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EXHIBIT 10.9
May ___, 1996
John Hancock Mutual Life
Insurance Company
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
Gentlemen:
Reference is made to the Warrants (as amended to date, the "Outstanding
PMI Warrants"), dated January 26, 1993, issued by Polymedica Industries, Inc.
("PMI") to John Hancock Mutual Life Insurance Company (the "Holder") for the
purchase of an aggregate of up to 542,417 shares of Common Stock of PMI (the
"PMI Common Stock") for a per share exercise price of $6.93. Capitalized terms
not defined in this letter shall have the meaning set forth in the Outstanding
PMI Warrants.
The Board of Directors of PMI has declared a stock dividend (the "Stock
Dividend"), upon the satisfaction of certain conditions, for the purpose of
making a distribution by PMI to its stockholders of all of the outstanding
Common Stock of CardioTech International, Inc. ("CardioTech") held by PMI
(3,490,638 shares). Stockholders of PMI of record on _____________, 1996 (the
"Record Date"), will receive one (1) share of Common Stock of CardioTech
("CardioTech Common Stock") for each two and twenty-one one hundredth (2.21)
shares of PMI Common Stock held by them on that date. Prior to delivery of the
CardioTech Warrants (as defined below), up to 486,879 additional shares of
CardioTech Common Stock (the "Adjustment Shares") may also be distributed to
the stockholders of record of PMI. In such event, the aggregate number of
shares of CardioTech Common Stock issuable upon exercise of the CardioTech
Warrants shall be increased by an amount equal to the Adjustment Shares
multiplied by a fraction, the numerator of which is 245,438, and the
denominator of which is 245,438 plus the number of shares of CardioTech Common
Stock outstanding on the Distribution Date (as defined below), (but no
adjustment shall be made to the aggregate exercise price payable upon the
exercise of the CardioTech Warrants).
Pursuant to section 4.2(g) of the Outstanding PMI Warrants, CardioTech
agrees to issue to the Holder warrants in the form
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attached hereto as Exhibit A for the purchase of an aggregate of 245,438 shares
of CardioTech Common Stock (the "CardioTech Warrants"), such number of shares
being subject to adjustment as provided above and in the CardioTech Warrants.
PMI agrees to amend and restate the Outstanding PMI Warrants to be in the form
of Exhibit B attached hereto and to provide for the issuance of an aggregate of
up to 542,417 shares of PMI Common Stock (the "New PMI Warrants"), such number
of shares being subject to adjustment as provided in the New PMI Warrants.
The aggregate amount payable upon exercise in full of the Outstanding
PMI Warrants is $3,758,949.81 (the "Aggregate Exercise Price"). The Aggregate
Exercise Price shall be allocated between the CardioTech Warrants and the New
PMI Warrants in the following manner. The portion of the Aggregate Exercise
Price (the "CardioTech Portion") payable upon exercise in full of the
CardioTech Warrants shall be equal to (a) the Aggregate Exercise Price
multiplied by (b) a fraction, the numerator of which is (i) the average closing
price of a share of CardioTech Common Stock on the first five trading days
following the date on which the Stock Dividend is distributed (the
"Distribution Date") multiplied by the number of shares of CardioTech Common
Stock outstanding on the Distribution Date, divided by (ii) the average closing
price of one share of PMI Common Stock on the first five trading days following
the Distribution Date multiplied by the number of shares of PMI Common Stock
outstanding on the Distribution Date (the "Price Ratio"), and the denominator of
which is one (1) plus the Price Ratio. The portion of the Aggregate Exercise
Price (the "PMI Portion") payable upon exercise in full of the New PMI Warrants
shall be equal to the Aggregate Exercise Price minus the CardioTech Portion. The
initial per share exercise price payable under the CardioTech Warrants shall be
equal to the CardioTech Portion divided by the initial aggregate number of
shares of CardioTech Common Stock issuable upon exercise in full of the
CardioTech Warrants. The initial per share exercise price payable under the New
PMI Warrants shall be equal to the PMI Portion divided by the initial aggregate
number of shares of PMI Common Stock issuable upon exercise in full of the New
PMI Warrants.
The CardioTech Warrants and the New PMI Warrants will be executed and
delivered to the Holder not later that May 30, 1996, together, in each case,
with (a) an opinion of counsel to CardioTech, in form reasonably satisfactory
to the Holder, as to the enforceability of this letter agreement and the
CardioTech Warrants and as to such other matters as the Holder may reasonably
request, (b) an opinion of counsel to PMI, in form reasonably satisfactory
to the Holder, as to the enforceability of this letter agreement and the New
PMI Warrants and as to such other matters as the Holder may reasonably
request, and (c) certificates duly executed by CardioTech and by PMI as to the
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calculations of the CardioTech Portion, the PMI Portion, the aggregate number
of shares of CardioTech Common Stock and PMI Common Stock initially issuable
pursuant to the CardioTech Warrants and the New PMI Warrants, respectively, and
the respective per share exercise prices therefor, all such calculations to be
reasonably satisfactory to the Holder. The Holder shall be deemed to be the
record and beneficial owner of the CardioTech Warrants and the New PMI Warrants
on and as of the Distribution Date, subject to the consummation of the Stock
Dividend and, until the delivery of the CardioTech Warrants and the New PMI
Warrants, the Outstanding PMI Warrants shall be deemed to evidence the same.
From and after the date hereof and so long as the CardioTech Warrants
are outstanding, CardioTech shall furnish to each holder of the CardioTech
Warrants all notices, proxy statements, financial statements, reports and
documents as CardioTech shall send or make available generally to its
stockholders.
CardioTech represents to the Holder that (i) this letter agreement and
the CardioTech Warrants have been duly authorized by CardioTech and, when
executed and delivered, will constitute the valid and legally binding
obligations of CardioTech enforceable against CardioTech in accordance with
their terms, and (ii) CardioTech has reserved 245,438 shares of CardioTech
Common Stock for issuance upon exercise of the CardioTech Warrants and such
shares, when issued in accordance with the terms of the CardioTech Warrants,
will be validly issued and outstanding, fully paid and non-assessable and not
subject to preemptive rights on the part of any other person.
PMI represents to the Holder that (i) this letter agreement and the New
PMI Warrants have been duly authorized by PMI and, when executed and delivered,
will constitute the valid and legally binding obligations of PMI enforceable
against PMI in accordance with their terms, and (ii) PMI has reserved 542,417
shares of PMI Common Stock for issuance upon exercise of the New PMI Warrants
and such shares, when issued in accordance with the terms of the New PMI
Warrants, will be validly issued and outstanding, fully paid and non-assessable
and not subject to preemptive rights on the part of any other person.
PMI ratifies and confirms the Note and Warrant Agreement and each of
the other Operative Agreements to which it is a party and agrees that each such
agreement, document and instrument is in full force and effect and that its
obligations thereunder are its legal, valid and binding obligations enforceable
against it in accordance with the terms thereof and that neither it nor any of
its affiliates has any defense, whether legal or equitable, setoff or
counterclaim, to the payment and performance of such obligations.
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PMI and Cardiotech agree to pay all reasonable fees and disbursements
incurred by the Holder in connection with this letter agreement, including,
without limitation, the reasonable fees, expenses and disbursements of special
counsel to the Holder.
The Holder hereby (i) consents (for purposes of the Outstanding PMI
Warrants and the Note and Warrant Agreement referred to below) to the Stock
Dividend and the transactions contemplated thereby (as described in the Form 10
registration statement attached hereto as Exhibit C); and (ii) acknowledges
that it will not have any Board Observer Rights, as set forth in Section 10 of
the Note and Warrant Agreement, dated January 26, 1993, with respect to
CardioTech.
This letter agreement, including the validity hereof and the rights and
obligations of the parties hereunder, shall be construed in accordance with and
governed by the domestic substantive laws of The Commonwealth of Massachusetts
without giving effect to any choice of law or conflicts of law provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
This letter agreement, together with the other documents referred to
herein, embody the entire agreement and understanding among the parties hereto
and supersede all prior agreements and understandings relating to the subject
matter hereof. In case any provision in this letter agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby. This
letter agreement may be executed in any number of counterparts and by the
parties hereto on separate counterparts, but all such counterparts shall
together constitute but one and the same instrument.
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If the foregoing is in accordance with your agreement and understanding
please sign this letter below.
Very truly yours,
CARDIOTECH INTERNATIONAL, INC.
By:
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Its
POLYMEDICA INDUSTRIES, INC.
By:
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Its
Accepted and agreed this
___ day of ___________, 1996.
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:
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Its
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