-----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, Wk61b410f/Ou9aBj5w3VdbUf3fB4ebgTekvMFrMH+o0avs01wfQZZYkmVY7Adzwr B3ieiqSQk7gEnotUC0Kf0g== 0000912057-99-004212.txt : 19991110 0000912057-99-004212.hdr.sgml : 19991110 ACCESSION NUMBER: 0000912057-99-004212 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABIOMED INC CENTRAL INDEX KEY: 0000815094 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 042743260 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20584 FILM NUMBER: 99744811 BUSINESS ADDRESS: STREET 1: 33 CHERRY HILL DR CITY: DANVERS STATE: MA ZIP: 01923 BUSINESS PHONE: 5087775410 MAIL ADDRESS: STREET 1: 33 CHERRY HILL DRIVE CITY: DANVERS STATE: MA ZIP: 01923 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------------- Commission file number 0-20584 ----------- ABIOMED, INC. ------------- (Exact name of registrant as specified in its charter) DELAWARE 04-2743260 -------- ---------- (State of incorporation) (IRS Employer No.) 22 CHERRY HILL DRIVE DANVERS, MASSACHUSETTS 01923 ---------------------------- (Address of principal executive offices, including zip code) (978) 777-5410 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) or the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of November 2, 1999, there were 8,662,642 shares outstanding of the registrant's Common Stock, $.01 par value. ABIOMED, INC. AND SUBSIDIARIES TABLE OF CONTENTS
Page No. --------- Part I - Financial Information: Item 1. Condensed Consolidated Financial Statements Consolidated Balance Sheets September 30, 1999 and March 31, 1999 3-4 Consolidated Statements of Operations Three and Six Months Ended September 30, 1999 and September 30, 1998 5 Consolidated Statements of Cash Flows Six Months Ended September 30, 1999 and September 30, 1998 6 Notes to Consolidated Financial Statements 7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-19 Item 3. Quantitative and Qualitative Disclosure about Market Risk 20 Part II - Other Information 21-22 Signatures 23
2 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (unaudited) ASSETS
September 30, March 31, 1999 1999 ----------- ----------- Current Assets: Cash and cash equivalents (Note 7) $ 5,117,314 $ 9,279,210 Short-term marketable securities (Note 8) 8,543,274 8,902,031 Accounts receivable, net of allowance for doubtful accounts of $210,000 and $204,000 at September 30, 1999 and March 31, 1999, respectively 6,916,380 6,437,225 Inventories (Note 4) 3,559,112 2,895,857 Prepaid expenses and other current assets 578,774 335,403 ----------- ----------- Total current assets 24,714,854 27,849,726 ----------- ----------- Property and Equipment, at cost: Machinery and equipment 5,854,020 5,443,930 Furniture and fixtures 1,036,796 575,166 Leasehold improvements 2,026,496 1,728,351 ----------- ----------- 8,917,312 7,747,447 Less: Accumulated depreciation and amortization 5,109,700 3,884,088 ----------- ----------- 3,807,612 3,863,359 ----------- ----------- Other Assets, net (Notes 2 and 9) 1,136,334 1,268,536 ----------- ----------- $29,658,800 $32,981,621 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 3 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS (continued) CONSOLIDATED BALANCE SHEETS (CONTINUED) (unaudited) LIABILITIES AND STOCKHOLDERS' INVESTMENT
September 30, March 31, 1999 1999 ------------ ------------ Current Liabilities: Accounts payable $ 1,728,964 $ 874,648 Accrued expenses 4,438,945 4,830,620 ------------ ------------ Total current liabilities 6,167,909 5,705,268 ------------ ------------ Long Term Liabilities 158,775 204,816 Stockholders' Investment (Note 5): Class B Preferred Stock, $.01 par value- Authorized 1,000,000 shares Issued and outstanding-none -- -- Common Stock, $.01 par value- Authorized 25,000,000 shares Issued and Outstanding- 8,657,742 shares at September 30, 1999 and 8,650,802 shares at March 31, 1999 86,577 86,508 Additional paid-in capital 58,287,537 58,219,906 Accumulated deficit (35,041,998) (31,234,877) ------------ ------------ Total stockholders' investment 23,332,116 27,071,537 ------------ ------------ $ 29,658,800 $ 32,981,621 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS (continued) CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended Six Months Ended -------------------------------- --------------------------------- September 30, September 30, September 30, September 30, 1999 1998 1999 1998 ----------- ------------ ------------ ------------ Revenues: Products $ 3,594,818 $ 4,352,983 $ 7,615,342 $ 7,877,493 Contracts 573,140 614,443 2,904,648 2,893,176 ----------- ------------ ------------ ------------ 4,167,958 4,967,426 10,519,990 10,770,669 ----------- ------------ ------------ ------------ Costs and expenses: Cost of product revenues 1,115,303 1,563,346 2,472,455 3,000,211 Research and development 3,450,526 3,950,444 6,842,159 6,984,224 Selling, general and administrative 2,911,648 2,306,439 5,410,000 4,538,306 ----------- ------------ ------------ ------------ 7,477,477 7,820,229 14,724,614 14,522,741 ----------- ------------ ------------ ------------ Loss from operations (3,309,519) (2,852,803) (4,204,624) (3,752,072) Interest and other income 240,421 369,791 397,503 727,003 ----------- ------------ ------------ ------------ Net loss $(3,069,098) $ (2,483,012) $ (3,807,121) $ (3,025,069) =========== ============ ============ ============ Net loss per share (Note 6): Basic $ (0.35) $ (0.29) $ (0.44) $ (0.35) Diluted $ (0.35) $ (0.29) $ (0.44) $ (0.35) Weighted average shares outstanding (Note 6): Basic 8,654,262 8,620,861 8,653,108 8,598,869 Diluted 8,654,262 8,620,861 8,653,108 8,598,869
The accompanying notes are an integral part of these consolidated financial statements. 5 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS (continued) CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Six Months Ended -------------------------------- September 30, September 30, 1999 1998 ----------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(3,807,121) $ (3,025,069) Adjustments to reconcile net loss to net cash (used in) provided by operating activities- Depreciation and amortization 1,330,504 763,872 Changes in assets and liabilities- Accounts receivable (479,155) 194,661 Inventories (663,255) (882,131) Prepaid expenses and other assets (216,061) (212,506) Accounts payable 854,316 (813,063) Accrued expenses (391,675) 287,609 Long-term liabilities (46,041) 23,865 Liabilities of discontinued operations, net -- (56,778) ----------- ------------ Net cash used in operating activities (3,418,488) (3,719,540) ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of short-term marketable securities 7,440,457 18,772,594 Purchases of short-term marketable securities (7,081,700) (15,496,494) Purchases of property and equipment (1,169,865) (1,174,378) ----------- ------------ Net cash provided by (used in) investing activities (811,108) 2,101,722 ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options and stock issued under employee stock purchase plan 67,700 651,506 ----------- ------------ Net cash provided by financing activities 67,700 651,506 ----------- ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (4,161,896) (966,312) CASH AND CASH EQUIVALENTS, EXCLUDING MARKETABLE SECURITIES, AT BEGINNING OF PERIOD 9,279,210 2,683,151 ----------- ------------ CASH AND CASH EQUIVALENTS , EXCLUDING MARKETABLE SECURITIES, AT END OF PERIOD $ 5,117,314 $ 1,716,839 =========== ============
The accompanying notes are an integral part of these consolidated financial statements. 6 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 1: FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PREPARATION Our unaudited consolidated financial statements of ABIOMED, Inc. (the Company), presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in our latest audited financial statements. These audited statements are contained in our Form 10-K for the year ended March 31, 1999 and have been filed with the Securities and Exchange Commission. In our opinion, the accompanying consolidated financial statements include all adjustments (consisting only of normal, recurring adjustments) necessary to summarize fairly the financial position and results of operations as of September 30, 1999 and for the six months then ended. The results of operations for the six months ended September 30, 1999 may not be indicative of the results that may be expected for the full fiscal year. 2. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and the accounts of its majority-owned subsidiary Abiomed Limited Partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. 3. ACCOUNTS RECEIVABLE Accounts receivable includes amounts due from customers, excluding long-term amounts due from customers under sales-type leases (see Note 9), net of allowance for doubtful accounts. Accounts receivable also includes amounts due from government and other third party sources related to our research and development contracts and grants. These research and development contracts and grants generally provide for payment on a cost-plus-fixed-fee basis. We seek funding from third-parties, including government sources, to support our research and development programs in their early stages and generally limit the use of our own funds until the scientific risk associated with a potential discovery or product is reduced. We recognize revenues under government contracts and grants as work is performed, provided that the government has appropriated sufficient funds for the work. The Company retains rights to all technological discoveries and products resulting from these efforts. As of September 30, 1999, accounts 7 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 1: FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited, continued) 3. ACCOUNTS RECEIVABLE (continued) receivable included approximately $1.9 million due under a government contract for AbioCor-TM- development scheduled to be collected over the remaining term of that contract which expires September 30, 2000. 4. INVENTORIES Inventories include raw materials, work-in-process, and finished goods, and are priced at the lower of cost (first-in, first-out) or market and consist of the following:
September 30, March 31, 1999 1999 ---------- ---------- Raw materials $1,494,188 $1,403,253 Work-in-process 1,121,670 636,125 Finished goods 943,254 856,479 ---------- ---------- $3,559,112 $2,895,857 ========== ==========
Finished goods and work-in-process inventories consist of direct material, labor and overhead. 5. STOCKHOLDERS' INVESTMENT During the six months ended September 30, 1999, options to purchase 301,000 shares of Common Stock were granted at exercise prices ranging from $8.875 to $16.000 per share. Options to purchase 21,750 shares were canceled and 2,300 options to purchase shares of Common Stock were exercised at a price of $8.000 per share during the six month period. During the six months ended September 30, 1999, 4,640 shares of Common Stock were issued under the Employee Stock Purchase Plan. 6. NET LOSS PER COMMON SHARE We calculate net loss per common share in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE, which requires that we present both basic and diluted net loss per share for all periods presented. Basic net loss per share 8 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 1: FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited, continued) 6. NET LOSS PER COMMON SHARE (continued) ("Basic EPS") is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share ("Diluted EPS") is computed by dividing net loss by the weighted average number of common and common equivalent shares outstanding during the period using the treasury stock method. In computing Diluted EPS, common equivalent shares are not considered dilutive in periods in which a net loss is reported because they are antidilutive. Accordingly, Basic EPS and Diluted EPS are the same for the periods presented. The number of equivalent shares that otherwise would have been dilutive for the three and six months ended September 30, 1999 are 275,630 and 283,768, respectively. 7. CASH AND CASH EQUIVALENTS We classify marketable securities, with a maturity date of 90 days or less at the time of purchase, as a cash equivalent. 8. MARKETABLE SECURITIES We classify any security, with a maturity date of greater than 90 days at the time of purchase, as marketable securities and classify marketable securities with a maturity date of greater than one year from the balance sheet date as long-term investments. At September 30, 1999 these marketable securities consisted primarily of government grade securities and high-grade corporate bonds. The amortized cost of these securities approximated market value. 9. OTHER ASSETS Other assets include approximately $130,000 in unamortized purchase cost of the Company's majority interest of the Abiomed Limited Partnership (the Partnership). The interest in the Partnership is being amortized over its useful life of five years. The Partnership was formed in March 1985 and provided initial funding for the design and development of certain of our products. Through August 3, 2000, a royalty is owed to the Partnership equal to 5.5% of certain revenues from these products. Because the Company owns 61.7% of the Partnership, the net royalty expense to the Company is approximately 2.1% of these product revenues. This royalty formula is subject to certain maximum amounts and to certain additional 9 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 1: FINANCIAL STATEMENTS (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited, continued) 9. OTHER ASSETS (continued) adjustments in the event that the Company sells the technology. The Partnership is inactive except with respect to receiving and distributing proceeds from these royalty rights. Also included in other assets are long-term accounts receivable related to sales-type leases. The terms of these non-cancelable leases are one to three years. As of September 30, 1999, the total amount due from sales-type leases was $1,946,000 of which $746,000 was classified as long-term receivables. As of March 31, 1999, the total amount due from these sales-type leases was $2,263,000 of which $892,000 was classified as long-term receivables. Other assets also include the unamortized cost of a number of awarded and pending patents. As of September 30, 1999, the unamortized cost of these patents approximated $261,000. As of March 31, 1999, the unamortized cost of these patents approximated $176,000. 10. RECLASSIFICATION OF PRIOR YEAR AMOUNTS Certain prior year financial statement information has been reclassified to be consistent with the current year presentation. 11. SEGMENT AND ENTERPRISE WIDE DISCLOSURES We believe that the Company operates in one business segment; the research, development, and sale of medical devices, with a primary focus on cardiac assist and heart replacement systems. 10 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1999 NET LOSS Net loss for the three months ended September 30, 1999, was approximately $3,069,000, or $0.35 per share. This compares to a net loss of approximately $2,483,000, or $0.29 per share, in the same period of the previous year. The net losses for both three month periods were primarily attributable to costs incurred for the development and pre-clinical testing costs associated with the AbioCor-TM- implantable replacement heart ("AbioCor"). REVENUES Product revenues decreased by 17% to $3.6 million in the three months ended September 30, 1999 from $4.4 million in the three months ended September 30, 1998. The decline in product revenues is primarily attributable to a reduction in unit sales of BVS systems to new hospital customers partially offset by increased unit sales and increased average selling prices of BVS disposable blood pumps reordered by and sold to existing customers. We believe that the decline in sales to new customers when compared to the prior year was largely a result of a decision made by the Company at the beginning of its current fiscal year to shift certain of its sales representatives away from focusing on BVS system sales to new customers as their primary responsibility to increasing support of existing customers in an effort to increase reorders of higher margin BVS blood pumps. Reorders of the Company's blood pumps increased by 18% during the second quarter of fiscal 2000 when compared to the same period of the prior year. Domestic sales accounted for 96% of total product revenues in the three months ended September 30, 1999 compared to 99% for the same period a year earlier. Contract and grant revenues were approximately $573,000 in the quarter ended September 30, 1999 and $614,000 for the same period of the prior year. The contract and grant revenues in both periods were primarily derived from the Company's AbioBooster-TM- contract and various government grants. None of the contract and grant revenue recognized in the three months ended September 30, 1999 and in the three months ended September 30, 1998 was derived from the Company's AbioCor government contract. Funds allotted by the government for that contract during fiscal years 2000 and 1999 were fully recognized in the Company's first fiscal quarters of both years as a result of the accelerated development of the AbioCor. The Company accounts for revenue under its government contracts and grants as work 11 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) REVENUES (continued) is performed, provided that the government has appropriated sufficient funds for the work. Through September 30, 1999, the government has appropriated all of the $8.5 million AbioCor contract amount, including the $1.8 million appropriated and recognized as revenue during the quarter ended June 30, 1999. No amount remains to be recognized under the AbioCor contract as of September 30, 1999. As of September 30, 1999, the Company's total backlog of research and development contracts and grants was $2.7 million, including $1.1 million for AbioBooster-TM- research and development. Funding for the Company's government research and development contracts is subject to government appropriation, and all of these contracts contain provisions that make them terminable at the convenience of the government. The Company retains rights to all technological discoveries and products resulting from these efforts. COSTS AND EXPENSES Total costs and expenses decreased to $7.5 million, 179% of total revenues, for the three months ended September 30, 1999, from $7.8 million, 157% of total revenues, for the three months ended September 30, 1998. The decrease in total costs was predominately the result of decreased research and development and cost of product revenues partially offset by increased selling, general and administrative expenses. Total costs and expenses increased as a percentage of total revenue due to the decline in revenues as a large portion of sales, general and administrative charges represent fixed costs. Cost of product revenues as a percentage of product revenues were 31% for the three months ended September 30, 1999 and 36% for the three months ended September 30, 1998. The majority of this decrease in cost of products sold as a percentage of product revenues was attributable to higher average selling prices for BVS blood pumps during the quarter ended September 30, 1999 compared to the same period of the prior year and to an increase in the proportion of higher margin BVS blood pumps sales relative to lower margin BVS console sales. Research and development expenses decreased by 13% to $3.5 million, 83% of total revenues, for the three months ended September 30, 1999, from $4.0 million, 80% of total revenues for the three months ended September 30, 1998. The decrease primarily reflects the timing of expenditures for materials used in the manufacture of AbioCor devices used in pre-clinical testing. Research and development expenses during the three months ended September 30, 1999 included 12 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) COSTS AND EXPENSES (continued) $2.4 million of expenses incurred in connection with the Company's development activities for the AbioCor, compared to $3.0 million for the same period of the prior year. We anticipate that AbioCor expenses will increase in coming fiscal quarters as materials are scheduled to be received in order for the Company to manufacture AbioCor systems for various testing purposes. Selling, general and administrative expenses increased by 26% to $2.9 million, 70% of total revenues, for the three months ended September 30, 1999, from $2.3 million, 46% of total revenues, for the three months ended September 30, 1998. This increase is primarily attributed to increased legal expenses and to increased marketing activities. INTEREST AND OTHER INCOME Interest and other income consists primarily of interest on the Company's investment balances, net of interest and other expenses. Interest and other income decreased to $240,000 for the three months ended September 30, 1999 from $370,000 for the three months ended September 30, 1998. This decrease was primarily due to lower average funds available for investment. Income taxes incurred during these periods were not material and the Company continues to have significant net tax operating loss and tax credit carryforwards. 13 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) SIX MONTHS ENDED SEPTEMBER 30, 1999 NET LOSS Net loss for the six months ended September 30, 1999, was approximately $3,807,000, or $0.44 per share. This compares to a net loss of approximately $3,025,000, or $0.35 per share, for the same period of the previous year. The losses for both six month periods are primarily attributable to costs incurred for the development and pre-clinical testing costs associated with the AbioCor implantable replacement heart. REVENUES Product revenues decreased by 3% to $7.6 million in the six months ended September 30, 1999 from $7.9 million in the six months ended September 30, 1998. The decline in product revenues is primarily attributable to a reduction in unit sales of BVS systems sold to new customers partially offset by increased units sales and increased average selling prices of BVS disposable blood pumps reordered by and sold to existing customers. We believe that the decline in sales to new customers was largely a result of a decision made by the Company at the beginning of its current fiscal year to shift certain of its sales representatives away from focusing on sales to new customers as their primary responsibility to increasing support of existing customers in an effort to increase reorders of higher margin BVS blood pumps. Reorders of BVS blood pumps increased by 11% during the six months ended September 30, 1999 compared to the same period of the prior year. Domestic sales accounted for 97% of total product revenue in the six months ended September 30, 1999, compared to 96% for the same period a year earlier. Contract and grant revenues were $2.9 million during the first six months of both fiscal 2000 and fiscal 1999. Approximately $1.8 million of the contract and grant revenue recognized in both years was derived from the Company's AbioCor government contract. The remaining $1.1 million in contract and grant revenue recorded during the six months ended September 30, 1999 and September 30, 1998 was primarily derived from the Company's AbioBooster contract and other government grants. 14 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) COSTS AND EXPENSES Total costs and expenses increased to $14.7 million, 140% of total revenues, for the six months ended September 30, 1999, from $14.5 million, 135% of total revenues, for the six months ended September 30, 1998. The increase is primarily due to increased development activities related to new BVS products and enhancements and increased sales, general and administrative expenses. Cost of product revenues as a percentage of product revenues were 32% for the six months ended September 30, 1999 and 38% for the six months ended September 30, 1998. The majority of this decrease in cost of products sold as a percentage of product revenues was attributable to higher average selling prices for BVS blood pumps during the six months ended September 30, 1999 compared to the same period of the prior year and to an increase in the proportion of higher margin BVS blood pumps sold relative to lower margin BVS console sales. Research and development expenses were $6.8 million for the six months ended September 30, 1999, compared to $7.0 million for the same period of the previous year. Expenditures remained consistent at 65% of total revenues for each six month period. During the six months ended September 30, 1999, lower spending for the development of the AbioCor was offset by increased spending on new products and enhancements to the BVS. Research and development expenses during the six months ended September 30, 1999 included $4.7 million of expenses incurred in connection with our development activities for the AbioCor, compared to $5.2 million for the same period of the prior year. Selling, general and administrative expenses increased by 19% to $5.4 million, 51% of total revenues, for the six months ended September 30, 1999, compared to $4.5 million, 42% of total revenues, for the six months ended September 30, 1998. This increase is primarily attributed to increased selling and marketing expenditures as a result of our implementing new programs designed to improve sales of our disposable blood pumps, and increased legal expenses. INTEREST AND OTHER INCOME Interest and other income consists primarily of interest on the Company's investment balances, net of interest and other expenses. Interest and other income decreased to $398,000 for the six months 15 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) INTEREST AND OTHER INCOME ended September 30, 1999 from $727,000 for the six months ended September 30, 1998. This decrease was primarily due to lower average funds available for investment. Income taxes incurred during these periods were not material and the Company continues to have significant net tax operating loss and tax credit carryforwards. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1999, the Company's balance in cash and short-term marketable securities was $13.7 million. The Company also has a $3 million line of credit from a bank that expires on October 13, 2000, and which was entirely available at September 30, 1999. In the six months ended September 30, 1999, operating activities used cash of $3,418,000. Net cash used by operating activities during this period resulted from a net loss of $3,807,000 and increases in accounts receivable, inventory, and prepaid expenses of $479,000, $663,000, and $216,000, respectively. It also resulted from decreases in accrued expenses and long-term liabilities of $392,000 and $46,000, respectively. These uses of cash were partially offset by increases in trade payables of $854,000 and noncash charges for depreciation and amortization of $1,331,000 included in the net loss. The increase in inventory is primarily attributable to lower than planned product sales. During the six months ended September 30, 1999, investing activities used $811,000 of cash. Cash used in these activities included purchases of capital equipment and expenditures for leasehold improvements of $1,170,000, made primarily in connection with building out and furnishing the Company's new 79,000 square foot facility located in Danvers, Massachusetts. These capital expenditures were partially offset by $359,000 of cash provided from the sale of short-term marketable securities, net of purchases of similar securities. During the six months ended September 30, 1999, financing activities provided $68,000 of cash from the exercise of employee stock options and from employee purchases of Common Stock under the Employee Stock Purchase Plan. 16 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) LIQUIDITY AND CAPITAL RESOURCES (continued) Although the Company does not currently have significant capital commitments, we believe that we will continue to make significant investments over the next several years to support the development and commercialization of new products. In addition, we estimate that we will incur additional costs of approximately $1,000,000 in 1999 and 2000 to complete construction, qualification and occupancy of the larger manufacturing area in the Company's new facility to be used in the manufacture of BVS and AbioCor devices. On October 14, 1999, the Company entered into an agreement with its primary bank whereby it will be able to draw up to $1.2 million in term loans through March 31, 2000 for the acquisition of manufacturing equipment and leasehold improvements. These promissory notes are subject to various financing covenants, secured by the acquired equipment and are to be repaid in equal monthly installments through September 1, 2003. These notes will bear interest at either the Prime Rate or LIBOR Rate, at the Company's election. Although no funds have been drawn on this loan facility as of September 30, 1999, approximately $250,000 expended for leasehold improvements through that date will be included in the first term loan that we anticipate will be executed in November 1999. These notes are incremental to and separate from the Company's $3 million line of credit with this bank. We believe that the Company's revenue and existing resources will be sufficient to fund our planned operations, including the planned increases in our internally funded AbioCor and new BVS development and product extension efforts, for at least the next twelve months. However, we estimate that it will require significant additional funds in order to complete the development, conduct clinical trials, and achieve regulatory approvals of the AbioCor and other products under development over the next several years. YEAR 2000 READINESS DISCLOSURE As the year 2000 approaches, it is generally anticipated that computers, software and other equipment utilizing microprocessors may be unable to function properly. We have evaluated this potential issue with respect to our products, our financial and management information systems and our suppliers. With respect to the our products, the software controlling the BVS drive console includes internal counters, but the BVS operation is not related in any way to a specific calendar date. Accordingly, we believe that the BVS will not need any repair or modification with regard to the Year 2000 issue. 17 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) YEAR 2000 READINESS DISCLOSURE (continued) With respect to the our financial and management information systems, we successfully installed and tested a year 2000 upgrade to our primary system and have completed an assessment of all personal computers ("PCs") and installed applications. All significant systems have been upgraded or replaced where necessary. Expenditures for new PCs, software applications, and operating systems under our Year 2000 plan have amounted to less than $100,000, with no significant costs remaining before the start of calendar year 2000. We are completing an assessment of key suppliers begun in fiscal 1999 and have increased safety stocks of materials inventory where a prolonged loss of material deliveries would have an adverse impact on our business, financial condition and results of operations. We have also made inquiries to assess key service providers such as financial institutions, our payroll service provider, and our retirement plan administrator as to their year 2000 readiness and have received assurances that the vendors' critical systems have been updated, tested, and found to be compliant. Although we do not expect Year 2000 issues to have a material impact on our business or future results of operations, there can be no assurance that there will not be interruptions of operations or other limitations of system functionality or that we may incur significant costs to avoid such interruptions or limitations. To the extent that we can not eliminate all Year 2000 issues, the most reasonably likely worst case year 2000 scenario is systemic failures beyond the control of the Company, such as a prolonged telecommunications or electrical failure, or a general disruption in supplies and services provided to the Company which could have a material adverse effect on the our business, results of operations and financial condition. RISK FACTORS WHICH MAY AFFECT FUTURE RESULTS This document contains forward looking statements, including statements regarding the anticipated timing and cost of our AbioCor development activities, enhancements to be made to the BVS, planned expansion of our manufacturing facilities, adequacy of existing resources and overcoming Year 2000 related issues. The Company's actual results, including our AbioCor development, BVS new products and enhancements, facility expansion, adequacy of resources and overcoming Year 2000 issues may differ materially based on a number of factors, both known and unknown, including: uncertainty of product development and clinical trials, complex manufacturing, high quality requirements, unproven demonstration of required reliability of products under development, dependence on key personnel, risks associated with growing number of 18 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) RISK FACTORS WHICH MAY AFFECT FUTURE RESULTS (continued) employees, inability to recruit required human resources on schedule, competition and technological change, government regulations including the FDA and other regulatory agencies, reliance on government contracts, dependence on limited sources of supply, future capital needs and uncertainty of additional funding, dependence on third-party reimbursement, potential inadequacy of product liability insurance, dependence on patents and proprietary rights and other risks detailed in our Form 10-K for the year ended March 31, 1999 which was filed with the Securities and Exchange Commission. Investors are cautioned that all such statements involve risks and uncertainties. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 19 ABIOMED, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION (continued) ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company does not use derivative financial instruments for speculative or trading purposes. However, it is exposed to market risk related to changes in interest rates. The Company maintains an investment portfolio consisting mainly of federal agency obligations, state and municipal bonds, and U.S. Treasury notes with maturities of one year or less. These held-to-maturity securities are subject to interest rate risk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 10 percent from levels at September 30, 1999, the fair market value of the portfolio would decline by an immaterial amount. The Company has the ability to hold the majority of its fixed income investments until maturity, and therefore the Company would not expect its operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on its securities portfolio. 20 ABIOMED, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On January 20, 1998, World Heart Corporation and the Ottawa Heart Institute Research Corporation filed a complaint in the United States District Court for the District of Delaware. The complaint seeks damages and injunctive relief for alleged breaches of contract, misappropriation of trade secrets, conversion of trade secrets and patent infringement by the Company. These claims and allegations relate to certain technology used in its transcutaneous energy transmission system that is a component of the AbioCor under development by the Company. On May 7, 1999, the Company filed a motion requesting leave of court to assert a counterclaim alleging that World Heart Corporation and Ottawa Heart Institute misappropriated the Company's trade secrets. On October 20, 1999, World Heart Corporation informed the Company that their discovery has identified no infringement by the Company of the patent held by the Ottawa Heart Institute Research Corporation and that their patent infringement claims and allegations against the Company will be dropped while World Heart Corporation and the Ottawa Heart Institute Research Corporation continue to seek evidence regarding their trade secret and breach of contract allegations. The Company does not believe that it is infringing nor has ever infringed any patent, trade secret or other intellectual property rights of the plaintiffs and is vigorously defending this position. The Company cannot assure that it will prevail in the defense of the remaining claims and allegation and the Company cannot assure that it will prevail in its claims or allegations against World Heart Corporation and the Ottawa Heart Institute Research Corporation. Further evaluation and discovery is being conducted by all parties involved. Unless otherwise resolved, the claims by the plaintiff against the Company are scheduled for trial in early 2000. Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None 21 ABIOMED, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION (continued) Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's Annual Meeting of Shareholders held on August 11, 1999, the stockholders approved the following: a) Elected two persons to serve as Class I directors as follows: Director Votes for Votes Withheld -------- --------- -------------- David M. Lederman 8,119,356 42,600 Desmond H. O'Connell, Jr. 8,120,756 41,200 b) A proposal to amend the Company's 1989 Non-Qualified Stock Option Plan. The proposal received 7,891,228 votes for and 172,149 votes against. There were 34,208 abstentions and 64,371 non-voting. Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) EXHIBITS Exhibit 10 a) Letter of Agreement between the Company and Fleet National Bank, dated as of October 14, 1999 with respect to Demand and Term Loans. b) Form of Change of Control Agreement.* c) Schedule related to Change of Control Agreement.* Exhibit 27 - Financial Data Schedule b) REPORTS ON FORM 8-K None * Compensatory plan or arrangement. 22 ABIOMED, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION (continued) - -------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ABIOMED, Inc. Date: November 9, 1999 /s/ David M. Lederman ----------------------------- David M. Lederman CEO and President Date: November 9, 1999 /s/ John F. Thero ----------------------------- John F. Thero Senior Vice President Finance and Treasurer Chief Financial Officer Principal Accounting Officer 23 EX-10.(A) 2 EXHIBIT 10(A) Exhibit 10(a) ABIOMED, INC. 22 Cherry Hill Drive Danvers, ma 01923 October 14, 1999 Fleet National Bank One Federal Street Boston, MA 02110 Gentlemen: This letter agreement will set forth certain understandings between ABIOMED, Inc., a Delaware corporation (the "Borrower") and Fleet National Bank (the "Bank") with respect to Demand Loans and Term Loans (each as hereinafter defined) which may be made by the Bank to the Borrower and with respect to letters of credit which may hereafter be issued by the Bank for the account of the Borrower. In consideration of the mutual promises contained herein and in the other documents referred to below, and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as follows: I. AMOUNTS AND TERMS 1.1. REFERENCE TO DOCUMENTS. Reference is made to (i) that certain $3,000,000 face principal amount demand promissory note (the "Demand Note") of even date herewith made by the Borrower and payable to the order of the Bank, (ii) that certain $250,000 face principal amount term promissory note (the "Tranche A Term Note") of even date herewith made by the Borrower and payable to the order of the Bank, (iii) that certain $400,000 face principal amount term promissory note (the "Tranche B Term Note") of even date herewith made by the Borrower and payable to the order of the Bank, (iv) that certain $550,000 face principal amount term note (the "Tranche C Term Note") made by the Borrower and payable to the order of the Bank, and (v) that certain Security Agreement (Equipment) of even date herewith from the Borrower to the Bank (the "Security Agreement"). This letter agreement and the Demand Note supersede and replace in its entirety that certain Demand Line of Credit Promissory Note dated October 21, 1998 made by the Borrower and payable to the order of the Bank (the "Prior Note"). From and after the date hereof the Bank shall not be deemed to have any obligations or commitments under or in respect of the loan facility evidenced by the Prior Note. All loans outstanding under the Prior Note at the date of execution and delivery of this letter agreement shall be deemed refunded and replaced by Demand Loans hereunder. 1.2. DEMAND LOANS; DEMAND NOTE. Subject to the terms and conditions hereinafter set forth, the Bank may, in the Bank's discretion, make loans ("Demand Loans") to the Borrower, in such amounts as the Borrower may request, on any Business Day prior to the first to occur of (i) the Expiration Date, or (ii) the date of any demand for payment under the Demand Note, or (iii) the earlier termination of the within-described financing arrangements for Demand Loans pursuant to Section 5.2 or Section 6.6; provided, however, that the aggregate principal amount of the Demand Loans outstanding shall at no time exceed the Maximum Demand Loan Amount (hereinafter defined) as then in effect. Within such limit, and subject to the terms and conditions hereof, the Borrower may obtain Demand Loans, repay Demand Loans and obtain Demand Loans again on one or more occasions. The Demand Loans shall be evidenced by the Demand Note. The Borrower hereby irrevocably authorizes the Bank to make or cause to be made, on a schedule attached to the Demand Note or on the books of the Bank, at or following the time of making each Demand Loan and of receiving any payment of principal of a Demand Loan, an appropriate notation reflecting such transaction and the then aggregate unpaid principal balance of the Demand Loans. The amount so noted shall constitute presumptive evidence as to the amount owed by the Borrower with respect to principal of the Demand Loans. Failure of the Bank to make any such notation shall not, however, affect any obligation of the Borrower or any right of the Bank hereunder or under the Demand Note. 1.3. REPAYMENT; RENEWAL OF DEMAND LOAN FACILITY. The Borrower shall repay in full all Demand Loans and all interest thereon upon the first to occur of: (i) the Expiration Date, or (ii) the date of any demand for payment (which demand may be made by the Bank at any time in the Bank's discretion, whether or not any Default or Event of Default has occurred), or (iii) an acceleration under Section 5.2(a) following an Event of Default. The Borrower may repay at any time, without penalty or premium, the whole or any portion of any Demand Loan. The Bank may, at its sole discretion, renew the financing arrangements described in Section 1.2 by extending the Expiration Date in a writing signed by the Bank and accepted by the Borrower. Neither the inclusion in this letter agreement or elsewhere of covenants relating to periods of time after the Expiration Date, nor any other provision hereof, nor any action (except a written extension pursuant to the immediately preceding sentence), non-action or course of dealing on the part of the Bank will be deemed an extension of, or agreement on the part of the Bank to extend, the Expiration Date. 1.4. TERM LOANS; TERM NOTES. In addition to the foregoing, subject to the terms and conditions of this letter agreement, the Bank will make one or more term loans (the "Term Loans") to the Borrower. The Term Loans are available as follows: (1) At the Borrower's request, and subject to the terms and conditions of this letter agreement, the Bank will make one or more Term Loans ("Tranche A Term Loans") to the Borrower in an aggregate original principal amount not to exceed $250,000. Such Tranche A Term Loans may be made on any Business Day prior to the first to occur of (i) the close of business on November 30, 1999 or (ii) the earlier termination of the Term Loan facilities pursuant to Section 5.2 or Section 6.6. (2) In addition, at the Borrower's request, and subject to the terms and conditions of this letter agreement, the Bank will make one or more Term Loans ("Tranche B Term Loans") to the Borrower in an aggregate original principal amount not to exceed $400,000. Such Tranche B Term Loans may be made on any Business Day prior to the first to occur of (i) the close of business on January 31, 2000 or (ii) the earlier termination of the Term Loan facilities pursuant to Section 5.2 or Section 6.6. (3) In addition, at the Borrower's request, and subject to the terms and conditions of this letter agreement, the Bank will make one or more Term Loans ("Tranche C Term Loans") to the Borrower in an aggregate original principal amount not to exceed $550,000. Such Tranche C Term Loans may be made on any Business Day prior to the first to occur of (i) the close of business on March 31, 2000 or (ii) 2 the earlier termination of the Term Loan facilities pursuant to ss.5.2 or ss.6.6. Thus, the maximum aggregate original principal amounts of the Term Loans available to the Borrower will be $1,200,000. At the time of each such request, the Borrower will indicate whether the Borrower requests a Tranche A Term Loan, a Tranche B Term Loan or a Tranche C Term Loan and the amount of the Term Loan of such Tranche being requested. A Term Loan of any Tranche (or contemporaneous Term Loans of two or more Tranches) shall be made, no more than once per month (unless the Bank shall consent to more frequent Term Loans), in order to finance costs of Qualifying Equipment acquired by the Borrower within the 60 days preceding the request for such a Term Loan and/or to finance the costs of Qualifying Leasehold Improvements incurred by the Borrower during the 60 days preceding such request. Each such Term Loan shall be in such amount as may be requested by the Borrower; provided that (i) no Term Loan of any Tranche will be made after the expiry date for such Tranche set forth above in this ss.1.4; (ii) the aggregate original principal amounts of the Term Loans of each Tranche shall not exceed the amount set forth above in this ss.1.4 as the maximum amount for such Tranche nor will the aggregate original principal amounts of all Term Loans exceed $1,200,000; (iii) no Term Loan will be in an amount more than 90% of the invoiced actual costs of the tangible property constituting the items of Qualifying Equipment and/or Qualifying Leasehold Improvements with respect to which such Term Loan is made (excluding taxes, shipping, software, installation charges, training fees and other "soft costs"); except that the Borrower may in its sole discretion elect to deposit with the Bank and pledge to the Bank cash equal to 10% of the original principal amount of any Term Loan; and if it so elects and pursuant to such election deposits with the Bank and pledges to the Bank (by instruments satisfactory in form and substance to the Bank) cash equal to 10% of the original principal amount of any Term Loan, then the amount of such Term Loan (including the amount so pledged) will be 100% of said invoiced actual costs; and (iv) the aggregate principal amount of all Term Loans made with respect to Qualifying Leasehold Improvements will not exceed the lesser of (A) $400,000 or (B) 30% of the total principal amounts of all Term Loans made at or prior to the date of the making of any such Term Loan for Leasehold Improvements. Prior to the making of each Term Loan, and as a precondition thereto, the Borrower will provide the Bank with: (i) invoices supporting the costs of the relevant Qualifying Equipment and/or the costs of the relevant Qualifying Leasehold Improvements, as the case may be; (ii) such evidence as the Bank may reasonably require showing that each item of Qualifying Equipment has been delivered to and installed at the Borrower's Danvers, MA premises, has been accepted by the Borrower, has been paid for by the Borrower and is owned by the Borrower free of all liens and interests of any other Person (other than the security interest of the Bank pursuant to the Security Agreement); (iii) such evidence as the Bank may reasonably require showing that each item of Qualifying Leasehold Improvements has been constructed at or installed at the Borrower's Danvers, MA premises, has been paid for by the Borrower and is owned by the Borrower free of all liens and interests of any other Person (other than the security interest of the Bank pursuant to the Security Agreement), except that the Bank acknowledges that certain Qualifying Leasehold Improvements may be so built into the real estate at the Borrower's Danvers, MA premises that the Borrower's landlord will, upon termination of the Borrower's lease, have rights in such Qualifying Leasehold Improvements; (iv) Uniform Commercial Code financing statements and appropriate supplements to the Security Agreement reflecting the relevant Qualifying Equipment and/or Qualifying Leasehold Improvements with respect to which such Term Loan is being made; and (v) evidence satisfactory to the Bank that 3 the Qualifying Equipment and the Qualifying Leasehold Improvements are fully insured against casualty loss, with insurance naming the Bank as secured party and first loss payee. The Tranche A Term Loans will be evidenced by the Tranche A Term Note. The Tranche B Term Loans will be evidenced by the Tranche B Term Note. The Tranche C Term Loans will be evidenced by the Tranche C Term Note. The Borrower hereby irrevocably authorizes the Bank to make or cause to be made, on a schedule attached to the appropriate Term Note or on the books of the Bank, at or following the time of making each Term Loan and of receiving any payment of principal of any Term Loan, an appropriate notation reflecting such transaction and the then aggregate unpaid principal balance of the Term Loans of that Tranche to which such Term Note relates. The amount so noted on each Term Note shall constitute presumptive evidence as to the amount owed by the Borrower with respect to principal of the Term Loans of that Tranche to which such Term Note relates. Failure of the Bank to make any such notation shall not, however, affect any obligation of the Borrower or any right of the Bank hereunder or under any Term Note. 1.5. PRINCIPAL REPAYMENT OF TERM LOANS. The Borrower shall repay principal of the Tranche A Term Loans in 45 equal consecutive monthly installments (each in an amount equal to 1/46th of the aggregate principal amount of the Tranche A Term Loans outstanding at the close of business on November 30, 1999), such monthly installments to commence on December 1, 1999 and to continue on the first day of each month thereafter through and including August 1, 2003, PLUS a 46th and final installment due and payable on September 1, 2003 in an amount equal to the entire then outstanding principal balance of the Tranche A Term Loans and all interest then accrued but unpaid thereon to the date of payment. The Borrower may prepay, at any time or from time to time, without premium or penalty, the whole or any portion of the Tranche A Term Loans to the extent that same are Floating Rate Term Loans; provided that each such principal prepayment shall be accompanied by payment of all interest on the amount so prepaid accrued under the Tranche A Term Note but unpaid to the date of payment. The Borrower may prepay the whole or any portion of any Tranche A Term Loan which is a LIBOR Term Loan; provided that (i) the Borrower gives the Bank not less than two (2) Business Days' prior written notice of its intent so to prepay, (ii) the Borrower pays all interest on each such Tranche A Term Loan which is a LIBOR Term Loan (or portion thereof) so prepaid accrued to the date of such prepayment, (iii) any voluntary prepayment with respect to a Tranche A Term Loan which is a LIBOR Term Loan must be in an integral multiple of $100,000 (provided that, in any event, no Tranche A Loan which is a LIBOR Term Loan will remain outstanding in a principal amount of less than $100,000), and (iv) if the Borrower for any reason makes any prepayment of a Tranche A Term Loan which is a LIBOR Term Loan prior to the last day of the Interest Period applicable thereto, the Borrower shall forthwith pay all amounts owing to the Bank pursuant to the provisions of ss.1.9 with respect to such LIBOR Term Loan. Any partial prepayment of principal of the Tranche A Term Loans will be applied to installments of principal of the Tranche A Term Loans thereafter coming due in inverse order of normal maturity. Amounts repaid or prepaid with respect to the Tranche A Term Loans are not available for reborrowing. The Borrower shall repay principal of the Tranche B Term Loans in 43 equal consecutive monthly installments (each in an amount equal to 1/44th of the aggregate principal amount of the 4 Tranche B Term Loans outstanding on at the close of business on January 31, 2000), such monthly installments to commence on February 1, 2000 and to continue on the first day of each month thereafter through and including August 1, 2003, PLUS a 44th and final installment due and payable on September 1, 2003 in an amount equal to the entire then outstanding principal balance of the Tranche B Term Loans and all interest then accrued but unpaid thereon to the date of payment. The Borrower may prepay, at any time or from time to time, without premium or penalty, the whole or any portion of the Tranche B Term Loans to the extent that same are Floating Rate Term Loans; provided that each such principal prepayment shall be accompanied by payment of all interest on the amount so prepaid accrued under the Tranche B Term Note but unpaid to the date of payment. The Borrower may prepay the whole or any portion of any Tranche B Term Loan which is a LIBOR Term Loan; provided that (i) the Borrower gives the Bank not less than two (2) Business Days' prior written notice of its intent so to prepay, (ii) the Borrower pays all interest on each such Tranche B Term Loan which is a LIBOR Term Loan (or portion thereof) so prepaid accrued to the date of such prepayment, (iii) any voluntary prepayment with respect to a Tranche B Term Loan which is a LIBOR Term Loan must be in an integral multiple of $100,000 (provided that, in any event, no Tranche B Loan which is a LIBOR Term Loan will remain outstanding in a principal amount of less than $100,000), and (iv) if the Borrower for any reason makes any prepayment of a Tranche B Term Loan which is a LIBOR Term Loan prior to the last day of the Interest Period applicable thereto, the Borrower shall forthwith pay all amounts owing to the Bank pursuant to the provisions of ss.1.9 with respect to such LIBOR Term Loan. Any partial prepayment of principal of the Tranche B Term Loans will be applied to installments of principal of the Tranche B Term Loans thereafter coming due in inverse order of normal maturity. Amounts repaid or prepaid with respect to the Tranche B Term Loans are not available for reborrowing. The Borrower shall repay principal of the Tranche C Term Loans in 41 equal consecutive monthly installments (each in an amount equal to 1/42nd of the aggregate principal amount of the Tranche C Term Loans outstanding at the close of business on March 31, 2000), such monthly installments to commence on April 1, 2000 and to continue on the first day of each month thereafter through and including August 1, 2003, PLUS a 42nd and final installment due and payable on September 1, 2003 in an amount equal to the entire then outstanding principal balance of the Tranche C Term Loans and all interest then accrued but unpaid thereon to the date of payment. The Borrower may prepay, at any time or from time to time, without premium or penalty, the whole or any portion of the Tranche C Term Loans to the extent that same are Floating Rate Term Loans; provided that each such principal prepayment shall be accompanied by payment of all interest on the amount so prepaid accrued under the Tranche C Term Note but unpaid to the date of payment. The Borrower may prepay the whole or any portion of any Tranche C Term Loan which is a LIBOR Term Loan; provided that (i) the Borrower gives the Bank not less than two (2) Business Days' prior written notice of its intent so to prepay, (ii) the Borrower pays all interest on each such Tranche C Term Loan which is a LIBOR Term Loan (or portion thereof) so prepaid accrued to the date of such prepayment, (iii) any voluntary prepayment with respect to a Tranche C Term Loan which is a LIBOR Term Loan must be in an integral multiple of $100,000 (provided that, in any event, no Tranche C Loan which is a LIBOR Term Loan will remain outstanding in a principal amount of less than $100,000), and (iv) if the Borrower for any reason makes any prepayment of a Tranche C Term Loan which is a LIBOR Term Loan prior to the last day of the Interest Period applicable thereto, the Borrower shall 5 forthwith pay all amounts owing to the Bank pursuant to the provisions of ss.1.9 with respect to such LIBOR Term Loan. Any partial prepayment of principal of the Tranche C Term Loans will be applied to installments of principal of the Tranche C Term Loans thereafter coming due in inverse order of normal maturity. Amounts repaid or prepaid with respect to the Tranche C Term Loans are not available for reborrowing. 1.6. INTEREST RATE FOR TERM LOANS. Except as otherwise provided below in this ss.1.6, interest on the Term Loans will be payable at a fluctuating rate per annum (the "Floating Rate") which shall at all times be equal to the Prime Rate as in effect from time to time (but in no event in excess of the maximum rate permitted by then applicable law), with a change in such rate of interest to become effective on each day when a change in the Prime Rate becomes effective. Subject to the conditions set forth herein, the Borrower may elect that all or any portion of any Term Loan to be made under ss.1.4 will be made as a LIBOR Term Loan, that all or any portion of any Floating Rate Term Loan will be converted to a LIBOR Term Loan and/or that any LIBOR Term Loan will be continued at the expiration of the Interest Period applicable thereto as a new LIBOR Term Loan. Such election shall be made by the Borrower giving to the Bank a written or telephonic notice received by the Bank within the time period and containing the information described in the next following sentence (a "LIBOR Term Loan Notice"). The LIBOR Term Loan Notice must be received by the Bank no later than 10:00 a.m. (Boston time) on that day which is two Business Days prior to the date of the proposed borrowing, conversion or continuation, as the case may be, and must specify the amount of the LIBOR Term Loan requested (which shall be an integral multiple of $100,000), must identify the particular Term Loan or Loans or portion thereof so to be made, converted or continued, as the case may be, and must specify the proposed commencement date of the relevant Interest Period. Notwithstanding anything provided elsewhere in this letter agreement, the Borrower may not elect to have any installment of a Term Loan included in a LIBOR Term Loan if the Interest Period applicable thereto would continue after the due date of such installment. Any LIBOR Term Loan Notice shall, upon receipt by the Bank, become irrevocable and binding on the Borrower, and the Borrower shall, upon demand and receipt of a Bank Certificate with respect thereto, forthwith indemnify the Bank against any loss or expense incurred by the Bank as a result of any failure by the Borrower to borrow any requested LIBOR Term Loan, including, without limitation, any loss or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by the Bank to fund or maintain such LIBOR Term Loan. At the expiration of each Interest Period applicable to a LIBOR Term Loan, the principal amount of such LIBOR Term Loan may be continued as a new LIBOR Term Loan to the extent and on the terms and conditions contained in this letter agreement by delivery to the Bank of a new LIBOR Term Loan Notice conforming to the requirements set forth above in this ss.1.6 (and any LIBOR Term Loan not repaid and not so continued as a new LIBOR Term Loan will be deemed to have been converted into a Floating Rate Term Loan). Notwithstanding any other provision of this letter agreement, the Bank need not make any LIBOR Term Loan or allow any conversion of a Floating Rate Term Loan to a LIBOR Term Loan at any time when there exists any Default or Event of Default. The Borrower may request and the Bank may issue caps, collars, swaps and other rate protection products, using the Bank's then customary documentation for such transactions. Such caps, collars, swaps and other rate protection products will be issued for such fees and upon such 6 other terms and conditions as may be agreed upon by the Bank and the Borrower at the time of issuance thereof. Any request for a LIBOR Term Loan and any election to convert all or any portion of the Term Loans to a LIBOR Term Loan may be made on behalf of the Borrower only by a duly authorized officer; provided, however, that the Bank may conclusively rely upon any written or facsimile communication received from any individual whom the Bank believes in good faith to be such a duly authorized officer. 1.7. INTEREST PAYMENTS ON ALL LOANS. The Borrower will pay interest on the principal amount of the Loans outstanding from time to time, from the date hereof until payment of the Loans and the Notes in full and the termination of this letter agreement. Interest on Demand Loans and on Floating Rate Term Loans will be payable monthly in arrears on the first day of each month. Interest on each LIBOR Term Loan will be payable in arrears on the Interest Payment Date applicable to such LIBOR Term Loan. In any event, interest under each Term Note shall also be paid on the date of payment of such Term Note in full. Interest on Demand Loans and on Floating Rate Term Loans shall be payable at the Floating Rate. The rate of interest payable on any LIBOR Term Loan will be the LIBOR Interest Rate applicable thereto. In any event, after the occurrence and during the continuance of an Event of Default the Loans shall bear interest at a rate per annum which at all times shall be equal to the sum of (i) four (4%) percent per annum PLUS (ii) the Prime Rate in effect from time to time. All interest and fees payable under this letter agreement and/or under any Note will be calculated on the basis of a 360-day year for the actual number of days elapsed. 1.8. RATE DETERMINATION PROTECTION. In the event that: (i) the Bank shall determine that, by reason of circumstances affecting the London interbank market or otherwise, adequate and reasonable methods do not exist for ascertaining the LIBOR Interest Rate which would otherwise be applicable during any Interest Period, or (ii) the Bank shall determine that: (A) the making or continuation of any LIBOR Term Loan has been made impracticable or unlawful by (1) the occurrence of any contingency that materially and adversely affects the London interbank market or (2) compliance by the Bank with any applicable law or governmental regulation, guideline or order or interpretation or change thereof by any governmental authority charged with the interpretation or administration thereof or with any request or directive of any such governmental authority (whether or not having the force of law); or (B) LIBOR (taking into account any adjustment in respect of any Reserve Rate which may become effective) will not, in the reasonable determination of the Bank, adequately and fairly reflect the cost to the Bank of funding the LIBOR Term Loans for such Interest Period 7 then the Bank shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower) to the Borrower. In such event the obligations of the Bank to make LIBOR Term Loans shall be suspended until the Bank determines that the circumstances giving rise to such suspension no longer exist, whereupon the Bank shall notify the Borrower. 1.9. PREPAYMENT OF LIBOR TERM LOANS. The following provisions of this ss.1.9 shall be effective only with respect to LIBOR Term Loans: If, due to acceleration of any Term Note or due to voluntary prepayment or mandatory repayment or prepayment or due to any other reason, the Bank receives payment of any principal of any LIBOR Term Loan on any date prior to the last day of the relevant Interest Period or if for any reason any LIBOR Term Loan is converted to a Floating Rate Term Loan prior to the expiration of the relevant Interest Period, the Borrower shall, upon demand and receipt of a Bank Certificate from the Bank with respect thereto, pay forthwith to the Bank a yield maintenance fee in an amount computed as follows: The current rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond equivalent) with a maturity date closest to the last day of the Interest Period applicable to the affected LIBOR Term Loan shall be subtracted from the "cost of funds" component (I.E., reserve-adjusted LIBOR) of the LIBOR Interest Rate in effect with respect to such LIBOR Term Loan at the date of such prepayment or conversion. If the result is zero or a negative number, there shall be no yield maintenance fee. If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the principal balance being prepaid. The resulting amount shall be divided by 360 and multiplied by the number of days remaining in the relevant Interest Period. Said amount shall be reduced to present value calculated by using the number of days remaining in the relevant Interest Period and by using the above-referenced United States Treasury securities rate as the discount rate. The resulting amount shall be the yield maintenance fee due to the Bank upon prepayment or conversion of the applicable LIBOR Term Loan. Any acceleration of a LIBOR Term Loan due to an Event of Default will give rise to a yield maintenance fee calculated with the respect to such LIBOR Term Loan on the date of such acceleration in the same manner as though the Borrower had exercised a right of prepayment at that date, such yield maintenance fee being due and payable at that date. 1.10. INCREASED COSTS; CAPITAL ADEQUACY. (i) If the adoption, effectiveness or phase-in, after the date hereof, of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (A) shall subject the Bank to any Imposition or other charge with respect to any LIBOR Term Loan or the Bank's agreement to make LIBOR Term Loans, or shall change the basis of taxation of payments to the Bank of the principal of or interest on any LIBOR Term Loan or any other amounts due under this letter agreement in respect of the LIBOR Term Loans or the Bank's 8 agreement to make LIBOR Term Loans (except for changes in the rate of tax on the over-all net income of the Bank); or (B) shall impose, modify or deem applicable any reserve, special deposit, deposit insurance or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding, with respect to any LIBOR Term Loan, any such requirement already included in the applicable Reserve Rate) against assets of, deposits with or for the account of, or credit extended by, the Bank or shall impose on the Bank or on the London interbank market any other condition affecting any LIBOR Term Loans or the Bank's agreement to make LIBOR Term Loans and the result of any of the foregoing is to increase the cost to the Bank of making or maintaining any LIBOR Term Loan or to reduce the amount of any sum received or receivable by the Bank under this letter agreement or under any Term Note with respect to any LIBOR Term Loan by an amount deemed by the Bank to be material, then (A) the Bank shall promptly after its determination of such occurrence deliver a Bank Certificate with respect thereto to the Borrower; and (B) promptly upon demand by the Bank and receipt of such Bank Certificate from the Bank with respect thereto, the Borrower shall pay to the Bank such additional amount or amounts as the Bank certifies to be necessary to compensate the Bank for such increased cost or reduction in amount received or receivable. (ii) If the Bank shall have determined that the adoption, effectiveness or phase-in after the date hereof of any applicable law, rule or regulation regarding capital requirements for banks or bank holding companies, or any change therein after the date hereof, or any change after the date hereof in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive of such entity regarding capital adequacy (whether or not having the force of law) has or would have the effect of reducing the return on the Bank's capital with respect to any Loan (whether or not then subject to any LIBOR Interest Rate) or any letter of credit and/or with respect to the Bank's agreements hereunder to make Loans and/or issue letters of credit to a level below that which the Bank could have achieved (taking into consideration the Bank's policies with respect to capital adequacy immediately before such adoption, effectiveness, phase-in, change or compliance and assuming that the Bank's capital was then fully utilized) by any amount deemed by the Bank to be material: (A) the Bank shall promptly after its determination of such occurrence deliver a Bank Certificate with respect thereto to the Borrower; and (B) the Borrower shall pay to the Bank as an additional fee from time to time on demand such amount as the Bank certifies to be the amount that will compensate it for such reduction. (iii) A Bank Certificate of the Bank claiming compensation under this ss.1.10 shall be conclusive in the absence of manifest error. Such certificate shall set forth the nature and date of the occurrence giving rise to such compensation, the additional amount 9 or amounts to be paid to the Bank hereunder and the method by which such amounts are determined. In determining any such amount, the Bank may use any reasonable averaging and attribution methods. (iv) No failure on the part of the Bank to demand compensation on any one occasion shall constitute a waiver of its right to demand such compensation on any other occasion and no failure on the part of the Bank to deliver any Bank Certificate in a timely manner shall in any way reduce any obligation of the Borrower to the Bank under this ss.1.10; provided, however, that if a Bank Certificate is delivered more than 180 days after the event or circumstance giving rise thereto, the Bank shall not be entitled to compensation under this ss.1.10 with respect to any period more than 180 days prior to the date of delivery of such Bank Certificate. 1.11. ILLEGALITY OR IMPOSSIBILITY. Notwithstanding any other provision of this letter agreement, if the introduction of or any change in or in the interpretation or administration of any law or regulation applicable to the Bank or the Bank's activities in the London interbank market shall make it unlawful, or any central bank or other governmental authority having jurisdiction over the Bank or the Bank's activities in the London interbank market shall assert that it is unlawful, or otherwise make it impossible, for the Bank to perform its obligations hereunder to make LIBOR Term Loans or to continue to fund or maintain LIBOR Term Loans, then on notice thereof and demand therefor by the Bank to the Borrower, (i) the obligation of the Bank to fund LIBOR Term Loans shall terminate and (ii) all affected LIBOR Term Loans shall be deemed to have been converted into Floating Rate Term Loans (with the Borrower to be responsible for any amount payable under ss.1.9 as a consequence of such conversion) at the last day on which such LIBOR Term Loans may legally remain outstanding. Except as provided above in this ss.1.11, the Borrower will have no right to convert any LIBOR Term Loan to a Floating Rate Term Loan prior to the end of the Interest Period applicable to such LIBOR Term Loan. 1.12. ADVANCES AND PAYMENTS. The proceeds of all Loans shall be credited by the Bank to a general deposit account maintained by the Borrower with the Bank. The proceeds of each Demand Loan shall be used by the Borrower solely for working capital purposes. At the date of execution and delivery of this letter agreement, all loans outstanding under the Prior Note are deemed to be refunded by Demand Loans under this letter agreement. The proceeds of each Term Loan will be used by the Borrower solely to pay or reimburse acquisition costs of Qualifying Equipment and/or Qualifying Leasehold Improvements. The Bank may charge any general deposit account of the Borrower at the Bank with the amount of all payments of interest, principal and other sums when same are due, from time to time, under this letter agreement and/or any Note and/or with respect to any letter of credit; and will thereafter promptly notify the Borrower of the amount so charged. The failure of the Bank so to charge any account or to give any such notice shall not affect the obligation of the Borrower to pay interest, principal or other sums as provided herein or in any Note or with respect to any letter of credit. 10 Whenever any payment to be made to the Bank hereunder or under any Note or with respect to any letter of credit shall be stated to be due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and interest payable on each such date shall include the amount thereof which shall accrue during the period of such extension of time. All payments by the Borrower hereunder and/or in respect of any Note and/or with respect to any letter of credit shall be made net of any impositions or taxes and without deduction, set-off or counterclaim, notwithstanding any claim which the Borrower may now or at any time hereafter have against the Bank. All payments of interest, principal and any other sum payable hereunder and/or under any Note and/or with respect to any letter of credit shall be made to the Bank, in lawful money of the United States in immediately available funds, at its office at One Federal Street, Boston, MA 02110 or at such other address as the Bank may from time to time direct. All payments received by the Bank after 2:00 p.m. on any day shall be deemed received as of the next succeeding Business Day. All monies received by the Bank shall be applied first to fees, charges, costs and expenses payable to the Bank under this letter agreement, any Note and/or any of the other Loan Documents and/or with respect to any letter of credit, next to interest then accrued on account of any Loans or letter of credit reimbursement obligations and only thereafter to principal of the Loans and letter of credit reimbursement obligations, being applied against the Loans and/or such obligations in such order as the Borrower may designate (and, failing such designation, being applied first against the letter of credit reimbursement obligations, next against any outstanding Demand Loans and thereafter against installments of the Term Loans in inverse order of normal maturity). All interest and fees payable hereunder and/or under any Note shall be calculated on the basis of a 360-day year for the actual number of days elapsed. 1.13. LETTERS OF CREDIT. At the Borrower's request, the Bank may, from time to time, in its sole discretion issue one or more letters of credit for the account of the Borrower; provided that at the time of issuance of such letter of credit and after giving effect thereto, the Aggregate Demand Facility Liabilities will not exceed $3,000,000. Any such letter of credit will be issued for such fee and upon such terms and conditions as may be agreed to by the Bank and the Borrower at the time of issuance. The Borrower hereby authorizes the Bank, without further request from the Borrower, to cause the Borrower's liability to the Bank for reimbursement of funds drawn under any such letter of credit to be repaid from the proceeds of a Demand Loan to be made hereunder. The Borrower hereby irrevocably requests that such Demand Loan be made. 1.14. CONDITIONS TO ADVANCE. Prior to the making of the initial Loan hereunder or the issuance of any letter of credit hereunder, the Borrower shall deliver to the Bank duly executed copies of this letter agreement, the Security Agreement, the Demand Note, the Tranche A Term Note, the Tranche B Term Note, the Tranche C Term Note and the documents and other items listed on the Closing Agenda delivered herewith by the Bank to the Borrower, all of which, as well as all legal matters incident to the transactions contemplated hereby, shall be satisfactory in form and substance to the Bank and its counsel. Without limiting the foregoing, any Loan or letter of credit issuance (including the initial Loan or letter of credit issuance) is subject to the further conditions precedent that on the date on which such Loan is made or such letter of credit is issued (and after giving effect thereto): 11 (a) All statements, representations and warranties of the Borrower made in this letter agreement and/or in the Security Agreement shall continue to be correct in all material respects as of the date of such Loan or issuance of such letter of credit, as the case may be. (b) All covenants and agreements of the Borrower contained herein and/or in any of the other Loan Documents shall have been complied with in all material respects on and as of the date of such Loan or issuance of such letter of credit, as the case may be. (c) No event which constitutes, or which with notice or lapse of time or both could constitute, an Event of Default shall have occurred and be continuing. (d) No material adverse change shall have occurred in the financial condition of the Borrower from that disclosed in the financial statements then most recently furnished to the Bank. Each request by the Borrower for any Loan or for the issuance of a letter of credit, and each acceptance by the Borrower of the proceeds of any Loan or delivery of a letter of credit, will be deemed a representation and warranty by the Borrower that at the date of such Loan or letter of credit issuance, as the case may be, and after giving effect thereto all of the conditions set forth in the foregoing clauses (a)-(d) of this ss.1.14 will be satisfied. II. REPRESENTATIONS AND WARRANTIES 2.1. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter into this letter agreement and to make Loans hereunder and/or issue letters of credit hereunder, the Borrower warrants and represents to the Bank as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of Delaware. The Borrower has full corporate power to own its property and conduct its business as now conducted and as contemplated to be conducted, to grant the security interests contemplated by the Security Agreement and to enter into and perform this letter agreement and the other Loan Documents. The Borrower is duly qualified to do business and in good standing in Massachusetts and in each other jurisdiction in which the Borrower maintains any facility, sales office or warehouse and in each other jurisdiction where the failure so to qualify could (singly or in the aggregate with all other such failures) have a material adverse effect on the financial condition, business or prospects of the Borrower, all such jurisdictions, as at the date of this letter agreement, being listed on item 2.1(a) of the attached Disclosure Schedule. At the date hereof, the Borrower has no Subsidiaries, except as shown on said item 2.1(a) of the attached Disclosure Schedule. The Borrower is not a member of any partnership or joint venture. (b) At the date of this letter agreement, no Person is known by the Borrower to own, of record and/or beneficially, more than 5% of the outstanding shares of any class of the Borrower's capital stock, except as set forth on item 2.1(b) of the attached Disclosure Schedule. The Borrower owns 100% of the outstanding capital stock of each Subsidiary. 12 (c) The execution, delivery and performance by the Borrower of this letter agreement and each of the other Loan Documents have been duly authorized by all necessary corporate and other action and do not and will not: (i) violate any provision of, or require any filings (other than filings under the Uniform Commercial Code), registration, consent or approval under, any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Borrower; (ii) violate any provision of the charter or by-laws of the Borrower, or result in a breach of or constitute a default or require any waiver or consent under any indenture or loan or credit agreement or any other material agreement, lease or instrument to which the Borrower is a party or by which the Borrower or any of its properties may be bound or affected or require any other consent of any Person; or (iii) result in, or require, the creation or imposition of any lien, security interest or other encumbrance (other than in favor of the Bank), upon or with respect to any of the properties now owned or hereafter acquired by the Borrower. (d) This letter agreement and each of the other Loan Documents has been duly executed and delivered by the Borrower and each is a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its respective terms. (e) Except as described on item 2.1(e) of the attached Disclosure Schedule, there are no actions, suits, proceedings or investigations pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any Subsidiary of the Borrower before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which could hinder or prevent the consummation of the transactions contemplated hereby or call into question the validity of this letter agreement or any of the other Loan Documents or any other instrument provided for or contemplated by this letter agreement or any of the other Loan Documents or any action taken or to be taken in connection with the transactions contemplated hereby or thereby or which in any single case or in the aggregate could result in any material adverse change in the business, prospects, condition, affairs or operations of the Borrower or any such Subsidiary. (f) The Borrower is not in violation of any term of its charter or by-laws as now in effect. Neither the Borrower nor any Subsidiary of the Borrower is in material violation of any term of any mortgage, indenture or judgment, decree or order, or any other instrument, contract or agreement to which it is a party or by which any of its property is bound. (g) The Borrower has filed (and has caused each Subsidiary of the Borrower to file) all federal, foreign, state and local tax returns, reports and estimates required to be filed by the Borrower or by any such Subsidiary. All such filed returns, reports and estimates are proper and accurate and the Borrower (or the Subsidiary concerned, as the case may be) has paid all taxes, assessments, impositions, fees and other governmental charges required to be paid in respect of the periods covered by such returns, reports or estimates. No deficiencies for any tax, 13 assessment or governmental charge have been asserted or assessed, and the Borrower knows of no material tax liability or basis therefor. (h) The Borrower is in compliance with (and each Subsidiary of the Borrower is in compliance with) all requirements of law, federal, state and local, and all requirements of all governmental bodies or agencies having jurisdiction over it, the conduct of its business, the use of its properties and assets, and all premises occupied by it, failure to comply with which could (singly or in the aggregate with all other such failures) have a material adverse effect upon the assets, business, financial condition or prospects of the Borrower or any such Subsidiary. Without limiting the foregoing, the Borrower has all the franchises, licenses, leases, permits, certificates and authorizations needed for the conduct of its business and the use of its properties and all premises occupied by it, as now conducted, owned and used and as proposed to be conducted, owned and used. (i) The audited financial statements of the Borrower as at March 31, 1999 and the management-generated financial statements of the Borrower as at June 30, 1999, each heretofore delivered to the Bank, are complete and accurate and fairly present the financial condition of the Borrower as at the date thereof and for the period covered thereby, except that the aforesaid management-generated statements do not have footnotes and thus do not present the information which would normally be contained in footnotes to financial statements and are subject to normal year-end audit adjustments. Neither the Borrower nor any of the Borrower's Subsidiaries has any liability, contingent or otherwise, not disclosed in the aforesaid financial statements or in the notes thereto that could materially affect the financial condition of the Borrower. Since March 31, 1999, there has been no material adverse development in the business or condition of the Borrower, and the Borrower has not entered into any transaction other than in the ordinary course. (j) The principal place of business and chief executive offices of the Borrower are located at 22 Cherry Hill Drive, Danvers, MA 01923. All of the books and records of the Borrower are located at 22 Cherry Hill Drive and/or at 33 Cherry Hill Drive, Danvers, MA 01923. Except as described on item 2.1(j) of the attached Disclosure Schedule, no Collateral is located at any other address. Said item 2.1(j) of the attached Disclosure Schedule sets forth the names and addresses of all record owners of any premises where any material amount of Collateral is located. (k) Except as described on item 2.1(k) of attached Disclosure Schedule, the Borrower owns or has a valid right to use all of the patents, licenses, copyrights, trademarks, trade names and franchises now being used or necessary to conduct its business. To the best knowledge of the Borrower, the conduct of the Borrower's business as now operated does not conflict with valid patents, licenses, copyrights, trademarks, trade names or franchises of others in any manner that could materially adversely affect the business or assets or condition, financial or otherwise, of the Borrower. (l) To the best knowledge of the Borrower, none of the executive officers or key employees of the Borrower is subject to any agreement in favor of anyone other than the Borrower which limits or restricts that person's right to engage in the type of business activity 14 conducted or proposed to be conducted by the Borrower or which grants to anyone other than the Borrower any rights in any inventions or other ideas susceptible to legal protection developed or conceived by any such officer or key employee. (m) The Borrower is not a party to any contract or agreement which now has or, as far as can be reasonably foreseen by the Borrower at the date hereof, may have a material adverse effect on the financial condition, business, prospects or properties of the Borrower. (n) As used herein, the term "Year 2000 Issue" refers to the concern that computers, software and other equipment utilizing microprocessors may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date on or after December 31, 1999. The Borrower has evaluated this potential issue with respect to its products, its financial and management information systems and its suppliers. With respect to the Borrower's products, the software controlling the BVS drive console includes internal counters, but the BVS operation is not related in any way to a specific calendar date. Accordingly, the Borrower believes that the BVS will not need any repair or modification with regard to the Year 2000 issue. With respect to the Borrower's financial and management information systems, the Borrower successfully installed and tested a Year 2000 upgrade to its primary system and is currently working on execution of a plan to ensure that all personal computers ("PCs") and applications are fully assessed and updated to be Year 2000 compliant before the end of 1999. To date, expenditures for new Pcs, software applications, and operating systems under the Borrower's Year 2000 plan have amounted to less than $100,000. Remaining expenditures to complete the plan are expected to be immaterial. With respect to its suppliers, the Borrower is completing an assessment of vendors begun in fiscal 1999 and is increasing safety stocks of materials and inventory where a prolonged loss of material and inventory deliveries would have an adverse impact on the Borrower's business, financial condition and results of operations. The Borrower has also made inquiries to assess its key service providers such as its financial institutions, its payroll service provider, and its retirement plan administrator as to their Year 2000 readiness and has received assurances that the vendors' critical systems have been updated, tested, and found to be compliant. Although the Borrower's management does not expect Year 2000 Issues to have a material impact on its business or future results of operations, there may be interruptions of operations or other limitations of system functionality or the Borrower may incur significant costs to avoid such interruptions or limitations. To the extent that the Borrower does not eliminate all Year 2000 Issues, the most likely worst case Year 2000 scenario is systemic failures beyond the control of the Borrower, such as prolonged telecommunications or electrical failure, or a general disruption in supplies and services provided to the Borrower which could have a material adverse effect on the Borrower's business, results of operations and financial condition. The Borrower will, at the request of the Bank, provide such reports and such other information as the Bank may reasonably request in order to evidence such Year 2000 compliance. 15 III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS Without limitation of any covenants and agreements contained in the Security Agreement or elsewhere, the Borrower agrees that so long as the financing arrangements contemplated hereby are in effect or any Demand Loan or any Term Loan or any of the other Obligations shall be outstanding or any letter of credit issued hereunder shall be outstanding: 3.1. LEGAL EXISTENCE; QUALIFICATION; COMPLIANCE. The Borrower will maintain (and will cause each Subsidiary of the Borrower to maintain) its corporate existence and good standing in the jurisdiction of its incorporation. The Borrower will remain qualified to do business and in good standing in Massachusetts. The Borrower will qualify to do business and will remain qualified and in good standing (and will cause each Subsidiary of the Borrower to qualify and remain qualified and in good standing) in each other jurisdiction where the Borrower or such Subsidiary, as the case may be, maintains any plant, sales office, warehouse or other facility and in each other jurisdiction in which the failure so to qualify could (singly or in the aggregate with all other such failures) have a material adverse effect on the financial condition, business or prospects of the Borrower or any such Subsidiary. The Borrower will comply with (and will cause each Subsidiary of the Borrower to comply with) its charter documents and by-laws. The Borrower will comply with (and will cause each Subsidiary of the Borrower to comply with) all applicable laws, rules and regulations (including, without limitation, ERISA and those relating to environmental protection) other than (i) laws, rules or regulations the validity or applicability of which the Borrower or such Subsidiary shall be contesting in good faith by proceedings which serve as a matter of law to stay the enforcement thereof and (ii) those laws, rules and regulations the failure to comply with any of which could not (singly or in the aggregate) have a material adverse effect on the financial condition, business or prospects of the Borrower or any such Subsidiary. 3.2. MAINTENANCE OF PROPERTY; INSURANCE. The Borrower will maintain and preserve (and will cause each Subsidiary of the Borrower to maintain and preserve) all of its properties in good working order and condition, making all necessary repairs thereto and replacements thereof. The Borrower will maintain all such insurance as may be required under the Security Agreement and will also maintain, with financially sound and reputable insurers, insurance with respect to its property and business against such liabilities, casualties and contingencies and of such types and in such amounts as shall be reasonably satisfactory to the Bank from time to time and in any event all such insurance as may from time to time be customary for companies conducting a business similar to that of the Borrower in similar locales. 3.3. PAYMENT OF TAXES AND CHARGES. The Borrower will pay and discharge (and will cause each Subsidiary of the Borrower to pay and discharge) all taxes, assessments and governmental charges or levies imposed upon it or upon its income or property, including, without limitation, taxes, assessments, charges or levies relating to real and personal property, franchises, income, unemployment, old age benefits, withholding, or sales or use, prior to the date on which penalties would attach thereto, and all lawful claims (whether for any of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon any property of the Borrower or any such Subsidiary, except any of the foregoing which is being contested in good faith and by appropriate proceedings which serve as a matter of law to stay the enforcement 16 thereof and for which the Borrower has established and is maintaining adequate reserves. The Borrower will pay, and will cause each of its Subsidiaries to pay, in a timely manner, all lease obligations, all material trade debt, purchase money obligations, equipment lease obligations and all of its other material Indebtedness. The Borrower will perform and fulfill all material covenants and agreements under any leases of real estate, agreements relating to purchase money debt, equipment leases and other material contracts. The Borrower will maintain in full force and effect, and comply with the terms and conditions of, all permits, permissions and licenses necessary or desirable for its business. 3.4. ACCOUNTS. The Borrower will maintain its principal depository and operating accounts with the Bank. 3.5. CONDUCT OF BUSINESS. The Borrower will conduct, in the ordinary course, the business in which it is presently engaged. The Borrower will not, without the prior written consent of the Bank, directly or indirectly (itself or through any Subsidiary), enter into any other lines of business, businesses or ventures. 3.6. REPORTING REQUIREMENTS. The Borrower will furnish to the Bank: (i) Within 120 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such fiscal year for the Borrower, including therein consolidated and consolidating balance sheets of the Borrower and Subsidiaries as at the end of such fiscal year and related consolidated and consolidating statements of income, stockholders' equity and cash flow for the fiscal year then ended. The annual consolidated financial statements shall be certified by independent public accountants selected by the Borrower and reasonably acceptable to the Bank, such certification to be in such form as is generally recognized as "unqualified". (ii) Within 45 days after the end of each fiscal quarter of the Borrower, consolidated and consolidating balance sheets of the Borrower and its Subsidiaries and related consolidated and consolidating statements of income and cash flow, unaudited but complete and accurate and prepared in accordance with generally accepted accounting principles fairly presenting the financial condition of the Borrower as at the dates thereof and for the periods covered thereby (except that such quarterly statements need not contain footnotes) and certified as accurate (subject to normal year-end audit adjustments, which shall not be material) by the chief financial officer of the Borrower, such balance sheets to be as at the end of each such fiscal quarter and such statements of income and cash flow to be for such fiscal quarter and for the fiscal year to date. Such income statements shall be accompanied by a comparison to budget and a comparison to the results for the corresponding period of the immediately prior fiscal year. (iii) At the time of delivery of each annual or quarterly statement of the Borrower, a certificate executed by the chief financial officer of the Borrower stating that he or she has reviewed this letter agreement and the other Loan Documents and has no knowledge of any default by the Borrower in the performance or observance of any of the provisions of this letter agreement or of any of the other Loan Documents or, if he or she 17 has such knowledge, specifying each such default and the nature thereof. Each such certificate given as at the end of any fiscal quarter shall also set forth the calculations necessary to evidence compliance with ss.ss.3.7-3.9. (iv) Promptly after receipt, a copy of all audits or reports submitted to the Borrower by independent public accountants in connection with any annual, special or interim audits of the books of the Borrower and any "management letter" prepared by such accountants. (v) Within 120 days after the beginning of each fiscal year, a copy of the Borrower's income statement and balance sheet projections for such fiscal year, in detail reasonably satisfactory to the Bank. (vi) If any securities of the Borrower are publicly traded or if registration of such securities is being sought, the Borrower will furnish to the Bank, promptly upon same becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Borrower to stockholders or the holders of debt securities generally, of each press release or other communication disseminated to the public generally, and of each regular or periodic report and any registration statement, prospectus or listing application filed by the Borrower with the National Association of Securities Dealers, any securities exchange or the Securities and Exchange Commission or any successor agency. (vii) As soon as possible and in any event within five days of the occurrence of any Event of Default or any event which, with the giving of notice or passage of time or both, would constitute an Event of Default, the statement of the Borrower setting forth details of such Event of Default or event and the action which the Borrower proposes to take with respect thereto. (viii) Promptly after receiving notice of the commencement thereof, notice of all actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, brought against the Borrower or any Subsidiary of the Borrower; provided, however, that this clause (viii) will not be deemed to require the Borrower to give notice of FDA proceedings occurring in the ordinary course of the Borrower's business (including, without limitation, product recalls in the ordinary course) which could not reasonably be expected to have a material adverse effect on the Borrower's financial condition, business or prospects. (ix) Promptly after the Borrower has knowledge thereof, written notice of any development or circumstance which may reasonably be expected to have a material adverse effect on the Borrower or its business, properties, assets, Subsidiaries or condition, financial or otherwise. (x) Promptly upon request, such other information respecting the financial condition, operations, Receivables, inventory, machinery or equipment of the Borrower or any Subsidiary as the Bank may from time to time reasonably request. 18 3.7. CAPITAL BASE. The Borrower will maintain, as at the end of each fiscal quarter of the Borrower (commencing with its results as at June 30, 1999), a consolidated Capital Base which shall not be less than $13,500,000. 3.8. LIQUIDITY. The Borrower will maintain, as at the end of each fiscal quarter of the Borrower (commencing with its results as at June 30, 1999), a ratio of Net Quick Assets to Total Liabilities, which ratio shall be not less than 2.0 to 1. 3.9. DEBT SERVICE COVERAGE. As used herein, "Determination Date" means the last day of each fiscal quarter of the Borrower. The Borrower will maintain on a consolidated basis, as at each Determination Date (commencing with its results as at June 30, 1999), a Debt Service Coverage Ratio of not less than 1.5 to 1. As used herein, the "Debt Service Coverage Ratio", as determined as at any Determination Date, means the ratio of (x) Earnings Available of the Borrower and Subsidiaries for the 12-month period ending on such Determination Date to (y) the total of (1) all interest on any Indebtedness (whether senior or subordinated, long-term or current), which interest was paid or payable or accrued by the Borrower or any Subsidiary of the Borrower during such 12-month period ending on such Determination Date, PLUS (2) the aggregate current maturities of long-term debt of the Borrower and Subsidiaries outstanding at such Determination Date. Notwithstanding the foregoing, the Borrower need not comply with the foregoing provisions of this ss.3.9 as at any Determination Date if the Borrower's Unencumbered Cash Balance as at such Determination Date exceeds $9,000,000. 3.10. BOOKS AND RECORDS. The Borrower will maintain (and cause each of its Subsidiaries to maintain) complete and accurate books, records and accounts which will at all times accurately and fairly reflect in all material respects all of its transactions in accordance with generally accepted accounting principles consistently applied. The Borrower will, at any reasonable time and from time to time upon reasonable notice and during normal business hours (and at any time and without any necessity for notice following the occurrence of an Event of Default), permit the Bank, and any agents or representatives thereof, to examine and make copies of and take abstracts from the records and books of account of, and visit the properties of the Borrower and any of its Subsidiaries, and to discuss its affairs, finances and accounts with its managers, officers or directors and independent accountants, all of whom are hereby authorized and directed to cooperate with the Bank in carrying out the intent of this ss.3.10. Each financial statement of the Borrower hereafter delivered pursuant to this letter agreement will be complete and accurate and will fairly present in all material respects the financial condition of the Borrower as at the date thereof and for the periods covered thereby. 3.11. LANDLORD'S WAIVER. Prior to the date of the first Loan hereunder the Borrower will obtain, and will thereafter maintain in effect at all times, waivers from the owners of all premises in which any material amount of Collateral is located, such waivers to be in form and substance satisfactory to the Bank. 19 IV. NEGATIVE COVENANTS Without limitation of any covenants and agreements contained in the Security Agreement or elsewhere, the Borrower agrees that so long as the financing arrangements contemplated hereby are in effect or any Demand Loan or any Term Loan or any of the other Obligations shall be outstanding or any letter of credit issued hereunder shall be outstanding: 4.1. INDEBTEDNESS. The Borrower will not create, incur, assume or suffer to exist any Indebtedness (nor allow any of its Subsidiaries to create, incur, assume or suffer to exist any Indebtedness), except for: (i) Indebtedness owed to the Bank, including, without limitation, the Indebtedness represented by the Notes and any Indebtedness in respect of letters of credit issued by the Bank; (ii) Indebtedness of the Borrower or any Subsidiary for taxes, assessments and governmental charges or levies not yet due and payable; (iii) unsecured current liabilities of the Borrower or any Subsidiary (other than for money borrowed or for purchase money Indebtedness with respect to fixed assets) incurred upon customary terms in the ordinary course of business; (iv) purchase money Indebtedness (including, without limitation, Indebtedness in respect of capitalized equipment leases) hereafter incurred to equipment vendors and/or lessors for equipment purchased or leased by the Borrower for use in the Borrower's business; provided that the total of (A) future Indebtedness permitted under this clause (iv) plus (B) presently-existing equipment financing permitted under clause (v) of this ss.4.1 will not exceed $2,200,000 in the aggregate outstanding at any one time; (v) other Indebtedness existing at the date hereof, but only to the extent set forth on item 4.1 of the attached Disclosure Schedule; (vi) any guaranties or other contingent liabilities expressly permitted pursuant to ss.4.3; and (vii) Subordinated Debt hereafter incurred by the Borrower; provided that (A) the Bank shall have approved in writing the principal amount, interest rate and other payment terms for such Subordinated Debt, such approval not to be unreasonably withheld or delayed, and (B) the Bank shall have approved in writing the subordination terms for such Subordinated Debt, which approval may be given or withheld by the Bank in its sole discretion. 4.2. LIENS. The Borrower will not create, incur, assume or suffer to exist (nor allow any of its Subsidiaries to create, incur, assume or suffer to exist) any mortgage, deed of trust, pledge, lien, security interest, or other charge or encumbrance (including the lien or retained security title of a conditional vendor) of any nature (collectively, "Liens") upon or with respect 20 to any of its property or assets (including, without limitation, any trustee process affecting any account of the Borrower with the Bank), now owned or hereafter acquired, except: (i) Liens for taxes, assessments or governmental charges or levies on property of the Borrower or any of its Subsidiaries if the same shall not at the time be delinquent or thereafter can be paid without interest or penalty, except any of the foregoing which is being contested in good faith and by an appropriate proceedings which serve as a matter of law to stay the enforcement thereof and for which the Borrower has established and is maintaining adequate reserves; (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar Liens arising in the ordinary course of business for sums not yet due or which are being contested in good faith and by appropriate proceedings which serve as a matter of law to stay the enforcement thereof and as to which adequate reserves have been made and are maintained; (iii) pledges or deposits under workmen's compensation laws, unemployment insurance, social security, retirement benefits or similar legislation; (iv)Liens in favor of the Bank; (v) Liens in favor of equipment vendors and/or lessors securing purchase money Indebtedness to the extent permitted by clause (iv) of ss.4.1; provided that no such Lien will extend to any property of the Borrower or any Subsidiary other than the specific items of equipment financed; or (vi) other Liens existing at the date hereof, but only to the extent and with the relative priorities set forth on item 4.2 of the attached Disclosure Schedule. Without limitation of the other representations, warranties, covenants and agreements of the Borrower set forth elsewhere in this letter agreement, the Borrower (i) represents and warrants that neither the Borrower nor any of its Subsidiaries is now a party to any Restrictive Agreement and (ii) agrees that the Borrower will not enter into (nor permit any of its Subsidiaries to enter into) any Restrictive Agreement, except that (A) the Borrower may enter into a Restrictive Agreement with the lessor of any equipment or with any Person providing purchase money financing permitted by clause (iv) of ss.4.1 above; provided that such Restrictive Agreement relates only to the particular item or items of equipment so leased or financed, and (B) software licenses under which the Borrower is the licensee may restrict assignment to any other Person. As used herein, a "Restrictive Agreement" is any agreement, covenant, undertaking or understanding which could have the effect of preventing the Borrower or any Subsidiary from granting a Lien on any of its assets to the Bank. 4.3. GUARANTIES. The Borrower will not, without the prior written consent of the Bank, assume, guarantee, endorse or otherwise become directly or contingently liable (including, without limitation, liable by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in any debtor or otherwise to assure 21 any creditor against loss) (and will not permit any of its Subsidiaries so to assume, guaranty or become directly or contingently liable) in connection with any indebtedness of any other Person, except (i) guaranties by endorsement for deposit or collection in the ordinary course of business, (ii) currently existing guaranties described on item 4.3 of the attached Disclosure Schedule and (iii) guaranties hereafter entered into by the Borrower relating to Indebtedness not in excess of $100,000 in the aggregate. 4.4. DIVIDENDS. The Borrower will not, without the prior written consent of the Bank, make any distributions to its shareholders, pay any dividends (other than dividends payable solely in capital stock of the Borrower) or redeem, purchase or otherwise acquire, directly or indirectly any of its capital stock. 4.5. LOANS AND ADVANCES. The Borrower will not make any loans or advances (and will not permit any of its Subsidiaries to make any loans or advances) to any Person, including, without limitation, the Borrower's directors, officers and employees, except advances to directors, officers or employees with respect to expenses incurred by them in the ordinary course of their duties and advances against salary, all of which will not exceed, in the aggregate, $300,000 outstanding at any one time. 4.6. INVESTMENTS. The Borrower will not, without the Bank's prior written consent, invest in, hold or purchase any stock or securities of any Person (nor will the Borrower permit any of its Subsidiaries to invest in, purchase or hold any such stock or securities) except (i) readily marketable direct obligations of, or obligations guarantied by, the United States of America or any agency thereof, (ii) other investment grade debt securities, (iii) mutual funds, the assets of which are primarily invested in items of the kind described in the foregoing clauses (i) and (ii) of this ss.4.6, (iv) deposits with or certificates of deposit issued by the Bank and any other obligations of the Bank or the Bank's parent, (v) deposits with or certificates of deposit issued by any United States commercial bank having more than $100,000,000 in capital, (vi) investments in any Subsidiaries now existing or hereafter created by the Borrower pursuant to ss.4.7 below; provided that in any event the Tangible Net Worth of the Borrower alone (exclusive of its investment in Subsidiaries and any debt owed by any Subsidiary to the Borrower) will not be less than 90% of the consolidated Tangible Net Worth of the Borrower and Subsidiaries, and (vii) other existing investments described on item 4.6 of the attached Disclosure Schedule and all such future investments as are permitted by the Borrower's Investment Policy, a copy of which is included in item 4.6 of the attached Disclosure Schedule. 4.7. SUBSIDIARIES; ACQUISITIONS. The Borrower will not, without the prior written consent of the Bank, form or acquire any Subsidiary or make any other acquisition of the stock of any Person or of all or substantially all of the assets of any other Person, other than Permitted Acquisitions. The Borrower will not become a partner in any partnership. 4.8. MERGER. The Borrower will not, without the prior written consent of the Bank, merge or consolidate with any Person (other than (A) a merger of any wholly-owned Subsidiary of the Borrower into the Borrower or (B) a merger made to carry out a Permitted Acquisition, provided that the Borrower is the surviving entity) or sell, lease, transfer or otherwise dispose of 22 any material portion of its assets (whether in one or more transactions), other than sale of inventory in the ordinary course. 4.9. AFFILIATE TRANSACTIONS. The Borrower will not, without the prior written consent of the Bank, enter into any transaction, including, without limitation, the purchase, sale or exchange of any property or the rendering of any service, with any affiliate of the Borrower, except in the ordinary course of and pursuant to the reasonable requirements of the Borrower's business and upon fair and reasonable terms no less favorable to the Borrower than would be obtained in a comparable arms'-length transaction with any Person not an affiliate; provided that nothing in this ss.4.9 shall be deemed to prohibit the payment of salary or other similar payments to any officer or director of the Borrower at a level consistent with the salary and other payments being paid at the date of this letter agreement and heretofore disclosed in writing to the Bank, nor to prevent the hiring of additional officers at a salary level consistent with industry practice, nor to prevent reasonable periodic increases in salary. For the purposes of this letter agreement, "affiliate" means any Person which, directly or indirectly, controls or is controlled by or is under common control with the Borrower; any officer or director or former officer or director of the Borrower; any Person owning of record or beneficially, directly or indirectly, 5% or more of any class of capital stock of the Borrower or 5% or more of any class of capital stock or other equity interest having voting power (under ordinary circumstances) of any of the other Persons described above; and any member of the immediate family of any of the foregoing. "Control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of any Person, whether through ownership of voting equity, by contract or otherwise. 4.10. CHANGE OF ADDRESS, ETC. The Borrower will not change its name or legal structure, nor will the Borrower move its chief executive offices or principal place of business from the address described in the first sentence of ss.2.1(j) above (except that the Borrower is in the process of moving from 33 Cherry Hill Drive, Danvers, MA to 22 Cherry Hill Drive, Danvers, MA), nor will the Borrower remove any books or records from such address (except as aforesaid), nor will the Borrower keep any Collateral at any location other than at one of the locations described in ss.2.1(j) and/or on item 2.1(j) of the attached Disclosure Schedule without, in each instance, giving the Bank at least 30 days' prior written notice and providing all such financing statements, certificates and other documentation as the Bank may request in order to maintain the perfection and priority of the security interests granted or intended to be granted pursuant to the Security Agreement. The Borrower will not change its fiscal year or methods of financial reporting unless, in each instance, prior written notice of such change is given to the Bank and prior to such change the Borrower enters into amendments to this letter agreement in form and substance satisfactory to the Bank in order to preserve unimpaired the rights of the Bank and the obligations of the Borrower hereunder. 4.11. HAZARDOUS WASTE. Except in compliance with applicable law, the Borrower will not dispose of or suffer or permit to exist any hazardous material or oil on any site or vessel owned, occupied or operated by the Borrower or any Subsidiary of the Borrower, nor (except in compliance with applicable law) shall the Borrower store (or permit any Subsidiary to store) on any site or vessel owned, occupied or operated by the Borrower or any such Subsidiary, or transport or arrange the transport of, any hazardous material or oil (the terms "hazardous 23 material", "oil", "site" and "vessel", respectively, being used herein with the meanings given those terms in Mass. Gen. Laws, Ch. 21E or any comparable terms in any comparable statute in effect in any other relevant jurisdiction). The Borrower shall provide the Bank with written notice of (i) any potential or known release or threat of release of any hazardous material or oil at or from any site or vessel owned, occupied or operated by the Borrower or any Subsidiary of the Borrower, and (ii) any incurrence of any expense or loss by any government or governmental authority in connection with the assessment, containment or removal of any hazardous material or oil for which expense or loss the Borrower or any Subsidiary of the Borrower may be liable. Notwithstanding the foregoing, the Borrower and its Subsidiaries may use, store and transport, and need not notify the Bank of the use, storage or transportation of, hazardous materials and oil in the ordinary course of their respective businesses, as long as in any case the Borrower or the Subsidiary concerned (as the case may be) has obtained and maintains in effect any necessary governmental permits, licenses and approvals, complies with all requirements of applicable federal, state and local law relating to such use, storage or transportation, follows the protective and safety procedures that a prudent businessperson conducting a business the same as or similar to that of the Borrower or such Subsidiary (as the case may be) would follow, and disposes of such materials (not consumed in the ordinary course) only through licensed providers of hazardous waste removal services. 4.12. NO MARGIN STOCK. No proceeds of any Loan shall be used directly or indirectly to purchase or carry any margin security. 4.13. SUBORDINATED DEBT. The Borrower will not directly or indirectly make any optional or voluntary prepayment or purchase of Subordinated Debt; nor will the Borrower modify, alter or add any material provisions with respect to any Subordinated Debt without the prior written consent of the Bank. The Borrower will not make any payment of any principal of or interest on any Subordinated Debt in violation of any applicable subordination agreement and, without limitation of the foregoing, no such payment will be made at any time when there exists, or if there would result therefrom, any Event of Default hereunder. V. DEFAULT AND REMEDIES 5.1. EVENTS OF DEFAULT. Without derogating in any way from the demand nature of the Demand Loans, the occurrence of any one of the following events shall constitute an Event of Default hereunder: (a) The Borrower shall fail to make any payment of principal of or interest on the Demand Note and/or any Term Note on or before the date when due; or the Borrower shall fail to pay when due any amount owed to the Bank with respect to any letter of credit now or hereafter issued by the Bank; or (b) Any representation or warranty of the Borrower contained herein shall at any time prove to have been incorrect in any material respect when made or any representation or warranty made by the Borrower in connection with any Loan or letter of credit shall at any time prove to have been incorrect in any material respect when made; or 24 (c) The Borrower shall default in the performance or observance of any agreement or obligation under any of ss.ss.3.1, 3.3, 3.6, 3.7, 3.8 or 3.9 or Article IV; or (d) The Borrower shall default in the performance of any other term, covenant or agreement contained in this letter agreement and such default shall continue unremedied for 30 days after notice thereof shall have been given to the Borrower; or (e) Any default on the part of the Borrower or any Subsidiary of the Borrower shall exist, and shall remain unwaived or uncured beyond the expiration of any applicable notice and/or grace period, under any other credit agreement or other agreement relating to borrowed money or the extension of credit now existing or hereafter entered into with or for the benefit of the Bank (or any affiliate of the Bank); or (f) Any default shall exist and remain unwaived or uncured with respect to any Subordinated Debt of the Borrower or with respect to any instrument evidencing, guaranteeing, securing or otherwise relating to any such Subordinated Debt, or any such Subordinated Debt shall not have been paid when due, whether by acceleration or otherwise, or shall have been declared to be due and payable prior to its stated maturity, or any event or circumstance shall occur which permits, or with the lapse of time or the giving of notice or both would permit, the acceleration of the maturity of any Subordinated Debt by the holder or holders thereof; or (g) Any default shall exist and remain unwaived or uncured with respect to any Indebtedness for borrowed money of the Borrower or any Subsidiary of the Borrower in excess of $100,000 in aggregate principal amount or with respect to any instrument evidencing, guaranteeing, securing or otherwise relating to any such Indebtedness for borrowed money, or any such Indebtedness for borrowed money in excess of $100,000 in aggregate principal amount shall not have been paid when due, whether by acceleration or otherwise, or shall have been declared to be due and payable prior to its stated maturity, or any event or circumstance shall occur which permits, or with the lapse of time or the giving of notice or both would permit, the acceleration of the maturity of any such Indebtedness by the holder or holders thereof; or (h) The Borrower shall be dissolved, or the Borrower or any Subsidiary of the Borrower shall become insolvent or bankrupt or shall cease paying its debts as they mature or shall make an assignment for the benefit of creditors, or a trustee, receiver or liquidator shall be appointed for the Borrower or any Subsidiary of the Borrower or for a substantial part of the property of the Borrower or any such Subsidiary, or bankruptcy, reorganization, arrangement, insolvency or similar proceedings shall be instituted by or against the Borrower or any such Subsidiary under the laws of any jurisdiction (except for an involuntary proceeding filed against the Borrower or any Subsidiary of the Borrower which is dismissed within 60 days following the institution thereof); or (i) Any final uninsured judgment in excess of $250,000 shall be entered against the Borrower or any Subsidiary of the Borrower by any court of competent jurisdiction and such judgment remains undischarged, unstayed or unpaid for 30 days after such entry; or 25 (j) The Borrower or any Subsidiary of the Borrower shall fail to meet its minimum funding requirements under ERISA with respect to any employee benefit plan (or other class of benefit which the PBGC has elected to insure) or any such plan shall be the subject of termination proceedings (whether voluntary or involuntary) and there shall result from such termination proceedings a liability of the Borrower or any Subsidiary of the Borrower to the PBGC which would have a material adverse effect upon the financial condition of the Borrower or any such Subsidiary; or (k) The Security Agreement or any other Loan Document shall for any reason (other than due to payment in full of all amounts secured or evidenced thereby or due to discharge in writing by the Bank) not remain in full force and effect; or (l) The security interests and liens of the Bank in and on any of the Collateral shall for any reason (other than due to payment in full of all amounts secured thereby or due to written release by the Bank) not be fully perfected liens and security interests; or (m) If, at any time, more than 50% of any class of voting stock of the Borrower shall be held, of record and/or beneficially, by any Person or by any "group" (as defined in the Securities Exchange Act of 1934, as amended, and the regulations thereunder), other than by one or more of the Persons listed on item 5.1(m) of the attached Disclosure Schedule; or (n) There shall occur any other material adverse change in the condition (financial or otherwise), operations, properties, assets, liabilities or earnings of the Borrower and its Subsidiaries, taken as a whole. 5.2. RIGHTS AND REMEDIES ON DEFAULT. Without derogating in any way from the demand nature of the Demand Loans, during the existence of any Event of Default, in addition to any other rights and remedies available to the Bank hereunder or otherwise, the Bank may exercise any one or more of the following rights and remedies (all of which shall be cumulative): (a) Declare the entire unpaid principal amounts of each of the Loans then outstanding, all interest accrued and unpaid thereon and all other amounts payable under this letter agreement and all other Indebtedness of the Borrower to the Bank to be forthwith due and payable, whereupon the same shall become forthwith due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower. (b) Terminate the Demand Loan financing arrangements and the Term Loan facilities provided for by this letter agreement. (c) Exercise all rights and remedies hereunder, under the Demand Note, under each Term Note, under the Security Agreement and under each and any other agreement with the Bank; and exercise all other rights and remedies which the Bank may have under applicable law. The Borrower expressly acknowledges and agrees that the Demand Loans are demand obligations and that the Bank may demand payment of same (in which case same shall be 26 immediately due and payable) at any time in the Bank's discretion, whether or not any Default or Event of Default then exists and whether or not at the end of any applicable Interest Period. 5.3. SET-OFF. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default, the Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, all of which are hereby expressly waived, to set off and to appropriate and apply any and all deposits and any other Indebtedness at any time held or owing by the Bank or any affiliate thereof to or for the credit or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to the Bank under this letter agreement or otherwise, irrespective of whether or not the Bank shall have made any demand hereunder and although said obligations, liabilities or claims, or any of them, may then be contingent or unmatured and without regard for the availability or adequacy of other collateral. As further security for the Obligations, the Borrower also grants to the Bank a security interest with respect to all its deposits and all securities or other property in the possession of the Bank or any affiliate of the Bank from time to time, and, upon the occurrence of any Event of Default, the Bank may exercise all rights and remedies of a secured party under the Uniform Commercial Code. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY OF THE OBLIGATIONS PRIOR TO THE EXERCISE BY THE BANK OF ITS RIGHT OF SET-OFF UNDER THIS SECTION ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. 5.4. LETTERS OF CREDIT. Without limitation of any other right or remedy of the Bank, (i) if an Event of Default shall have occurred and the Bank shall have accelerated the Demand Loans, or (ii) if the Bank shall demand payment under the Demand Note, or (iii) if this letter agreement and/or the Demand Loan financing arrangements described herein shall have expired or shall have been earlier terminated by either the Bank or the Borrower for any reason, the Borrower will forthwith deposit with the Bank in cash a sum equal to the total of all then undrawn amounts of all outstanding letters of credit issued by the Bank for the account of the Borrower. VI. MISCELLANEOUS 6.1. COSTS AND EXPENSES. The Borrower agrees to pay on demand all costs and expenses (including, without limitation, reasonable legal fees) of the Bank in connection with the preparation, execution and delivery of this letter agreement, the Security Agreement, the Demand Note, the Term Notes and all other instruments and documents to be delivered in connection with any Loan or letter of credit issued hereunder and any amendments or modifications of any of the foregoing, as well as the costs and expenses (including, without limitation, the reasonable fees and expenses of legal counsel) incurred by the Bank in connection with preserving, enforcing or exercising, upon default, any rights or remedies under this letter agreement, the Security Agreement, the Demand Note, the Term Notes and all other instruments and documents delivered or to be delivered hereunder or in connection herewith, all whether or not legal action is instituted. In addition, the Borrower shall be obligated to pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and 27 delivery of this letter agreement, the Security Agreement, the Demand Note, the Term Notes and all other instruments and documents to be delivered in connection with any Obligation. Any fees, expenses or other charges which the Bank is entitled to receive from the Borrower under this Section shall bear interest from the date of any demand therefor until the date when paid at a rate per annum equal to the sum of (i) four (4%) percent PLUS (ii) the Prime Rate (but in no event in excess of the maximum rate permitted by then applicable law). 6.2. FACILITY FEES; BALANCES. With respect to the within facilities for Term Loans, the Borrower is paying to the Bank, at the date of execution and delivery of this letter agreement, a non-refundable facility fee in the amount of $6,000. In addition, in respect of the within facility for Demand Loans the Borrower will maintain, from and after the date hereof, in a demand deposit account at the Bank, average collected balances which shall be equal, at least, to the sum of (i) $100,000 PLUS (ii) 5% of the average aggregate outstanding balance of the Demand Loans. Balances shall be averaged monthly on the last day of each month and on the Expiration Date or date of earlier termination of the within facility for Demand Loans, and if any deficiency in the amount thereof specified in the preceding sentence shall occur, such occurrence shall not constitute an Event of Default, provided that the Borrower shall forthwith make payment to the Bank of such sum as the Bank would have earned on the amount of the deficiency, if it had made a loan of such amount outstanding throughout the month in question and repayable with interest at the rate of interest payable from time to time on the Demand Loans. Fees and balances described in this Section are in addition to any fees and balances required by the Bank or any of its affiliates in connection with any other services now or hereafter made available to the Borrower. 6.3. OTHER AGREEMENTS. The provisions of this letter agreement are not in derogation or limitation of any obligations, liabilities or duties of the Borrower under any of the other Loan Documents or any other agreement with or for the benefit of the Bank. No inconsistency in default provisions between this letter agreement and any of the other Loan Documents or any such other agreement will be deemed to create any additional grace period or otherwise derogate from the express terms of each such default provision. No covenant, agreement or obligation of the Borrower contained herein, nor any right or remedy of the Bank contained herein, shall in any respect be limited by or be deemed in limitation of any inconsistent or additional provisions contained in any of the other Loan Documents or in any such other agreement. 6.4. GOVERNING LAW. This letter agreement and the Notes shall be governed by, and construed and enforced in accordance with, the laws of The Commonwealth of Massachusetts. 6.5. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and other communications provided for hereunder shall be in writing and shall be mailed or delivered to the applicable party at the address indicated below: 28 If to the Borrower: ABIOMED, Inc. 22 Cherry Hill Drive Danvers, MA 01923 Attention: John F. Thero, Vice President Finance and Business Operations If to the Bank: Fleet National Bank High Technology Division Mail Stop: MA OF D07A One Federal Street Boston, MA 02110 Attention: Irina V. Case, Vice President or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to the other party complying as to delivery with the terms of this Section. All such notices, requests, demands and other communications shall be effective two (2) Business Days after deposit in the United States mails, if sent postage prepaid, certified or registered mail, return receipt requested, addressed as aforesaid. If any such notice, request, demand or other communication is hand-delivered, same shall be effective upon receipted delivery. 6.6. BINDING EFFECT; ASSIGNMENT; TERMINATION. This letter agreement shall be binding upon the Borrower, its successors and assigns and shall inure to the benefit of the Borrower and the Bank and their respective permitted successors and assigns. The Borrower may not assign this letter agreement or any rights hereunder without the express written consent of the Bank. The Bank may, in accordance with applicable law, from time to time assign or grant participations in this letter agreement, the Loans, the Notes and/or any letters of credit issued hereunder. Without limitation of the foregoing generality, (i) The Bank may at any time pledge all or any portion of its rights under the Loan Documents (including any portion of any Note) to any of the 12 Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the Bank from its obligations under any of the Loan Documents. (ii) The Bank shall have the unrestricted right at any time and from time to time, and without the consent of or notice to the Borrower, to grant to one or more banks or other financial institutions (each, a "Participant") participating interests in the Bank's obligation to lend hereunder and/or any or all of the Loans held by the Bank hereunder. In the event of any such grant by the Bank of a participating interest to a Participant, whether or not upon notice to the Borrower, the Bank shall remain responsible for the performance of its obligations hereunder and the Borrower shall continue to deal solely and directly with the Bank in connection with the Bank's rights and obligations hereunder. The Bank may furnish any information concerning the Borrower in its 29 possession from time to time to prospective assignees and Participants; provided that the Bank shall require any such prospective assignee or Participant to agree in writing to maintain the confidentiality of such information to the same extent as the Bank would be required to maintain such confidentiality. The Borrower may terminate this letter agreement and the financing arrangements made herein by giving written notice of such termination to the Bank; provided that no such termination will release or waive any of the Bank's rights or remedies or any of the Borrower's obligations under this letter agreement or any of the other Loan Documents unless and until the Borrower has paid in full all Loans and all interest thereon and all fees and charges payable in connection therewith and all letters of credit issued hereunder have been terminated. 6.7. CONSENT TO JURISDICTION. The Borrower irrevocably submits to the non-exclusive jurisdiction of any Massachusetts court or any federal court sitting within The Commonwealth of Massachusetts over any suit, action or proceeding arising out of or relating to this letter agreement and/or any Note. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. The Borrower agrees that final judgment in any such suit, action or proceeding brought in such a court shall be enforced in any court of proper jurisdiction by a suit upon such judgment, provided that service of process in such action, suit or proceeding shall have been effected upon the Borrower in one of the manners specified in the following paragraph of this ss.6.7 or as otherwise permitted by law. The Borrower hereby consents to process being served in any suit, action or proceeding of the nature referred to in the preceding paragraph of this ss.6.7 either (i) by mailing a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to it at its address set forth in ss.6.5 or (ii) by serving a copy thereof upon it at its address set forth in ss.6.5. 6.8. SEVERABILITY. In the event that any provision of this letter agreement or the application thereof to any Person, property or circumstances shall be held to any extent to be invalid or unenforceable, the remainder of this letter agreement, and the application of such provision to Persons, properties or circumstances other than those as to which it has been held invalid and unenforceable, shall not be affected thereby, and each provision of this letter agreement shall be valid and enforced to the fullest extent permitted by law. 6.9. REPLACEMENT NOTE. Upon receipt of an affidavit of an officer of the Bank as to the loss, theft, destruction or mutilation of any Note or of any other Loan Document which is not of public record and, in the case of any such mutilation, upon surrender and cancellation of such Note or other Loan Document, the Borrower will issue, in lieu thereof, a replacement Note or other Loan Document in the same principal amount (as to any Note) and in any event of like tenor. 6.10. USURY. All agreements between the Borrower and the Bank are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the Notes or otherwise, shall the amount paid or agreed to be paid to the Bank for the 30 use or the forbearance of the Indebtedness represented by any Note exceed the maximum permissible under applicable law. In this regard, it is expressly agreed that it is the intent of the Borrower and the Bank, in the execution, delivery and acceptance of the Notes, to contract in strict compliance with the laws of The Commonwealth of Massachusetts. If, under any circumstances whatsoever, performance or fulfillment of any provision of any of the Notes or any of the other Loan Documents at the time such provision is to be performed or fulfilled shall involve exceeding the limit of validity prescribed by applicable law, then the obligation so to be performed or fulfilled shall be reduced automatically to the limits of such validity, and if under any circumstances whatsoever the Bank should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced by the Notes and not to the payment of interest. The provisions of this ss.6.10 shall control every other provision of this letter agreement and of each Note. 6.11. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY MUTUALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LETTER AGREEMENT, ANY NOTE OR ANY OTHER LOAN DOCUMENTS OR OUT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ENTER INTO THIS LETTER AGREEMENT AND TO MAKE LOANS AS CONTEMPLATED HEREIN. VII. DEFINED TERMS 7.1. DEFINITIONS. In addition to terms defined elsewhere in this letter agreement, as used in this letter agreement, the following terms have the following respective meanings: "Acquisition" - Any purchase or other acquisition made by the Borrower or any Subsidiary of the Borrower of all or substantially all of the business or assets of any other corporation or other entity or any line of business of another corporation or entity, all whether through the acquisition of stock or assets or otherwise. "Aggregate Demand Facility Liabilities" - At any time, the sum of (i) the principal amount of all Demand Loans then outstanding, PLUS (ii) all then undrawn amounts of letters of credit issued by the Bank for the account of the Borrower, PLUS (iii) all amounts then drawn on any such letter of credit which at said date shall not have been reimbursed to the Bank by the Borrower. "Bank Certificate" - A certificate signed by an officer of the Bank setting forth any additional amount required to be paid by the Borrower to the Bank pursuant to ss.1.6, ss.1.9 or ss.1.10 of this letter agreement, which certificate shall be submitted by the Bank to the Borrower in connection with each demand made at any time by the Bank upon the Borrower with respect to any such additional amount, and each such certificate shall, save for manifest error, constitute presumptive evidence of the additional amount required to be paid by the Borrower to the Bank 31 upon each demand. A claim by the Bank for all or any part of any additional amount required to be paid by the Borrower may be made before and/or after the end of the Interest Period to which such claim relates or during which such claim has arisen and before and/or after any payment hereunder to which such claim relates. Each Bank Certificate shall set forth in reasonable detail the basis for and the calculation of the claim to which it relates. "Business Day" - Any day which is not a Saturday, nor a Sunday nor another day on which banks in Boston, Massachusetts are authorized or directed to close; provided however that if the applicable provision relates to a LIBOR Term Loan, then the term "Business Day" shall not include any day on which dealings are not carried on in the London interbank market or on which banks are not open for business in London. "Capital Base" - At any time, the sum of (i) the consolidated Tangible Net Worth of the Borrower and Subsidiaries then existing PLUS (ii) the principal amount of Subordinated Debt of the Borrower then outstanding (nothing contained herein being deemed to authorize the incurrence of any additional Subordinated Debt). "Collateral" - All property now or hereafter owned by the Borrower or in which the Borrower now or hereafter has any interest which is described as "Collateral" in the Security Agreement. "Default" - Any event or circumstance which, with the passage of time or the giving of notice or both, could become an Event of Default. "Demand Loans" - As defined in ss.1.2. "Demand Note" - As defined in ss.1.1. "Earnings Available" - The consolidated Net Income (or consolidated Net Loss, as the case may be, expressed as a negative number) of the Borrower and Subsidiaries for any period, PLUS, without duplication of any item, (i) all federal and state income taxes (but not taxes in the nature of an AD VALOREM property tax or a sales or excise tax) paid or accrued by the Borrower and/or any of its Subsidiaries with respect to such period, (ii) all interest on any Indebtedness (whether senior debt or subordinated debt) paid or accrued by the Borrower and/or any of its Subsidiaries for such period and actually deducted on the consolidated books of the Borrower for the purposes of computation of consolidated Net Income (or consolidated Net Loss, as the case may be) for the period involved, and (iii) the amount of the provision for depreciation and/or amortization actually deducted on the consolidated books of the Borrower for the purposes of computation of consolidated Net Income (or consolidated Net Loss, as the case may be) for the period involved, but MINUS all cash taxes paid during such period by the Borrower and/or any of its Subsidiaries. "ERISA" - The Employee Retirement Income Security Act of 1974, as amended. 32 "Eurocurrency Liabilities" - Has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as in effect from time to time, or in any successor regulation relating to the liabilities described in said Regulation D. "Event of Default" - As defined in ss.5.1. "Expiration Date" - October 13, 2000. "FDA" - The United States Food and Drug Administration or any successor agency. "Floating Rate" - As defined in ss.1.6. "Floating Rate Term Loan" - All or any portion of any Term Loan which bears interest at a rate calculated with reference to the Prime Rate. "Impositions" - All present and future taxes, levies, duties, impositions, deductions, charges and withholdings applicable to the Bank with respect to any LIBOR Term Loan, excluding, however, any taxes imposed directly on the Bank's income and any franchise taxes imposed on it by the jurisdiction under the laws of which the Bank is organized or any political subdivision thereof. "Indebtedness" - The total of all obligations of a Person, whether current or long-term, senior or subordinated, which in accordance with generally accepted accounting principles would be included as liabilities upon such Person's balance sheet at the date as of which Indebtedness is to be determined, and shall also include guaranties, endorsements (other than for collection in the ordinary course of business) or other arrangements whereby responsibility is assumed for the obligations of others, whether by agreement to purchase or otherwise acquire the obligations of others, including any agreement, contingent or otherwise, to furnish funds through the purchase of goods, supplies or services for the purpose of payment of the obligations of others. "Interest Payment Date" - As to each LIBOR Term Loan, the Interest Payment Date will be the last day of Interest Period applicable to such LIBOR Term Loan. "Interest Period" - As to each LIBOR Term Loan, the period commencing with the date of the making of such LIBOR Term Loan and ending three months thereafter; provided that (A) any such Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day occurs in a new calendar month, in which case such Interest Period shall end on the immediately preceding Business Day, (B) any such Interest Period which begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest Period is to end shall end on the last Business Day of such calendar month, and (C) no Interest Period may be selected as to any principal amount of any Term Loan if such Interest Period would end after the regularly-scheduled due date of such principal amount. 33 "LIBOR" - With respect to each Interest Period for a LIBOR Term Loan, that rate per annum (rounded upward, if necessary, to the nearest 1/32nd of one percent) which represents the offered rate for deposits in U.S. Dollars, for a period of time comparable to such Interest Period, which appears on the Telerate page 3750 as of 11:00 a.m. (London time) on that day that is two (2) London Banking Days preceding the first day of such Interest Period; provided, however, that if the rate described above does not appear on the Telerate System on any applicable interest determination date, LIBOR for such Interest Period shall be the rate (rounded upwards as described above, if necessary) for deposits in dollars for a period substantially equal to such Interest Period shown on the Reuters Page "LIBO" (or such other page as may replace the LIBO Page on that service for the purpose of displaying such rates), as of 11:00 a.m. (London Time), on that day that is two (2) London Banking Days prior to the beginning of such Interest Period. "London Banking Day" shall mean any date on which commercial banks are open for business in London. If both the Telerate and Reuters systems are unavailable, then LIBOR for any Interest Period will be determined on the basis of the offered rates for deposits in U.S. Dollars for a period of time comparable to such Interest Period which are offered by four major banks in the London interbank market at approximately 11:00 a.m., London time, on that day that is two (2) London Banking Days preceding the first day of such Interest Period, as selected by the Bank. The principal London office of each of four major London banks will be requested to provide a quotation of its U.S. Dollar deposit offered rate. If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in U.S. Dollars to leading European banks for a period of time comparable to such Interest Period offered by major banks in New York City at approximately 11:00 a.m., New York City time, on that day that is two London Banking Days preceding the first day of such Interest Period. In the event that the Bank is unable to obtain any such quotation as provided above, it will be deemed that LIBOR for the proposed Interest Period cannot be determined. The Bank shall give prompt notice to the Borrower of LIBOR as determined for each LIBOR Term Loan and such notice shall be deemed conclusively correct, absent manifest error. "LIBOR Interest Rate" - For any Interest Period, an interest rate per annum, expressed as a percentage, determined by the Bank pursuant to the following formula: * LIR = LIBOR + 2.5 ----------- [1.00 - RR] Where LIR = LIBOR Interest Rate LIBOR = See definition of LIBOR RR = Reserve Rate *LIR to be rounded upwards to the next higher 1/32 of 1%. The LIBOR Interest Rate will be adjusted during any Interest Period to reflect any change in the Reserve Rate during such Interest Period. "LIBOR Term Loan" - All or any portion of a Term Loan which bears interest at a LIBOR Interest Rate. 34 "Loan" - Any Demand Loan or any Term Loan. "Loan Documents" - Each of this letter agreement, the Demand Note, the Tranche A Term Note, the Tranche B Term Note, the Tranche C Term Note, the Security Agreement and each other instrument, document or agreement evidencing, securing, guaranteeing or relating in any way to any of the Loans or to any of the letters of credit issued hereunder, all whether now existing or hereafter arising or entered into. "Maximum Demand Loan Amount" - At any date as of which same is to be determined, the amount by which (x) $3,000,000 exceeds (y) the sum of (i) all then undrawn amounts of letters of credit issued by the Bank for the account of the Borrower PLUS (ii) all amounts then drawn on any such letter of credit which at said date shall not have been reimbursed to the Bank by the Borrower. "Net Income" (or "Net Loss") - The book net income (or book net loss, as the case may be) of a Person for any period, after all taxes actually paid or accrued and all expenses and other charges determined in accordance with generally accepted accounting principles consistently applied. "Net Quick Assets" - Such current assets of the Borrower as consist of cash, cash-equivalents, readily-marketable securities and Receivables (less an allowance for bad debt consistent with the Borrower's prior experience). "Notes" - Collectively, the Demand Note, the Tranche A Term Note, the Tranche B Term Note and the Tranche C Term Note. "Obligations" - All Indebtedness, covenants, agreements, liabilities and obligations, now existing or hereafter arising, made by the Borrower with or for the benefit of the Bank or owed by the Borrower to the Bank in any capacity. "PBGC" - The Pension Benefit Guaranty Corporation or any successor thereto. "Permitted Acquisition" - Any Acquisition hereafter made by the Borrower which meets all of the following criteria: (1) the Person so acquired conducts a business (or the assets so acquired are used to conduct a business) which is the same as or is substantially related to the business conducted by the Borrower at the date of this letter agreement; (2) the Board of Directors of the Person so acquired (as such Board was constituted prior to the commencement of the Acquisition) has approved the Acquisition; (3) the consideration paid or payable for such Acquisition by the Borrower must consist solely of capital stock of the Borrower; (4) the aggregate number of shares of capital stock of the Borrower issued or transferred as such consideration (computed on a fully diluted and converted basis) for any one or more Acquisitions during the term of this letter agreement will not exceed 20% of the total number of shares of capital stock of the Borrower outstanding at the date of this letter agreement (computed on a fully diluted and converted basis); (5) at the time of each such Acquisition and after giving effect thereto there shall be no Default or Event of Default, with compliance with each of ss.3.7 35 and ss.3.8 being measured for this purpose as at the then most recent fiscal quarter-end, giving effect to such acquisition on a PRO FORMA basis as if it had occurred immediately prior to such fiscal quarter-end, and with compliance with ss.3.9 being measured for this purpose as at the then most recent fiscal quarter-end, giving effect to such acquisition as if it had occurred at the beginning of the 12-month period ending at said fiscal quarter-end; and (6) prior to such Acquisition the Borrower provides the Bank with projections reasonably satisfactory to the Bank showing that the Borrower (giving effect to such Acquisition) will remain in compliance with each of ss.3.7, ss.3.8 and ss.3.9 during the fiscal year in which sucH Acquisition takes place and during the immediately following fiscal year. "Person" - An individual, corporation, limited liability company, partnership, limited partnership, joint venture, trust, or unincorporated organization, or a government or any agency or political subdivision thereof. "Prime Rate" - That variable rate of interest per annum designated by the Bank, from time to time, as being its prime rate, it being understood that such rate is merely a reference rate and does not necessarily represent the lowest or best rate being charged to any customer. "Prior Note" - As defined in ss.1.1. "Qualifying Equipment" - Tangible equipment purchased by the Borrower for use in the Borrower's business which meets all of the following criteria: (i) such equipment consists of one of the items shown on the Equipment and Improvements List heretofore delivered by the Borrower to the Bank or has otherwise been approved by the Bank for use in supporting a Term Loan, and (ii) the Bank has a fully perfected first security interest in such equipment. "Qualifying Leasehold Improvements" - Fixtures and leasehold improvements purchased by the Borrower which meet all of the following criteria: (i) such fixtures and leasehold improvements consist of one or more of the items shown on the Equipment and Improvements List heretofore delivered by the Borrower to the Bank or have otherwise been approved by the Bank for use in supporting a Term Loan, and (ii) the Bank has a fully perfected first security interest in each such item (subject to the interest of the owner of the Borrower's premises, as described in ss.1.4 above). "Receivables" - All of the Borrower's accounts and accounts receivable for goods sold or services rendered. "Reserve Rate" - The aggregate rate, expressed as a decimal, at which the Bank would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulation relating to such reserve requirements) against Eurocurrency Liabilities, as well as any other reserve required of the Bank with respect to the LIBOR Term Loans. The LIBOR Interest Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Rate. "Security Agreement" - As defined in ss.1.1. 36 "Subordinated Debt" - Any Indebtedness of the Borrower which is expressly subordinated, pursuant to a subordination agreement in form and substance satisfactory to the Bank, to all Indebtedness now or hereafter owed by the Borrower to the Bank. "Subsidiary" - Any corporation or other entity of which the Borrower and/or any of its Subsidiaries, directly or indirectly, owns, or has the right to control or direct the voting of, fifty (50%) percent or more of the outstanding capital stock or other ownership interest having general voting power (under ordinary circumstances). "Tangible Net Worth" - An amount equal to the total assets of any Person (excluding (i) the total intangible assets of such Person and (ii) any assets representing amounts due from any officer, employee or other affiliate of such Person) minus the total liabilities of such Person. Total intangible assets shall be deemed to include, but shall not be limited to, the excess of cost over book value of acquired businesses accounted for by the purchase method, formulae, trademarks, trade names, patents, patent rights and deferred expenses (including, but not limited to, unamortized debt discount and expense, organizational expense, capitalized software costs and experimental and development expenses). "Term Loans" - Collectively, the Tranche A Term Loans, the Tranche B Term Loans and the Tranche C Term Loans. "Term Notes" - Collectively, the Tranche A Term Note, the Tranche B Term Note and the Tranche C Term Note. "Total Liabilities" - All Indebtedness of the Borrower and/or any Subsidiary of the Borrower (secured or unsecured, senior or subordinated) which would properly be included in liabilities shown on a balance sheet of the Borrower prepared in accordance with generally accepted accounting principles. "Tranche" - Each of Tranche A, Tranche B and Tranche C, as applicable. "Tranche A" - The facility for Tranche A Term Loans established by ss.1.4. "Tranche A Term Loans" - As defined in ss.1.4. "Tranche A Term Note" - As defined in ss.1.1. "Tranche B" - The facility for Tranche B Term Loans established by ss.1.4. "Tranche B Term Loans" - As defined in ss.1.4. "Tranche B Term Note" - As defined in ss.1.1. "Tranche C" - The facility for Tranche C Term Loans established by ss.1.4. "Tranche C Term Loans" - As defined in ss.1.4. 37 "Tranche C Term Note" - As defined in ss.1.1. "Unencumbered Cash Balance" - At any time, the total of all cash, cash-equivalents and readily-marketable securities of the Borrower which are not subject to any pledge, lien, encumbrance or other restriction. Any defined term used in the plural preceded by the definite article shall be taken to encompass all members of the relevant class. Any defined term used in the singular preceded by "any" shall be taken to indicate any number of the members of the relevant class. 38 This letter agreement is executed, as an instrument under seal, as of the day and year first above written. Very truly yours, ABIOMED, INC. By ------------------------------- Name: Title: Accepted and agreed: FLEET NATIONAL BANK By -------------------------------- Name: Title: 39 DISCLOSURE SCHEDULE Item 2.1(a) Jurisdictions in which Borrower is qualified; Subsidiaries Item 2.1(b) Stock ownership Item 2.1(e) Litigation Item 2.1(j) Collateral locations of Borrower; Record owners of premises where Collateral is located Item 2.1(k) Claims regarding intellectual property Item 4.1 Existing Indebtedness Item 4.2 Existing Liens Item 4.3 Existing Guaranties Item 4.6 Existing Investments; Investment Policy Item 5.1(m) Permitted 50% Stockholders
EX-10.(B) 3 EXHIBIT 10(B) EXHIBIT 10(b) AGREEMENT AGREEMENT by and between ABIOMED, INC., a Delaware corporation (the "Company"), and _ (the "Executive"), dated as of the _day of _, 1999. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section 1(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Company is terminated or the Executive ceases to be an officer of the Company prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (2) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" is the period commencing on the date hereof and ending on the second anniversary of such date; provided, however that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof is hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be automatically extended without any further action by the Company or the Executive so as to terminate two years from such Renewal Date; provided, however, that if the Company shall give notice in writing to the Executive, at least sixty days prior to the Renewal Date, stating that the Change of Control Period shall not be extended, then the Change of Control Period shall expire two years from the last effective Renewal Date. 2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than David M. Lederman or any of his affiliates (as defined in the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent or more of the then outstanding shares of stock of the Company entitled to vote in the election of directors (the "Outstanding Company Common Stock"), whether in one transaction or in multiple transactions which in the aggregate equal or exceed thirty percent of the Outstanding Company Common Stock; provided, however, that (i) any acquisition by the Company or its subsidiaries, or any -2- employee benefit plan (or related trust) of the Company or its subsidiaries of thirty percent or more of Outstanding Company Common Stock shall not constitute a Change of Control; (ii) any acquisition by any individual, entity or group of beneficial ownership of thirty percent or more but less than forty percent of the Outstanding Company Common Stock may be deemed by the Board of Directors of the Company as it is constituted as of the date of this Agreement (the "Incumbent Board"), excluding any members of the Incumbent Board affiliated with the acquiror, to not constitute a Change of Control, in the Incumbent Board's sole and absolute discretion; and (iii) any acquisition by a corporation with respect to which, following such acquisition, more than fifty percent of the then outstanding shares of common stock of such corporation, is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock, shall not constitute a Change of Control; or (b) Individuals who, as of the date of this Agreement, constitute the Board of Directors (the "Board") of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of -3- the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or c) Approval by the stockholders of the Company of (i) a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such reorganization, merger or consolidation will not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock of the corporation resulting from such a reorganization, merger or consolidation, other than a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) acquires 30% or more of Outstanding Company Common Stock; or (ii) the sale or other disposition of all or substantially all of the assets of the Company, excluding a sale or other disposition of assets to a subsidiary of the Company and excluding a sale or license of a portion of the business of the Company which is deemed by the Incumbent Board, acting in its sole and absolute discretion, to not constitute a Change of Control. Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a Change of Control results from or arises out of a purchase or -4- other acquisition of the Company, directly or indirectly, by a corporation or other entity in which the Executive has a greater than ten percent direct or indirect equity interest, such event shall not constitute a Change of Control. 3. EMPLOYMENT PERIOD. Subject to the terms and conditions hereof, the Company hereby agrees to continue the Executive in its employ for the period commencing on the Effective Date and ending on the last day of the twenty-fourth month following the month in which the Effective Date occurs (the "Employment Period"). The Executive hereby agrees to remain in the employ of the Company for the period commencing on the Effective Date and ending on the last day of the sixth month following the month in which the Effective Date occurs (the "Six Month Period"). 4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) Except as provided in Section 4(c) below, during the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the one hundred eighty-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than thirty-five miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote his full business time to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period -5- it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) ANNUAL BONUS. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the average annualized (for any fiscal year consisting of less than twelve full months or with respect to which the Executive has been employed by the Company for less than twelve full months) bonus (the "Average Annual Bonus") paid or payable to the Executive by the Company in respect of the lesser of the three fiscal years immediately -6- preceding the fiscal year in which the Effective Date occurs or the number of full fiscal years for which the Executive has been employed by the Company immediately preceding the fiscal year in which the Effective Date occurs. Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to deferral plans of the Company. (iii) At the end of the Six Month Period, if Executive remains employed by the Company, all unvested stock options or stock appreciation rights which Executive then holds to acquire securities from the Company shall be immediately and automatically exercisable as of such date. (iv) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to Annual Base Salary and Annual Bonus payable as herein above provided, the Executive shall be entitled to participate during the Employment Period in all incentive, savings and retirement plans, practices, policies and programs applicable to other peer executives of the Company, but in no event shall such plans practices, policies and programs provide the Executive with incentive, savings and retirement benefits opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company for the Executive under such plans, practices, policies and programs as in effect at any time during the one-year immediately preceding the Effective Date. (v) WELFARE BENEFIT PLANS. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, salary -7- continuance, employee life, group life, accidental death and travel accident insurance plans and programs) and applicable to other peer executives of the Company, but in no event shall such plans, practices, policies and programs provide benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect at any time during the one-year period immediately preceding the Effective Date. (vi) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in the conduct of the Company's business upon submission of appropriate accountings in accordance with the most favorable policies, practices and procedures of the Company in effect at any time during the one-year period immediately preceding the Effective Date. (vii) FRINGE BENEFITS. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company in effect at any time during the one-year period immediately preceding the Effective Date. If at the end of the Employment Period, the Company elects not to continue to employ Executive for reasons other than for Cause, death or Disability, or if the Executive shall terminate employment hereunder for Good Reason, the Company will provide to Executive up to $5,000 in fees paid for out-placement assistance. (viii) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company at any time during the one-year period immediately preceding the Effective Date. -8- (ix) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company as in effect at any time during the one-year period immediately preceding the Effective Date. (c) SIX MONTH PERIOD. Notwithstanding anything to the contrary in this Section 4, during the Six Month Period, the Company's obligations under this Agreement are limited to employing the Executive in any capacity reasonably assigned to Executive by the Company to assist in the transition caused by the Change of Control at the location where the Executive was employed immediately preceding the Effective Date or at any office or location less than thirty-five miles from such location and providing to the Executive compensation and benefits, as set forth in Section 4(b) hereof in accordance with the most favorable plans, practices, policies and programs provided by the Company for the Executive as in effect at any time during the one year period immediately preceding the Effective Date. 5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of "Disability" set forth below), it may give to the Executive written notice in accordance with Section 11(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the thirtieth day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the thirty days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means the absence of the Executive from the -9- Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) CAUSE. The Company may terminate the Executive's employment during the Employment Period for "Cause". For purposes of this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive at the expense of the Company, (ii) repeated violations by the Executive of the Executive's obligations under Section 4(a) of this Agreement (other than as a result of incapacity due to physical or mental illness) which are demonstrably willful and deliberate on the Executive's part, which are committed in bad faith or without reasonable belief that such violations are in the best interests of the Company and which are not remedied in a reasonable period of time after receipt of written notice from the Company or (iii) the conviction of the Executive of a felony involving moral turpitude. (c) GOOD REASON. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" means: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not -10- taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) any failure by the Company to fulfill its obligations to the Executive during the Six Month Period, as set forth in Section 4(c) of this Agreement, other than an isolated, insubstantial and inadertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iv) the Company's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) hereof; (v) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (vi) any failure by the Company to comply with and satisfy Section 10(c) of this Agreement. Notwithstanding the foregoing, during the Six Month Period, "Good Reason" shall mean (iii), (iv), (v) or (vi) above only. For purposes of this Section 5(c), any good faith determination of "Good Reason" after the Six Month Period made by the Executive shall be conclusive. (d) NOTICE OF TERMINATION. Any termination by the Company for Cause or without Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the -11- specific termination provision in this Agreement relied upon, if applicable, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; provided however, that (i) if the Executive's employment is terminated by the Company other than for Cause, death or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (ii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than payment of the sum of the following amounts: (i) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (ii) the product of (A) the greater of (x) the Annual Bonus paid -12- or payable (and annualized for any fiscal year consisting of less than twelve full months or for which the Executive has been employed for less than twelve full months) to the Executive for the Company's most recently completed fiscal year, and (y) the Average Annual Bonus and (B) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, and (iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued bonus amounts or vacation pay, in each case, to the extent not yet paid by the Company (the amounts described in subparagraphs (i), (ii), and (iii) are hereafter referred to as "Accrued Obligations" and shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within sixty days of the Date of Termination. Subject to the provisions of Section 9 hereof, but, otherwise, anything herein to the contrary notwithstanding, the Executive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Company to surviving families of peer executives of the Company under such plans, programs, practices and policies relating to family death benefits, if any, as in effect with respect to other peer executives and their families at any time during the one year period immediately preceding the Effective Date. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations of the Company to the Executive, other than for payment of the Accrued Obligations (which shall be paid in a lump sum in cash within sixty days of the Date of Termination). Subject to the provisions of Section 9 hereof, but, otherwise, anything herein to the contrary notwithstanding, the Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the -13- Company to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect with respect to other peer executives and their families at any time during the one year period immediately preceding the Effective Date. (c) CAUSE, OTHER THAN FOR GOOD REASON. If the Executive's employment shall be terminated by the Company for Cause or by the Executive other than for Good Reason (and other than by reason of his death or disability) during the Employment Period, this Agreement shall terminate without further obligations of the Company to the Executive other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination, plus the amount of any compensation previously deferred by the Executive and any accrued and awarded bonus amounts or vacation pay, in each case, to the extent theretofore unpaid. In such case, such amounts shall be paid to the Executive in a lump sum in cash within thirty days of the Date of Termination, except that accrued and awarded bonus amounts, if any, shall be paid as previously scheduled at the time of the award. The Executive shall, in such event, also be entitled to any benefits required by law that are not otherwise provided by this Agreement. (d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, death or Disability, or if the Executive shall terminate employment under this Agreement for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within sixty days after the Date of Termination the aggregate of the following amounts: A. all Accrued Obligations; and -14- B. the amount (such amount shall be hereinafter referred to as the "Severance Amount") equal to the product of (I) two and ninety-nine one-hundredths (2.99) and (II) the Executive's "base amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). (ii) the Company shall timely pay and provide, for eighteen months from the Date of Termination, medical benefits to the Executive and/or the Executive's family at least equal to those which would have been provided in accordance with the applicable plans (including the Company's 401(k), match and profit-sharing plans), programs, practices and policies described in Section 4(b)(v) of this Agreement as if the Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company as in effect and applicable generally to other peer executives and their families during the one year period immediately preceding the Effective Date, provided, however, that if the Executive becomes re-employed with another employer and is eligible to receive medical and dental benefits under another employer provided plan, the medical and dental benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility and provided, further, that if any Company plan would not allow Executive to participate, the Company shall provided to Executive comparable tax-adjusted payments of an equivalent amount; and (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive and/or the Executive's family any other amounts or benefits required to be paid or provided or which the Executive and/or the Executive's family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company as in effect and applicable generally to other peer executives of the -15- Company and their families, including up to $5,000 in fees paid for out-placement assistance (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"); and (iv) all remaining unvested stock options or stock appreciation rights which Executive then holds to acquire securities from the Company shall be immediately and automatically exercisable as of the Date of Termination; and (v) the Company shall pay the Executive in cash a lump sum equal to the amounts accrued on behalf of the Executive, but not yet vested, under the Company's profit-sharing plan. 7. NON-EXCLUSIVITY OF RIGHTS. Except as provided in Section 6, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices, provided by the Company and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other agreements with the Company. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement. 8. FULL SETTLEMENT. (a) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section -16- 6(d)(ii), such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement, unless a court of competent jurisdiction determines that the Executive made such effort in bad faith), plus in each case interest at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). (b) If there shall be any dispute between the Company and the Executive (i) in the event of any termination of the Executive's employment by the Company, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that the determination by the Executive of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, to the Executive and/or the Executive's family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 6(d) as though such termination were by the Company without Cause, or by the Executive with Good Reason; provided, however, that the Company shall not be required to pay any disputed amount pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled. -17- 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9 (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), the Company shall make an additional payment with respect to such Excise Tax (a "Gross-Up Payment") to the Executive in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen LLP (or its successor), unless such firm shall be the accounting firm of the individual, entity or group effecting the Change of Control or any affiliate of the Company at the Date of Termination, in which case such determinations shall be made by an accounting firm of national standing agreed to by the Company and the Executive, or, if the Company does not so agree within 10 days of the Date of Termination, such an accounting firm shall be selected by the Executive, (the "Accounting Firm") which shall provide -18- detailed supporting calculations both to the Company and the Executive within fifteen business days of the date such firm is selected or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence, accuracy-related or similar penalty. Any such determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine that amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive -19- shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest -20- to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. -21- 10. SUCCESSORS. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. In addition, the Executive shall be entitled, upon exercise of any outstanding stock options or stock appreciation rights of the Company, to receive in lieu of shares of the Company's stock, shares of such stock or other securities of such successor as the holders of shares of the Company's stock received pursuant to the terms of the merger, consolidation or sale. 11. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. -22- This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: [ ] [ ] [ ] If to the Company: ABIOMED, Inc. 33 Cherry Hill Drive Danvers, MA 01923 Attention: [ ] or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. -23- (f) This Agreement and the employment agreement between the Company and the Executive (the "Employment Agreement") contain the entire understanding of the Company and the Executive with respect to the subject matter hereof and by entering into this Agreement the Executive waives all rights he may have under the Company's separation policy, provided that if the Company's separation policy would provide greater benefits to the Executive than this Agreement, than the Executive may elect to receive benefits under the Company's separation policy in lieu of the benefits provided hereunder. In the event of any conflict between a provision of the Employment Agreement and a provision of this Agreement, the provision of this Agreement shall control. Without limiting the generality of the foregoing, it is expressly acknowledged that the definition of "Cause" in this Agreement shall be controlling in all respects with respect to Executive's employment following the Effective Date. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under the Employment Agreement, prior to the Effective Date and following the end of the Employment Period, the employment of the Executive by the Company is "at will" and may be terminated by either the Executive or the Company at any time. Moreover, if prior to the Effective Date, the Executive's employment with the Company terminates, then the Executive shall have no further rights under this Agreement. Notwithstanding anything contained herein, if, during the Employment Period, the Executive shall terminate employment with the Company other than for Good Reason, the Executive shall have no liability to the Company. (h) As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. -24- IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ABIOMED, INC. By: -------------------------------- Name: Title: EXECUTIVE ----------------------------------- EX-10.(C) 4 EXHIBIT 10(C) EXHIBIT 10 (c) SCHEDULE RELATED TO CHANGE OF CONTROL AGREEMENT The Company entered into change of control agreements with the following executives effective August 9, 1999. NAME TITLE David M. Lederman, Ph.D. President and Chief Executive Officer Robert T.V. Kung, Ph.D. Senior Vice President, Chief Scientific Officer Eugene D. Rabe Senior Vice President Worldwide Sales and Services John F. Thero Senior Vice President-Finance, Treasurer and Chief Financial Officer Anthony W. Bailey Vice President Engineering, Director of the AbioCor Program EX-27 5 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (IDENTIFY SPECIFIC FINANCIAL STATEMENTS HERE) THE COMPANY'S CONSOLIDATED INCOME STATEMENT, CONSOLIDATED BALANCE SHEET, AND CONSOLIDATED STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000815094 ABIOMED, INC. 6-MOS MAR-31-2000 APR-01-1999 SEP-30-1999 5,117,314 8,543,274 7,126,081 209,701 3,559,112 24,714,854 8,917,312 5,109,700 29,658,800 6,167,909 0 0 0 86,577 23,245,539 29,658,800 10,519,990 10,519,990 9,314,614 14,724,614 0 0 (397,503) (3,807,121) 0 (3,807,121) 0 0 0 (3,807,121) (.44) (.44)
-----END PRIVACY-ENHANCED MESSAGE-----