-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R/PB66AFZWD8x9E0YF6bADr8bxvQczxUG2wrbblrGPBvV4P5lmefKM3u/vnPjgGC j/t8fbEjjt/5qrg8IFSZnA== 0000931763-01-501473.txt : 20010815 0000931763-01-501473.hdr.sgml : 20010815 ACCESSION NUMBER: 0000931763-01-501473 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOVOSTE CORP /FL/ CENTRAL INDEX KEY: 0001012131 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 592787476 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20727 FILM NUMBER: 1711402 BUSINESS ADDRESS: STREET 1: 3890 STEVE REYNOLDS BLVD CITY: NORCROSS STATE: GA ZIP: 30093 BUSINESS PHONE: 7707170904 MAIL ADDRESS: STREET 1: 4350 C INTERNATIONAL BLVD CITY: NORCROSS STATE: GA ZIP: 30093 10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities --- Exchange Act of 1934. For the quarterly period ended June 30, 2001 Transition period pursuant to Section 13 or 15(d) of the Securities --- Exchange Act of 1934. For the transition period from to . ------------- -------------- 0-20727 ------- (Commission File Number) Novoste Corporation ------------------- (Exact Name of Registrant as Specified in Its Charter) Florida 59-2787476 ------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 3890 Steve Reynolds Blvd., Norcross, GA 30093 --------------------------------------- -------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone, including area code: (770) 717-0904 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. (Item 1) Yes X No ----- ----- (Item 2) Yes X No ----- ----- As of August 1, 2001 there were 16,203,807 shares of the Registrant's Common Stock outstanding. NOVOSTE CORPORATION FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION PAGE NO. -------- Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of June 30, 2001 (unaudited) and December 31, 2000............................................ 3 Consolidated Statements of Operations (unaudited) for the six months ended June 30, 2001 and 2000.............................. 4 Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2001 and 2000.............................. 5 Notes to Unaudited Consolidated Financial Statements............... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................. 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk......... 14 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds.......................... 14 Item 4. Submission of Matters to a Vote of Security Holders................ 14 Item 5. Other Information.................................................. 15 Item 6. Reports on Form 8-K................................................ 15 SIGNATURES...................................................................... 16
2 NOVOSTE CORPORATION UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, 2001 December 31, 2000 ------------- ----------------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 7,792,055 $ 26,512,398 Short-term investments 28,845,851 30,655,436 Accounts receivable, net of allowance of $599,244 at June 30, 2001 and $311,310 at December 31, 2000 13,270,313 4,469,781 Inventories 2,391,803 1,251,687 Prepaid expenses and other current assets 802,243 482,383 ------------- ------------- Total current assets 53,102,265 63,371,685 ------------- ------------- Property and equipment, net 8,895,904 7,277,734 Radiation and transfer devices, net 8,805,691 5,480,948 Other assets 1,309,708 942,427 ------------- ------------- Total assets $ 72,113,568 $ 77,072,794 ============= ============= Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 2,910,741 $ 3,425,250 Accrued expenses 7,895,137 5,415,277 Unearned revenue 3,069,427 580,817 Capital lease obligations 123,807 208,805 ------------- ------------- Total current liabilities 13,999,112 9,630,149 ------------- ------------- Long-term liabilities Capital lease obligations 475,152 400,526 ------------- ------------- Shareholders' equity: Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued and outstanding -- -- Common stock, $.01 par value, 25,000,000 shares authorized; 16,184,184 and 16,094,635 shares issued, respectively 161,842 160,946 Additional paid-in-capital 186,517,178 184,511,610 Other accumulated comprehensive loss (1,336,726) (93,690) Accumulated deficit (126,199,861) (116,274,687) ------------- ------------- 59,142,433 68,304,179 Less treasury stock, 5,780 shares of common stock at cost (23,840) (23,840) Unearned compensation (1,479,289) (1,238,220) ------------- ------------- Total shareholders' equity 57,639,304 67,042,119 ------------- ------------- Total liabilities and shareholders' equity $ 72,113,568 $ 77,072,794 ============= =============
See accompanying notes. 3
NOVOSTE CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended June 30, Six months ended June 30, ------------------------------- -------------------------------- 2001 2000 2001 2000 ------------------------------- -------------------------------- Net Sales $17,290,707 $ 1,197,647 $ 26,581,336 $ 2,043,693 Cost of Sales 5,725,840 770,013 9,470,344 1,523,393 ----------- ----------- ------------ ------------ Gross Margin 11,564,867 427,634 17,110,992 520,300 ----------- ----------- ------------ ------------ Operating expenses Research and Development 3,724,430 4,250,381 7,320,567 8,725,921 Sales and Marketing 9,149,095 2,987,702 16,435,329 5,357,206 General and Administrative 2,576,296 1,367,654 4,486,996 2,415,155 ----------- ----------- ------------ ------------ Total operating expenses 15,449,820 8,605,737 28,242,892 16,498,282 ----------- ----------- ------------ ------------ Loss from operations (3,884,953) (8,178,103) (11,131,900) (15,977,982) ----------- ----------- ------------ ------------ Interest income 606,169 1,053,899 1,247,854 1,661,575 Interest expense (17,822) (4,929) (41,128) (11,668) ----------- ----------- ------------ ------------ 588,347 1,048,970 1,206,726 1,649,907 ----------- ----------- ------------ ------------ Net loss $(3,296,606) $(7,129,133) $ (9,925,174) $(14,328,075) =========== =========== ============ ============ Net loss per share Basic & Diluted $ (0.20) $ (0.45) $ (0.62) $ (0.95) =========== =========== ============ ============ Weighted average shares outstanding 16,131,974 15,865,441 16,104,834 15,067,015 =========== =========== ============ ============
See accompanying notes. 4 NOVOSTE CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2001 2000 ------------- ------------- Cash flows from operating activities: Net loss $ (9,925,174) $(14,328,075) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 1,145,248 626,219 Issuance of stock for services or compensation 1,076,614 212,351 Amortization of deferred compensation (241,069) 295,132 Amortization of radiation & transfer devices 1,440,662 -- Provision for doubtful accounts 287,934 -- Changes in assets and liabilities: Accounts receivable (9,088,466) (857,413) Inventory (1,140,116) 1,717,211 Prepaid expenses (319,860) (144,526) Accounts payable (514,509) 545,071 Accrued expenses 2,479,860 (427,918) Unearned revenue 2,488,610 46,481 Other assets (1,610,317) (4,734) ------------ ------------ Net cash used by operations (13,920,582) (12,320,201) ------------ ------------ Cash flow from investing activities: Maturity of short-term investments 1,809,585 10,223,458 Purchase of property and equipment (2,658,484) (1,742,848) Purchase of radiation and transfer devices (4,765,405) (2,451,128) ------------ ------------ Net cash (used) provided by investing activities (5,614,304) 6,029,452 ------------ ------------ Cash flows from financing activities: Proceeds from issuance of common stock 929,850 54,264,162 Repayment of capital lease obligations (115,307) -- ------------ ------------ Net cash provided by financing activities 814,543 54,264,162 ------------ ------------ Net (decrease) increase in cash and cash equivalents (18,720,343) 47,973,413 Cash and equivalents at beginning of period 26,512,398 7,091,025 ------------ ------------ Cash and cash equivalents at end of period $ 7,792,055 $ 55,064,438 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW Information: Cash paid for interest on capital lease obligation $ (31,027) $ -- Non-cash investing and financing activities: Assets acquired under capital lease $ 105,000 $ --
See accompanying notes. 5 NOVOSTE CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2001 NOTE 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with instructions to Article 10 of Regulation S-X. Accordingly, such consolidated financial statements do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results of the interim periods presented are not necessarily indicative of the results to be achieved for the year ending December 31, 2001. The accompanying consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2000 included in the Company's 2000 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"). The consolidated financial statements include the accounts of Novoste Corporation and its wholly owned subsidiaries incorporated in August 1998 in The Netherlands, in December 1998 in Belgium, in February 1999 in Germany and in January 2000 in France. Significant intercompany transactions and accounts have been eliminated. NOTE 2. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Cash equivalents are comprised of certain highly liquid investments with maturities of less than three months at the time of their acquisition. In addition to cash equivalents, the Company has investments in commercial paper that are classified as short-term (mature in more than 90 days but less than one year from the date of acquisition). Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Investments held-to-maturity are carried at amortized cost, adjusted for the amortization or accretion of premiums or discounts without recognition of gains or losses that are deemed to be temporary. Premiums and discounts are amortized or accreted over the life of the related instrument as an adjustment to yield using the straight-line method, which approximates the effective interest method. Interest income is recognized when earned. Marketable equity securities and debt securities not classified as held-to- maturity are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in a separate component of shareholders' equity, if significant. The amortized cost of debt securities in this category is adjusted for amortization included in investment income. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in investment income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in investment income. At June 30, 2001 fair value approximated net book value for all short-term investments and all were considered available for sale and have been accounted for as such. The effect of exchange rates on cash and cash equivalents was insignificant for the three and six month period ended June 30, 2001 and 2000. NOTE 3. ACCOUNTS RECEIVABLE Accounts receivable at June 30, 2001 and December 31, 2000 includes receivables due from product sales and amounts due under lease arrangements relating to radiation and transfer devices (see Note 5. Radiation and Transfer Devices). The carrying amounts reported in the consolidated balance sheets for accounts receivable approximate their fair value. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Management records estimates of expected credit losses and returns of product sold. Bad debt expense for the six month period ended June 30, 2001 amounted to approximately $12,000. There was no bad debt expense recorded for the six month period ended June 30, 2000. 6 NOTE 4. INVENTORIES Inventories are stated at the lower of cost or market on a first-in, first-out (FIFO) basis and are comprised of the following: June 30, 2001 December 31, 2000 ------------- ----------------- Raw Materials $ 995,403 $ 777,819 Work in Process 483,487 218,958 Finished Goods 912,913 254,910 ---------- ---------- Total $2,391,803 $1,251,687 ========== ========== NOTE 5. RADIATION AND TRANSFER DEVICES The Company retains ownership of the radiation source trains (RSTs) and transfer devices (TDs). During 1999, the Company was the lessor of RSTs and TDs under annual sales-type lease agreements expiring through December 2000. During the second quarter of 2000, the Company determined that based upon experience, testing and discussions with the FDA the estimated useful life of RSTs and TDs would exceed one year. Accordingly, the Company has reclassified these assets from inventory to a long-term asset named, radiation and transfer devices. Depreciation of the costs of these assets, which is included in cost of sales, will be over their estimated useful lives (currently estimated at 18 months) using the straight-line method and will begin once the Beta-Cath(TM) System is placed into service. Concurrent with the change in estimated life, the RST and TD annual agreements to license the use of the radiation and transfer devices are classified by the Company as operating leases. At June 30, 2001, equipment with a cost of approximately $6,568,000 before accumulated depreciation of approximately $1,441,000 was under operating leases. Approximately $3,678,000 of radiation and transfer devices were available for lease at June 30, 2001. At June 30, 2001, amounts receivable under these operating leases approximated $1,555,000 and are recorded in accounts receivable. Radiation and transfer devices are stated at cost and are comprised of the following: June 30, 2001 December 31, 2000 ------------- ----------------- Radiation and Transfer Devices $10,246,353 $5,612,763 Less: Accumulated Depreciation 1,440,662 131,815 ----------- ---------- Total $ 8,805,691 $5,480,948 =========== ========== NOTE 6. BASIC AND DILUTED LOSS PER SHARE The basic and diluted loss per share is computed based on the weighted average number of common shares outstanding. Common equivalent shares are not included in the per share calculations where the effect of their inclusion would be antidilutive. Options to purchase shares of common stock are not included in the computation of diluted loss per share since the effect would be antidilutive. NOTE 7. SEGMENT INFORMATION SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131") requires the reporting of segment information based on the information provided to the company's chief operating decision maker for purposes of making decisions about allocating resources and accessing performance. The Company's business activities are represented by a single industry segment, the manufacture and distribution of medical devices. For management purposes, the Company is segmented into three geographic areas: North America, Europe and the Rest of World (Asia and South America) 7 The Company's net sales by geographic area are as follows: Six Months Ended June 30, ------------------------- Rest of United States Europe World Consolidated ------------- ------ ------- ------------ 2001 $24,028,800 $2,124,193 $428,343 $26,581,336 2000 125,000 1,674,770 243,923 2,043,693 At June 30, 2001 and 2000, the Company's net assets outside of the United States, consisting principally of cash and cash equivalents, accounts receivable, inventory and office equipment, were approximately $5,696,000 and $2,819,000, respectively. NOTE 8. SHAREHOLDERS' EQUITY For the three and six month period ended June 30, 2001, changes in shareholders' equity consisted of the following: Three Months Six Months ------------ ---------- Shareholders' Equity at beginning of period $60,688,999 $67,042,119 Proceeds from exercise of 24,112 and 70,676 stock options ranging from $3.20 to $27.00 per share 274,703 885,366 Proceeds from issuance of stock under employee stock purchase plan, 18,873 shares on 4/2/01 at $14.93 per share 281,738 281,738 Deferred compensation relating to issuance of certain stock options 839,360 839,360 Amortization of unearned compensation (419,076) (241,069) Comprehensive loss: Translation adjustment (729,813) (1,243,036) Net loss (3,296,607) (9,925,174) ----------- ------------ Total comprehensive loss (4,026,420) (11,168,210) ----------- ------------ Shareholders' Equity at June 30, 2001 $57,639,304 $ 57,639,304 =========== ============ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD LOOKING INFORMATION The statements contained in this Form 10-Q that are not historical are forward- looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the expectations, beliefs, intentions or strategies regarding the future. The Company intends that all forward-looking statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company's views as of the date they are made with respect to future events and financial performance, but are subject to many uncertainties and risks which could cause the actual results of the Company to differ materially from any future results expressed or implied by such forward-looking statements. Some of these risks are discussed below and in the section "Certain Factors That May Impact Future Operations." Additional risk factors are discussed in other reports filed by the Company from time to time on Forms 10-K, 10-Q and 8-K including the Company's annual report on Form 10-K for the year ended December 31, 2000. The Company does not undertake any obligations to update or revised any forward-looking statement, made by it or on its behalf, whether as a result of new information, future events, or otherwise. OVERVIEW Novoste commenced operations as a medical device company in May 1992. Since 1994, we have devoted substantially all of our efforts to developing the Beta- Cath(TM) System. On November 3, 2000, Novoste received U.S. marketing approval for the 30-millimeter Beta-Cath(TM) System from the FDA for use in patients suffering from "in-stent restenosis", a condition in which coronary stents become clogged with new tissue growth. On June 18, 2001, Novoste received US marketing approval for the 40-millimeter Beta-Cath(TM) System from the FDA. Since our inception, through June 30, 2001, we experienced significant losses in each period. The Company commenced the active marketing of the Beta-Cath(TM) System in Europe in January 1999. Although revenues are growing since the introduction of the Beta-Cath(TM) System in the U.S. market, we do not have significant experience in manufacturing, marketing or selling our products in quantities necessary for achieving profitability. At June 30, 2001, we had an accumulated deficit of approximately $126.2 million. We expect to continue to incur operating losses through at least 2001 as we continue to allocate resources to increasing our manufacturing operations, both internally and with outside vendors, continue to invest in expanding our sales and marketing efforts in support of United States market development and continue to increase our administrative activities to support our growth. At the same time we will continue to conduct clinical trials and research and development projects in order to expand the opportunities for our technology. While the Beta-Cath(TM) System has been approved by the FDA for use in patients suffering from in-stent restenosis, future clinical trials may not demonstrate the safety and effectiveness of other or different applications or utilizations of the product. Additionally, the hospitals and catheterization labs that will be our customers may not obtain necessary approvals for the Beta-Cath(TM) System from the state, federal or foreign governmental agencies that regulate the medical use of radiation. Our research and development efforts may not be successfully completed. Manufacturing of our products may be delayed by production problems or our vendors may be unable to produce sufficient quantities to meet our needs. The Company also faces intense competition in the field of vascular brachytherapy with companies that have significantly greater capital resources than Novoste. New technologies under development, including coated stents, pose additional competitive threats in treating restenosis. We may not successfully sustain an acceptable level of market demand for Beta- Cath(TM) System or any other product we develop. We may never achieve significant revenues from sales of our Beta-Cath(TM) System and we may never achieve or sustain profitability. 8 RESULTS OF OPERATIONS Net loss for the three months ended June 30, 2001 was $3,296,606 or ($.20) per share, as compared to $7,129,133 or ($.45) per share, for the three months ended June 30, 2000. Net loss for the six months ended June 30, 2001 was $9,925,174, or ($.62) per share, as compared to $14,328,075 or ($.95) per share, for the six months ended June 30, 2000. The decrease in net loss for the three and six months ended June 30, 2001 compared to the year earlier period was primarily due to an increase in revenue from sales in the U.S. market from its commercial launch of the Beta-Cath(TM) System. Net Sales. Net sales of $17,290,707 and $26,581,336 were recognized in the - ---------- three and six months ended June 30, 2001 as compared to net sales of $1,197,647 and $2,043,693 for the three and six months ended June 30, 2000. Net sales increased in both the three and six month periods due to sales of the Beta- Cath(TM) System in the U.S., following FDA pre-market approval of the system in November 2000. Net sales in the U.S. comprised approximately 90% of all net sales for the first six months of 2001. The significant growth in net sales in second quarter 2000 was primarily due to the rapid growth in the number of new hospitals leasing the Beta-Cath(TM) System in the U.S. as well as continued utilization in the existing sites. The Company added over 100 sites for the three months ended June 30, 2001 for a total of over 200 new sites for the year. The Company expects net sales to increase in the future as direct distribution is expanded in the U.S. The Company expects utilization to increase in the future with the recent FDA approval of the 40mm radiation source train and the radiation license guidance changes and anticipated reimbursement by third parties. Cost of Sales. Cost of sales for the three months ended June 30, 2001 were - ------------- $5,725,840 resulting in a gross margin of 66.9%, compared to cost of sales of $770,013 and gross margin of 35.7% for the same period of 2000. Cost of sales were $9,470,344 for the six months ended June 30, 2001 resulting in a gross margin of 64.4% as compared to cost of sales of $1,523,393 and a gross margin of 25.5% for the six months ended June 30, 2000. Cost of Sales includes raw material, labor and overhead to manufacture catheters as well as the amortized costs of transfer devices and radiation source trains used in the Beta-Cath(TM) System. The Company expects cost of sales to increase as sales activities in the U.S. continue to grow. However, cost of sales are expected to continue to grow at a slower pace than sales as the manufacturing facility continues to utilize capacity of the current plant and therefore increase gross margin. Research and Development Expenses. Research and Development expenses decreased - ---------------------------------- 12% to $3,724,430 for the three months ended June 30, 2001 from $4,250,381 for the three months ended June 30, 2000. For the six months ended June 30, 2001 research and development expenses decreased 16% to $7,320,567 from $8,725,921 for the same period a year earlier. These decreases were primarily the result of decreased clinical trial activity related to the completion of pivotal trials and the elimination of costs associated with enrollments such as the costs of supplying product to clinical sites. However, the Company expects research and development expenses to increase as a result of anticipated new clinical trial activity. Sales and Marketing Expenses. Sales and marketing expenses increased 206% to - ----------------------------- $9,149,095 for the three months ended June 30, 2001 from $2,987,702 for the three months ended June 30, 2000. For the six months ended June 30, 2001 sales and marketing expenses were $16,435,329 as compared to $5,357,206 for the six months ended June 30, 2000, an increase of 207%. These increases were primarily the result of additional sales and customer support personnel, training, trade show, consulting and promotional literature costs associated with marketing the Company's product on a direct basis in the U.S. as we launched the new Beta- Cath(TM) System in the U.S. The Company has built up a solid base of sales and marketing infrastructure to penetrate the market rapidly and expects sales and marketing expenses to increase in the future as direct distribution is expanded in the U.S., but expects a slower rate of increase as a percent of net sales. The Company expects that its recently modified sales commission program, which recognizes the completion of the initial product launch in the US and generally reduces the commission percentage on net sales beyond certain thresholds, will reduce commission expense as a percentage of net sales in the future. General and Administrative Expenses. General and administrative expenses for - ------------------------------------ the three and six months ended June 30, 2001 were $2,576,296 and $4,486,996 as compared to the three and six months ended June 30, 2000 of $1,367,654 and $2,415,155, and increase of 88% and 86%, respectively. The increase for the three and six month period was primarily the result of additional management personnel at higher salaries and information systems costs. Given the continued revenue growth, the Company expects general and administrative expenses to increase in the future in support of a higher level of operations, but at a slower rate as a percentage of net sales. Interest Income. Net interest income decreased 44% to $588,347 for the three - ---------------- months ended June 30, 2001 from $1,048,970 for the three months ended June 30, 2000. Net interest income decreased 27% to $1,206,726 for the six months ended June 30, 2001 from $1,649,907 for the six months ended June 30, 2000. The decrease in interest income for the three and six months was primarily due to the decrease in average cash equivalent and short-term investment balances combined with falling interest rates. LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 2001 and 2000, the Company used cash to fund operations of $13.9 million and $12.3 million, respectively. The increase in cash used by operating activities of $1.6 million for 2001 over 2000 was primarily attributable to (i) $8.2 million funding of accounts receivable due to the growth in sales of the Beta-Cath(TM) System related to the initial market launch in the US, (ii) $2.8 million used to fund the purchase of increased levels of inventory, (iii) $.2 million used for prepaid expenses, (iv) $1.1 million used to pay accounts payable, and (v) $1.6 million increase in other assets, offset by (i) $4.4 million decrease in net loss, (ii) $2.6 million increase in earnings related to non-cash items, (iii) $2.9 million provided by accrued expenses, and (iv) $2.4 million increase in unearned revenue related to revenue recognized on radiation and transfer devices. Net cash used by investing activities for the six months ended June 30, 2001 was $5.6 million and net cash provided by investing activities for the six months ended June 30, 2000 was $6.0 million. The $11.6 million increase in cash used in 2001 compared to 2000 was due to $8.4 million in short-term investments that matured, $.9 million to purchase additional property and equipment and $2.3 million used to buy radiation and transfer devices related to the increase in demand for our Beta-Cath(TM) System. Our financing activities include equity offerings and borrowings and repayments of capital leases. Financing activities for the six months ended June 30, 2001 and 2000 provided net cash of $.8 million and $54.3 million, respectively. The change of $53.5 million resulted primarily from receiving net proceeds of $49.0 million in april 2000 for a private placement offering plus $5.3 million from the exercise of stock options during the six months ended June 30, 2000 and $.9 million from the exercise of stock options during the same period in 2001. In addition, the Company repaid $.1 million for capital leases of computer equipment. On April 7, 2000 we completed a private placement offering, in which we sold 1,463,500 shares of our common stock at $35.00 per share. The placement raised net proceeds of approximately $49 million, of which $5 million was received during the second quarter. After the offering, we had 15.85 million shares of common stock outstanding. The Company also received approximately $2 million for the quarter and $5.3 million for the six months ended June 30, 2000 from the exercise of stock options. In 2001, the Company received $.9 million from the exercise of stock options, all received during the second quarter of 2001. At June 30, 2001, the Company had commitments to purchase $7.1 million in inventory components of the Beta-Cath(TM) System over the next year. In addition, on October 14, 1999, the Company signed a development and manufacturing supply agreement with AEA Technologies QSA GmbH for a second source of radioisotope supply and for the development of a smaller diameter source. This agreement provides for the construction of a production line over the period October 1, 1999 to January 2002. The cost of this production line is estimated at $4.0 million and is being paid by the Company 9 as construction progresses. Through June 30, 2001, the Company has paid $3.1 million towards this commitment. Significant proportions of key components and processes relating to the Company's products are purchased from single sources due to technology, availability, price, quality, and other considerations. Key components and processes currently obtained from single sources include isotopes, protective tubing for catheters, proprietary connectors, and certain plastics used in the design and manufacture of the transfer device. In the event a supply of a key single-sourced material or component was delayed or curtailed, the Company's ability to produce the related product in a timely manner could be adversely affected. The Company attempts to mitigate these risks by working closely with key suppliers regarding the Company's product needs and the maintenance of strategic inventory levels. The Company has entered into a license agreement with a physician pursuant to which he is entitled to receive a royalty on the net sales of the Beta-Cath(TM) System (excluding consideration paid for the radioactive isotope), subject to a maximum payment of $5,000,000. Royalty fees to the physician aggregated $273,944 and $17,024 for the six months ended June 30, 2001 and 2000, respectively, and have been expensed in Cost of Sales. On January 30, 1996, the Company entered into a license agreement whereby Emory University assigned its claim to certain technology to the Company for royalties based on net sales (as defined in the agreement) of products derived from such technology, subject to certain minimum royalties. The royalty agreement term is consistent with the life of the related patent and applies to assignments of the patent technology to a third party. Royalty fees to Emory University aggregated $573,500 and $41,647 for the six months ended June 30, 2001 and 2000, respectively, and have been expensed in Cost of Sales. The Company's principal source of liquidity at June 30, 2001 consisted of cash, cash equivalents and short-term investments of $36.6 million. The Company did not have any credit lines available or outstanding borrowings at June 30, 2001. The Company anticipates that its operating losses will continue through at least the third quarter of 2001 as it continues to expend additional resources to expand sales and marketing activities. We believe that our existing capital resources will be sufficient to fund the Company until it reaches a positive operating cash flow. The Company expects that given its current rate of revenue growth, it will continue to have sufficient cash flow to support growth of the business in the US and the Company also feels it will have sufficient cash reserves until it is able to sustain a positive cash flow by early in 2002. The Company's future liquidity and capital requirements will depend upon numerous factors, including, among others: market acceptance and demand for its products; the resources required to maintain a direct sales force in the United States and in the larger markets of Europe, develop distributors internationally, and to continue to expand manufacturing capacity; the resources the Company devotes to the development, manufacture and marketing of its products; the receipt of and the time required to obtain additional regulatory clearances and approvals; the resources required to gain such approvals; and the progress of the Company's clinical research and product development programs. Novoste may in the future seek to raise additional funds through bank facilities, debt or equity offerings or other sources of capital. Additional financing, if required, may not be available on satisfactory terms, or at all. CERTAIN FACTORS THAT MAY IMPACT FUTURE OPERATIONS We depend on the successful development and commercialization of the Beta-Cath (TM) System. We began to commercialize the Beta-Cath(TM) System in the United States in November 2000 and our distribution system in Europe and certain Asian countries are still being developed. Substantially all of our revenue in the first half of 2001 has been from sales in the United States. We anticipate that for the foreseeable future we will be solely dependent on the continued successful development and commercialization of the Beta-Cath(TM) System. Our failure to continue commercialization of the Beta-Cath(TM) System would have a material adverse effect on our business, financial condition and results of operations. The Beta-Cath(TM) System received FDA approval for the 30-millimeter system on November 3, 2000 and on June 18, 2001, the Company received FDA approval for the 40-millimeter system; however, we may be unable to: . manufacture the Beta-Cath(TM) System in commercial quantities at acceptable costs; . gain any significant degree of market acceptance of the Beta-Cath(TM) System among physicians, patients and/or health care payors; . broaden the Beta-Cath(TM) system marketability by obtaining approval for additional applications of our product; or 10 . demonstrate that the Beta-Cath(TM) System is an attractive and cost- effective alternative or complement to other procedures, including coronary stents, competing vascular brachytherapy devices, or other competitive technologies. Commercialization of the Beta-Cath(TM) System in Europe is subject to certain additional risks. Physicians in Europe are generally less receptive to and slower to adopt new medical devices and technologies than physicians in the United States due to various factors, including the influence of national health care policies and reimbursement strategies of health care payers. We may never achieve significant revenue from sales in Europe or ever achieve or sustain profitability in our European operations. Our sales in selected European countries and several other countries aggregated approximately $1.8 million in 1999, approximately $4.2 million in 2000 and approximately $2.1 million for the first six months of 2001. WE HAVE LIMITED OPERATING HISTORY; WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES THROUGH AT LEAST THE THIRD QUARTER OF 2001. We have a limited history of operations. Since our inception in May 1992, we have been primarily engaged in developing and testing our Beta-Cath(TM) System. We have generated only limited revenue and do not have significant experience in manufacturing, marketing or selling our products in quantities necessary for achieving or sustaining profitability. At June 30, 2001, we had accumulated a deficit of approximately $126.2 million since our inception in 1992. The commercialization of the Beta-Cath(TM) System and other new products, if any, will require substantial additional development, clinical, regulatory, manufacturing, sales and marketing and other expenditures. We expect our operating losses to continue through at least the third quarter of 2001 as we continue to expand our product development, clinical trials and marketing efforts. We may never: . achieve commercial success in the sale of the Beta-Cath(TM) System or any other product in any countries in which we have received the necessary governmental approvals to market these products; or . achieve or sustain profitability. WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL REGULATORY APPROVALS TO EXPAND BETA-CATH(TM) SYSTEM PRODUCT OFFERINGS OR TO BE ABLE TO MARKET THE BETA-CATH(TM) SYSTEM TO TREAT A BROADER RANGE OF INDICATIONS FOR THE UNITED STATES On November 3, 2000, we received marketing approval from the FDA for the 30mm Beta-Cath(TM) System. On June 18, 2001, we received marketing approval from the FDA for the 40mm Beta-Cath(TM) System. These approvals limit our ability to promote the Beta-Cath(TM) System for use with patients who are being treated for "in-stent" restenosis in a single coronary artery with a 30-millimeter radiation source train or a 40-millimeter radiation source train. In order to market the Beth-Cath(TM) System with radiation source trains longer than 40-millimerters, we will likely be required to demonstrate to the FDA that a longer source train is safe and effective. In order to market the Beta-Cath(TM) System for a broader range of patients, we may seek to expand the indications for which the Beta- Cath(TM) System can be marketed to, for example, patients undergoing balloon angioplasty of previously untreated (de novo) lesions. In order to market the Beta-Cath(TM) System for use with (1) further product design enhancements, such as a 60-millimeter radiation source train or modifications to the catheter or (2) a broader range of indications, including stand alone balloon angioplasty or previously untreated (de novo) lesions, we will likely be required to demonstrate to the FDA through additional clinical trials that the Beta-Cath(TM) System is safe and effective with such product design enhancement(s) or in treating a broader range of indications and the FDA must approve a pre-market approval application or application supplement covering the product design enhancement(s) or the broader range of indications for the device. The process of obtaining a pre-market approval and other required regulatory approvals can be expensive, uncertain and lengthy, and we may be unsuccessful in obtaining additional approvals to market the Beta-Cath(TM) System. We may encounter significant difficulties and costs in our efforts to obtain additional FDA approvals that could delay or preclude us from selling new products in the United States. Furthermore, the FDA may request additional data or require that we conduct further clinical studies, causing us to incur substantial cost and delay. In addition, the FDA may impose strict labeling requirements, onerous operator training requirements or other requirements as a condition of our pre- market approval, any of which could limit our ability to market our systems. Labeling and marketing activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. FDA enforcement policy strictly prohibits the marketing of FDA cleared or approved medical devices for unapproved uses. Further, if a company wishes to modify a product after FDA approval of a pre-market approval, including any changes that could affect safety or effectiveness, additional approvals will be required by the FDA. Such changes include, but are not limited to: new indications for use, the use of a different facility to manufacture, changes to process or package the device, changes in vendors to supply components, changes in manufacturing methods, changes in design specifications and certain labeling changes. Failure to receive or delays in receipt of FDA approvals, including the need for additional clinical trials or data as a prerequisite to approval, or any FDA conditions that limit our ability to market our systems, could have a material adverse effect on our business, financial condition and results of operations. Sales of the Beta-Cath(TM) System outside the United States are subject to regulatory requirements that vary widely from country to country but generally include pre-marketing governmental approval. The time required to obtain approval for sale in foreign countries may be longer or shorter than required for FDA approval, and the requirements for the conduct of clinical trials, marketing authorization, pricing and reimbursement differ from those in the United States. Moreover, the export of medical devices from the United States must be in compliance with FDA regulations. In August 1998 we qualified to apply CE marking to the Beta-Cath(TM) System, a requirement necessary to sell our device in most of Western Europe. In August of 2001 we qualified to apply CE marking to the Beta-Cath(TM) 3.5F System. We are subject to continuing audit and reporting requirements related to this marking. We may be delayed or precluded from marketing the Beta-Cath(TM) System in other foreign countries. Foreign pre- market and other regulatory approvals of the Beta-Cath(TM) System, if granted, may include significant limitations on the indicated uses for which the device may be marketed. Our business involves the import, export, manufacture, distribution, use and storage of Strontium-90 (Strontium/Yttrium), the beta-emitting radioisotope utilized in the Beta-Cath(TM) System 's radiation source train. Accordingly, manufacture, 11 distribution, use and disposal of the radioactive material used in the Beta- Cath(TM) System in the United States will be subject to federal, state and/or local rules relating to radioactive material. On August 4, 2000, the State of Georgia Department of Natural Resources (DNR) issued a sealed source and device registration certificate for the Company's Beta-Cath(TM) System, allowing it to be listed on the Nuclear Regulatory Commission's Sealed Source and Device Registry. The Company, in addition, must comply with NRC, Georgia and United States Department of Transportation regulations on the labeling and packaging requirements for shipment of radiation sources to hospitals or other users of the Beta-Cath(TM) System. Further, hospitals and/or physicians in the United States may be required to amend their radiation licenses to hold, handle and use Strontium-90 prior to receiving and using our Beta-Cath(TM) System. Hospitals in the United States are required to have radiation licenses to hold, handle and use radiation. Many of the hospitals and/or physicians in the United States will be required to amend their radiation licenses to include Strontium- 90 prior to receiving and using our Beta-Cath(TM) System. Depending on the state that the hospital is located in, its license amendment will be processed by the State's nuclear regulatory agency in agreement states, or by the NRC. Obtaining any of the foregoing radiation-related approvals and licenses can be complicated and time consuming and may take longer in the NRC States (sixteen states). If a significant number of hospitals are delayed in obtaining any of the foregoing approvals or any of those approvals are not obtained, our business, financial condition and results of operations could be materially adversely affected. THE INDUSTRY IN WHICH WE PARTICIPATE IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND INTENSE COMPETITION. Competition in the medical device industry, and specifically the markets for cardiovascular devices, is intense and characterized by extensive research and development efforts and rapidly advancing technology. New developments in technology could render vascular brachytherapy generally or the Beta-Cath(TM) System in particular noncompetitive or obsolete. Vascular brachytherapy may compete with other treatment methods designed to improve outcomes from coronary artery procedures that are well established in the medical community, such as coronary stents. Stents are the predominant treatment currently utilized to reduce the incidence of coronary restenosis following PTCA and were used in approximately 75% of all PTCA procedures performed worldwide in 2000. Manufacturers of stents include Johnson & Johnson, Medtronic, Inc., Guidant Corporation and Boston Scientific Corporation. Stent manufacturers often sell many products used in the cardiac catheterization labs, commonly referred to as cath labs, and as discussed below, certain of these companies are developing vascular brachytherapy devices. Also on November 3, 2000, the FDA approved Johnson & Johnson's CHECKMATE(TM) System, a gamma radiation vascular brachytherapy device. Guidant has publicly disclosed that it anticipates FDA pre-marketing approval of its beta radiation device in the third quarter of 2001. Johnson & Johnson, and if it receives FDA approval, Guidant, compete directly with Novoste for market acceptance of vascular brachytherapy and has substantially greater capital resources and greater resources and experience at introducing new products than does Novoste. We may not be able to compete effectively against Johnson & Johnson or Guidant. Many of these same companies and others are researching coatings and treatments to coronary stents that could reduce restenosis and possibly be more acceptable to a medical community already experienced at using stents. Recently, results from early non-randomized trials were reported as eliminating restenosis. Extensive clinical trials will need to be completed in order to confirm these results, however, positive information from these trials could have a negative impact on the ultimate acceptability of vascular brachytherapy and the Company's stock price. Many of our competitors and potential competitors have substantially greater capital resources than we do and also have greater resources and expertise in the area of research and development, obtaining regulatory approvals, manufacturing and marketing. Our competitors and potential competitors may succeed in developing, marketing and distributing technologies and products that are more effective than those we will develop and market or that would render our technology and products obsolete or noncompetitive. Additionally, many of the competitors have the capability to bundle a wide variety of products in sales to cath labs. We may be unable to compete effectively against such competitors and other potential competitors in terms of manufacturing, marketing, distribution, sales and servicing. WE HAVE LIMITED MANUFACTURING EXPERIENCE AND MAY ENCOUNTER DIFFICULTIES IN SCALING-UP PRODUCTION. To date, we have not yet successfully commercialized the Beta-Cath(TM) System in order to sustain profitability. To achieve profitability, the Beta-Cath(TM) System must be manufactured in commercial quantities in compliance with regulatory requirements and at acceptable costs. Production in commercial quantities has required us to expand our manufacturing capabilities and to hire and train additional personnel. We do not have significant experience in manufacturing our products in commercial quantities. We may encounter difficulties in scaling up production, including problems involving production yields, quality control and assurance, component supply and shortages of qualified personnel. Difficulties encountered in manufacturing scale up could have a material adverse effect on our business, financial condition and results of operations. We cannot assure that future-manufacturing difficulties, which could have a material adverse effect on our business, financial condition and results of operations, will not occur. THE PRICE OF OUR STOCK IS SUBJECT TO VOLATILITY AND FLUCTUATIONS AND WILL DEPEND ON OPERATING RESULTS. The market price of our common stock could decline below the public offering price. Specific factors relating to our business or broad market fluctuations may materially adversely affect the market price of our common stock. The trading price of our common stock could be subject to wide fluctuations in response to quarter-to-quarter variations in operating results, announcements of technological innovations, new products or clinical data announced by us or our competitors, governmental regulatory action, developments with respect to patents or proprietary rights, general conditions in the medical device or cardiovascular device industries, changes in earnings estimates by securities analysts, or other events or factors, many of which are beyond our control. In addition, the stock market has experienced extreme price and volume fluctuations, which have particularly affected the market prices of many medical device companies and which have often been unrelated to the operating performance of such companies. Our revenue or operating results in future quarters may be below the expectations of securities analysts and investors. In such an event, the price of our common stock would likely decline, perhaps substantially. During the six month period ended June 30, 2001, the closing price of our common stock ranged from a high of $39.50 per share to a low of $13.00 per share and ended that period at $25.50 per share. WE DEPEND ON THE PROTECTION PROVIDED BY OUR ISSUED PATENT AND PENDING PATENT APPLICATIONS, WHICH MAY BE CHALLENGED. Our policy is to protect our proprietary position by, among other methods, filing United States and foreign patent applications. On November 4, 1997 we were issued United States Patent No. 5,683,345, on May 4, 1999 we received United States Patent No. 5,899,882 (which is jointly owned by us and Emory University) and on January 11, 2000 we received United States Patent No. 6,013,020, all related to the Beta Cath(TM) System. We also have several additional United States applications pending covering aspects of our Beta- Cath(TM) System. The United States Patent and Trademark Office has indicated that certain claims pending in another United States application are allowable. With respect to the above identified United States Patents and our other pending United States patent applications, we have filed, or will file in due course, counterpart applications in the European Patent Office and certain other countries. Like other firms that engage in the development of medical devices, we must address issues and risks relating to patents and trade secrets. United States Patent No. 5,683,345 may not offer any protection to us because competitors may be able to design functionally equivalent devices that do not infringe this patent. It may also be reexamined, invalidated or circumvented. In addition, claims under our other pending applications may not be allowed, or if allowed, may not offer any protection or may be reexamined, invalidated or circumvented. In addition, competitors may have or may obtain patents that will prevent, limit or 12 interfere with our ability to make, use or sell our products in either the United States or international markets. We received a letter from NeoCardia, L.L.C., dated July 7, 1995, in which NeoCardia notified us that it was the exclusive licensee of United States Patent No. 5,199,939, or the Dake patent, and requested that we confirm that our products did not infringe the claims of the Dake patent. On August 22, 1995 our patent counsel responded on our behalf that we did not infringe the Dake patent. The United States Patent and Trademark Office later reexamined the Dake patent. In the reexamination proceeding some of the patent claims were amended and new claims were added. We have concluded, based upon advice of patent counsel, that our Beta-Cath(TM) System does not infringe any claim of the Dake patent as reexamined. In May 1997 Guidant acquired NeoCardia together with the rights under the Dake patent. Guidant is attempting to develop and commercialize products that may compete with the Beta-Cath(TM) System and has significantly greater capital resources than the Company. Guidant may sue for patent infringement in an attempt to obtain damages from us and/or injunctive relief restraining us from commercializing the Beta-Cath(TM) System in the United States. While the Company does not believe such an action would have merit, if Guidant were successful in any such litigation, we might be required to obtain a license from Guidant under the Dake patent to market the Beta-Cath(TM) System in the United States, if such license were available, or be prohibited from selling the Beta-Cath(TM) System in the United States. Any of these actions could have a material adverse effect on our business, financial condition and results of operations, or could result in cessation of our business. We have two versions of our delivery catheter: a "rapid exchange" catheter and an "over the wire" catheter. As a result of certain United States patents held by other device manufacturers covering "rapid exchange" catheters, we currently intend to sell the "over the wire" version of our delivery catheter in the United States. If further investigation reveals that we may sell a "rapid exchange" version in the United States without infringing the valid patent rights of others, we might decide to do so in the future. However, we cannot assure that we will be able to sell a "rapid exchange" version in the United States without a license of third party patent rights or that such a license would be available to us on favorable terms or at all. 13 Item 3. Quantitative And Qualitative Disclosures About Market Risk Interest Rate Risk The Company's cash equivalents and short-term investments are subject to market risk, primarily interest-rate and credit risk. The Company's investments are managed by outside professional managers within investment guidelines set by the Company. Such guidelines include security type, credit quality and maturity and are intended to limit market risk by restricting the Company's investments to high credit quality securities with relatively short-term maturities. At June 30, 2001, the Company had $7.8 million in cash equivalents with a weighted average interest rate of 3.80% and $28.8 million in available for sale investments with a weighted average interest rate of 4.13%. At June 30, 2000 the Company had $51.0 million in cash equivalents with a weighted average interest rate of 6.31% and $26.6 million in available for sale investments with a weighted average interest rate of 6.70%. All investments mature, by policy, in one year or less. PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds (c) On June 14, 2001, the Company issued Dr. Charles Wilmer, a consultant, 1,000 restricted shares under its 2001 Stock Plan. The shares contain restrictions on transfer, which lapse over time or upon a change of control. The restrictions lapse on June 14, 2002, with respect to all of the shares. The shares were issued pursuant to an exemption from registration under the Securities Act of 1933 under Section 4(2) thereof. The shares were purchased for investment and the shares have been duly legended to reflect that they have not been registered under the Securities Act. Item 4. Submission of Matters to a Vote of Security Holders (a) The Company held its annual meeting of stockholders on June 14, 2001 and solicited votes by proxy in connection with such meeting. (c) The following matters were approved by the shareholders: (i) The approval of management's nominees to the Board of Directors with the nominees receiving the following votes: FOR AGAINST WITHHELD William A. Hawkins 13,639,441 1,422,335 -- Donald Harrison, MD. 14,928,969 132,807 -- 14 (ii) The shareholders approved the Company's 2001 Stock Plan with 6,803,434 votes in favor, 4,649,855 against and 36,195 abstained. There were 3,572,292 broker non-votes. Immediately following approval of the 2001 Stock Plan, the Board, at its meeting on June 14, 2001 approved amendments to the Plan to clarify that options must be granted at 100% of fair market value on the date of grant and to limit the number of shares that may be granted thereunder pursuant to awards that are not stock options to 10% of the shares reserved thereunder. (iii) The shareholders approved an increase in the number of shares reserved for issuance under Novoste's Employee Stock Purchase Plan from 100,000 to 250,000 shares. Shareholders approved the plan amendment as follows: 11,267,686 in favor, 188,556 against and 33,242 abstained. There were 3,572,292 broker non-votes. (iv) The ratification of the appointment of Ernst & Young LLP as independent auditors of the Company for the year ending December 31, 2001. The proposal received 14,863,798 votes in favor, 193,875 against and 4,103 abstained. Item 5. Other Information On June 14, 2001, Cheryl Johnson, the Company's Vice President of Business Development and Investor Relations resigned. Rob Walsh was elected by the Board as Vice President, Investor Relations to fill the vacancy created by Ms. Johnson's resignation, effective July 2, 2001. On June 20, 2001, the Company entered into a new agreement with its primary supplier of radiation source trains, Bebig Gmbh. The new agreement, with a term of four years, supersedes all prior agreements and establishes minimum supply obligations for Bebig, prices of the product for the full term of the agreement and the costs of disposal for the radiation source trains. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Copy of Novoste Corporation 2001 Stock Plan, as amended. Filed as Exhibit A to the Registrant's Proxy Statement for its 2000 Annual Meeting of Stockholders filed on April 30, 2001. #10.29 Amendment to the Framework Agreement and Security Agreement (NOV 34) between Registrant and Bebig Isotopentechnik und Umweltdiagnostik GmbH - -------- #Portions have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. (b) Reports on Form 8-K The Company filed a Form 8-K on April 4, 2001,indicating that as stated in its Annual Report on Form 10-K for the year ended December 31, 2000, the Company had evaluated the impact of Staff Accounting Bulletin (SAB) 101,Revenue Recognition in Financial Statements, on its revenue recognition policies and concluded, based on its understanding of the SEC's ongoing interpretation of SAB 101, that the adoption of SAB 101 in 2000 did not require the Company to change its revenue recognition policies in its audited financial statements for the year ended December 31, 2000. The Registrant had previously disclosed and reported in its Form 10-Q for the quarter ended September 30, 2000, that the adoption of SAB 101 would require a change in its revenue recognition policies. The Company stated in the Form 8-K that it believed its adoption of SAB 101 would not have any material effect on the recognition of revenues during the year ending December 31, 2001. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NOVOSTE CORPORATION August 14, 2001 /s/ Edwin B. Cordell, Jr. - --------------- ------------------------- Date Edwin B. Cordell, Jr. Vice President - Finance, Chief Financial Officer (Principal Financial & Accounting Officer) 16 EX-10.1 3 dex101.txt NOVOSTE 2001 STOCK PLAN EXHIBIT 10.1 NOVOSTE CORPORATION 2001 STOCK PLAN Section 1. Purpose. - ------------------- The purpose of the Plan is to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors and non-employee directors capable of contributing to the future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company's business and to afford such persons an opportunity to acquire a proprietary interest in the Company. Section 2. Definitions. - ------------------------ As used in the Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean (i) any person or entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any person or entity in which the Company has a significant equity interest, in each case as determined by the Committee. (b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, Other Stock Grant or Other Stock-Based Award granted under the Plan. (c) "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan. (d) "Board" shall mean the Board of Directors of the Company. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. (f) "Committee" shall mean a committee of Directors designated by the Board to administer the Plan. The Committee shall be comprised of not less than such number of Directors as shall be required to permit Awards granted under the Plan to qualify under Rule 16b-3, and each member of the Committee shall be a "Non- Employee Director" within the meaning of Rule 16b-3 and an "outside director" within the meaning of Section 162(m) of the Code. The Company expects to have the Plan administered in accordance with the requirements for the award of "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. (g) "Company" shall mean Novoste Corporation, a Florida corporation, and any successor corporation. (h) "Director" shall mean a member of the Board. (i) "Eligible Person" shall mean any employee, officer, consultant, independent contractor or Director providing services to the Company or any Affiliate whom the Committee determines to be an Eligible Person. (j) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such 1 methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of Shares as of a given date shall be, if the Shares are then quoted on the Nasdaq Stock Market sm, the closing sales price on the immediately preceding trading date as reported on the Nasdaq Stock Market sm; provided, however, that if no closing sale price shall have been made within ten business days preceding such relevant date, or if deemed appropriate by the Committee for any reason, the Fair Market Value of such Shares shall be determined by the Committee. In no event shall the Fair Market Value of any Share be less than its par value. (k) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision. (l) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option. (m) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option, and shall include Reload Options. (n) "Other Stock Grant" shall mean any right granted under Section 6(e) of the Plan. (o) "Other Stock-Based Award" shall mean any right granted under Section 6(f) of the Plan. (p) "Participant" shall mean an Eligible Person designated to be granted an Award under the Plan. (q) "Performance Award" shall mean any right granted under Section 6(d) of the Plan. (r) "Person" shall mean any individual, corporation, partnership, association or trust. (s) "Plan" shall mean the Novoste Corporation 2001 Stock Plan, as amended from time to time, the provisions of which are set forth herein. (t) "Reload Option" shall mean any Option granted under Section 6(a)(iv) of the Plan. (u) "Restricted Stock" shall mean any Shares granted under Section 6(c) of the Plan. (v) "Restricted Stock Unit" shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date. (w) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation. (x) "Shares" shall mean shares of Common Stock, $.01 par value per share, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan. (y) "Stock Appreciation Right" shall mean any right granted under Section 6(b) of the Plan. 2 Section 3. Administration. - -------------------------- (a) Power and Authority of the Committee. The Plan shall be administered ------------------------------------ by the Committee. Subject to the express provisions of the Plan and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of Options or the lapse of restrictions relating to Restricted Stock, Restricted Stock Units or other Awards; (vi) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) determine whether, to what extent and under what circumstances cash, Shares, promissory notes, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee; (viii) interpret and administer the Plan and any instrument or agreement, including an Award Agreement, relating to the Plan; (ix) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award and any employee of the Company or any Affiliate. (b) Delegation. The Committee may delegate its powers and duties under the ---------- Plan to one or more Directors or a committee of Directors, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion. (c) Power and Authority of the Board of Directors. Notwithstanding --------------------------------------------- anything to the contrary contained herein, the Board may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan. Section 4. Shares Available for Awards. - ---------------------------------------- (a) Shares Available. Subject to adjustment as provided in Section 4(c) of ---------------- the Plan, the aggregate number of Shares that may be issued under all Awards under the Plan shall be 1,250,000 and shall be subject to adjustment as provided herein and subject to the provisions of Section 422 or 424 of the Code or any successor provision. A maximum of 10% of the total number of Shares authorized shall be available for Awards other than Options. Shares to be issued under the Plan may be either authorized but unissued Shares or Shares acquired in the open market or otherwise. Any Shares that are used by a Participant as full or partial payment to the Company of the purchase price relating to an Award, or in connection with the satisfaction of tax obligations relating to an Award, shall again be available for granting Awards (other than Incentive Stock Options) under the Plan. In addition, if any Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan. (b) Accounting for Awards. For purposes of this Section 4, if an Award --------------------- entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such 3 Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan. (c) Adjustments. In the event that the Committee shall determine that any ----------- dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, issuance of warrants or other rights to purchase Shares or other securities of the Company to all holders of common stock pro rata whether as a dividend or otherwise or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) that thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards and (iii) the purchase or exercise price with respect to any Award; provided, however, that the number of Shares -------- ------- covered by any Award or to which such Award relates shall always be a whole number. (d) Award Limitations Under the Plan. No Eligible Person may be granted -------------------------------- any Award or Awards under the Plan, the value of which Award or Awards is based solely on an increase in the value of the Shares after the date of grant of such Award or Awards, for more than 400,000 Shares (subject to adjustment as provided for in Section 4(c) of the Plan), in the aggregate in any calendar year. The foregoing annual limitation specifically includes the grant of any Award or Awards representing "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. Section 5. Eligibility. - ------------------------ Any Eligible Person shall be eligible to be designated a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full or part-time employees (which term as used herein includes, without limitation, officers and Directors who are also employees), and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code or any successor provision. Section 6. Awards. - ------------------ (a) Options. The Committee is hereby authorized to grant Options to ------- Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Exercise Price. The purchase price per Share purchasable under -------------- an Option shall be 100% of the Fair Market Value of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be fixed by the ----------- Committee. (iii) Time and Method of Exercise. The Committee shall determine the --------------------------- time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) in which, payment of the exercise price with respect thereto may be made or 4 deemed to have been made; provided however, no Shares may be surrendered in ---------------- payment of the exercise price if originally issued to the Participant upon exercise of an option within six months of the date of the current exercise. (iv) Reload Options. The Committee may grant Reload Options, separately -------------- or together with another Option, pursuant to which, subject to the terms and conditions established by the Committee, the Participant would be granted a new Option when the payment of the exercise price of a previously granted option is made by the delivery of Shares owned by the Participant pursuant to Section 6(a)(iii) of the Plan or the relevant provisions of another plan of the Company, and/or when Shares are tendered or withheld as payment of the amount to be withheld under applicable income tax laws in connection with the exercise of an Option, which new Option would be an Option to purchase the number of Shares not exceeding the sum of (A) the number of Shares so provided as consideration upon the exercise of the previously granted option to which such Reload Option relates and (B) the number of Shares, if any, tendered or withheld as payment of the amount to be withheld under applicable tax laws in connection with the exercise of the option to which such Reload Option relates pursuant to the relevant provisions of the plan or agreement relating to such option. Reload Options may be granted with respect to Options previously granted under the Plan or any other stock option plan of the Company or may be granted in connection with any Option granted under the Plan or any other stock option plan of the Company at the time of such grant. Such Reload Options shall have a per share exercise price as determined by the Committee in the grant of such Option. Any Reload Option shall be subject to availability of sufficient Shares for grant under the Plan. (b) Stock Appreciation Rights. The Committee is hereby authorized to grant ------------------------- Stock Appreciation Rights to Participants subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, in the grant of the Stock Appreciation Right. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate. (c) Restricted Stock and Restricted Stock Units. The Committee is hereby ------------------------------------------- authorized to grant Restricted Stock and Restricted Stock Units to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Restrictions. Shares of Restricted Stock and Restricted Stock ------------ Units shall be subject to such restrictions as the Committee may impose (including, without limitation, a waiver by the Participant of the right to vote or to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. (ii) Stock Certificates. Any Restricted Stock granted under the Plan ------------------ shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. 5 (iii) Forfeiture. Except as otherwise determined by the Committee, upon ---------- termination of employment (as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units at such time subject to restriction shall be forfeited and reacquired by the Company; provided, however, that the -------- ------- Committee may, when it finds that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holders of the Restricted Stock Units. (d) Performance Awards. The Committee is hereby authorized to grant ------------------ Performance Awards to Participants subject to the terms of the Plan and any applicable Award Agreement. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock and Restricted Stock Units), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan and any applicable Award Agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and any other terms and conditions of any Performance Award shall be determined by the Committee. (e) Other Stock Grants. The Committee is hereby authorized, subject to the ------------------ terms of the Plan and any applicable Award Agreement, to grant to Participants Shares without restrictions thereon as are deemed by the Committee to be consistent with the purpose of the Plan. (f) Other Stock-Based Awards. The Committee is hereby authorized to grant ------------------------ to Participants subject to the terms of the Plan and any applicable Award Agreement, such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan. Shares or other securities delivered pursuant to a purchase right granted under this Section 6(f) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property or any combination thereof), as the Committee shall determine in connection with such Award. (g) General. ------- (i) No Cash Consideration for Awards. Awards shall be granted for no -------------------------------- cash consideration or for such minimal cash consideration as may be required by applicable law. (ii) Awards May Be Granted Separately or Together. Awards may, in the -------------------------------------------- discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any plan of the Company or any Affiliate other than the Plan. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. (iii) Forms of Payment under Awards. Subject to the terms of the Plan ----------------------------- and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine 6 (including, without limitation, cash, Shares, promissory notes, other securities, other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of dividend equivalents with respect to installment or deferred payments. (iv) Limits on Transfer of Awards. No Award (other than Other Stock ---------------------------- Grants) and no right under any such Award shall be transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, -------- however, that, if so determined by the Committee, a Participant may, in the - ------- manner established by the Committee, (a) transfer Awards (other than Incentive Stock Options) to family members by gift, (b) transfer any Award by domestic order to a family member or (c) designate a beneficiary or beneficiaries to exercise the rights of the Participant and receive any property distributable with respect to any Award upon the death of the Participant. Each Award or right under any Award shall be exercisable during the Participant's lifetime only by the Participant or, if permissible under applicable law, by the Participant's guardian or legal representative. No Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. (v) Term of Awards. The term of each Award shall be for such period as -------------- may be determined by the Committee. (vi) Restrictions; Securities Exchange Listing. All Shares or other ----------------------------------------- securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such restrictions as the Committee may deem advisable under the Plan, applicable federal or state securities laws and regulatory requirements, and the Committee may cause appropriate entries to be made or legends to be affixed to reflect such restrictions. If any securities of the Company are traded on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been admitted for trading on such securities exchange. Section 7. Amendment and Termination; Adjustments. - --------------------------------------------------- (a) Amendments to the Plan. The Committee may amend, alter, suspend, ---------------------- discontinue or terminate the Plan at any time; provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the shareholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval: (i) would violate the rules or regulations of the Nasdaq Stock Market sm or any securities exchange that are applicable to the Company; or (ii) would cause the Company to be unable, under the Code, to grant Incentive Stock Options under the Plan. (iii) decrease the grant or exercise price of any Option to less than Fair Market Value on the date of the grant; or (iv) increase the total number of shares of Common Stock that may be issued under the Plan. (b) Amendments to Awards. The Committee may waive any conditions of or -------------------- rights of the Company under any outstanding Award, prospectively or retroactively. Except as otherwise provided herein or in the Award Agreement, the Committee may not amend, alter, suspend, discontinue or 7 terminate any outstanding Award, prospectively or retroactively, if such action would adversely affect the rights of the holder of such Award, without the consent of the Participant or holder or beneficiary thereof. (c) Correction of Defects, Omissions and Inconsistencies. The Committee ---------------------------------------------------- may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. Section 8. Income Tax Withholding; Tax Bonuses. - ----------------------------------------------- (a) Withholding. In order to comply with all applicable federal or state ----------- income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the federal and state taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined. (b) Tax Bonuses. The Committee, in its discretion, shall have the ----------- authority, at the time of grant of any Award under this Plan or at any time thereafter, to approve cash bonuses to designated Participants to be paid upon their exercise or receipt of (or the lapse of restrictions relating to) Awards in order to provide funds to pay all or a portion of federal and state taxes due as a result of such exercise or receipt (or the lapse of such restrictions). The Committee shall have full authority in its discretion to determine the amount of any such tax bonus. Section 9. General Provisions. - ------------------------------- (a) No Rights to Awards. No Eligible Person, Participant or other Person ------------------- shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants. (b) Award Agreements. No Participant will have rights under an Award ---------------- granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company and, if requested by the Company, signed by the Participant. (c) No Limit on Other Compensation Arrangements. Nothing contained in the ------------------------------------------- Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (d) No Right to Employment. The grant of an Award shall not be construed ---------------------- as giving a Participant the right to be retained in the employ of the Company or any Affiliate, nor will it affect in any way the right of the Company or an Affiliate to terminate such employment at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment 8 free from any liability or any claim under the Plan or any Award, unless otherwise expressly provided in the Plan or in any Award Agreement. (e) Governing Law. The validity, construction and effect of the Plan or ------------- any Award, and any rules and regulations relating to the Plan or any Award, shall be determined in accordance with the laws of the State of Florida. (f) Severability. If any provision of the Plan or any Award is or becomes ------------ or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect. (g) No Trust or Fund Created. Neither the Plan nor any Award shall create ------------------------ or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. (h) No Fractional Shares. No fractional Shares shall be issued or -------------------- delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. (i) Headings. Headings are given to the Sections and subsections of the -------- Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Section 10. Effective Date of the Plan. - ---------------------------------------- The Plan shall be effective as of April 12, 2001, subject to approval by the shareholders of the Company within one year thereafter. Section 11. Term of the Plan. - ------------------------------ No Award shall be granted under the Plan after April 12, 2011 or any earlier date of discontinuation or termination established pursuant to Section 7(a) of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such date. 9 EX-10.29 4 dex1029.txt AMENDMENT TO FRAMEWORK AGR. AND SECURITY EXHIBIT 10.29 ________________________________________________________________________ | | | Confidential treatment has been requested for portions of this exhibit.| | The copy filed herewith omits the information subject to the | | confidentiality request. Omissions are designated as *****. A complete | | version of this exhibit has been filed separately with the Securities | | and Exchange Commission. | |________________________________________________________________________| MANUFACTURING AND SUPPLY AGREEMENT between Novoste Corporation 3890 Steve Reynolds Boulevard Norcross, GA 30093 represented by its Vice President of Manufacturing Don Webber - hereinafter referred to as NOVOSTE - and BEBIG Isotopen- und Medizintechnik GmbH d/b/a so far as BEBIG Isotopentechnik und Umweltdiagnostik GmbH Robert-Rossle-Str. 10 D-13125 Berlin represented by its General Managers Dr. Andre Heb and Dr. Gunnar Mann - hereinafter referred to as BEBIG - Preamble 1. NOVOSTE produces medical devices and has developed a catheter based device for the delivery of radiation seeds to the site of restenotic lesions in coronary arteries for the inhibition and prevention of restenosis (hereinafter referred to as "Restenosis Device"). 2. BEBIG manufactures radioactive sealed Strontium-90 Seed sources (BEBIG Product Code SrO.SO3) in units called seed-trains usable in the Restenosis Device (hereinafter referred to as "Product" or "Seed-Trains"). 3. The parties hereto concluded an Agreement under the term RESTENOSIS THERAPY PROJECT DEVELOPMENT AND SUPPLY AGREEMENT dated November 14, 1994, amended by the FRAME AGREEMENT CONTAINING PURCHASE ORDER PROVISION AND INVESTMENT GRANT (hereinafter referred to as the "Framework Agreement"), dated November 15, 1996, dealing et. al. with the supply of the Product to NOVOSTE. 4. Additionally BEBIG granted an option to purchase all of BEBIG's tangible and intangible assets required for the production of the Product under an agreement called the OPTION TO PURCHASE ASSETS AGREEMENT dated August 22, 1995 (hereinafter referred to as the "Purchase Option Agreement"). 5. Both the Framework Agreement and the Purchase Option Agreement were amended by the AMENDMENT TO FRAMEWORK AGREEMENT AND SECURITY AGREEMENT (hereinafter referred to as "Amendment 1") dated July 23, 1998, dealing inter alia with the transfer of certain assets required for the manufacturing of the Product as security collateral to NOVOSTE. 6. Finally the parties hereto concluded a 2. AMENDMENT TO THE FRAMEWORK AGREEMENT AND SECURITY AGREEMENT dated February 11, 2000. 7. Both parties intend to continue their cooperation on the basis of the considerations described hereinafter. 8. THEREFORE, in the light of the above, both parties agree to the following MANUFACTURING AND SUPPLY AGREEMENT (hereinafter referred to as the "Agreement"): (S)1 Previous Agreements 1. Validity of Previous Agreements: The parties mutually agree that this ------------------------------- Agreement supersedes all agreements mentioned above (collectively referred to as "Previous Agreements"). These Previous Agreements shall no longer be valid after the Effective Date of this Agreement and all rights and claims, whether existing or contingent, whether known or unknown, shall finally and fully be released and settled. All payments that have been made by 1 ________________________________________________________________________ | | | *****Certain information on this page has been omitted and filed | | separately with the Securities and Exchange Commission. Confidential | | treatment has been requested with respect to the omitted portions. | |________________________________________________________________________| NOVOSTE to BEBIG under this Previous Agreements shall be and remain the sole property of BEBIG and NOVOSTE shall not be entitled to reclaim these payments. 2. Waiver of the Option: NOVOSTE waives in particular its option to acquire -------------------- the assets as specified in section 1 of the Purchase Option Agreement. In this regard the option fee of one hundred thousand dollars (US$100,000) as specified in section 2 of the Purchase Option Agreement that has been paid by NOVOSTE to BEBIG shall be and remain the sole property of BEBIG and NOVOSTE shall not be entitled to reclaim this payment. 3. Retransfer of Security Collateral: Additionally with the execution of this --------------------------------- Agreement NOVOSTE retransfers the title in the Security Collateral A and B as defined in par. 2 of section B of Amendment 1 to BEBIG. The parties mutually agree that the investment contribution of an aggregate sum of DM 2,500,000 paid by NOVOSTE in respect to the Framework Agreement and the Amendment 1 shall be and remain the sole property of BEBIG and NOVOSTE shall not be entitled to reclaim this payment. In respect to the retransfer of the title in the Security Collateral NOVOSTE promises to hold BEBIG harmless from any debts, liabilities or obligations incurred in connection with the transfer of the Security Collateral. 4. Offset License Fee Payments: Two prepaid offset license fee payments for --------------------------- the year 2000 for a total of 354.670 USD have been made by NOVOSTE to BEBIG. These prepayments are not subject to refund or return to NOVOSTE by BEBIG. (S)2 Manufacturing and Supply of the Product 1. Manufacture and Sale of Product: During the Term, BEBIG shall manufacture ------------------------------- and sell the Product to NOVOSTE, in accordance with the terms and conditions of this Agreement as specified below and in quantities specified in NOVOSTE's purchase orders. The obligation to supply NOVOSTE is limited to a production capacity of ***** Seed-Trains per year with a maximum of ***** individual Seed sources unless otherwise agreed in writing. In 2001 the production capacity is limited to ***** Seed sources per week. BEBIG will exert a maximum and best effort to meet NOVOSTE's actual purchase requirements above the foregoing commitments. 2. Forecast: NOVOSTE shall provide to BEBIG a rolling forecast for Seed-Train -------- delivery requirements for 12-month periods, the first such forecast to be delivered to BEBIG within 30 days of the date of execution of this Agreement and subsequent rolling and updated forecasts to be delivered to BEBIG each 90 days thereafter during the term of this Agreement and any extensions thereof. 3. Purchase Orders: NOVOSTE shall submit firm purchase orders to BEBIG from --------------- time to time, but not later than three (3) months before the established Date of Delivery of Seed-Trains. NOVOSTE may exceed the forecast requirements set forth in the 12-month rolling forecasts, in which case BEBIG will do its best effort to fulfil NOVOSTE's orders. 4. Quality Assurance: BEBIG warrants and represents that the Product supplied ----------------- by BEBIG under this Agreement will be manufactured in accordance with all applicable ISO 9000 and EN46000 regulations. BEBIG shall notify NOVOSTE of any proposed or planned changes in the manufacturing processes or components of the Product, and shall not implement such changes until such time as NOVOSTE approves the proposed or planned changes, in writing. In addition, BEBIG agrees to have implemented a quality control system and procedures as shall be appropriate to assure compliance with the requirements of International Standards. NOVOSTE has the right to supervise the agreed upon quality and shall be entitled to inspect the facility in which any part of the Product is been manufactured upon one (1) week's prior notice. 5. Terms of Use of the Trains: NOVOSTE agrees not to have a Seed-Train in -------------------------- clinical use after a period of 18 months from the Date of Manufacturing of any such Seed-Train, as evidenced by the manufacturer's certificate. BEBIG will deliver the Seed-Trains to NOVOSTE within 30 days after the Date of Manufacturing. The time for Use of the Seed-Trains in the clinic shall not exceed a period of 12 months. 6. Use of existing manufacturing line: BEBIG agrees not to sell directly or ---------------------------------- indirectly radioactive sources produced on the manufacturing line on which the Product for NOVOSTE is manufactured. 7. Insurance. BEGBIG is obliged to maintain a reasonale damage insurance for --------- the Product manufacturing line insuring against damages covering the risks of fire, water damage, storm 2 ________________________________________________________________________ | | | *****Certain information on this page has been omitted and filed | | separately with the Securities and Exchange Commission. Confidential | | treatment has been requested with respect to the omitted portions. | |________________________________________________________________________| and hail and theft with breaking and entering. BEBIG also maintains all necessary insurance coverage under the German Atomic Law for the manufacturing facility. (S)3 Remuneration and Payment Terms 1. Price: NOVOSTE agrees to pay the prices (collectively referred to as the ----- "Price or Prices") according to the following price schedule: in 30 mm in 40 mm in 60 mm packaging packaging packaging --------- --------- --------- ***** In the event of an increase in material costs, BEBIG may add to the Prices increases in material cost, after such cost increases exceed 5 % during any one year period of the Agreement . BEBIG shall provide NOVOSTE with evidence for such price increase. Prices are ex works BEBIG's manufacturing facility Berlin (INCOTERMS), including packaging and ensuring product is cleared for export but excluding taxes if any. NOVOSTE agrees to pay for reasonable shipping costs for such deliveries. 2. Payment Guarantee: NOVOSTE guarantees the following minimum annual payments ----------------- (collectively referred to as "Annual Guaranteed Payment"), for all purchases of Products of NOVOSTE to BEBIG during the term of this Agreement: Year Annual Guaranteed payment ---- ------------------------- 2001 2002 ***** 2003 2004 During the respective calendar year payments of the invoiced Price shall be credited against the Annual Guaranteed Payment commitment until the remaining balance equals zero. In case NOVOSTE may order less Seed-Trains than prepaid by the Annual Guaranteed Payment commitment the remaining balance of the respective Annual Guaranteed Payment shall be due and payable, in full, by NOVOSTE to BEBIG, 30 days after the end of the one- year contract period. In the event that the three month purchase orders are less than the prorated Guaranteed Payment, NOVOSTE and BEBIG shall in good faith negotiate an appropriate prepayment or mutually acceptable alternative. All Seed-train revenues resulting from deliveries in 2001 which are in excess of the Annual Guaranteed Payment for 2001 can be credited against the Guaranteed Payment of the year 2002. In the event both parties have entered into a new development and manufacturing agreement for a new source by the end of year 2002 the Annual Guaranteed Payment commitments for the years 2003 and 2004 under this Agreement shall be the payment commitments for the new agreement. 3. Surcharge: BEBIG will make a substantial investment in the Sr-90 seed --------- production line upon the execution of this Agreement to ensure continuous production for a period of four (4) years. NOVOSTE agrees to pay a surcharge of ***** for the first ***** seeds (total: *****) delivered after the execution of this Agreement to cover a part of BEBIG's investment costs. This surcharge will not be credited against the Annual Guaranteed Payments and will be charged separately. 4. Payment terms: Payment shall be due within 30 days after receiving an -------------- invoice from BEBIG. The payment shall be made free of charge to account no. ***** at the Commerzbank Berlin, code no. *****. 3 ________________________________________________________________________ | | | *****Certain information on this page has been omitted and filed | | separately with the Securities and Exchange Commission. Confidential | | treatment has been requested with respect to the omitted portions. | |________________________________________________________________________| (S)4 Warranty 1. Warranties: BEBIG warrants and represents that the Product when delivered ---------- to NOVOSTE will meet all Product specifications and be free from defects and unreasonable hazards in material and workmanship and conform to applicable specifications and to contract requirements. 2. Warranty Period: During a period of twelve (12) month following the Date of --------------- Delivery (referred to as the "Warranty Period") BEBIG agrees to replace at its own expenses any defective Product which has been returned to BEBIG by NOVOSTE. This provision does not apply to any defective Product that will be returned after expiration of the Warranty Period. 3. Occurrence of any Defective Product: NOVOSTE is obliged to immediately ----------------------------------- notify BEBIG in writing upon becoming aware of any potentially defective source train. In such case the two companies agree to mutually determine the cause of defect and work in good faith to identify the root cause. 4. Exclusions of Warranty: Any warranty is excluded with respect to defects ---------------------------- caused in BEBIG's reasonable opinion by (i) accident, abuse, alteration, misuse or neglect, (ii) failure to use Products under normal operating conditions or environment, , (iii) (iv) failure to use or take any proper precautions under the circumstances, (v) user modification of any Product. (S)5 Terms of Disposal 1. Disposal Obligation: BEBIG will, on NOVOSTE's request, take back Seed- ------------------- Trains for final disposal at a flat rate of ***** per seed. The flat rate shall be valid for disposal of a total of ***** seeds, however, BEBIG shall not be required, at the ***** rate, to dispose of more than 6000 seeds per year. For any additional seeds disposed by BEBIG, the flat rate will be *****. However, NOVOSTE is not obliged to send Seed-Trains back to BEBIG for disposal. BEBIG agrees not to reuse Seed-Trains returned for disposal. 2. Duration: The disposal obligation by BEBIG as stated above, shall be in -------- effect for a period of 18 months after termination of this Agreement. (S)6 Force Majeure 1. Force Majeure: The performance of a Party, required by this Agreement, ------------- shall be extended by a reasonable period of time if such performance of the respective Party is impeded by an unforeseeable event beyond such Party's control, which shall include but not be limited to acts of God, industrial actions, riots, wars, embargo or requisition (acts of government). 2. Notification: In case of Force Majeure, each Party shall promptly notify ------------ and furnish the other Party in writing with all relevant information thereto and the Parties shall negotiate in good faith appropriate solutions. (S)7 Term and Termination 1. Term of the Agreement: The Agreement shall be valid for a period of four --------------------- (4) years (referring to as the "Initial Term") beginning from the date of Execution of this Agreement (referred to as "Effective Date"). The Agreement will automatically be extended for a period of one (1) year (referred to as "Extended Term") unless written cancellation is given by either party six (6) month before the end of the Initial Term or any Extended Term (collectively referred to as "Term"). During the Extended Term the terms and conditions as of the last year of the Initial Term shall apply. 2. Line Decontamination and Disposal: After termination of this Agreement and --------------------------------- provided that both parties will not enter into an Agreement to continue the production of the Product, then NOVOSTE agrees to pay BEBIG the costs to decontaminate the strontium 90 line assets, up to a maximum of US$250,000. 3. At the time of termination of this agreement, BEBIG will grant to NOVOSTE a fully paid, non-exclusive and non-transferable license to all its know-how and intellectual property used in the design and manufacture of the Seed trains. NOVOSTE will not assign these rights to any third party, however, NOVOSTE may permit a third party manufacturer to utilize the said know-how and intellectual property for the sole purpose of manufacturing product for NOVOSTE. 4 4. In case of material breach of this agreement caused by BEBIG, NOVOSTE will give written notice to BEBIG within 30 days. If such breach is not cured by reasonable measures by BEBIG within 90 days from the date of notice, then NOVOSTE may permit a third party manufacturer to utilize the said know-how and intellectual property for the sole purpose of manufacturing product for NOVOSTE. (S)8 Confidential Information Each party promises to hold in confidence any confidential information disclosed by the other party in the execution of this Agreement and the Previous Agreements and not provide such information to third parties, during this Agreement and for a period of two (2) years after its termination. Neither party shall have the right to use the confidential information given to the other party for any purposes other than those of this Agreement. The confidential information and all copies or part or all thereof, shall be and remain the exclusive property of the disclosing party. (S)9 Miscellaneous 1. Amendments: This Agreement may only be amended or modified at any time and ---------- in all respects by an instrument in writing executed by NOVOSTE and BEBIG. 2. Notices: Any notices or other communications required or permitted ------- hereunder shall be sufficiently given if delivered personally or sent by registered or certified mail, postage prepaid, addressed to: To NOVOSTE: NOVOSTE Corporation 3890 Steve Reynolds Boulevard Norcross, GA 30093 Attn: Don Webber To BEBIG: BEBIG Isotopen- und Medizintechnik GmbH Robert-Rossle-Str. 10 D-13125 Berlin Attn: Dr. Andre Heb or to such other address as shall be furnished in writing by a party to the other and shall be deemed to have been given as of the date so personally delivered or three (3) days after being deposited in the United States mail, postage pre-paid, as the case may be. 3. Governing Law: It is the intention of the parties the laws of the Federal ------------- Republic of Germany, both substantive and remedial, should govern the validity of this Agreement, the construction of its terms and the interpretation of its rights and duties of the parties. 4. Execution of Counterparts: This Agreement may be executed in counterparts, ------------------------- each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. 5. Succession: All the terms and provisions of this Agreement shall be binding ---------- upon and inure to the benefit of, and be enforceable by, BEBIG and NOVOSTE and their successors and valid assigns. 6. Entire Understanding: This Agreement constitutes the entire agreement -------------------- between the parties hereto, and there are no agreements, understandings, restrictions, warranties or representations between the parties other than those set forth herein. 7. Severability: Should any provision of this Agreement be or become invalid ------------ or void, the remaining provisions will continue to be in effect. Invalid or void provisions are to be replaced by such provisions that will fulfil the intent of the parties and the economic purpose of this Agreement in a legally binding form. 8. Adverse Regulatory Events: Bebig agrees to inform Novoste immediately in ------------------------- writing upon receipt of any information regarding any adverse regulatory event that holds any potential to interfere with production schedules or specification changes 5 NOVOSTE: BEBIG: Date: 14 June 2001 Date: 20 June 2001 ------------------------- -------------------- /s/ Donald J. Webber /s/ Dr. Andre Heb ------------------------------- ----------------- Donald J. Webber Dr. Andre Heb Vice President of Manufacturing General Manager /s/ Dr. Gunnar Mann ------------------- Dr. Gunnar Mann General Manager 6 -----END PRIVACY-ENHANCED MESSAGE-----