period shall
commence on the Effective Date and shall come to an end on the date
seven business days prior to the second anniversary of the Effective
Date.
6.3. If no Call Notice is served by Freemedic within the Call Option
Period, repayment of the Option Monies shall take place in accordance
with Clause 7 or Clause 8.
7. PUT OPTION
----------
7.1. The Parent shall be entitled at any time during the Put Option Period
to serve a Put Notice on Freemedic, such notice to be in writing
informing Freemedic that the Parent is exercising the Put Option and
specifying that Freemedic will be required to apply for the Option
Shares in accordance with the terms hereof. A Put Notice, once given,
may be withdrawn by the Parent at any time prior to completion of
such Put Option on written notification to Freemedic.
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7.2. For the purposes of this Agreement the Put Option Period shall be any
period following the Effective Date during which the Market Price for
the Common Stock exceeds the conversion price for Option Shares set
out in Clause 12 below and shall come to an end on the date seven
business days prior to the second anniversary of the Effective Date
PROVIDED THAT if after service of a Put Notice in accordance with
this clause 7, the Market Price falls below the said conversion
price, the right to exercise and complete such Put Option at that
time shall cease unless Freemedic shall in its absolute discretion
agree otherwise in writing.
8. REPAYMENT
---------
8.1. The Company shall be entitled at any time during the Repayment Period
to serve a Repayment Notice on Freemedic, such notice to be in
writing, stating that the Company shall repay the Option Monies to
Freemedic.
8.2. For the purposes of this Agreement the Repayment Period shall
commence on the Effective Date and shall come to an end on the
service of a validly completed Put Notice or Call Notice as the case
may be.
8.3. If no Call Notice or Put Notice is served within the Call Option
Period or Put Option Period (as the case may be) and validly
completed in accordance with Clause 13, then the Company shall repay
the Option Monies in full in accordance with Clause 15 below.
9. OPTION SHARES
-------------
9.1. The following provisions shall apply to the Option Shares:
9.1.1. Any Option Shares issued pursuant to this Agreement shall,
prior to any such issuance and at the cost and expense of the
Parent be listed on AMEX (or such other national securities
exchange or automated quotation system on which the Common
Stock is then listed).
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9.1.2. The Parent shall procure that subject to Clause 9.1.4 below,
on the second anniversary of the Effective Date (or, if not
possible, the first day immediately following the date on
which such securities may be registered with the SEC) those
Option Shares then issued to (which shall for the avoidance of
doubt include any Option Shares issued on such date), and not
previously disposed of by Freemedic shall be registered with
the SEC under the Securities Act. Registration shall be made
at the cost and expense of the Parent by filing a registration
statement with the SEC, no later than 30 days prior to the
second anniversary of the Effective Date and using its best
efforts to cause such registration statement to be declared
effective by the SEC prior to the second anniversary of the
Effective Date. The Parent shall keep such registration
statement continuously effective for the lesser of 45 days or
the period required for Freemedic to distribute the Option
Shares registered pursuant thereto. Notwithstanding the
foregoing, the Parent may delay filing a registration
statement and may withhold efforts to cause the registration
statement to become effective if the Parent shall furnish to
Freemedic a certificate signed by the President of the Parent
stating that in the good faith judgment of its Board of
Directors (i) such registration would have a material adverse
effect on the Parent's ability to negotiate or complete a
transaction which had been approved by the Board of Directors
prior to the date on which the Parent filed or was to have
filed the registration statement as set forth above or (ii) it
would be seriously detrimental to the Parent and its
stockholders for such registration statement to be filed
within such period. If, after a registration statement becomes
effective, the Parent advises Freemedic that the Parent
considers it appropriate for the registration statement to be
amended, Freemedic shall suspend any further sales of its
registered shares until the Parent advises it that the
registration statement has been amended. The number of days
during which the registration statement shall be effective
shall be extended for an additional number of days equal to
the number of
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days during which Freemedics' right to sell the Option Shares
was suspended pursuant to the preceding sentence.
9.1.3. For the avoidance of doubt, any disposal of Option Shares
shall be subject to the provisions of this Agreement and in
particular this Clause 9.
9.1.4.
(a) The Parent shall further procure that if prior to the
expiry of the period mentioned in Clause 9.1.2 above the
Parent shall register (other than a registration relating
solely to employee benefit plans or a Rule 145
transaction or a registration on any registration form
that does not permit secondary resales) any other
unregistered Common Stock (not being Option Shares) with
the SEC, (including pursuant to a demand ("demand") of
any stockholder of the Parent exercising registration
rights), it shall (i) promptly give Freemedic notice
thereof, and (ii) at its own cost and expense, include in
such registration and in any underwriting involved
therein, subject to paragraphs (b) and (c) below, all or
any part of the Option Shares that have been purchased
hereunder that are specified in written notice from
Freemedic that is received by the Parent within twenty
days after the written notice from the Parent described
above is mailed or delivered by the Parent.
(b) If the registration of which the Parent gives notice is
for a registered public offering involving an
underwriting, the right to registration hereunder shall
be conditioned upon Freemedic's participation in such
underwriting, the inclusion of Freemedic's Option Shares
in the underwriting to the extent provided herein and
Freemedic entering into an underwriting agreement in
customary form with the representative of the underwriter
selected by the Parent. Freemedic shall not be required
to make any
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representations or warranties to or agreements with the
Parent or the underwriters other than representations and
warranties contained in a writing furnished by Freemedic
expressly for use in such registration statement or
representations, warranties and agreements regarding
Freemedic, the Option Shares being registered and
Freemedic's intended method of distribution and any other
representation required by law. If the representative of
the underwriters advises the Parent in writing that
marketing factors require a limitation on the number of
shares to be underwritten, the representative may
(subject to the limitations set forth below) exclude the
Option Shares from, or limit the number of Option Shares
to be included in, the registration and underwriting. The
Parent shall so advise all holders of securities
requesting registration pursuant to contractual,
incidental ("piggy back") registration rights, and the
number of shares of securities that are entitled to be
included in the registration and underwriting shall be
allocated first to the Parent (or, if applicable to the
stockholders exercising demand registration rights) for
securities being sold for its own account and thereafter
as set forth in paragraph (c) below.
(c) In any circumstance in which all of the Option Shares and
other shares of Common Stock with piggy back registration
rights (including any security convertible into Common
Stock) ("Other Shares") requested to be included in a
registration cannot be so included, the number of shares
of Option Shares and Other Shares that may be so included
shall be allocated among Freemedic and the other selling
stockholders requesting inclusion of shares such that the
selling holders of the Option Shares and Other Shares
shall have their shares included pro rata on the basis of
the number of
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shares of Option Shares and Other Shares that would be
held by Freemedic and the other selling stockholders
assuming conversion that Freemedic and the other selling
stock holders had requested to be included in the
registration, provided that Freemedic shall have priority
to all shares sought to be included by officers and
directors of the Parent. The Parent shall have the right
to postpone or withdraw any registration effected without
obligation to Freemedic.
9.1.5.
(a) In connection with any registration, Freemedic will pay
its own costs and expenses, including the fees of its
counsel and brokerage fees and commissions and transfer
taxes on resale of any Option Shares. As soon as
practicable but in no event later than the third business
day following receipt of a written request from the
Parent, Freemedic shall furnish the Parent with such
information regarding Freemedic and its proposed
dispositions of Option Shares as the Parent may from time
to time reasonably request for use in preparing any
registration statement hereunder (and any related
qualification under applicable state securities laws).
The Parent shall not be obligated to register the Option
Shares if Freemedic fails to promptly provide the Parent
with such information as the parent may reasonably
request at the time to enable the Parent to comply with
applicable laws or regulations to facilitate the
preparation of the registration statement (and any
related qualification under applicable state securities
laws). Freemedic shall notify the Parent within five
business days of completion of its disposition of the
Option Shares.
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(b) In the case of each registration effected by the Parent
pursuant to this Agreement, at its expense the Parent
will:
(i) promptly prepare and file with the SEC the
registration statement to effect such registration
and such amendments and supplements to such
registration statement and the prospectus used in
connection therewith as may be necessary to comply
with the provisions of the Securities Act and to
keep such registration statement effective for
that period of time specified in Clause 9.1.2,
provided that before filing such registration
statement or any amendments thereto, the Parent
will furnish to Freemedic and its counsel copies
of all documents proposed to be filed;
(ii) furnish such number of prospectuses and other
documents incidental thereto as Freemedic from
time to time may reasonably request;
(iii) use its best efforts to register or qualify the
Option Shares covered by such registration
statement under the securities or blue sky laws of
such jurisdictions as Freemedic or any underwriter
reasonably requires (other than any state in which
the Parent would be required to execute a general
consent to service of process in effecting such
registration), and keep such registration or
qualification effective during the period set
forth in Clause 9.1.2;
(iv) cause its accountants to issue to Freemedic and
any underwriter comfort letters and updates
thereof in customary form and covering matters of
the type customarily covered in such letters;
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(v) make available for inspection by Freemedic, any
underwriter participating in any disposition
pursuant to such registration statement, and any
attorney, accountant or other agent retained by
Freemedic or any such underwriter, all pertinent
financial and other records, corporate documents
and properties of the Parent and cause the
Parent's officers, directors, employees and
independent accountants to supply all information
reasonably requested by any Freemedic or any such
underwriter, attorney, accountant or agent in
connection with such registration statement;
(vi) furnish to Freemedic an opinion of counsel for the
Parent dated the effective date of such
registration statement (or, if such registration
includes an underwritten public offering, dated
the date of the closing under the underwriting
agreement), addressed to the underwriters and to
Freemedic, reasonably satisfactory in form and
substance to Freemedic and such underwriters; and
(vii) notify Freemedic, at any time a prospectus covered
by such registration statement is required to be
delivered under the Securities Act, of the
happening of any event of which it has knowledge
as a result of which the prospectus included in
such registration statement, as then in effect,
includes an untrue statement of a material fact or
omits to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading in the light of the
circumstances then existing.
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9.1.6. The right of Freemedic to request registration or inclusion in
any registration pursuant to this Agreement shall terminate on
the date that all Option Shares held or entitled to be held
upon exercise or conversion of this Agreement by Freemedic may
immediately be sold under Rule 144(k) of the Securities Act,
assuming Freemedics' compliance with the provisions of the
Rule.
9.1.7. In the event that Freemedic wishes to dispose of any Option
Shares issued to it prior to their registration with the SEC,
then such sale or other disposal of the said Option Shares by
Freemedic shall be carried out:-
(i) only after consultation with the Board of Directors of
the Parent; and
(ii) as unregistered shares exempt from the requirement of SEC
registration in compliance with Rule 144 of the
Securities Act, or pursuant to Regulation S as defined in
Clause 10.1.2 below, or by private placement to
accredited investors in compliance with US Securities
laws (in the case of an exemption under Rule 144 or
Regulation S, such compliance to be evidenced by
certificates of an officer of Freemedic, in the case of
Rule 144, or of officers of both Freemedic and the
transferee in case of Regulation S, and in the case of a
private placement, such compliance to be evidenced by an
opinion of counsel to Freemedic (in both cases the form
of which certificate or opinion is reasonably
satisfactory to the Parent).
9.1.8. All dealings with the Option Shares by Freemedic and whether
or not registered will at all times be subject to compliance
by Freemedic and the Parent with the rules of AMEX (or such
other national securities exchange or automated quotation
system on which the Common Stock is then listed), the SEC and
any other regulatory body in connection therewith.
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Freemedic agrees that it will not offer, transfer, sell,
pledge, hypothecate or otherwise dispose of any of the Option
Shares, except in compliance with the Securities Act and the
rules and regulations of the SEC thereunder, and in compliance
with applicable state securities laws. In the event that
compliance with this Clause 9 conflicts in any way with such
rules or regulations, then the relevant provisions of this
Clause 9 shall be varied to ensure compliance therewith.
9.1.9. So long as Freemedic owns any of the Option Shares, the Parent
shall timely file all reports required to be filed with the
SEC pursuant to the Securities Exchange Act of 1934, as
amended ("the "Exchange Act"), and the Parent shall not
terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules
and regulations thereunder would permit such termination. The
Parent currently meets, and will take all necessary action to
continue to meet, the "registrant requirements" for the use of
Form S-3 set forth therein. The Parent shall comply with the
Parent's reporting, filing and other obligations under the
Exchange Act.
9.1.10.
(a) In the event of a registration of any of the Option
Shares under the Securities Act, the Parent will
indemnify and hold harmless Freemedic, each of its
directors and officers and each person, if any, who
controls Freemedic within the meaning of the Securities
Act, against any losses, claims, damages or liabilities,
joint or several, actually made against or incurred by
Freemedic or such person under the Securities Act or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any
registration
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statement under which such Option Shares were
registered, any prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are
based upon the 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 in which they were made, not
misleading, or any violation by the Parent of any rule
or regulation promulgated under the Securities Act or
any state securities law applicable to the Parent and
relating to action or inaction required of the Parent
in connection with any such registration, and will
reimburse Freemedic, each of its officers and
directors, and each person controlling Freemedic for
any reasonable legal and any other expenses incurred in
connection with defending or settling any such claim,
loss, damage, liability or action, provided that the
Parent will not be liable in any such case to the
extent that any such claim, loss, damage or liability
arises out of or is based on any untrue statement or
omission based upon written information furnished to
the Parent by an instrument duly executed by Freemedic,
its officers, directors or any person controlling
Freemedic specifically for user therein. The indemnity
agreement contained in this Clause 9.1.10 (a) will not
apply to amounts paid in settlement of any such loss,
claim, damage or liability if such settlement is
effected without the consent of the Parent (which
consent shall not be unreasonably withheld) unless the
Parent waived its right pursuant to Clause 9.1.10(c) to
assume the defence of such loss, claim, damage or
liability.
(b) Freemedic will, if Option Shares are included in the
securities as to which such registration is being
effected, indemnify and hold harmless the Parent, each
of its directors and officers, each
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underwriter, if any, of the Parent's securities covered
by such a registration statement, each person who
controls the Parent and each underwriter within the
meaning of the Securities Act, against all claims,
losses, expenses, damages and liabilities (or actions
in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a
material fact contained in any such registration
statement or prospectus, or any omission (or alleged
omission) to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Parent,
such directors, officers, persons or underwriters for
any reasonable legal or any other expenses incurred in
connection with defending or settling any such claim,
loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration
statement or prospectus in reliance upon and in
conformity with written information furnished to the
Parent by an instrument duly executed by Freemedic its
officers, directors or any person controlling Freemedic
specifically for use therein. The indemnity agreement
contained in this Clause 9.1.10(b) will not apply to
amounts paid in settlement of any such loss, claim,
damage or liability if such settlement is effected
without the consent of Freemedic (which consent shall
not be unreasonably withheld) unless Freemedic waived
its right pursuant to Clause 9.1.10(c) to assume the
defence of such loss, claim, damage or liability.
(c) Each party entitled to indemnification under this
Clause 9.1.10 (the "Indemnified Party") shall give
notice to the party required to provide indemnification
(the "Indemnifying Party") promptly after
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such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defence of
such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who
shall conduct the defence of such claim or any
litigation resulting therefrom, shall be approved by
the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party
may participate in such defence at such party's
expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its
obligations under this Clause 9.1.10 to the extent such
failure is not prejudicial. In case the defendants in
any such action include both the Indemnified Party and
the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be one or more
legal defences available to it which are different from
or additional to those available to the Indemnifying
Party, the Indemnifying Party shall not have the right
to direct the defence of such action on behalf of the
Indemnified Party and the Indemnified Party shall have
the right to select separate counsel to defend such
action on behalf of the Indemnified Party and in such
event the Indemnifying Party shall be liable for the
legal and other costs and expenses associated with such
separate counsel. No Indemnifying Party in the defence
of any such claim or litigation shall, except with the
consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement that does not
include as an unconditional term thereof, the giving by
the claimant or plaintiff to such Indemnified Party of
a release from all liability in respect of such claim
or litigation and no Indemnified Party shall consent to
entry of any judgment or settle such claim or
litigation without the prior consent
21
of the Indemnifying Party (which consent shall not be
unreasonably withheld). Each Indemnified Party shall
furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably
request in writing and as shall be reasonably required
in connection with defence of such claim and litigation
resulting therefrom.
(d) The indemnification provided by this Clause 9.1.10
shall be a continuing right to indemnification and
shall survive the registration and sale of any
securities by any person entitled to indemnification
hereunder and the expiration or termination of this
Agreement.
9.1.11. If requested by the Parent and an underwriter of Common
Stock (or other securities) of the Parent, Freemedic shall
not sell or otherwise transfer or dispose of any Option
Shares (or other securities of the Parent held by Freemedic)
other than those included in the registration, during the
one hundred and eighty day period following the effective
date of a registration statement of the Parent filed under
the Securities Act, provided, however, that all officers and
directors of the Parent and all persons with demand or piggy
back registration rights enter into similar agreements. The
obligations described in this Clause 9.1.11 shall not apply
to a registration relating solely to employee benefit plans
on Form S-8 or similar forms that may be promulgated in the
future, or a registration relating solely to a Commission
Rule 145 transaction on Form S-4 or similar forms that may
be promulgated in the future. The Parent may impose stop-
transfer instructions with respect to the shares (or
securities) subject to the foregoing restriction until the
end of the said one hundred and eighty day period.
22
10. COVENANTS AND REPRESENTATIONS OF FREEMEDIC
------------------------------------------
10.1. Freemedic hereby represents, warrants and covenants with the Parent
and as a separate representation, warranty and covenant with the
Company that:-
10.1.1. this Agreement when executed and delivered by Freemedic
will constitute a valid and legally binding obligation of
Freemedic enforceable in accordance with its terms.
10.1.2. Freemedic is not "U.S. person" as defined in Securities and
Exchange Commission Regulation S - Rules Governing Offers
and Sales Made Outside the United States Without
Registration under the Securities Act ("Regulation S"); a
"U.S. person" includes, without limitation:-
(i) any natural person resident in the United States;
(ii) any trust of which any trustees is a U.S. person;
(iii) any partnership or corporation organised or
incorporated under the laws of the United States;
and at the time of execution of this Agreement by
Freemedic, it is outside the United States (as defined in
Regulation S);
10.1.3. Freemedic is not acquiring the Option Shares or any part
thereof for the account or benefit of any U.S. person;
10.1.4. Freemedic agrees to resell such Option Shares only in
accordance with Clause 9 above;
10.1.5. Freemedic acknowledges that the Option Shares will contain
a legend to the effect that transfer of such shares shall
be prohibited except in accordance with the requirements of
Regulation S;
23
10.1.6. Freemedic is not an underwriter, dealer, or other person who
is participating pursuant to a contractual arrangement, in
the distribution of the Option Shares offered or sold in
reliance on Regulation S;
10.1.7. the valid issue and allotment of the Option Shares in
accordance with the terms of this Agreement shall constitute
a complete discharge and release of the Parent and the
Company from any liability arising from or in respect of the
Option Monies.
11. COVENANTS AND REPRESENTATIONS OF THE PARENT
-------------------------------------------
11.1. The Parent hereby covenants and undertakes with Freemedic that:-
11.1.1. The Parent is a Corporation duly incorporated and in good
standing under the laws of the State of Massachusetts, with
the corporate power and authority to conduct its business
and to enter into and perform this Agreement;
11.1.2. The execution, delivery and performance by the Parent of
this Agreement have been duly authorised by all necessary
action on the part of the stockholders and directors of the
Parent, and this Agreement is a legal, valid and binding
obligation enforceable in accordance with its terms;
11.1.3. The Parent has reserved for issuance the Option Shares and
will ensure that sufficient authorised but unissued shares
of Common Stock to enable it to comply with its obligations
under this Agreement and the Put Option and Call Option
granted hereby are reserved at all times.
11.1.4. Upon the issue of the Option Shares pursuant to either the
Call Option or the Put Option pursuant to this Agreement,
the Option Shares will be fully paid and non-assessable.
24
11.1.5. The issuance of the Option Shares to Freemedic on the
completion of either the Call Option or the Put Option will
be exempt from registration under the Securities Act and the
Parent will comply with all US federal and state securities
laws in connection with such issuance.
12. CALCULATION OF OPTION SHARE PRICE AND OPTION SHARES
----------------------------------------------------
12.1. For the purpose of this Agreement in the event that either party
exercises its rights hereunder in respect of the Put Option or Call
Option as the case may be, the price payable by Freemedic for the
Option Shares shall be the greater of:
(a) closing price for the Common Stock of the Parent on the trading
day immediately prior to 31st March 1998, plus 25%; or
(b) $3.70.
and the number of Option Shares shall be the number equal to the
Option Monies divided by the price per Option Share as specified
above (provided that in the case of a fractional number of Option
Shares the number of Option Shares shall be rounded down to the
nearest whole number).
12.2. For the purposes of this Clause 12, the relevant dollar sterling
exchange rate for the formula under Clause 12.1 shall be the
exchange rate on the trading day immediately prior to the Effective
Date.
13. COMPLETION OF PUT OPTION OR CALL OPTION
----------------------------------------
Completion of the Put Option or Call Option (as the case may be) shall take
place at the offices of the Company (or at such other place as the parties
shall agree) on the date seven business days from the date of service of
the Call Notice or Put Notice when the following acts shall be effected in
the following order:-
25
13.1. The Company shall prepare a statement certified by Freemedic
specifying the precise amount of the Option Monies and a calculation
of the relevant number of Option Shares which may be acquired
therewith pursuant to Clause 12 above.
13.2. The Parent shall issue and allot to Freemedic the Option Shares
specified in the statement referred to in Clause 13.1 above credited
as fully paid and shall issue a Share Certificate to Freemedic in
respect of these Option Shares.
13.3. On receipt of a validly executed share certificate, Freemedic shall
release and/or procure the release of the Parent and the Company
from the Parent Guarantee, Debenture and any associated
indebtedness.
14. DEFAULT
-------
14.1. COMPANY EVENTS OF DEFAULT
Each of the following events shall constitute an Event of Default,
namely:
(a) If any event shall have occurred which would entitle Freemedic
or the Medical School to terminate the Research Agreement in
accordance with the terms set out in Clause 9 thereof;
(b) If there shall be a material breach by either the Company or
the Parent of any provision of this Agreement which shall
remain un-remedied for a period of 30 days following receipt of
a notice by the defaulting party of such breach and requiring
it to be so remedied.
(c) The Parent ceases to be the legal and beneficial owner of at
least 50% of the total issued equity share capital of the
Company (it being understood that the Parent is entering into a
pledge and Security Agreement with the third party investor
described in Clause 2.1 and that such third party shall not be
deemed to beneficially own the equity share capital of the
Company until an event of default (beyond the applicable period
of grant with
26
respect thereto) has occurred and is continuing, unless
waived) or the Company ceases or threatens to cease to carry
on the whole or a substantial part of its business, other
than with the prior written consent of Freemedic, such
consent not to be unreasonably withheld or delayed.
14.2. RIGHTS ON A DEFAULT
Freemedic may upon and at any time after the happening of an Event
of Default, so long as the same is continuing, by notice to the
Company declare that:
(a) any outstanding obligation of Freemedic to lend any
amount hereunder shall be terminated forthwith; and/or
(b) the sum advanced, by way of loan, pursuant to Clauses 2.1.1
and 3.1 and the sum provided to the Company but not yet
utilised for the purchase of Capital Equipment pursuant to
Clauses 2.2 and 4.1 have become immediately due and payable
together with all accrued interest in accordance with
Schedule 1, whereupon the Company shall forthwith repay the
same and the provisions of Clause 15 below shall apply.
15. COMPLETION OF REPAYMENT
-----------------------
15.1. Completion of the repayment of the Option Monies by the Company to
Freemedic shall take place at the offices of the Company (or such
other place as the parties shall agree) on whichever is the first to
occur of the following:-
15.1.1. the first business day following:
(i) the date of service of a Repayment Notice; or
(ii) the date of receipt of notification that the Research
Agreement is being terminated by the Medical School in
accordance with Clauses 9.2 or 9.3 thereof or by reason
of the Company or the Parent having committed an Event
of Default under Clause 14.1 of
27
this Agreement or an event has occurred which
under the terms of the Debenture confers on
Freemedic the right to enforce the Debenture; or
(iii) the termination of the Research Agreement in
accordance with Clause 9.5 thereof by reason of
the insolvency of the Parent or the Company; or
15.1.2. the date seven business days from the expiry of the Call
Option Period or Put Option Period respectively provided
that no Call Notice has been served by Freemedic or no
Put Notice has been served by the Parent; or
15.1.3. the first business day following the second anniversary
of the Effective Date in the event that the Research
Agreement is terminated in accordance with Clause 9.4
thereof by reason of the default or insolvency of either
Freemedic or the Medical School; or
15.1.4. in any event the second anniversary (or if it is not a
business day the first business day immediately
thereafter) of the Effective Date.
15.2. On Completion in accordance with Clause 15.1 the following acts
shall be effected in the following order:
15.2.1. Freemedic shall deliver or shall procure that there is
delivered to the Company or to the Company's solicitors
as its agent a statement specifying the precise amount of
the Option Monies.
15.2.2. The Company shall repay or shall procure the repayment of
the Option Monies set out in the statement referred to in
Clause 15.2.1 above, in full in cleared funds.
15.2.3. Upon receipt of the Option Monies in full in cleared
funds, Freemedic shall provide or procure that there is
provided a release of the Company and the
28
Parent in respect of the indebtedness for the Option
Monies in such form as the Parent may require, including
a release of the Parent Guarantee and Debenture.
16. NOTICES
-------
16.1. Any notices required to be given hereunder shall be in writing and
shall be served by sending the same by prepaid first class,
registered post or recorded delivery, personal delivery or telex or
facsimile transmission to the registered office or business address
of the party in question as set out in this Agreement or to such
other address as shall have been notified to the other party(ies)
from time to time.
16.2. Any such notice shall be deemed to be served at the time when the
same is personally handed to or left at the address of the party to
be served and if served by post on the next business day following
the day of posting and in the case of telex or facsimile
transmission when in the ordinary course of the means of
transmission it would first be received by the addressee in normal
business hours.
17. In proving the giving of notice it shall be sufficient to prove that the
notice was left or that the envelope containing such notice was properly
addressed and posted or that the applicable means of telecommunication was
properly addressed and despatched (as the case may be).
18. MISCELLANEOUS
-------------
18.1. This Agreement is personal to the parties hereto, none of whom may
assign its rights or obligations under it in whole or in part
without the other parties' prior written agreement except that
Freemedic shall be entitled, without the other parties' prior
written agreement, to assign its rights and benefits under this
Agreement to University College London (or any other organisation in
the University of London) or any company owned by University College
London (or any such other organisation) in connection with the
proposed merger of the Medical School with University College London
(or any such other organisation)
29
provided that in the event of such merger Freemedic, the Parent, the
Company and University College, London (or any such other
organisation) will enter into an agreement novating the obligations
of Freemedic hereunder to University College, London (or such other
organisation).
18.2. No party shall be bound by any variation or amendment of or addition
to this Agreement except where that party has agreed expressly in
writing to be so bound.
18.3. This Agreement shall not constitute a partnership between the
parties.
18.4. Each of the parties hereto undertakes that it is fully empowered to
enter into this Agreement and to become bound in accordance with its
terms.
18.5. No failure by any party to exercise and no delay in exercising any
right power or privilege under this Agreement shall operate as a
waiver nor shall any single or partial exercise of any right power
or privilege preclude any further exercise of it or the exercise of
any other right power or privilege. The rights and remedies provided
in this Agreement are cumulative and not exclusive of any rights or
remedies provided by law.
18.6. If any term of this Agreement or its application is judicially or
otherwise held invalid or unenforceable or if the parties mutually
agree in writing to any variation or revision of this Agreement the
remainder of this Agreement and its application shall not be
affected and this Agreement shall remain in full force and effect.
18.7. This Agreement, the Confidentiality Agreement, the Research
Agreement, the Debenture and the Parent Guarantee constitute the
entire agreement between the parties hereto in respect of such
subject matter hereof, and each party hereby confirms that it has
not relied upon any representation, warranty or undertaking other
than those expressly set out herein. Without prejudice to the
foregoing, each of the parties waives any right it or he may have to
any damages or rescission for any misrepresentation which is not
contained in these Agreements, or for breach
30
of any warranty not contained in these Agreements, unless and to the
extent such misrepresentation or warranty was made fraudulently.
19. The proper law of this Agreement shall be the law of England and Wales, and
the parties hereto submit to the non exclusive jurisdiction of the English
courts.
IN WITNESS whereof this Agreement has been entered into the day and year first
before written.
31
EXECUTED AND DELIVERED AS )
A DEED by FREEMEDIC PLC )
acting by:- )
Director:
Director/Secretary
EXECUTED AND DELIVERED AS )
A DEED by CARDIOTECH )
INTERNATIONAL LIMITED )
acting by:- )
Director:
Director/Secretary
EXECUTED AND DELIVERED AS )
A DEED by CARDIOTECH INTERNATIONAL )
INC. acting by:- )
)
Director:
Director/Secretary
32
SCHEDULE 1
----------
Terms of Loan
-------------
LOAN AMOUNT: (Pounds)252,942 advanced pursuant to Clauses
2.1.1 and 3.1 but excluding for the avoidance
of doubt any monies advanced pursuant to
Clauses 2.2 and 4.1.
INTEREST A fixed rate of 10% cumulative per annum to be
calculated up to the date of repayment or
conversion of the loan and to be paid or
credited as the case may in accordance with
this Agreement, together with the additional
sum of (Pounds)25,927 (calculated on the basis
of an additional interest penalty of 5%
cumulative per annum on the loan then
outstanding, calculated up to the expiry of the
Minimum Period and to be paid or credited
notwithstanding repayment or conversion of the
loan prior to the expiry of such Minimum
Period); PROVIDED THAT the additional sum will
not be paid or credited in the event of the
default or insolvency of Freemedic or the
Medical School hereunder or under the Research
Agreement;
REPAYMENT: Repayment of capital and interest to be subject
to the terms of the Loan Agreement.
SECURITY: The Security for the repayment or conversion of
the sum of (Pounds)252,942 together with all
accrued interest, calculated as set out above,
on the sum then outstanding shall be the
Debenture and the Parent Guarantee.
33
SCHEDULE 2
----------
DEBENTURE
---------
34
SCHEDULE 3
----------
PARENT GUARANTEE
----------------
35
SCHEDULE 4
----------
ACCOUNT DETAILS
---------------
Account Name: RFH/CTI Research Account
Account Number: 00000000
Sort Code: 40-33-10
Bank: Midland Bank Plc
00 Xxxx Xxxxxx
Xxxx
Xxxxxxxxxx
XX0 0XX
Authorised Signatories: Xxxx Xxxxxxx
Xxxxxxx Xxxxxxx
36
SCHEDULE 5
----------
SIDE LETTER
-----------
[TO BE TYPED ON THE NOTEPAPER OF FREEMEDIC PLC]
To:- The Board of Directors
Cardiotech International Inc.
00 Xxxxx Xxxxxx
Xxxxxx
Xxxxxxxxxxxxx XX00000
XXX
Dear Sirs
RESEARCH AND LICENCE AGREEMENTS
-------------------------------
We refer to the Research Agreement in respect of the Development of Vascular
Grafts entered into today between your subsidiary, Cardiotech International
Limited, and our parent, the Royal Free Hospital School of Medical, a copy of
which agreement is attached to this letter ("the Research Agreement").
Clause 5.5 of the Research Agreement provides that the Medical School will
procure that Freemedic will grant Cardiotech International Inc. a licence on the
terms set out in the Licence Agreement attached as Schedule 2 to the Research
Agreement ("the Licence Agreement"). In consideration of the payment by
Cardiotech International Inc. of the sum of (Pounds)1.00, Freemedic hereby
undertakes that upon the receipt by the Medical School of a written request from
Cardiotech International Limited in accordance with Clause 5.5 of the Research
Agreement, Freemedic will enter into the Licence Agreement with Cardiotech
International Inc. on the terms set out in the Licence Agreement.
Yours faithfully
FOR AND ON BEHALF OF FREEMEDIC PLC
----------------------------------
37
