AGREEMENT AND RELEASE
This
Agreement and Release (this “ Agreement ”
), dated as of April 3, 2007, is by and among HT Prostate Therapy
Management Company, LLC, a Delaware limited liability company
(“ HT Prostate ”), HealthTronics, Inc., a
Georgia corporation (“ HealthTronics ”),
EDAP TMS S.A., a French société anonyme (“
Parent Corporation ”), EDAP S.A., a French
société anonyme (“ HIFU Subsidiary
”), and Technomed Medical Systems S.A., a French
société anonyme (“ Manufacturing
Subsidiary ” and, collectively with Parent
Corporation and HIFU Subsidiary, the “ EDAP
Parties ”). Capitalized terms used but not defined
herein shall have the meanings given them in the Distribution
Agreement (as defined below).
BACKGROUND
HT
Prostate is a wholly-owned subsidiary of HealthTronics; HT Prostate
and HealthTronics are collectively called “ HT Prostate
Parties ”.
HT
Prostate and the EDAP Parties previously entered into that certain
Distribution Agreement dated February 25, 2004, as amended by that
certain Amendment No. 1 to the Distribution Agreement, dated as of
December 23, 2004, and that certain Agreement and Amendment No. 2
of the Distribution Agreement, dated December 29, 2005 (as amended,
the “ Distribution Agreement
”);
In
accordance with the terms of the Distribution Agreement, HT
Prostate agreed to provide certain services to the EDAP Parties
towards the goal of obtaining United States Food and Drug
Administration (“ FDA ”) approval to
market a medical device that utilizes High Intensity Focused
Ultrasound (“ HIFU ”) to provide
minimally invasive treatment of prostate cancer (such medical
device, the “ Ablatherm ”);
The
EDAP Parties granted HT Prostate (i) the exclusive distribution
rights to market the Ablatherm in the United States of America and
(ii) warrants, issued on January 28, 2005, to purchase one million
(1,000,000) ordinary shares of the Parent Corporation at a price of
U.S. $1.50 per share (the “ Warrants
”);
On
December 29, 2005, both Parties amended the Distribution Agreement
to cancel the Category E and F Warrants;
HT
Prostate, Parent Corporation, and Caceis Corporate Trust (as
successor to Euro Emetteurs Finance) (“ Caceis
”) entered into that certain Escrow Agreement, dated as of
January 25, 2005, as amended by Amendment #1 thereto, dated
December 30, 2005 (as amended, the “ Escrow
Agreement ”), to govern the terms of the
Warrants;
HT
Prostate and the EDAP Parties desire (i) to terminate the
Distribution Agreement effective immediately, (ii) to terminate the
Escrow Agreement effective as soon as practicable, (iii) for HT
Prostate to exercise Warrants covering 200,000 ordinary shares of
the Parent Corporation (the “ Shares ”)
and pay Parent Corporation U.S.$300,000 as the purchase price
therefor, (iv) for HT Prostate to receive 200,000 restricted
American Depositary Shares (the “ Restricted
ADSs ”), each representing one ordinary share of the
Parent Corporation, as a result of the conversion of the Shares
into ADSs, (v) to cancel the remaining Warrants (the “
Remaining Warrants ”), (vi) that the Parent
Corporation register the resale of the Shares represented by the
Restricted ADS, either in the form of Shares or in the form of
American Depositary Shares (“ ADSs ”)
evidenced by American Depositary Receipts (“
ADRs ”) that do not include restrictive legends
pursuant to a registration statement filed with and declared
effective by the United States Securities and Exchange Commission
(the “ SEC ”), (vii) for the HT Prostate
Parties to compensate the EDAP Parties for termination of the
Distribution Agreement by paying the Parent Corporation the amounts
set forth in Section 2.4 , and (viii) that the HT Prostate
Parties will provide certain transition services to the EDAP
Parties in connection with the Investigational Device Exemption
(“ IDE ”) with the FDA and the ongoing
clinical study (the “ Study ”) being
conducted in the United States in respect of the Ablatherm device
under the IDE.
1
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration
of the promises and mutual covenants contained herein and for other
good, valuable and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
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I.
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TERMINATION
OF DISTRIBUTION AGREEMENT AND ESCROW AGREEMENT.
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1.1
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The parties
hereby terminate the Distribution Agreement and agree that all
respective obligations of the parties under the Distribution
Agreement are hereby forever discharged.
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1.2
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On the date
hereof, HT Prostate and Parent Corporation shall execute and
deliver to the other an agreement to terminate the Escrow
Agreement, the form of which agreement is attached hereto as
Exhibit A (the “ Escrow Termination
Agreement ”). Parent Corporation shall cause Caceis
to execute and deliver to HT Prostate and Parent Corporation the
Escrow Termination Agreement as soon as practicable on or after the
date hereof.
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II.
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EXERCISE OF
WARRANTS; REGISTRATION RIGHTS; PAYMENT; RETURN OF
DEVICES.
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2.1
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On the Business
Day (as such term is defined in the Registration Rights Agreement
(as defined below)) immediately following the date hereof, HT
Prostate shall (i) exercise Warrants covering the Shares effective
as of the second Business Day after the date hereof (the “
Effective Date ”) and (ii) pay to Parent
Corporation U.S.$300,000 (the “ Purchase Price
”) by wire transfer of immediately available funds in
accordance with wire transfer instructions given by Parent
Corporation in writing to HT Prostate (such wire to be received by
the second Business Day after the date hereof). Parent Corporation
shall execute a receipt acknowledging its receipt of the Purchase
Price immediately following such receipt.
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2.2
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On the
Effective Date (provided Parent Corporation has received the
Purchase Price by such date), the Board of Directors of Parent
Corporation shall, and Parent Corporation shall cause its Board of
Directors to, hold a duly convened meeting (the
“Meeting ”) of such Board of Directors to
take note of the exercise of the Warrants and to acknowledge and
record the subsequent issuance of the Shares. As soon as
practicable following the Meeting, but in no event later than the
third Business Day after the Business Day on which the Purchase
Price was received by Parent Corporation, Parent Corporation shall
cause Caceis (i) to issue the Shares registered in the name of HT
Prostate, and (ii) on behalf of HT Prostate, cause the
re-registration of such Shares in the name of The Bank of New York
and transfer such Shares for deposit into the account designated by
The Bank of New York, as depositary (the “
Depositary ”) under the Deposit Agreement dated
as of July 31, 1997 (the “ Deposit Agreement
”) among the Parent Corporation, the Depositary and the
owners and beneficial owners of ADRs from time to time. On the date
of such transfer, the EDAP Parties shall instruct the Depositary to
promptly deliver to HT Prostate by overnight delivery at the
address set forth beneath its signature to this Agreement the
Restricted ADSs evidenced by restricted American Depositary
Receipts (the “ Restricted ADRs ”) that
include the legend set forth in Section 5.2 hereof. The EDAP
Parties shall use their reasonably best efforts to cause the
Depositary to deliver the Restricted ADRs to HT Prostate within
three Business Days of such transfer.
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2
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2.3
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On the date
hereof, Parent Corporation and HT Prostate shall execute and
deliver to the other a Registration Rights Agreement, the form of
which is attached hereto as Exhibit B (the “
Registration Rights Agreement ”).
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2.4
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During the
period beginning on the date the SEC declares the Registration
Statement effective and ending on the sixtieth (60th )
day following such date (or if there exists any Tolling Event (as
defined in the Registration Rights Agreement) during such sixty-day
period, such sixty-day period shall be tolled during the
continuation of such Tolling Event and the days during the
continuation of such Tolling Event shall be excluded when
calculating the number of days in the sixty-day period) (such
period, the “ Resale Period ”), HT
Prostate shall use its reasonably best efforts to resell the Shares
in accordance with a Registration Statement (as defined in the
Registration Rights Agreement). Within five (5) days following the
earlier of (the “ Expiration Date ”) (a)
the expiration of the Resale Period and (b) the resale by HT
Prostate of all of the Shares in accordance with the Registration
Statement, HT Prostate Parties shall pay to Parent Corporation an
amount equal to (x) $600,000, plus (y) the amount of Excess
Proceeds (as defined below) as of the Expiration Date, by wire
transfer of immediately available funds in accordance with wire
transfer instructions given by Parent Corporation in writing to HT
Prostate. For purposes of this Section 2.4 , “
Excess Proceeds ” shall mean an amount equal to
(i) the aggregate net proceeds received by HT Prostate from sales
of the Shares during the relevant period (net of brokers’
commissions and other out-of-pocket expenses incurred in connection
with such sales), less (ii) an amount equal to the number of Shares
sold in such sales multiplied by $7.00. If HT Prostate has not
resold all of the Shares by the Expiration Date, then HT Prostate
shall use its reasonably best efforts to resell the Shares in
accordance with a Registration Statement following the Expiration
Date. With respect to each fifteen-day period following the
Expiration Date, HT Prostate shall, promptly following the end of
such fifteen-day period, pay to Parent Corporation any Excess
Proceeds received by HT Prostate for sales of Shares during such
fifteen-day period. Any sale of Shares by any HT Prostate Party,
whether made under a Registration Statement, Rule 144 under the
Securities Act or otherwise, shall be included in the calculation
of Excess Proceeds pursuant to this Section 2.4 . The HT
Prostate Parties shall provide support documentation reasonably
requested by the EDAP Parties to evidence such sales.
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3
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2.5
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Promptly after
the date hereof and after delivery of the written notice of
location described below, the HT Prostate Parties shall deliver or
cause to be delivered, at their expense and free of any lien,
pledge, charge, claim, encumbrance, security interest, option,
mortgage, challenge to use, license or other restriction or third
party right of any kind created or caused by an HT Prostate Party
or any of their affiliates (other than those consented to by an
EDAP Party) (each, an “Encumbrance ”),
the six (6) lithotripters, together with the associated spare
parts, tools, accessories and disposables, described in Exhibit
C hereto (the “ European Devices ”)
to Parent Corporation at such location as Parent Corporation
determines, written notice of which location shall be delivered to
HT Prostate by Parent Corporation. Delivery of the European Devices
shall be by air freight. Risk of loss or damage to the European
Devices shall pass to the EDAP Parties upon delivery of the
European Devices to the transportation company DDP (INCOTERMS
2000).
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2.6
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Promptly after
the date hereof, the HT Prostate Parties shall assign, transfer,
convey and deliver to Parent Corporation, free and clear of all
Encumbrances, all of their right, title and interest to the
transportation robots (including Intellectual Property Rights
therein) related to the Ablatherm device referenced in Section
2.5 hereof (the “ Ablatherm Robots
”), and to effect any necessary registration of the transfer
of title to such robots with the appropriate authorities. The
Ablatherm Robots will be delivered to Parent Corporation at
HealthTronics’ facility located at 110 Reservation Road,
Aberdeen, NC 28315 on April 10, 2007. Risk of loss or damage to the
Ablatherm Robots shall pass to the EDAP Parties upon delivery of
the Ablatherm Robots to Parent Corporation.
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2.7
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Promptly after
the date hereof, the HT Prostate Parties shall deliver or cause to
be delivered, at their expense, free and clear of all Encumbrances,
the three (3) Ablatherm devices, together with associated spare
parts, tools, accessories and disposables, described in Exhibit
C hereto (the “ U.S. Devices, ” and
together with the European Devices and the Ablatherm Robots, the
“ Devices ”), to Parent Corporation. The
U.S. devices will be delivered to Parent Corporation at
HealthTronics’ facility located at 110 Reservation Road,
Aberdeen, NC 28315 on April 10, 2007. Risk of loss or damage to the
U.S. Devices shall pass to the EDAP Parties upon delivery of the
U.S. Devices to Parent Corporation.
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III.
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CONFIDENTIAL
INFORMATION AND INTELLECTUAL PROPERTY RIGHTS
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3.1
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The HT Prostate
Parties hereby acknowledge and agree that all rights of the HT
Prostate Parties in the Intellectual Property Rights created by any
party to this Agreement in connection with the Study, or
contributed by any party to this Agreement exclusively in
connection with the Study, during the term of the Distribution
Agreement shall vest exclusively in the EDAP Parties. In this
Agreement, “ Intellectual Property Rights
” means all intellectual property rights at any time
protected by statute or common law, in any jurisdiction, including
but not limited to: inventions (whether or not patentable),
patents, copyright, design rights, trademarks, rights in databases,
rights in know-how, and other confidential information and trade
secrets; and any application or right to apply for any of the
foregoing.
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4
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3.2
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Each HT
Prostate Party hereby covenants and agrees that it shall, and
procure that its affiliates shall, transfer all Confidential
Information and related Intellectual Property Rights, and any
embodiment thereof, whether tangible or intangible and on whatever
media, referred to in Section 3.1 above and owned by an EDAP
Party, to the Parent Corporation, or such third party as the Parent
Corporation may designate in writing, within thirty (30) days of
the date of this Agreement; provided, that (a) to the extent the
consent of a third party is required for such transfer, such
transfer shall not be completed until receipt of such consent by HT
Prostate, and (b) to the extent Confidential Information of an EDAP
Party is contained in any notes, analyses or other documents
prepared by an HT Prostate Party, HT Prostate may destroy such
documents (unless such documents represent the only documentation
of particular Intellectual Property Rights of an EDAP Party and the
EDAP Parties do not otherwise have documentation of such
Intellectual Property Rights).
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3.3
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Each HT
Prostate Party hereby covenants and agrees that it shall not use,
or procure the use of, any or all of the Confidential Information
of the EDAP Parties and Intellectual Property Rights referred to in
Section 3.1 above, in any way from the date of this
Agreement, including without limitation, any use in relation to
obtaining a Pre-Market Approval from the FDA (“
PMA ”) or any full approval of the IDE, or its
equivalent in any jurisdiction, including without limitation, the
United States of America.
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4.1
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The HT Prostate
Parties shall use their reasonably best efforts to transition HT
Prostate’s responsibilities as sponsor of the IDE and Study
to an EDAP Party or a third party designated by the EDAP Parties
and reasonably cooperate therewith. The HT Prostate Parties’
transition services and related cooperation shall be, without
prejudice to Section 3 above, limited to (a) officially
transfer the IDE Study to EDAP, (b) coordination with the current
contract research organization (“ CRO ”)
for the Study in respect of the EDAP Parties’ engagement of
the CRO, (c) coordination with Parent Corporation and the CRO to
file the appropriate notice(s) with the FDA to reflect that HT
Prostate is no longer the sponsor of the IDE or Study, and (d)
coordination with those investigation sites that as of the date
hereof are parties to clinical study agreements (and related
agreements) in respect of the Study to assign HealthTronics’
rights and obligations under such agreements to Parent
Corporation.
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4.2
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Each of the
parties shall bear its own costs and expenses in complying with the
terms of Section 4.1 .
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4.3
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If the amount
of out-of-pocket costs and expenses incurred by HT Prostate,
HealthTronics and/or their affiliates paid to third parties in
connection with the transition of the Study (and related transition
matters), including but not limited to costs to ship the equipment
and documents contemplated herein and such other equipment and
documents reasonably requested by the EDAP Parties and costs
(including legal fees and expenses) incurred in connection with the
transition services described in Section 4.1 , but excluding
costs (including legal fees and expenses) incurred in connection
with the preparation and negotiation of this Agreement and the
Registration Rights Agreement and the registration of the Shares
and ADSs pursuant to the Registration Rights Agreement, is less
than $50,000 (the excess of $50,000 over such amount, the “
Cap ”), then HT Prostate agrees to promptly
reimburse the EDAP Parties for out-of-pocket transition costs
incurred by them, provided, that (a) the EDAP Parties provide
support documentation reasonably requested by HT Prostate to
evidence the incurrence of such costs and (b) the amount of such
reimbursement shall not exceed the amount of the Cap.
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V.
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REPRESENTATIONS AND WARRANTIES OF
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