Novoste, ONI to merge

May 18, 2005

Vascular brachytherapy firm Novoste of Norcross, GA, and extremity MRI developer ONI Medical Systems of Wilmington, MA, are planning to merge, according to the companies.

Under the terms of the merger agreement, Novoste will issue shares of its common stock in exchange for all of the outstanding shares of capital stock of ONI. In addition, Novoste has provided ONI with an 18-month senior unsecured loan for $3 million at an 8% annual interest rate. In connection with the loan, ONI has granted to Novoste a warrant to purchase up to 2.3 million shares of ONI stock.

The actual number of shares to be issued by Novoste will be determined at the closing of the transaction based on a formula that values ONI at approximately $20 million subject to various adjustment provisions, and values Novoste at the amount of its net cash assets at closing.

Novoste and ONI anticipate that the transaction will result in the current ONI stockholders owning a majority interest, on a fully diluted basis, in the combined company.

Novoste in February announced that it was planning to discontinue its vascular brachytherapy business due to heavy competition from drug-eluting stents in the market for prevention of restenosis. The company slashed its U.S. workforce almost in half and terminated all 16 of its international employees, and said it was pursuing strategic alternatives that could include liquidation and dissolution of the company.

The merger will change these plans completely. Novoste said it is modifying its wind-down plan and is actively selling its VBT products to its physician customers. The firm also said it is accepting new contracts to supply radiation source trains and transfer devices, and is renewing existing contracts. Novoste said that it has received expressions of interest from several parties to acquire the assets of its VBT business.

Upon the closing of the merger, ONI will become a wholly owned subsidiary of Novoste and the combined company will be called ONI Medical Systems. The companies reported that the existing management of ONI will become the management of the combined company.

Closing of the transaction is expected to occur during the third quarter this year, subject to approval by the stockholders of Novoste of an increase in the authorized capital stock of Novoste, and the issuance by Novoste of shares of its common stock in the merger.

By AuntMinnie.com staff writers
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