EXHIBIT 10.3
________________________________________________________________________
SUBORDINATED NOTE
AND
COMMON STOCK
PURCHASE AGREEMENT
BY AND AMONG
NITINOL MEDICAL TECHNOLOGIES, INC.,
WHITNEY SUBORDINATED DEBT FUND, L.P.
AND,
FOR CERTAIN PURPOSES,
▇.▇. ▇▇▇▇▇▇▇ & CO.
_________________________________
DATED AS OF JULY 8, 1998
_________________________________
_______________________________________________________________________
TABLE OF CONTENTS
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Page
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ARTICLE 1 DEFINITIONS 1
1.1 Definitions 1
1.2 Accounting Term: Financial Statements 13
1.3 Knowledge of the Company 13
ARTICLE 2 PURCHASE AND SALE OF THE WSDF NOTE AND THE PURCHASED SHARES 13
2.1 Purchase and Sale of the WSDF Note and the Purchased Shares 13
2.2 Fees at Closing 14
2.3 Closing 14
2.4 Financial Accounting Positions; Tax Reporting 14
ARTICLE 3 CONDITIONS TO THE OBLIGATION OF THE
PURCHASER TO PURCHASE THE WSDF NOTE AND THE PURCHASED SHARES 15
3.1 Representations and Warranties 15
3.2 Compliance with this Agreement 15
3.3 Secretary's Certificates 15
3.4 Documents 15
3.5 Opinion of Counsel 16
3.6 Approval of Counsel to the Purchaser 16
3.7 Consents and Approvals 16
3.8 No Material Judgment or Order 16
3.9 Pro Forma Balance Sheet 16
3.10 Goodstanding Certificates 16
3.11 No Material Adverse Change 17
3.12 Due Diligence 17
3.13 Certificate of Incorporation and By-Laws of the Company
and the Subsidiaries 17
3.14 Market Conditions 17
3.15 No Default or Breach 17
3.16 Elekta Purchase Agreement 17
3.17 Fairness Opinion 18
3.18 Facilities Fee and Transaction Fee 18
3.19 Registration Rights Agreement. 18
3.20 Security Documents. 18
ARTICLE 4 CONDITIONS TO THE OBLIGATION OF THE COMPANY
TO ISSUE AND SELL THE WSDF NOTE AND THE PURCHASED SHARES 18
4.1 Representations and Warranties 19
4.2 Compliance with this Agreement 19
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4.3 Consents and Approvals 19
4.4 Elekta Purchase Agreement 19
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 19
5.1 Corporate Existence and Power 19
5.2 Corporate Authorization; No Contravention 20
5.3 Governmental Authorization; Third Party Consents 20
5.4 Binding Effect 20
5.5 No Legal Bar 20
5.6 Litigation 20
5.7 Compliance with Laws 21
5.8 No Default or Breach 21
5.9 Title to Properties 21
5.10 Use of Real Property 22
5.11 Taxes 23
5.12 Financial Condition 25
5.13 ERISA -- Prohibited Transactions 26
5.14 Disclosure 26
5.15 Absence of Certain Changes or Events 27
5.16 Environmental Matters 27
5.17 Investment Company/Government Regulations 28
5.18 Subsidiaries 28
5.19 Capitalization 29
5.20 Private Offering 30
5.21 Broker's, Finder's or Similar Fees 30
5.22 Labor Relations 30
5.23 Employee Benefit Plans 31
5.24 Patents, Trademarks, Etc. 32
5.25 Potential Conflicts of Interest 34
5.26 Trade Relations 35
5.27 Outstanding Borrowings 35
5.28 Material Contracts 35
5.29 Insurance 35
5.30 Products Liability 36
5.31 Solvency 36
5.32 Year 2000 Systems 36
5.33 Elekta Purchase Agreement 36
5.34 Commission Documents 36
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND WHITNEY 37
6.1 Authorization; No Contravention 37
6.2 Binding Effect 37
6.3 No Legal Bar 37
6.4 Purchase for Own Account 38
6.5 Broker's, Finder's or Similar Fees 38
6.6 Governmental Authorization; Third Party Consent 38
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ARTICLE 7 INDEMNIFICATION 38
7.1 Indemnification 38
7.2 Procedure; Notification 39
ARTICLE 8 AFFIRMATIVE COVENANTS 40
8.1 Financial Statements and Other Information 41
8.2 Preservation of Corporate Existence 44
8.3 Payment of Obligations 45
8.4 Compliance with Laws 45
8.5 Inspection 45
8.6 Payment of Note 46
8.7 Insurance 46
8.8 Books and Records 46
8.9 Use of Proceeds 46
8.10 Initial Interest Payments 46
ARTICLE 9 NEGATIVE COVENANTS 47
9.1 Fundamental Changes; Consolidations, Mergers and Acquisitions 47
9.2 Transactions with Affiliates 47
9.3 No Inconsistent Agreements 47
9.4 Limitation on Indebtedness 47
9.5 Limitation on Liens 49
9.6 Dispositions of Assets 50
9.7 Limitations on Restricted Payments 51
9.8 Financial Covenants 51
9.9 Employee Benefit Plans 53
9.10 Limitation on Business of the Company 54
9.11 Investments 54
9.12 Contingent Obligations 54
9.13 Management Fees and Compensation 55
9.14 Fiscal Year 55
9.15 Subsidiaries 55
9.16 No Negative Pledges 55
9.17 No Restrictions on Subsidiary Distributions to the Company 55
9.18 Bank Accounts 55
ARTICLE 10 PREPAYMENT 56
10.1 Optional Prepayment 56
10.2 Mandatory Prepayment 56
ARTICLE 11 MISCELLANEOUS 56
11.1 Survival of Representations and Warranties 56
11.2 Dispositions by the Purchaser 56
11.3 Notices 56
11.4 Successors and Assigns 57
11.5 Termination 58
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11.6 Amendment and Waiver 58
11.7 Signatures; Counterparts 59
11.8 Headings 59
11.9 GOVERNING LAW 59
11.10 Determinations, Request or Consents 59
11.11 JURISDICTION, JURY TRIAL WAIVER, ETC. 59
11.12 Severability 60
11.13 Rules of Construction 60
11.14 Entire Agreement 60
11.15 Certain Expenses 61
11.16 Publicity 61
11.17 Further Assurances 61
Exhibit A Form of WSDF Note
Exhibit B-1 Form of Legal Opinion of ▇▇▇▇ and ▇▇▇▇ LLP
Exhibit B-2 Form of Legal Opinion of ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
Exhibit B-3 Form of Legal Opinion of ▇▇▇▇▇ Dutilh
Exhibit C Form of Guarantee and Collateral Agreement
Exhibit D Form of UK Pledge Agreement
Exhibit E Form of Dutch Pledge Agreement
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of Compliance Certificate
Exhibit H Financial Covenant Calculations
Schedule 5.6 Litigation
Schedule 5.7 Compliance with Laws
Schedule 5.9(a) Title to Properties
Schedule 5.9(b) Title to Properties -- Leases
Schedule 5.10 Use of Real Property
Schedule 5.11 Taxes
Schedule 5.14(b) Material Adverse Effects
Schedule 5.15 Absence of Certain Changes or Events
Schedule 5.16 Environmental Matters
Schedule 5.18 Subsidiaries
Schedule 5.19(a) Capitalization
Schedule 5.19(b) Exchangeable Securities
Schedule 5.22 Labor Relations
Schedule 5.23(a) Employee Benefit Plans
Schedule 5.23(c) Prohibited Transaction
Schedule 5.23(d) COBRA
Schedule 5.24(a) Intellectual Property Exceptions
Schedule 5.24(b)(i) Patents, Copyrights and Trademarks
Schedule 5.24(b)(ii) IP Licenses - Licensee
Schedule 5.24(b)(iii) IP Licenses - Licensor
Schedule 5.24(e) Intellectual Property - Litigation
Schedule 5.24(h) Intellectual Property - Indemnification
Schedule 5.25 Potential Conflicts of Interest
Schedule 5.26 Trade Relations
Schedule 5.27 Outstanding Borrowings
Schedule 5.28 Material Contracts
Schedule 5.29 Insurance
Schedule 5.30 Products Liability
Schedule 5.32 Year 2000 Systems
Schedule 9.2 Transactions with Affiliates
Schedule 9.5 Existing Liens
Schedule 9.12 Permissible Contingent Obligations
Schedule 9.13 Permissible Management Fees and Compensation
SUBORDINATED NOTE AND COMMON STOCK
PURCHASE AGREEMENT
SUBORDINATED NOTE AND COMMON STOCK PURCHASE AGREEMENT, dated as of July 8,
1998, by and among NITINOL MEDICAL TECHNOLOGIES, INC. (the "COMPANY"), a
Delaware corporation, WHITNEY SUBORDINATED DEBT FUND, L.P. (the "PURCHASER")
and, solely for the purposes of Section 2.2, Article 6 and Section 11.2 hereof,
▇.▇. ▇▇▇▇▇▇▇ & CO. ("WHITNEY").
W I T N E S S E T H:
WHEREAS, the Company proposes to acquire (the "ACQUISITION") certain assets
of Elekta AB (PUBL), a Swedish corporation ("ELEKTA"), relating to its
neurosurgical instrument business pursuant to a Purchase Agreement, dated May 8,
1998, among Elekta and the Company (the "ELEKTA PURCHASE AGREEMENT"); and
WHEREAS, concurrently with the Acquisition, the Company wishes to sell
to the Purchaser and the Purchaser wishes to purchase from the Company, a
subordinated promissory note (the "WSDF NOTE"), due September 30, 2003, in the
principal amount of $20,000,000, substantially in the form attached hereto as
Exhibit A, and 561,207 shares (the "PURCHASED SHARES") of common stock, $.001
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par value (the "COMMON STOCK"), of the Company upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
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1.1 DEFINITIONS. As used in this Agreement, and unless the context
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requires a different meaning, the following terms have the meanings indicated:
"ACQUISITION" shall have the meaning ascribed to such term in the first
Whereas clause.
"ACQUISITION DOCUMENTS" shall mean the Elekta Purchase Agreement and the
agreements entered into in connection therewith.
"AFFILIATE" shall mean any Person (a) directly or indirectly controlling,
controlled by, or under common control with, the Company, (b) directly or
indirectly owning or holding five percent (5%) or more of any equity interest in
the Company, or (c) five percent (5%) or more of whose voting stock or other
equity interest is directly or indirectly owned or held by the Company. For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling," "controlled by" and under "common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AFFILIATED GROUP" shall have the meaning set forth in Section 1504(a) of
the Code.
"AGREEMENT" shall mean this Agreement, including the exhibits and schedules
attached hereto, as the same may be amended, supplemented or modified in
accordance with the terms hereof.
"ASSET DISPOSITION" shall mean the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise of any of the
following: (a) any of the stock of any of the Company's Subsidiaries or (b) any
substantial portion or all of the assets of the Company or its Subsidiaries
other than sales of inventory in the ordinary course of business. "NET PROCEEDS"
of any Asset Disposition means cash proceeds received by the Company or any of
its Subsidiaries from any Asset Disposition (including insurance proceeds,
awards of condemnation, and payments under notes or other debt securities
received in connection with any Asset Disposition), net of (x) the costs of such
sale, lease, transfer or other disposition (including taxes attributable to such
sale, lease or transfer), and (y) amounts applied to repayment of Indebtedness
secured by a Lien on the asset or property disposed.
"AUDITED FINANCIAL STATEMENTS" shall have the meaning assigned to that term
in Section 5.12(a) of this Agreement.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law or executive order to close.
"BY-LAWS" shall mean, unless the context in which it is used otherwise
requires, the By-laws of the Company or any of its Subsidiaries as in effect on
the Closing Date.
"CAPITAL EXPENDITURES" shall mean the aggregate expenditures (whether or
not financed) made by the Company and its Subsidiaries for fixed or capital
assets
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(other than interests in real property held for resale in which only purchase
money Indebtedness is issued in payment therefor) or improvements, or for
replacements, substitutions or additions thereto, that have a useful service
life of one year or more at the time the asset is acquired by the Company or any
of its Subsidiaries, and are used in the production, distribution and/or the
sale of the goods or services or offered for sale by the Company or any of its
Subsidiaries, all as determined in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP consistently applied.
"CASH" shall mean the currency of the United States of America.
"CASH EQUIVALENTS" shall mean: (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within two (2) years from the date of acquisition thereof;
(ii) commercial paper maturing no more than one (1) year from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's rating service or a least P-1 from ▇▇▇▇▇'▇ Investors Service, Inc., (iii)
certificates of deposit or bankers' acceptances maturing within one (1) year
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000; (iv) time deposits
maturing no more than thirty (30) days from the date of creation thereof with
commercial banks having membership in the Federal Deposit Insurance Corporation
in amounts not exceeding the lesser of $100,000 or the maximum amount of
insurance applicable to the aggregate amount of the Company's and its
Subsidiaries' deposits at such institution; and (v) deposits or investments in
mutual or similar funds offered or sponsored by brokerage or other companies
having membership in the Securities Investor Protection Corporation in amounts
not exceeding the lesser of $100,000 or the maximum amount of insurance
applicable to the aggregate amount of the Company's and its Subsidiaries,
deposits at such institution.
"CERTIFICATE OF INCORPORATION" shall mean, unless the context in which it
is used shall otherwise require, the Certificate of Incorporation of the Company
or any of its Subsidiaries as in effect on the Closing Date.
"CHANGE OF CONTROL" means (i) any transaction or series of transactions in
which any Person or group, other than the Purchaser, Whitney Equity Partners,
L.P., the Company or any affiliates of the foregoing becomes the beneficial
owner of 50% or
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more of the then outstanding capital stock of the Company or of any Subsidiary
of the Company, the operations of which in the reasonable judgment of the
Purchaser would constitute a material part of the business or operations of the
Company and all of its Subsidiaries, taken as a whole, (ii) the sale of all or
substantially all of the assets of the Company or any Subsidiary of the Company,
the operations of which in the reasonable judgment of the Purchaser would
constitute a material part of the business or operations of the Company and all
of its Subsidiaries, taken as a whole, (iii) the liquidation of the Company, and
(iv) the combination of the Company or of any Subsidiary of the Company, the
operations of which in the reasonable judgement of the Purchaser would
constitute a material part of the business or operations of the Company and all
of its Subsidiaries, taken as a whole, with another entity, as a result of which
(A) the shareholders of the Company or any of its Subsidiaries hold less than
50% of the total of all voting shares outstanding or (B) directors of the
Company or any of its Subsidiaries constitute less than a majority of the Board
of Directors of the combined entity.
"CLOSING" shall have the meaning assigned to that term in Section 2.3.
"CLOSING DATE" shall have the meaning assigned to that term in Section 2.3.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"COMMISSION" shall mean the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"COMMISSION DOCUMENTS" shall have the meaning assigned to such term in
Section 5.34.
"COMMON STOCK" shall have the meaning assigned to that term in the second
Whereas clause hereof, or any other capital stock of the Company into which such
stock is reclassified or reconstituted.
"COMPLIANCE CERTIFICATE" shall have the meaning assigned to such term in
Section 8.1(c).
"CONDITION OF THE COMPANY" shall mean the assets, business, properties,
prospects, operations or financial or other condition of the Company and its
Subsidiaries, taken as a whole.
"CONTINGENT OBLIGATION" as applied to any Person, shall mean any direct or
indirect liability, contingent or otherwise, of that Person: (i) with respect to
any indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or
4
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto; (ii) with respect to any letter of credit
issued for the account of that Person or as to which that Person is otherwise
liable for reimbursement of drawings; or (iii) under any foreign exchange
contract, currency swap agreement, interest rate swap agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising from
fluctuations in currency values or interest rates. Contingent Obligations shall
include (a) the direct or indirect guaranty, endorsement (other than for
collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of another, (b) the obligation to make take-or-pay or similar payments if
required regardless of nonperformance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligations of another
through any agreement to purchase, repurchase or otherwise acquire such
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another. The
amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.
"CONTRACTUAL OBLIGATIONS"shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"CURRENT ASSETS" shall mean, at any date, the aggregate of the current
assets of the Company and its Subsidiaries determined on a consolidated basis as
of such date, as determined in accordance with GAAP.
"CURRENT LIABILITIES" shall mean, at any date, the aggregate of the current
liabilities of the Company and its Subsidiaries, determined on a consolidated
basis as of such date, as determined in accordance with GAAP.
"DEFINED BENEFIT PLAN" shall mean a defined benefit plan within the meaning
of Section 3(35) of ERISA or Section 414(j) of the Code, whether funded or
unfunded, qualified or non-qualified (whether or not subject to ERISA or the
Code).
"EBITDA" shall be calculated as set forth in Exhibit H.
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"ELEKTA" shall have the meaning ascribed to such term in the first Whereas
clause.
"ELEKTA PURCHASE AGREEMENT" shall have the meaning ascribed to such term in
the first Whereas clause.
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"ENVIRONMENTAL LAWS" shall mean any applicable federal, state, territorial,
provincial or local law, common law doctrine, rule, order, decree, judgment,
injunction, license, permit or regulation relating to environmental matters,
including those pertaining to land use, air, soil, surface water, ground water
(including the protection, cleanup, removal, remediation or damage thereto,
public or employee health or safety or any other environmental matter, together
with any other laws (federal, state, territorial, provincial or local) relating
to emissions, discharges, releases or threatened releases of any pollutant or
contaminant including, without limitation, medical, chemical, biological,
biohazardous or radioactive waste and materials, into ambient air, land, surface
water, groundwater, personal property or structures, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, discharge or handling of any contaminant, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. 9601 et seq.), the Hazardous Material Transportation Act (49
-- ---
U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
-- ---
6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251
-- ---
et seq.), the Clean Air Act (42 U.S.C. 1251 et seq.), the Toxic Substances
-- --- -- ---
Control Act (15 U.S.C. 2601 et seq.), and the Occupational Safety and Health
-- ---
Act (29 U.S.C. 651 et seq.), as such laws have been, or are, amended, modified
-- ---
or supplemented heretofore.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall mean a corporation that is or was a member of a
controlled group of corporations with the Company within the meaning of section
4001(a) or (b) of ERISA or section 414(b) of the Code, a trade or business
(including a sole proprietorship, partnership, trust, estate or corporation)
that is under common control with the Company within the meaning of section
414(m) of the Code, or a trade or business which together with the Company, is
treated as a single employer under section 414(o) of the Code.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in the
Note.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
"FDA" shall have the meaning ascribed to such term in Section 5.7.
"FUNDED DEBT" means with respect to any Person and as at any date of
determination thereof, without duplication, (a) all Indebtedness of such Person
as at such date for money borrowed, (b) the principal component of all Capital
Lease Obligations, (c) all Indebtedness for the deferred purchase price of
property or services represented by a note or other security (other than in
respect of any trade payable) or other Indebtedness arising under any
conditional sale or other title retention agreement with
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respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), and (d) all Indebtedness of such
Person secured by a purchase money mortgage or other lien to secure all or part
of the purchase price of property subject to such mortgage or lien.
"GAAP" shall mean generally accepted accounting principles in effect from
time to time within the United States.
"GOVERNMENTAL AUTHORITY" shall mean the government of any nation, state,
city, locality or other political subdivision of any thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"GUARANTEE AND COLLATERAL AGREEMENT" means the Guarantee and Collateral
Agreement substantially in the form of Exhibit C to be delivered by the Company
and the Guarantors under the terms of this Agreement, including any future such
agreement delivered by a Subsidiary pursuant to Section 8.1(j) hereof.
"GUARANTORS" means any Subsidiary of the Company that is party to the
Guarantee and Collateral Agreement, including without limitation, NMT
NeuroSciences (International), Inc., NMT Investments Corp., NMT NeuroSciences
(US), Inc., NMT NeuroSciences (IP), Inc., NMT Heart, Inc. and Cordis Innovasive
Systems, Inc.
"HAZARDOUS MATERIALS" shall mean (i) any chemical pollutant, contaminant,
pesticide, petroleum or petroleum product or byproduct radioactive substance,
solid waste (hazardous or extremely hazardous), special, dangerous or toxic
waste, hazardous or toxic substance, chemical or material regulated, listed,
referred to, limited or prohibited under any Environmental Law, including
without limitation: (i) friable or damaged asbestos, asbestos-containing
material, polychlorinated biphenyls (PCBs), solvents and waste oil; (ii) any
"hazardous substance" as defined under CERCLA or any environmental law, statute,
regulation or rule; (iii) any hazardous waste defined under RCRA or any
Environmental Law; and (iv) even if not prohibited, listed, limited or regulated
by an Environmental Law, all pollutants, contaminants, hazardous, dangerous or
toxic chemical materials, wastes or any other substances, including without
limitation, any industrial process or pollution control waste (whether or not
hazardous within the meaning of RCRA) which could pose a hazard to the
environment, or the health and safety of any person or impair the use or value
of any portion of the property of the Company or any of its Subsidiaries.
"INDEBTEDNESS" shall mean as to any Person (a) all obligations of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, unfunded credit commitments,
letters of credit and bankers' acceptances, whether or not matured), (b) all
obligations of such Person
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evidenced by notes, bonds, debentures or similar instruments, (c) all
obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable and accrued commercial or trade
liabilities arising in the ordinary course of business, (d) all interest rate
and currency swaps, caps, collars and similar agreements or hedging devices
under which payments are obligated to be made by such Person, whether
periodically or upon the happening of a contingency, (e) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (f) all Capital Lease
Obligations of such Person, (g) all indebtedness secured by any Lien (other than
Liens in favor of lessors under leases other than leases included in clause (f))
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is non-
recourse to the credit of that Person, and (h) any Contingent Obligation of such
Person.
"INDEMNIFIED PARTY" shall have the meaning assigned to such term in
Section 7.1.
"INTELLECTUAL PROPERTY" shall mean all of the following as they exist in
all jurisdictions throughout the world:
(i) patents and patent applications (including any divisions,
continuations, continuations-in-part, substitutions or reissues thereof, whether
or not patents are issued on such applications and whether or not such
applications are modified, withdrawn or resubmitted) ("PATENTS")'
(ii) trademarks, service marks, trade dress, trade names, brand
names, designs and logos, corporate names, product or service identifiers,
whether registered or unregistered, and all registrations and applications for
registration thereof (collectively, "TRADEMARKS");
(iii) copyright registrations and applications for registration
thereof, and any non-registered copyrights ("COPYRIGHTS");
(iv) trade secrets, inventions (whether or not patentable and
whether or not reduced to practice), invention disclosures and improvements
thereto (collectively, "TRADE SECRETS");
(v) proprietary computer software programs and source code; and
(vi) any other information concerning the Company or any Subsidiary
that is not generally available to the public and which is treated as
confidential
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or proprietary by the Company or such Subsidiary (collectively, "CONFIDENTIAL
INFORMATION").
"INTEREST COVERAGE" shall be determined as set forth in Exhibit H.
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"INTEREST EXPENSE" shall mean, with respect to the Company and its
Subsidiaries on a consolidated basis for any period, the sum of (a) gross
interest expense of the Company and its Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP consistently applied, including
(i) the amortization of debt discounts, (ii) the amortization of all fees
payable in connection with the incurrence of Indebtedness to the extent included
in interest expense, (iii) the portion of any payments or accruals with respect
to Capital Lease Obligations allocable to interest expense and (iv) all
commissions paid to factors during such period, and (b) any other capitalized
interest of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP consistently applied.
"INTERIM FINANCIAL STATEMENTS" shall have the meaning assigned to that term
in Section 5.12(a) of this Agreement.
"INVESTMENT" shall mean (i) any direct or indirect purchase or other
acquisition by the Company or any of its Subsidiaries of any beneficial interest
in, including stock, partnership interest or other equity securities of, any
other Person (other than a Person that prior to the relevant purchase or
acquisition was a Subsidiary of the Company) or (ii) any direct or indirect
loan, advance or capital contribution by the Company or any of its Subsidiaries
to any other Person (other than a Subsidiary of the Company), including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the ordinary course
of business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
----
increases or decreases in value, or writeups, write-downs or write-offs with
respect to such Investment.
"IP LICENSES" shall have the meaning assigned to that term in Section
5.24(b)(ii).
"ITC" shall have the meaning assigned to that term in Section 5.12(b) of
this Agreement.
"ITC AUDITED FINANCIAL STATEMENTS" shall have the meaning assigned to that
term in Section 5.12(b) of this Agreement.
"ITC INTERIM FINANCIAL STATEMENTS" shall have the meaning assigned to that
term in Section 5.12(b) of this Agreement.
"LIABILITIES" shall have the meaning assigned to that term in Section 7.1.
9
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), charge, claim, restriction
or preference, priority, right or other security interest or preferential
arrangement of any kind or nature whatsoever (excluding preferred stock and
equity related preferences) including, without limitation, those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease Obligation, or any
financing lease having substantially the same economic effect as any of the
foregoing.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan within the meaning of
Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code.
"NET FUNDED INDEBTEDNESS" shall be calculated as set forth in Exhibit H.
---------
"NOTES" shall mean the WSDF Note, together with all notes issued in
connection with the substitution, replacement or transfer thereof.
"OPERATING CASH FLOW" shall be calculated as set forth in Exhibit H.
---------
"OPTIONS" shall have the meaning assigned to that term in Section 5.19(a)
of this Agreement.
"OUTSTANDING BORROWINGS" shall mean all Indebtedness of the Company and its
Subsidiaries for money borrowed that is outstanding at the relevant time of
determination.
"PERSON" shall mean any individual, firm, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"PLANS" shall have the meaning assigned to that term in Section 5.23 of
this Agreement.
"PLEDGE AGREEMENTS" means the pledge agreements substantially in the forms
of Exhibits D and E hereto to be delivered by (x) NMT NeuroSciences
(International) Inc., in respect of the stock of NMT NeuroSciences (U.K.) Ltd.
and (y) NMT Neurosciences (International) Inc. and Nitinol Medical Technologies,
Inc. in respect of the stock of Yellow Tape B.V. and Nitinol Medical
Technologies International, B.V., under the terms of this Agreement, and any
future pledge agreements delivered by the Company or a Subsidiary pursuant to
Section 8.1(j) hereof.
"PREFERRED STOCK" shall have the meaning assigned to that term in Section
5.19(a) of this Agreement.
10
"PRO FORMA BALANCE SHEET" shall mean the pro forma consolidated balance
sheet of the Company and its Subsidiaries referred to in Section 5.12(a).
"PURCHASED SHARES" shall have the meaning assigned to such term in the
second Whereas clause.
REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
substantially in the form attached hereto as Exhibit F granting registration
---------
rights to the Purchaser and Whitney.
"REQUIREMENTS OF LAW" shall mean as to any Person, provisions of the
Certificate of Incorporation and By-laws or other organizational or governing
documents of such Person, or any law, treaty, rule, regulation, right,
privilege, qualification, license or franchise or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable or binding
upon such Person or any of its property or to which such Person or any of its
Property is subject or pertaining to any or all of the transactions contemplated
or referred to herein.
"RESTRICTED PAYMENT"shall mean: (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock, limited
liability company interest, or partnership interest of the Company or any of its
Subsidiaries now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock, limited liability company interest, or
partnership interest to the holders of that class; (ii) any redemption,
conversion, exchange, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
stock, limited liability company interest or partnership interest of the Company
or any of its Subsidiaries now or hereafter outstanding; (iii) any payment or
prepayment of interest on, principal of, premium, if any, redemption,
conversion, exchange, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, any Indebtedness subordinated to the Indebtedness
existing pursuant to the Note and this Agreement; (iv) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock, limited liability company
interest, or partnership interest of the Company or any of its Subsidiaries now
or hereafter outstanding; and (v) any payment under any noncompete agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations thereunder as the same
shall be in effect at the time.
"SECURITY DOCUMENTS" shall mean, collectively, the Guarantee and Collateral
Agreement and the Pledge Agreements.
"SENIOR INDEBTEDNESS" shall mean all Indebtedness of the Company and its
Subsidiaries currently outstanding or incurred in the future pursuant to any
borrowing by the Company or any of its Subsidiaries from any bank or
institutional lender having
11
total assets (together with its affiliates) in excess of $500,000,000, and any
renewals, extensions, refinancings or refundings thereof.
"SHARES" shall mean the Purchased Shares and the Transaction Fee Shares.
"SOLVENT" shall mean, with respect to the Company and its Subsidiaries
considered as a whole, based on the Pro Forma Balance Sheet, that (i) the assets
and the property of the Company and its Subsidiaries, considered as a whole,
exceed the aggregate liabilities (including contingent and unliquidated
liabilities) of the Company and its Subsidiaries, considered as a whole, and
(ii) after giving effect to the transactions contemplated by the Transaction
Documents and the Acquisition Documents, the Company and its Subsidiaries,
considered as a whole, are able to both service and pay their liabilities as
they mature. In computing the amount of contingent or unliquidated liabilities
at any time, such liabilities will be computed as the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that is likely to become an actual or matured liability.
"STOCK PLAN" shall have the meaning assigned to that term in Section
5.19(a) of this Agreement.
"STOCK PLAN SHARES" shall have the meaning assigned to that term in Section
5.19(a) of this Agreement.
"SUBSIDIARY" shall mean, with respect to any Person, a corporation or other
entity of which 50% or more of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Agreement shall refer to a Subsidiary or Subsidiaries of the Company.
"TAX" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" shall mean, any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TRANSACTION DOCUMENTS" shall mean, collectively, this Agreement, the Note,
the Security Documents, and any other document, certificate, notice or consent
related to any of the foregoing.
12
"TRANSACTION FEE SHARES" has the meaning assigned such term in Section 2.2.
"WARRANTS" shall have the meaning assigned to that term in Section 5.19(a)
of this Agreement.
"WHITNEY" shall have the meaning assigned to such term in the preamble
hereto.
"WSDF NOTE" shall have the meaning ascribed such term in the second Whereas
clause.
1.2 ACCOUNTING TERM: FINANCIAL STATEMENTS. All accounting terms used
--------------------------------------
herein and not expressly defined in this Agreement shall have the respective
meanings given to them in conformance with GAAP. Financial statements and other
information furnished pursuant to this Agreement or the other Transaction
Documents shall be prepared in accordance with GAAP as in effect at the time of
such preparation. No "Accounting Changes" (as defined below) shall affect
financial covenants, standards or terms in this Agreement; provided that the
--------
Company shall prepare footnotes to each Compliance Certificate and the financial
statements required to be delivered hereunder that show the differences between
the financial statements delivered (which reflect such Accounting Changes) and
the basis for calculating financial covenant compliance (without reflecting such
Accounting Changes). "ACCOUNTING CHANGES" means: (a) changes in accounting
principles required by GAAP and implemented by the Company and (b) changes in
accounting principles recommended by the Company's certified public accountants
and implemented thereby.
1.3 KNOWLEDGE OF THE COMPANY. All references to the knowledge of the
------------------------
Company or to facts known by the Company shall mean actual knowledge or notice
of its Chief Executive Officer, President, Chief Financial Officer or other
executive officer or any Chief Executive Officer, Chief Financial Officer or
other executive officer of any Subsidiary (prior to giving effect to the
Acquisition) or division thereof or knowledge which such Person could reasonably
have acquired through the exercise of due inquiry.
ARTICLE 2
PURCHASE AND SALE OF THE WSDF NOTE
AND THE PURCHASED SHARES
------------------------
2.1 PURCHASE AND SALE OF THE WSDF NOTE AND THE PURCHASED SHARES.
------------------------------------------------------------
Subject to the terms and conditions herein set forth, the Company agrees that it
will issue and sell to the Purchaser, and the Purchaser agrees that it will
acquire from the Company on the Closing Date, the WSDF Note and the Purchased
Shares. The purchase price for
13
the WSDF Note and the Purchased Shares shall be $20,000,000. The parties hereto
covenant and agree that they shall allocate $3,255,001 of the purchase price to
the purchase by the Purchaser of the Purchased Shares.
2.2 FEES AT CLOSING. Concurrently with the execution hereof, the
---------------
Company shall (a) pay to Whitney a debt placement fee of $600,000, (b) pay to
Whitney a transaction fee of 113,793 shares (the "TRANSACTION FEE SHARES") of
Common Stock in connection with the Elekta Purchase Agreement and (c) reimburse
all of the Purchaser's and Whitney's reasonable out-of-pocket expenses
(including, without limitation, reasonable fees, charges, disbursements of
counsel (including ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇▇ & Maw and
Stibbe Simont ▇▇▇▇▇▇▇ Dubot) and travel expenses) incurred in connection with
(i) the negotiation and execution and delivery of this Agreement and the
Transaction Documents and the Purchaser's due diligence investigation and (ii)
the transactions contemplated by this Agreement and the other Transaction
Documents, which payments shall be made, if in cash, by wire transfer of
immediately available funds to an account or accounts designated by the
Purchaser and, if in Common Stock, as set forth herein.
2.3 CLOSING. The purchase and issuance of the WSDF Note and the
-------
Purchased Shares shall take place at the closing (the "CLOSING") to be held at
the offices of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 1285 Avenue of the
Americas, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ concurrently with the closing of the
Acquisition pursuant to the Elekta Purchase Agreement (the "CLOSING DATE"). At
the Closing, the Company shall deliver the WSDF Note and the Purchased Shares to
the Purchaser against delivery by the Purchaser to the Company of the purchase
price therefor specified in Section 2.1. Payment of such purchase price shall be
by wire transfer.
2.4 FINANCIAL ACCOUNTING POSITIONS; TAX REPORTING. Each of the
---------------------------------------------
parties hereto agrees to take reporting and other positions with respect to the
WSDF Note and the Purchased Shares which is consistent with the purchase price
of the WSDF Note and the Purchased Shares set forth herein for all financial
accounting purposes, unless otherwise required by applicable GAAP or Commission
rules (in which case the parties agree only to take positions inconsistent with
the purchase price of the WSDF Note and the Purchased Shares set forth herein
provided that the Purchaser has consented thereto, which consent shall not be
unreasonably withheld). Each of the parties to this Agreement agrees to take
reporting and other positions with respect to the WSDF Note and the Purchased
Shares which is consistent with the purchase price of the WSDF Note and the
Purchased Shares set forth herein for all other purposes, including without
limitation, for all federal, state and local tax purposes.
14
ARTICLE 3
CONDITIONS TO THE OBLIGATION OF THE
PURCHASER TO PURCHASE THE WSDF NOTE
AND THE PURCHASED SHARES
------------------------
The obligation of the Purchaser to purchase the WSDF Note and the
Purchased Shares, to pay the purchase price therefor at the Closing and to
perform any obligations hereunder shall be subject to the satisfaction as
determined by, or waived by, the Purchaser of the following conditions on or
before the Closing Date or as specified herein.
3.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of the Company contained in Article 5 hereof shall be true and
correct (a) at and as of the Closing Date and (b) after giving effect to the
transactions contemplated by the Transaction Documents and the Acquisition
Documents, as if made at and as of such date, and the Purchaser shall have
received at the Closing a certificate to the foregoing effect, dated the Closing
Date, and executed by the Chief Executive Officer, President or a Vice President
of the Company.
3.2 COMPLIANCE WITH THIS AGREEMENT. The Company shall have performed
------------------------------
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before the Closing Date, and the Purchaser shall have received at the Closing a
certificate to the foregoing effect, dated the Closing Date, and executed by the
Chief Executive Officer, President or a Vice President of the Company.
3.3 SECRETARY'S CERTIFICATES. The Purchaser shall have received
------------------------
certificates from the Company and each of its Subsidiaries that is party to the
Guarantee and Collateral Agreement, dated the Closing Date and signed by the
Secretary or an Assistant Secretary of the Company or its appropriate
Subsidiary, certifying (a) that the attached copies of the Certificate of
Incorporation and By-laws of the Company or its Subsidiary, and resolutions of
the Board of Directors of the Company or its Subsidiary, approving the
Transaction Documents to which it is a party and the transactions contemplated
hereby and thereby, are all true, complete and correct and remain unamended and
in full force and effect, and (b) as to the incumbency and specimen signature of
each officer of the Company or its Subsidiaries, as appropriate, executing any
Transaction Document to which it is a party or any other document delivered in
connection herewith on behalf of the Company or one of its Subsidiaries, as
appropriate.
3.4 DOCUMENTS. The Purchaser shall have received true, complete and
---------
correct copies of such agreements, schedules, exhibits, certificates, documents,
financial information and filings as it may request in connection with or
relating to the transactions contemplated hereby, all in form and substance
satisfactory to the Purchaser.
15
3.5 OPINION OF COUNSEL. The Purchaser shall have received opinions
------------------
of ▇▇▇▇ and ▇▇▇▇ LLP, ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇, and ▇▇▇▇▇ Dutilh, outside counsel to the
Company and its Subsidiaries, dated as of the Closing Date, relating to the
transactions contemplated by or referred to herein, in form and substance
attached hereto as Exhibits ▇-▇, ▇-▇ and B-3.
-------------------------
3.6 APPROVAL OF COUNSEL TO THE PURCHASER. All actions and
------------------------------------
proceedings hereunder and all agreements, schedules, exhibits, certificates,
opinions, financial information, filings and other documents required to be
delivered by the Company and each of its Subsidiaries hereunder or in connection
with the consummation of the transactions contemplated hereby, and all other
related matters, shall have been in form and substance acceptable to ▇▇▇▇,
Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Purchaser, in its reasonable
judgment.
3.7 CONSENTS AND APPROVALS. All consents, exemptions, authorizations, or
----------------------
other actions by, or notices to, or filings with, Governmental Authorities and
other Persons in respect of all Requirements of Law and with respect to those
Contractual Obligations of the Company and each of its Subsidiaries necessary,
desirable, or required in connection with the execution, delivery or performance
(including, without limitation, the payment of interest on the Note) by the
Company or its Subsidiaries, or enforcement against the Company or its
Subsidiaries, of those Transaction Documents to which it is a party shall have
been obtained and be in full force and effect, and the Purchaser shall have been
furnished with appropriate evidence thereof, and all waiting periods shall have
lapsed without extension or the imposition of any conditions or restrictions.
3.8 NO MATERIAL JUDGMENT OR ORDER. There shall not be on the Closing
-----------------------------
Date any judgment or order of a court of competent jurisdiction or any ruling of
any Governmental Authority or any condition imposed under any Requirement of Law
which, in the judgment of the Purchaser, would prohibit the purchase and
issuance of the WSDF Note or the Purchased Shares or the issuance of the
Transaction Fee Shares or the payment of the debt placement fee hereunder or
subject the Purchaser to any penalty or other onerous condition under or
pursuant to any Requirement of Law if the WSDF Note or the Purchased Shares were
to be purchased hereunder; and the Purchaser shall have received such
certificates or other evidence as it may reasonably request to establish
compliance with this condition.
3.9 PRO FORMA BALANCE SHEET. The Company shall have delivered to the
-----------------------
Purchaser as of the Closing Date the Pro Forma Balance Sheet, certified by the
Chief Financial Officer of the Company that fairly presents the pro forma
adjustments reflecting the consummation of the transactions contemplated by the
Transaction Documents and the Acquisition Documents, including all material fees
and expenses in connection therewith.
3.10 GOODSTANDING CERTIFICATES. The Company shall have delivered to
-------------------------
the Purchaser as of the Closing Date, goodstanding certificates for the Company
and each
16
of its Subsidiaries that is a party to the Guarantee and Collateral
Agreement for each of their respective jurisdictions of incorporation and all
other jurisdictions where they are qualified to do business as a foreign
corporation.
3.11 NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, except as
--------------------------
publicly announced and identified on Schedule 5.14(b), there shall have been no
----------------
material adverse change, nor shall any such change be threatened, in the
Condition of the Company.
3.12 DUE DILIGENCE. The Purchaser shall have completed its due
-------------
diligence review of the assets, business, properties, prospects, operations and
financial and other condition of the assets of Elekta being acquired pursuant to
the Elekta Purchase Agreement, and shall be reasonably satisfied with the
results of such review. Such due diligence review shall include, without
limitation, receipt of audited Elekta financial statements for the 12 months
ended April 30, 1998 and review of Elekta's financial systems integration plan
and audit work papers by the Purchaser's Chief Financial Officer, ▇▇▇▇▇▇
▇'▇▇▇▇▇.
3.13 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE COMPANY AND THE
---------------------------------------------------------------
SUBSIDIARIES. No amendments to the articles or certificate of incorporation or
------------
by-laws of the Company or any of its Subsidiaries as in effect on the date
hereof shall have been effected.
3.14 MARKET CONDITIONS. Prior to the Closing Date, (a) trading in
-----------------
securities generally on the National Market System of the Nasdaq Stock Market
shall not have been suspended or limited or minimum or maximum prices shall not
have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement, shall not
have been imposed upon trading in securities generally by such exchange or by
order of the Commission or any court or other Governmental Authority, (b) a
general banking moratorium shall not have been declared by either federal, New
York State or Commonwealth of Massachusetts authorities or (c) any material
adverse change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any outbreak
or material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall not have occurred.
3.15 NO DEFAULT OR BREACH. Neither the Company nor any of its
--------------------
Subsidiaries shall have been in default under or with respect to any of the
Transaction Documents or the Acquisition Documents and, after giving effect to
the transactions contemplated hereby and thereby, neither the Company nor any of
its Subsidiaries will be in default under any of the Transaction Documents or
the Acquisition Documents.
3.16 ELEKTA PURCHASE AGREEMENT. The closing of the transactions
-------------------------
contemplated by the Elekta Purchase Agreement shall simultaneously occur with
the Closing hereof and all of the conditions set forth in Article 6 thereof
shall have been
17
satisfied or waived; provided, that any such waiver shall have been given only
-------- ----
with the prior written consent of the Purchaser.
3.17 FAIRNESS OPINION. At least three (3) Business Days prior to the
----------------
Closing, the Company shall have obtained and delivered to the Purchaser a copy
of an opinion from Junewicz & Co., Inc., in form and substance satisfactory to
the Purchaser, that the terms of this Agreement are fair, from a financial point
of view, to the Company.
3.18 FACILITIES FEE AND TRANSACTION FEE. The Company shall have paid
----------------------------------
to Whitney the fees and payments provided for in Section 2.2 hereof.
3.19 REGISTRATION RIGHTS AGREEMENT. The Company shall have duly
-----------------------------
executed and delivered the Registration Rights Agreement.
3.20 SECURITY DOCUMENTS. The Company and its Subsidiaries, as
------------------
appropriate, shall have duly executed and delivered to the Purchaser, the
Security Documents. The Security Documents shall be accompanied by (i)
financing statements (UCC-1) duly executed and in proper form for filing under
the Uniform Commercial Code of all jurisdictions necessary or, in the opinion of
the Purchaser, desirable, to perfect the security interests created by the
Security Documents, and (ii) certified copies of requests for information
identifying all of the financing statements on file with respect to the debtors
in all jurisdictions referred to under (i), indicating that no party claims an
interest in any of the Collateral (as defined in the Security Documents), except
for Liens identified on Schedule 5.27. The Guarantee and Collateral Agreement
shall be accompanied by duly executed instruments for filing with the United
States Patent and Trademark Office and the United States Copyright Office and
searches of the files of such offices indicating that no party claims an
interest in any of the Collateral (as defined in the Guarantee and Collateral
Agreement). Pledges of stock pursuant to the Pledge Agreements and Section 5.7
of the Guarantee and Collateral Agreement shall be accompanied by certificates
representing the pledged shares referred to therein accompanied by undated stock
powers executed in blank.
ARTICLE 4
CONDITIONS TO THE OBLIGATION OF THE COMPANY
TO ISSUE AND SELL THE WSDF NOTE AND THE PURCHASED SHARES
--------------------------------------------------------
The obligation of the Company to issue and sell the WSDF Note and the
Purchased Shares and to perform its other obligations hereunder relating thereto
shall be subject to the satisfaction as determined by, or waived by, the Company
of the following conditions on or before the Closing Date:
18
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of the Purchaser contained in Article 6 hereof shall be true and
correct at and as of the Closing Date as if made at and as of such date.
4.2 COMPLIANCE WITH THIS AGREEMENT. The Purchaser shall have
------------------------------
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchaser on or before the Closing Date.
4.3 CONSENTS AND APPROVALS. All consents, exemptions, authorizations
----------------------
or other actions by, or notices to, or filings with, Governmental Authorities
and other Persons in respect of all Requirements of Law and with respect to
those Contractual Obligations of the Company and each of its Subsidiaries
necessary, desirable, or required in connection with the execution, delivery or
performance (including, without limitation, the payment of interest on the Note)
by the Company or enforcement against the Company, of the Transaction Documents
to which it is a party shall have been obtained and be in full force and effect,
and the Company shall have been furnished with appropriate evidence thereof.
4.4 ELEKTA PURCHASE AGREEMENT. The closing of the transactions
-------------------------
contemplated by the Elekta Purchase Agreement shall simultaneously occur with
the Closing hereof.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to the Purchaser as follows:
5.1 CORPORATE EXISTENCE AND POWER. The Company and each of its
-----------------------------
Subsidiaries: (a) is, and after giving effect to the transactions contemplated
by the Transaction Documents and the Acquisition Documents, will be a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; (b) will have all requisite corporate
power and authority to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently, or is
currently proposed to be, engaged; (c) is, and after giving effect to the
transactions contemplated by the Transaction Documents and the Acquisition
Documents, will be duly qualified as a foreign corporation, licensed and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except to the extent that the failure to do so would not have a
material adverse effect on the Condition of the Company; and (d) has the
corporate power and authority to execute, deliver and perform its obligations
under each Transaction Document to which it is or will be a party.
19
5.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution,
-----------------------------------------
delivery and performance by the Company and its Subsidiaries of each Transaction
Document to which it is a party and the consummation of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the WSDF Note and the Shares: (a) has been duly authorized by all necessary
corporate, and if required, stockholder action; (b) does not contravene the
terms of the Company's or any of its Subsidiaries' Certificate of Incorporation
or By-laws, or any amendment thereof, and (c) will not violate, conflict with or
result in any breach or contravention of or the creation of any Lien under, any
Contractual Obligation of the Company or any of its Subsidiaries or any
Requirement of Law applicable to the Company or any of its Subsidiaries.
5.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. No approval,
------------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is necessary or required in connection with the execution, delivery or
performance by (including, without limitation, the payment of interest on the
Note), or enforcement against, the Company or any of its Subsidiaries of the
Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereby or thereby.
5.4 BINDING EFFECT. This Agreement has been, and each of the other
--------------
Transaction Documents to which the Company or any of its Subsidiaries will be a
party to, will be duly executed and delivered by the Company or one of its
Subsidiaries, as applicable, and this Agreement constitutes, and such
Transaction Documents will constitute, the legal, valid and binding obligation
of the Company or its Subsidiaries, as applicable, enforceable against the
Company or its Subsidiaries in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity relating to enforceability.
5.5 NO LEGAL BAR. Neither the execution, delivery and performance of
------------
the Transaction Documents or the Acquisition Documents, the issuance of the
Shares nor the issuance or performance of the terms of the WDSF Note will
violate any Requirement of Law or any Contractual Obligation of the Company or
any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has
previously entered into any agreement which is currently in effect or to which
the Company or any of its Subsidiaries is currently bound, granting any rights
to any Person which are inconsistent with the rights to be granted by the
Company in the Transaction Documents.
5.6 LITIGATION. Except as set forth on Schedule 5.6, there are no
---------- ------------
legal actions, suits, proceedings, claims or disputes pending or, to the
knowledge of the Company, threatened, at law, in equity, in arbitration or
before any Governmental Authority against or affecting the Company or any of its
Subsidiaries (or, as applicable, to the Company's knowledge, any of their
respective shareholders, directors, officers,
20
employees or agents). No injunction, writ, temporary restraining order, decree
or any order of any nature has been issued by any court or other Governmental
Authority purporting to enjoin or restrain the execution, delivery or
performance of the Transaction Documents.
5.7 COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.7, the
-------------------- ------------
Company and each of its Subsidiaries are in compliance with all Requirements of
Law. Except as set forth on Schedule 5.7, there are no product recalls by the
------------
United States Food and Drug Administration ("FDA") or any comparable foreign
regulatory authority pending or, to the knowledge of the Company, contemplated
or threatened, with respect to any products manufactured, sold, marketed,
distributed or delivered by the Company or any of its Subsidiaries or, to the
knowledge of the Company, with respect to any licensed products manufactured,
sold, marketed, distributed or delivered by the Company's licensees pursuant to
license agreements with the Company and, to the knowledge of the Company, there
are no pending or threatened investigations by any Governmental Authority with
respect to such products which, either individually or in the aggregate, could
have a material adverse effect on the Condition of the Company. Except as set
forth on Schedule 5.7, the Company and each of its Subsidiaries is in compliance
------------
in all material respects with all applicable FDA or comparable foreign
regulatory authority requirements, including, without limitation, facility
registration, device listing and product notifications, and the Company has no
knowledge that it or any of its Subsidiaries or licensees is not operating in
compliance in all material respects with FDA or comparable foreign regulatory
authority operating requirements, including, without limitation, good
manufacturing practices. In April 1990 the FDA accepted the Company's 510(k)
notification with respect to the Simon Nitinol Filter and all 510(k)
notifications with respect to subsequent modifications thereto have been
accepted by the FDA.
5.8 NO DEFAULT OR BREACH. No event has occurred and is continuing or
--------------------
would result from the incurring of obligations by the Company and its
Subsidiaries under the Transaction Documents or the Acquisition Documents which
constitutes or, with the giving of notice or lapse of time or both, would
constitute an Event of Default. Neither the Company nor any of its Subsidiaries
is in default under or with respect to any Contractual Obligation in any
material respect.
5.9 TITLE TO PROPERTIES.
-------------------
(a) The Company and/or its Subsidiaries have good and marketable
title in and to all real property reflected on the Pro Forma Balance Sheet or
used in connection with their business, free and clear of all Liens, liabilities
and rights except as provided on Schedule 5.9(a).
---------------
(b) The Company and/or its Subsidiaries hold all of the right, title
and interest of the tenant under the leases reflected on the Pro Forma Balance
Sheet free and clear of all Liens, liabilities and rights except as provided on
Schedule 5.9(b).
---------------
21
5.10 USE OF REAL PROPERTY. Except as set forth on Schedule 5.10, the
-------------------- -------------
owned and leased real properties reflected on the Pro Forma Balance Sheet or
used in connection with the business of the Company and its Subsidiaries, are
used and operated in compliance and conformity with all applicable leases,
contracts, commitments, licenses and permits, except to the extent that the
failure so to comply would not, in the aggregate, materially adversely affect
the Condition of the Company; neither the Company nor any of its Subsidiaries
has received notice of violation of any applicable zoning or building
regulation, ordinance or other law, order, regulation or requirement relating to
the operations of either the Company or any of its Subsidiaries; and there is no
such violation. Except as set forth on Schedule 5.10, all structures,
-------------
improvements and other buildings that are owned or covered by leases reflected
on the Pro Forma Balance Sheet or used in connection with the business of the
Company and its Subsidiaries, comply with all applicable ordinances, codes,
regulations and requirements, have a valid and subsisting certificate of
occupancy for their present use, and neither the Company nor any Subsidiary
thereof has received any written notice from any Governmental Authority which is
still outstanding of any failure to obtain any certificate, permit, license or
approval with respect to the real property, or any intended revocation,
modification or cancellation of same, and no law or regulation presently in
effect or condition precludes or materially restricts continuation of the
present use of such properties. Each lease relating to leased real property
reflected on the Pro Forma Balance Sheet or used in connection with the business
of the Company and its Subsidiaries is in full force and effect and the Company
enjoys peaceful and undisturbed possession thereunder. There is no default on
the part of the Company or any of its Subsidiaries or event or condition which
with notice or lapse of time, or both, would constitute a default on the part of
the Company or any of its Subsidiaries under any such lease. There are no
service contracts, maintenance contracts, union contracts, concession
agreements, licenses, agency agreements or any other written contracts or
agreements affecting the real property or the leased property, reflected on the
Pro Forma Balance Sheet or used in connection with the business of the Company
and its Subsidiaries, or the operation thereof, other than those listed on
Schedule 5.10, except for contracts or agreements (oral or written) which are
-------------
cancelable on no more than thirty (30) days' notice. There are no pending or,
to the knowledge of the Company, threatened condemnation or eminent domain
proceedings that would affect any part of the real property or the leased
property reflected on the Pro Forma Balance Sheet or used in connection with the
business of the Company and its Subsidiaries. There are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against the
real property or the leased property on the Pro Forma Balance Sheet or used in
connection with the business of the Company and its Subsidiaries, at law or in
equity, before any federal, state, municipal or governmental department,
commission, board, bureau, agency or instrumentality which would in any way
affect title to such real property or the leased property.
22
5.11 TAXES.
-----
(a) Each of the Company and its Subsidiaries has filed all Tax Returns
that it was required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by the Company or any of its Subsidiaries (whether
or not shown on any Tax Return) have been paid. Except as set forth on Schedule
--------
5.11, neither the Company nor any of its Subsidiaries currently is the
----
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by a Governmental Authority in a jurisdiction where the
Company or any of Subsidiaries does not file Tax Returns that the Company or any
of its Subsidiaries is or may be subject to taxation by that jurisdiction.
There are no Liens on any of the assets of the Company or any of its
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Tax.
(b) Each of the Company and its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.
(c) Neither the Company nor any of its Subsidiaries expects any
Governmental Authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any Tax
liability of the Company or any of its Subsidiaries either (i) claimed or raised
by any Governmental Authority in writing or (ii) as to which the Company has
knowledge based upon personal contact with any agent of such authority.
Schedule 5.11 lists all federal, state, local, and foreign income Tax Returns
-------------
filed with respect to any of the Company and its Subsidiaries for taxable
periods ended on or after December 31, 1995, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of an audit. The Company has delivered to the Purchaser correct and
complete copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by any of the Company
and its Subsidiaries since December 31, 1995.
(d) Neither the Company nor any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(e) Neither the Company nor any of its Subsidiaries has filed a
consent under Code (S) 341(f) concerning collapsible corporations. Neither the
Company nor any of its Subsidiaries has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Code
(S) 280G. Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Code (S)
897(c)(2) during the applicable period specified in Code (S) 897(c)(1)(A)(ii).
Each of the Company and its Subsidiaries has disclosed on
23
its federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement of federal income Tax within the meaning of Code
(S) 6621. Neither the Company nor any of its Subsidiaries is a party to any Tax
allocation or sharing agreement. Neither the Company nor any of its Subsidiaries
has been a member of an Affiliated Group filing a consolidated federal income
Tax Return other than a group consisting of the Company and its Subsidiaries.
(f) Schedule 5.11 sets forth the following information with respect to
-------------
each of the Company and its Subsidiaries (or, in the case of clause (ii) below,
with respect to each of the Subsidiaries) as of the most recent practicable date
(as well as on an estimated pro forma basis as of the Closing giving effect to
the consummation of the transactions contemplated hereby and by the other
Transaction Documents and the Acquisition Documents); (i) the basis of the
Company or Subsidiary in its assets, (ii) the basis of the stockholder(s) of the
Subsidiary in its stock (or the amount of any excess loss account); (iii) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to the
Company or Subsidiary; and (iv) the amount of any deferred gain or loss
allocable to the Company or Subsidiary arising out of any deferred intercompany
transaction.
(g) The unpaid Taxes of the Company and its Subsidiaries (i) did not,
as of April 30, 1998 month end, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the balance sheet for such
month end (rather than in any notes thereto) and (ii) do not exceed that reserve
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Company and its Subsidiaries in filing their
Tax Returns.
(h) Neither the Company nor any of its Subsidiaries has any liability
for the Taxes of any person or entity other than the Company and its
Subsidiaries (i) under Reg. (S) 1.1502-6 (or any similar provision of state,
local or foreign law), (ii) as a transferee or successor, (iii) by contract, or
(iv) otherwise.
(i) Each Affiliated Group has filed all income Tax Returns that it was
required to file for each taxable period during which any of the Company and its
Subsidiaries was a member of the group. All such Tax Returns were correct and
complete (i) in all respects insofar as they relate to any of the Company and
its Subsidiaries and (ii) in all material respects insofar as they do not relate
to the Company and its Subsidiaries. All material income Taxes owed by any
Affiliated Group (whether or not shown on any Tax Return) have been paid for
each taxable period during which any of the Company and its Subsidiaries was a
member of the group.
(j) Neither the Company nor any of its Subsidiaries expects any
Governmental Authority to assess any additional income Tax against any
Affiliated Group for any taxable period during which any of the Company and its
Subsidiaries was a member of the group. There is no dispute or claim concerning
any income Tax liability
24
of any Affiliated Group for any taxable period during which any of the Company
and its Subsidiaries was a member of the group either (i) claimed or raised by
any Governmental Authority in writing or (ii) as to which the Company has
knowledge based upon personal contact with any agent of such authority. Except
as disclosed on Schedule 5.11, no Affiliated Group has waived any statute of
-------------
limitations in respect of any income Taxes or agreed to any extension of time
with respect to an income Tax assessment or deficiency for any taxable period
during which any of the Company and its Subsidiaries was a member of the group.
5.12 FINANCIAL CONDITION.
-------------------
(a) The Company has furnished the Purchaser with true and complete
copies of (i) the audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1997, December 1, 1996 and December 31, 1995 and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows, together with the notes thereto, of the Company and
its Subsidiaries for the years then ended, together with the report of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP thereon (the "AUDITED FINANCIAL STATEMENTS") and (ii) the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of April 30,
1998 and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flow of the Company and its Subsidiaries for the four month
period ended April 30, 1998 (the "INTERIM FINANCIAL STATEMENTS"). The Audited
Financial Statements and the Interim Financial Statements fairly present, in all
material respects, the consolidated financial position of the Company and its
Subsidiaries as of the respective dates thereof, and the consolidated results of
operations and cash flows of the Company and its Subsidiaries as of the
respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied during the periods involved, except as
otherwise set forth in the notes thereto and subject, in the case of the Interim
Financial Statements, to normal year-end audit adjustments.
(b) The Company has furnished the Purchaser with true and complete
copies of (i) the audited balance sheet of Image Technologies Corporation
("ITC") as of December 31, 1997, and the related statements of operations,
stockholders' equity (deficit) and cash flows, together with the notes thereto,
of ITC for the year then ended, and for the period from inception (November 17,
1995) to December 31, 1997, together with the report of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
thereon (the "ITC AUDITED FINANCIAL STATEMENTS") and (ii) the unaudited balance
sheet of ITC as of April 30, 1998 and the related statements of operations,
stockholders' equity (deficit) and cash flow of ITC for the four months ended
April 30, 1998 (the "ITC INTERIM FINANCIAL STATEMENTS"). The ITC Audited
Financial Statements and the ITC Interim Financial Statements fairly present, in
all material respects, the financial position of ITC as of the respective dates
thereof, and the results of operations and cash flows of ITC as of the
respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied during the period involved, except as
otherwise set forth in the notes thereto and
25
subject, in the case of the ITC Interim Financial Statements, to normal year-end
audit adjustments.
(c) The Pro Forma Balance Sheet delivered to the Purchaser sets forth
the assets and liabilities of the Company and each of its Subsidiaries on a pro
forma consolidated basis after taking into account the consummation of the
transactions contemplated in this Agreement and by the other Transaction
Documents and the Acquisition Documents as of the Closing Date. The Pro Forma
Balance Sheet has been prepared in a manner that fairly presents in all material
respects the assets and liabilities of the Company and each Subsidiary and: (i)
in respect of information relating to periods ending on or prior to April 30,
1998, (x) in relation to the Company and Subsidiaries of the Company prior to
the consummation of the Acquisition, in accordance with GAAP and (y) in relation
to entities and assets acquired by the Company upon consummation of the
Acquisition, based upon an audited financial statement prepared by Coopers &
▇▇▇▇▇▇▇ in accordance with International GAAP; and (ii) in respect of
information relating to the period commencing May 1, 1998, (x) in relation to
the Company and Subsidiaries of the Company prior to the consummation of the
Acquisition, in accordance with the Company's normal accounting practices which
are, to the best of the Company's knowledge, consistent with GAAP, consistently
applied, and (y) in relation to entities and assets acquired by the Company upon
consummation of the Acquisition, in accordance with such entities' normal
accounting practices which are, to the best of the Company's knowledge,
consistent with International GAAP, consistently applied; provided, however,
-------- -------
that information in the Pro Forma Balance Sheet for the period commencing May 1,
1998 with respect to the business being acquired in the Acquisition represents
the best estimate by the Company of such information.
(d) The projections of the Company and its Subsidiaries on a
consolidated basis heretofore delivered to the Purchaser (i) were prepared by
the Company in the ordinary course of its operations consistent with past
practice, (ii) are the most current projections prepared by the Company relating
to the periods covered thereby, and (iii) are based on assumptions which were
reasonable when made and such assumptions and projections are reasonable on the
date hereof. Neither the Company nor any of its Subsidiaries have delivered to
any Person any later dated projections.
5.13 ERISA -- PROHIBITED TRANSACTIONS. The execution and delivery of
--------------------------------
the Transaction Documents and the Acquisition Documents, the purchase and sale
of the WSDF Note hereunder and the consummation of the transactions contemplated
hereby and thereby will not result in any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code.
5.14 DISCLOSURE.
----------
(a) Agreement and Other Documents. Neither (i) the Acquisition
-----------------------------
Agreements or (ii) the Transaction Documents contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
26
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading; provided however, that to the extent the
----------------
representation made by the Company in this Section 5.14(a) relates to statements
or omissions regarding the assets acquired pursuant to the Acquisition
Documents, it is made by the Company solely to the extent of its knowledge.
(b) Material Adverse Effects. Except as described in Schedule
------------------------ --------
5.14(b), there is no fact known to the Company, which the Company has not
disclosed to the Purchaser in writing which materially adversely affects or,
insofar as the Company can reasonably foresee, could materially adversely
affect, the Condition of the Company or the ability of the Company or any of its
Subsidiaries to perform its obligations under the Transaction Documents or the
Acquisition Documents, or any agreement or other document contemplated hereby or
thereby to which it is a party.
5.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997,
------------------------------------
except as set forth on Schedule 5.15 or as contemplated by this Agreement,
-------------
neither the Company nor any of its Subsidiaries has (i) issued any stock, bonds
or other corporate securities, (ii) borrowed any amount or incurred any
liabilities (absolute or contingent), other than in the ordinary course of
business, in excess of $10,000, (iii) discharged or satisfied any Lien or
incurred or paid any obligation or liability (absolute or contingent), other
than in the ordinary course of business, in excess of $10,000, (iv) declared or
made any payment or distribution to stockholders or purchased or redeemed any
shares of its capital stock or other securities, (v) mortgaged, pledged or
subjected to Lien any of its assets, tangible or intangible, other than in the
ordinary course of business consistent with past practice, (vi) sold, assigned
or transferred any of its tangible assets, or canceled any debts or claims,
other than in the ordinary course of business consistent with past practice
(vii) sold, assigned or transferred any patents, trademarks, trade names,
copyrights, trade secrets or other intangible assets, other than in the ordinary
course of business consistent with past practice, (viii) suffered any losses of
property or waived any rights of substantial value, (ix) suffered any material
adverse change in the Condition of the Company, (x) expended any material
amount, granted any bonuses or extraordinary salary increases, (xi) entered into
any transaction involving consideration in excess of $50,000 other than in the
ordinary course of its business and consistent with past practice or except as
otherwise contemplated hereby or (xii) entered into any agreement or
transaction, or amended or terminated any agreement, with an Affiliate.
5.16 ENVIRONMENTAL MATTERS. Except as described on Schedule 5.16:
--------------------- -------------
(a) The property, assets and operations of the Company and its
Subsidiaries are and have been in compliance with all applicable Environmental
Laws; there are no Hazardous Materials stored or otherwise located in, on or
under any of the property or assets of the Company or its Subsidiaries,
including, without limitation, the groundwater, except in compliance with
applicable Environmental Laws; and there have been no releases or threatened
releases of Hazardous Materials in, on or under any property adjoining any of
the property or assets of the Company or its Subsidiaries which
27
have not been remediated to the satisfaction of the appropriate Governmental
Authorities and in compliance with Environmental Laws.
(b) None of the property, assets or operations of the Company or its
Subsidiaries is the subject of any Federal, state, local or foreign
investigation evaluating whether (i) any remedial action is needed to respond to
a release or threatened release of any Hazardous Materials into the environment
or (ii) any release or threatened release of any Hazardous Materials into the
environment is in contravention of any Environmental Law.
(c) Neither the Company nor any of its Subsidiaries has received any
notice or claim, nor are there pending, threatened or reasonably anticipated,
lawsuits or proceedings against any of them, with respect to violations of an
Environmental Law or in connection with the presence of or exposure to any
Hazardous Materials in the environment or any release or threatened release of
any Hazardous Materials into the environment, and neither the Company nor its
Subsidiaries is or was the owner or operator of any property which (i) pursuant
to any Environmental Law has been placed on any list of Hazardous Materials
disposal sites, including, without limitation, the "National Priorities List" or
"CERCLIS List," (ii) has, or had, any subsurface storage tanks located thereon,
or (iii) has ever been used as or for a waste disposal facility, a mine, a
gasoline service station or, other than for petroleum substances stored in the
ordinary course of business, a petroleum products storage facility.
(d) Neither the Company nor any of its Subsidiaries has any present
or contingent liability in connection with the presence either on or off the
property or assets of the Company or its Subsidiaries of any Hazardous Materials
in the environment or any release or threatened release of any Hazardous
Materials into the environment.
5.17 INVESTMENT COMPANY/GOVERNMENT REGULATIONS. The Company is not an
-----------------------------------------
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. Neither the Company nor its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, as amended, the Federal
Power Act, the Interstate Commerce Act, or any federal or state statute or
regulation limiting its ability to incur Indebtedness.
5.18 SUBSIDIARIES.
------------
(a) Schedule 5.18 sets forth a complete and accurate list, after
-------------
giving effect to the transactions contemplated by the Acquisition Documents, of
all of the Subsidiaries of the Company together with their respective
jurisdictions of incorporation or organization. All of the outstanding shares
of capital stock of such Subsidiaries that are corporations are validly issued,
fully paid and nonassessable. Except as set forth on Schedule 5.18 or as
-------------
contemplated by the Transaction Documents, as of the Closing Date,
28
all of the outstanding shares of capital stock of, or other ownership interests
in, each of such Subsidiaries are owned by the Company or by a wholly owned
Subsidiary free and clear of any Liens. No Subsidiary has outstanding options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Subsidiary to issue, transfer or sell
any securities of the Subsidiary.
(b) Except for the Subsidiaries of the Company and as set forth on
Schedule 5.18, the Company does not own of record or beneficially, directly or
-------------
indirectly, (i) any shares of outstanding capital stock or securities
convertible into capital stock of any other corporation, and (ii) any equity,
voting or participating interest in any limited liability company, partnership,
joint venture or other noncorporate business enterprises.
5.19 Capitalization.
--------------
(a) As of the Closing Date, the authorized capital stock of the
Company consists of 30,000,000 shares of Common Stock, of which 9,828,210 shares
are issued and outstanding, and 3,000,000 shares of preferred stock, $.001 par
value per share (the "PREFERRED STOCK"), of which no shares were issued and
outstanding. The Company has no shares of capital stock held in treasury. As
of the Closing Date, after giving effect to the transactions contemplated hereby
and by the other Transaction Documents and the Acquisition Documents, there will
be: (i) no shares of issued and outstanding Preferred Stock; (ii) 10,503,210
shares of Common Stock issued and outstanding; (iii) an aggregate of 1,865,789
shares of Common Stock reserved for issuance pursuant to the exercise of stock
options issuable in accordance with the terms of the Company's 1994 Stock Option
Plan, 1996 Stock Option Plan, 1996 Stock Option Plan for Non-Employee Directors
and the 1998 Stock Incentive Plan and an aggregate of 1,320,002 shares of Common
Stock reserved for issuance pursuant to the exercise of stock options not issued
pursuant to a plan (collectively, the "OPTIONS"); (iv) 83,329 shares of Common
Stock reserved for issuance upon exercise of the stock purchase warrant issued
in February 1996 to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc. relating to the acquisition by the
Company of certain technology relating to the CardioSEAL Septal Occluder; (v)
28, 489 shares of Common Stock reserved for issuance upon exercise of the stock
purchase warrant transferred by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc. in June 1998 to ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇; (vi) 99,660 shares of Common Stock reserved for issuance upon
exercise of the stock purchase warrant issued in February 1996 to Junewicz &
Co., Inc.; (vii) 5,263 shares of Common Stock reserved for issuance upon
exercise of the stock purchase warrant issued in April 1996 to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
(together with the warrants described above in (iii), (iv) and (v), the
"WARRANTS"); and (viii) 84,973 shares (the "STOCK PLAN SHARES") of Common Stock
reserved for issuance in connection with the Company's Employee Stock Purchase
Plan (the "STOCK PLAN"). The Options, the Warrants, the Stock Plan Shares and
all outstanding shares of capital stock of the Company have been duly authorized
by all necessary corporate action. All outstanding shares of capital stock of
the Company are, and the shares of Common Stock issuable upon (i) exercise of
the Options and the Warrants and (ii) purchase under the Stock Plan, when
issued, will be,
29
validly issued, fully paid and nonassessable. Schedule 5.19(a) provides an
----------------
accurate list of all of the holders of warrants, options, rights and securities
convertible into Common Stock, together with the number of shares of Common
Stock to be issued upon the exercise or conversion of such warrants, options,
rights and convertible securities.
(b) On the Closing Date, except for the Warrants and the Options and
as set forth on Schedule 5.19(b), there will be no outstanding securities
----------------
convertible into or exchangeable for capital stock of the Company or options,
warrants or other rights to purchase or subscribe to capital stock of the
Company or contracts, commitments, agreements, understandings or arrangements of
any kind to which the Company is a party relating to the issuance of any capital
stock of the Company, any such convertible or exchangeable securities or any
such options, warrants or rights.
5.20 PRIVATE OFFERING. No form of general solicitation or general
----------------
advertising was used by the Company or any of its Subsidiaries, or their
respective representatives in connection with the offer or sale of the WSDF Note
and the Purchased Shares. No registration of the WSDF Note or the Shares
pursuant to the provisions of the Securities Act or the state securities or
"blue sky" laws will be required by the offer, sale or issuance of the WSDF Note
pursuant to this Agreement. The Company agrees that neither it, nor anyone
acting on its behalf, will offer or sell the WSDF Note or any other security so
as to require the registration of the WSDF Note pursuant to the provisions of
the Securities Act or any state securities or "blue sky" laws.
5.21 BROKER'S, FINDER'S OR SIMILAR FEES. Except as provided in
----------------------------------
Section 2.2 hereof, there are no brokerage commissions, finder's fees or similar
fees or commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Company or
any of its Subsidiaries, or any action taken by any such entity.
5.22 LABOR RELATIONS. Neither the Company nor any of its Subsidiaries
---------------
has committed or is engaged in any unfair labor practice. Except as set forth
in Schedule 5.22, there is (a) no unfair labor practice complaint pending or, to
-------------
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries before the National Labor Relations Board and no grievance or
arbitration proceeding arising out of or under collective bargaining agreements
is so pending or, to the knowledge of the Company, threatened, (b) no strike,
labor dispute, slowdown or stoppage pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, (c) no union
representation question existing with respect to the employees of the Company or
any of its Subsidiaries and, to the knowledge of the Company, no union
organizing activities are taking place, and (d) no employment contract with any
employee or independent contractor of the Company or any Subsidiary. The Company
and each Subsidiary is in compliance in all material respects with all federal,
state or other applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours. Neither the Company,
nor any of its Subsidiaries, is a party to any collective bargaining agreement.
30
5.23 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Employee Benefit Plans and Liabilities. Neither the Company nor
--------------------------------------
any ERISA Affiliate has contributed to nor has any actual or contingent, direct
or indirect, liability in respect of any employee benefit plan (as defined in
Section 3(3) of ERISA) or other employee benefit arrangement (collectively, the
"PLANS"), within the five-consecutive-year period immediately preceding the
first day of the year in which the Closing Date occurs other than those
liabilities with respect to such Plans specifically described on Schedule
--------
5.23(a). Schedule 5.23(a) sets forth all Plans. At no time during such five
------- ----------------
year period has the Company or any ERISA Affiliate participated in or
contributed to any Multiemployer Plan, nor during such period has the Company or
any ERISA Affiliate had an obligation to participate in or contribute to any
such Multiemployer Plan. No agreement subject to Section 4204 of ERISA has been
entered into in connection with the transactions contemplated in this Agreement.
There are no outstanding liabilities of the Company or any ERISA Affiliate to
any employee benefit plans previously maintained by the Company or any ERISA
Affiliate, and the Company is not aware of any potential liabilities in
connection therewith. There are no actions, suits or claims, other than for
benefits in the ordinary course, pending or, to the knowledge of the Company,
threatened against the Company or the Plans which might subject the Company to
any material liability. The Company has delivered to the Purchaser accurate and
complete copies of all of the Plans.
(b) Plan Compliance. The Company and each of its Subsidiaries is in
---------------
compliance in all material respects with all reporting, disclosure and
registration requirements applicable to it under the Code, ERISA and all federal
and state securities laws, and Department of Labor, Internal Revenue Service and
Commission rules and regulations promulgated thereunder, with respect to all of
the Plans, and is not subject to any liability, whether asserted or not, for any
penalties to any Governmental Authority for late filing, of any return, report
or other governmental filing. No civil or criminal action brought pursuant to
the provisions of Title 1, Subtitle B, Part 5 of ERISA or any other federal or
state law is pending or threatened against any fiduciary of the Plans. No Plan,
or any fiduciary thereof, has been, or is currently the direct or indirect
subject of an audit, investigation or examination by any Governmental Authority.
All of the Plans comply currently, and have complied in the past, both as to
form and operation, in all material respects, with their terms and with all
Requirements of Law. Each of the Plans maintained by the Company or any
Subsidiary that is an "employee benefit pension plan" (within the meaning of
Section 3(2)(A) of ERISA) has obtained a favorable determination (covering all
changes or amendments applicable under Requirements of Law) from the Internal
Revenue Service as to its qualification under Sections 401(a) and 501(a) of the
Code or is within the remedial amendment period (as provided in Section 401(b)
of the Code) for making any required changes or amendments, and nothing has
occurred before or after the date of each such determination letter that would
adversely affect such qualification. All amounts that are currently owing to
plan participants or contributions required to be made to the Plans (without
giving effect to the transactions contemplated by the Acquisition Documents)
31
have been timely paid or contributed with respect to all periods prior to the
Closing Date or provided for by adequate reserves on the Pro Forma Balance
Sheet.
(c) Prohibited Transaction. Except as set forth on Schedule 5.23(c),
---------------------- ----------------
no Plan, nor any related trust, nor the Company, nor any Subsidiary thereof, nor
any trustee, administrator or other "party in interest" or "disqualified person"
(within the meaning of Section 3(14) of ERISA or Section 4975(e)(2) of the Code,
respectively) with respect to the Plans, has engaged in any nonexempt
"prohibited transaction" (within the meaning of Section 406 of ERISA or Section
4975(c) of the Code, respectively) with respect to the participation of Company
or any of its Subsidiaries therein, which could subject any of the Plans or
related trusts, or any trustee, administrator or other fiduciary of any such
Plan, or the Company, any Subsidiary of the Company or the Purchaser, or any
other party dealing with the Plans, to the penalties or excise tax imposed on
prohibited transactions by Section 502 of ERISA or Section 4975 of the Code
which could have a material adverse effect on the Condition of the Company.
(d) COBRA. Except as set forth in Schedule 5.23(d), the Company and
----- ----------------
each of its Subsidiaries has complied with the continuation coverage
requirements of group health plans provided in Section 4980B of the Code,
Sections 601 et seq. of ERISA, the Family and Medical Leave Act of 1994, and the
regulations promulgated thereunder.
(e) Miscellaneous. Neither the Company, its Subsidiaries, nor any
-------------
Plan provides for or promises retiree medical, disability or life insurance
benefits to any current or former employees, officers or directors of the
Company or any of its Subsidiaries, other than continuation coverage required by
section 4980B of the Code. Neither the Company nor any of its Subsidiaries is a
party to or obligated under any agreement, plan, contract or other arrangements
that will result, separately or in the aggregate, in the payment of any "excess
parachute payment" within the meaning of section 280G of the Code.
5.24 PATENTS, TRADEMARKS, ETC.
-------------------------
(a) Except as set forth on Schedule 5.24(a), the Company or one of
----------------
its Subsidiaries owns or is licensed or otherwise has the right to use all
Intellectual Property necessary for the operation of its business as presently
conducted (including its business after giving effect to the transactions
contemplated by the Elekta Purchase Agreement).
(b) (i) Schedule 5.24(b)(i) sets forth all Patents, Copyrights and
-------------------
Trademarks owned by or issued to the Company or any Subsidiary, and all
applications relating to Patents, Copyrights and Trademarks filed by the Company
or any Subsidiary, specifying as to each item, as applicable: (A) the nature of
the item, including the title or description; (B) the owner of the item; (C) the
jurisdictions by or in which the item
32
is recognized without regard to registration, or in which the item has been
issued or registered, or in which an application for issuance or registration
has been filed, including the respective registration or application numbers;
(D) the registration or application number; (E) the issue date and expiration
date of the item; and (F) with respect to each Trademark, the class or classes
of goods or services on which such trademark is or is intended to be used.
(ii) Schedule 5.24(b)(ii) sets forth all material licenses,
--------------------
sublicenses, registered user agreements and other agreements or permissions ("IP
LICENSES") under which the Company or any Subsidiary is a licensee or otherwise
is authorized to use or practice any Intellectual Property.
(iii) Schedule 5.24(b)(iii) sets forth all IP Licenses under
---------------------
which the Company or any Subsidiary is a licensor or otherwise authorizes any
person to use or practice Intellectual Property.
(c) To the knowledge of the Company, all issued Patents and
registered Trademarks and Copyrights held by the Company or any Subsidiary are
valid and subsisting. The Company and its Subsidiaries have taken all necessary
and desirable action to maintain and protect each item of Intellectual Property
owned or used by the Company and its Subsidiaries.
(d) To the knowledge of the Company, no party is in breach or default
under any IP License in any material respect, nor does any condition exist which
with notice or lapse of time or both would constitute a material breach or
default or permit termination, modification or acceleration thereunder, and no
party has repudiated any provision thereof. Except as disclosed with respect to
the IP Licenses listed on Schedule 5.24(b)(ii), there are no material royalties,
--------------------
fees or other payments payable by the Company or any Subsidiary to any other
Person by reason of the ownership, use, license, sale or disposition of any
Intellectual Property.
(e) Except as set forth on Schedule 5.24(e), no litigation is pending
----------------
or, to the knowledge of the Company, threatened that challenges the validity,
enforceability, ownership or right to use, sell, license or dispose of any item
of Intellectual Property used (including after giving effect to the transactions
contemplated by the Elekta Purchase Agreement) by the Company or any Subsidiary,
and no such item of Intellectual Property is subject to any outstanding order,
ruling, judgment, decree, stipulation, charge or settlement agreement,
restricting in any manner the use or the licensing thereof by the Company or any
Subsidiary.
(f) To the knowledge of the Company, neither the Company nor any
Subsidiary has ever infringed upon the material intellectual property rights of
any third party, or received any claim, charge, complaint, demand or notice in
writing alleging any such infringement or other violation of the intellectual
property rights of any third party, or knows of any basis for any such claim.
To the knowledge of the
33
Company, the use of any Intellectual Property as a result of the operation of
the businesses as currently conducted or proposed to be conducted (including
after giving effect to the transactions contemplated by the Elekta Purchase
Agreement) will not infringe upon or otherwise violate the intellectual property
rights of any third party.
(g) To the knowledge of the Company, no third party is materially
infringing upon or otherwise materially violating rights of the Company or any
Subsidiary in the Intellectual Property.
(h) Except as set forth on Schedule 5.24(h), neither the Company nor
----------------
any Subsidiary has agreed to indemnify any person against any charge of
infringement or other violation, or granted any third party the right to bring
infringement or other enforcement actions, with respect to any Intellectual
Property owned or used by the Company or any Subsidiary. Except as set forth on
Schedule 5.24(h), the Company or one of its Subsidiaries has the exclusive right
----------------
to file, prosecute and maintain all applications and registrations with respect
to the Intellectual Property owned or used by the Company or any Subsidiary.
(i) To the knowledge of the Company, no current or former employee of
the Company or any Subsidiary is in violation of any Requirement of Law
applicable to such employee, or any term of any employment agreement, patent or
invention disclosure agreement, or other agreement with the Company or such
Subsidiary concerning Intellectual Property. No former employer of any Company
or Subsidiary employee, or current or former employer of any Company or
Subsidiary consultant, has made a claim against the Company or any Subsidiary,
or, to the knowledge of the Company, against any other person, that such
employee or such consultant is utilizing proprietary information of such
employer.
5.25 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on Schedule
------------------------------- --------
5.25, no officer or director of the Company or any of its Subsidiaries (other
----
than a director of the Company who is a representative of Whitney or any
investment fund affiliate of Whitney): (a) owns, directly or indirectly, any
interest in (excepting less than 5% stock holdings for investment purposes in
securities of publicly held and traded companies), or is an officer, director,
employee or consultant of, any Person that is, or is engaged in business as, a
competitor, lessor, lessee, supplier, distributor, sales agent or customer of,
or lender to or borrower from, the Company or any of its Subsidiaries; (b) owns,
directly or indirectly, in whole or in part, any tangible or intangible property
that the Company or any of its Subsidiaries uses in the conduct of business; or
(c) has any cause of action or other claim whatsoever against, or owes or has
advanced any amount to, the Company or any of its Subsidiaries, except for
claims in the ordinary course of business such as for accrued vacation pay,
accrued benefits under employee benefit plans, and similar matters and
agreements existing on the date hereof; provided however, that to the extent the
----------------
representation made by the Company in this Section 5.25 relates to Subsidiaries
to be acquired pursuant to the Acquisition Documents, it is made by the Company
solely to the extent of its knowledge.
34
5.26 TRADE RELATIONS. Set forth on Schedule 5.26 is a true and
--------------- -------------
correct list of the twenty largest customers of the Company and its Subsidiaries
taken as a whole in terms of sales during the twelve-month period ended December
31, 1997 and the five-month period ended May 31, 1998, and any other customers
who accounted for more than 3% of such sales, and a list of the five largest
suppliers to the Company and its Subsidiaries taken as a whole in terms of
purchases during the twelve-month period ended December 31, 1997 and the five-
month period ended May 31, 1998, as well as any sole source suppliers of goods
or services for which there is no ready alternative to the Company and its
Subsidiaries on comparable terms. There exists no actual or, to the knowledge
of the Company, threatened termination, cancellation or limitation of, or any
adverse modification or change in, the business relationship of the Company, its
Subsidiaries or their business with any customer or any group of customers whose
purchases are individually or in the aggregate material to the business of the
Company or any such Subsidiary, or with any material supplier, and there exists
no present condition or state of facts or circumstances that would materially
adversely affect the Condition of the Company or prevent the Company or its
Subsidiaries from conducting their business after the consummation of the
transactions contemplated by the Transaction Documents and the Acquisition
Documents, in substantially the same manner in which such business has
heretofore been conducted.
5.27 OUTSTANDING BORROWINGS. Schedule 5.27 lists (i) the amount of
---------------------- -------------
all Outstanding Borrowings of the Company and its Subsidiaries (other than
Indebtedness under this Agreement) as of the closing of the transactions
contemplated hereby and by the Acquisition Documents, (ii) the Liens that relate
to such Outstanding Borrowings and that encumber the assets of the Company and
its Subsidiaries, (iii) the name of each lender thereof, and (iv) the amount of
any unfunded commitments available to the Company in connection with any
Outstanding Borrowings; provided however, that to the extent the representation
----------------
made by the Company in Section 5.27(ii) relates to Liens relating to Outstanding
Borrowings of Subsidiaries to be acquired pursuant to the Acquisition Documents,
it is made by the Company solely to the extent of its knowledge.
5.28 MATERIAL CONTRACTS. Neither the Company nor any Subsidiary is a
------------------
party to any Contractual Obligation, or is subject to any charge, corporate
restriction, judgment, injunction, decree, or Requirement of Law, materially
adversely affecting the Condition of the Company. Schedule 5.28 lists all
-------------
contracts, agreements and commitments of the Company and its Subsidiaries as of
the Closing Date, whether written or oral, other than (a) the Transaction
Documents and the Acquisition Documents, (b) purchase orders in the ordinary
course of business, and (c) any other contracts, agreements and commitments of
the Company that do not extend beyond one year and involve the receipt or
payment of not more than $25,000. Each of the contracts, agreements and
commitments of the Company set forth on Schedule 5.28 is in full force and
-------------
effect.
5.29 INSURANCE. Schedule 5.29 accurately summarizes all of the
--------- -------------
insurance policies or programs of the Company and each Subsidiary in effect as
of the
35
date hereof, and indicates the insurer's name, policy number, expiration
date, amount of coverage, type of coverage, annual premiums, exclusions and
deductibles, and also indicates any self-insurance program that is in effect.
All such policies are in full force and effect, are underwritten by financially
sound and reputable insurers, are sufficient for all applicable Requirements of
Law and otherwise are in compliance with the criteria set forth in Section 8.7
hereof. All such policies will remain in full force and effect and will not in
any way be affected by, or terminate or lapse by reason of any of the
transactions contemplated by the Transaction Documents or the Acquisition
Documents.
5.30 PRODUCTS LIABILITY. Except as set forth on Schedule 5.30, there
------------------ -------------
is no action, suit, proceeding or, to the knowledge of the Company, inquiry or
investigation pending, by or before any Governmental Authority against the
Company or any of its Subsidiaries relating to any product alleged to have been
sold by the Company or any of its Subsidiaries and alleged to have been
defective, or improperly designed or manufactured, nor to the knowledge of the
Company is there any valid basis for any such action, proceeding or
investigation; provided however, that to the extent the representation made by
----------------
the Company in this Section 5.30 relates to Subsidiaries to be acquired pursuant
to the Acquisition Documents, it is made by the Company solely to the extent of
its knowledge.
5.31 SOLVENCY. On and as of the Closing Date, after giving effect to
--------
the transactions contemplated by the Transaction Documents and the Acquisition
Documents, the Company and its Subsidiaries, taken as a whole, will be Solvent.
5.32 YEAR 2000 SYSTEMS. Except as set forth in Schedule 5.32 and
----------------- -------------
except with respect to any assets acquired under the Elekta Purchase Agreement,
to the Company's knowledge, the Company's computer systems and software are able
to process accurately date data, including, without limitation, calculating,
comparing and sequencing from, into and between the twentieth century (through
year 1999), in the year 2000 and the twenty-first century, including, without
limitation leap year calculations.
5.33 ELEKTA PURCHASE AGREEMENT. The copy of the Elekta Purchase
-------------------------
Agreement provided by the Company to the Purchaser (a) is a true and correct
copy thereof, (b) has not been amended or modified since May 8, 1998 and (c) is
in full force and effect and will be in full force and effect as of the Closing
Date. On the Closing Date, each of the representations and warranties made by
the Company and, to the knowledge of the Company, Elekta in the Elekta Purchase
Agreement is true and correct in all material respects. All consents, approvals
and authorizations of, and filings, registrations and qualifications with, any
Governmental Authority on the part of the Company and, to the knowledge of the
Company, Elekta required in connection with the consummation of the Acquisition
have been obtained or made and remain in full force and effect.
5.34 COMMISSION DOCUMENTS. The Company has filed all registration
--------------------
statements, proxy statements, reports and other documents required to be filed
by it
36
under the Securities Act and the Exchange Act, and all amendments thereto
(collectively, the "COMMISSION DOCUMENTS"), and the Company has furnished or
made available to the Purchaser correct and complete copies of all Commission
Documents, each as filed with the Commission. Each Commission Document was true
and accurate in all material respects and did not omit to state a material fact
necessary to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading when filed with the
Commission and in compliance in all material respects with the requirements of
its respective report form.
The representations and warranties made by the Company in Sections
5.9, 5.10, 5.18 and 5.24 with respect to the assets being acquired by the
Company simultaneously herewith pursuant to the Elekta Purchase Agreement are
made solely to the extent and in reliance upon the representations and
warranties made by Elekta to the Company in the Elekta Purchase Agreement.
The representations and warranties made by the Company in the first
sentence of Section 5.6 and in Sections 5.7, 5.8, 5.11, 5.13, 5.15, 5.16, 5.22,
5.23, 5.26, 5.28 and 5.29 shall be made by the Company prior to giving effect to
the consummation of the transactions contemplated by the Acquisition Documents.
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASER AND WHITNEY
---------------------------------------
Each of the Purchaser and Whitney, severally and not jointly, hereby
represents and warrants as follows:
6.1 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and
-------------------------------
performance by it of this Agreement: (a) is within its power and authority and
has been duly authorized by all necessary action; (b) does not contravene the
terms of its organizational documents or any amendment thereof, and (c) will not
violate, conflict with or result in any breach or contravention of any of its
Contractual Obligations, or any order or decree directly relating to it.
6.2 BINDING EFFECT. This Agreement has been duly executed and
--------------
delivered by it and this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
6.3 NO LEGAL BAR. The execution, delivery and performance of this
------------
Agreement by it will not violate any Requirement of Law applicable to it.
37
6.4 PURCHASE FOR OWN ACCOUNT. The WSDF Note and/or the Shares to be
------------------------
acquired by it pursuant to this Agreement are being or will be acquired for its
own account and with no intention of distributing or reselling such security or
any part thereof in any transaction that would be in violation of the securities
laws of the United States of America, or any state, without prejudice, however,
to its right at all times to sell or otherwise dispose of all or any part of the
WSDF Note or the Shares under an effective registration statement under the
Securities Act, or under an exemption from such registration available under the
Securities Act, and subject, nevertheless, to the disposition of its property
being at all times within its control. If it should in the future decide to
dispose of all or any portion of the WSDF Note or the Shares, it understands and
agrees that it may do so only in compliance with the Securities Act and
applicable state securities laws, as then in effect. It agrees to the
imprinting of a legend on certificates representing the WSDF Note and the Shares
to the following effect: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."
6.5 BROKER'S, FINDER'S OR SIMILAR FEES. Except as set forth in
----------------------------------
Section 2.2 hereof, there are no brokerage commissions, finder's fees or similar
fees or commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with it or any
action taken by it.
6.6 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT. No approval,
-----------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person in respect of any
Requirement of Law, and no lapse of a waiting period under a Requirement of Law,
is necessary or required in connection with the execution, delivery or
performance by it or enforcement against it of this Agreement or the
transactions contemplated hereby.
ARTICLE 7
INDEMNIFICATION
---------------
7.1 INDEMNIFICATION. In addition to all other sums due hereunder or
---------------
provided for in this Agreement, the Company agrees to indemnify and hold
harmless the Purchaser and its Affiliates and each of their respective officers,
directors, agents, employees, subsidiaries, partners, attorneys, accountants and
controlling persons (each, an "INDEMNIFIED PARTY") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including, without limitation, reasonable fees, disbursements and other charges
of counsel incurred by an Indemnified Party in any
38
action or proceeding between the Company and such Indemnified Party (or
Indemnified Parties) or between an Indemnified Party (or Indemnified Parties)
and any third party or otherwise) or other liabilities, losses, or diminution in
value (collectively, "LIABILITIES") resulting from or arising out of any breach
of any representation or warranty, covenant or agreement of the Company in this
Agreement, the Note or the other Transaction Documents, including without
limitation, the failure to make payment when due of amounts owing pursuant to
this Agreement, the Note or the other Transaction Documents, on the due date
thereof (whether at the scheduled maturity, by acceleration or otherwise) or any
legal, administrative or other actions (including, without limitation, actions
brought by the Purchaser, the Company, any of its Subsidiaries or any equity
holders of the Company or any of its Subsidiaries or derivative actions brought
by any Person claiming through or in the Company's or any Subsidiary's name),
proceedings or investigations (whether formal or informal), or written threats
thereof, based upon, relating to or arising out of the Transaction Documents,
the transactions contemplated thereby, or any Indemnified Party's role therein
or in the transactions contemplated thereby; provided, however, that the Company
-------- -------
shall not be liable under this Section 7.1 to an Indemnified Party: (a) for any
amount paid by the Indemnified Party in settlement of claims by the Indemnified
Party without the Company's consent (which consent shall not be unreasonably
withheld), (b) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from the willful misconduct or gross negligence
of such Indemnified Party or (c) to the extent that it is finally judicially
determined that such Liabilities resulted primarily from the breach by such
Indemnified Party of any representation, warranty, covenant or other agreement
of such Indemnified Party contained in this Agreement; provided, further, that
-------- -------
if and to the extent that such indemnification is unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of such Liabilities which shall be permissible under applicable laws. In
connection with the obligation of the Company to indemnify for reasonable
expenses as set forth above, the Company further agrees, upon presentation of
appropriate invoices containing reasonable detail, to reimburse each Indemnified
Party for all such expenses (including, without limitation, reasonable fees,
disbursements and other charges of counsel incurred by an Indemnified Party in
any action or proceeding between the Company and such Indemnified Party (or
Indemnified Parties) or between an Indemnified Party (or Indemnified Parties)
and any third party or otherwise) as they are incurred by such Indemnified
Party; provided, however, that if an Indemnified Party is reimbursed hereunder
-------- -------
for any expenses, such reimbursement of expenses shall be refunded to the extent
it is finally judicially determined that the Liabilities in question resulted
primarily from (i) the willful misconduct or gross negligence of such
Indemnified Party or (ii) the breach by such Indemnified Party of any
representation, warranty, covenant or other agreement of such Indemnified Party
contained in this Agreement or any other Transaction Document.
7.2 PROCEDURE; NOTIFICATION. Each Indemnified Party under this
-----------------------
Article 7 will, promptly after the receipt of notice of the commencement of any
action, investigation, claim or other proceeding against such Indemnified Party
in respect of which indemnity may be sought from the Company under this Article
7, notify the
39
Company in writing of the commencement thereof. The omission of any Indemnified
Party so to notify the Company of any such action shall not relieve the Company
from any liability which it may have to such Indemnified Party unless, and only
to the extent that, such omission results in the Company's forfeiture of
substantive rights or defenses. In case any such action, claim or other
proceeding shall be brought against any Indemnified Party, and it shall notify
the Company of the commencement thereof, the Company shall be entitled to assume
the defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party, in its reasonable judgment; provided, however, that any
-------- -------
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action, claim
or proceeding in which the Company, on the one hand, and an Indemnified Party,
on the other hand, is, or is reasonably likely to become, a party, such
Indemnified Party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action, claim or
proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a
conflict or potential conflict exists between the Company, on the one hand, and
such Indemnified Party, on the other hand, that would make such separate
representation advisable; provided, however, that in no event shall the Company
-------- -------
be required to pay fees and expenses under this Article 7 for more than one firm
of attorneys in any jurisdiction in any one legal action or group of related
legal actions. The Company agrees that it will not, without the prior written
consent of the Purchaser, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated hereby (if any Indemnified Party is a party thereto or
has been actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of the Purchaser and
each other Indemnified Party from all liability arising or that may arise out of
such claim, action or proceeding. The Company shall not be liable for any
settlement of any claim, action or proceeding effected against an Indemnified
Party without its written consent, which consent shall not be unreasonably
withheld. The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
ARTICLE 8
AFFIRMATIVE COVENANTS
---------------------
Until the payment by the Company of all principal of and interest on
the Note and all other amounts due to the Purchaser under this Agreement and the
other Transaction Documents, including, without limitation, all fees, expenses
and amounts due in respect of indemnity obligations under Article 7, the Company
hereby covenants and agrees with the Purchaser as follows:
40
8.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall
------------------------------------------
maintain, and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP (it being
understood that monthly financial statements are not required to have footnote
disclosures). The Company shall deliver to the Purchaser each of the financial
statements and other reports described below:
(a) Monthly and Quarterly Financial. As soon as available and in any
-------------------------------
event within thirty (30) days after the end of each month, the Company shall
deliver (i) the consolidated balance sheet of the Company and its Subsidiaries,
as at the end of such month and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flow for such month and for
the period from the beginning of the then current fiscal year of the Company to
the end of such month (and, with respect to financial statements delivered for
months that are also the last month of any fiscal quarter, accompanied by the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flow for such fiscal quarter) and a schedule of the outstanding
Indebtedness for borrowed money of the Company and its Subsidiaries describing
in reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such debt
issue or loan. As soon as available and in any event within forty-five (45)
days after the end of each month that is also the last month of any fiscal
quarter, the Company shall deliver the consolidated balance sheet of the Company
and its Subsidiaries, as at the end of such fiscal quarter and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flow for such fiscal quarter and for the period from the beginning of the then
current fiscal year of the Company to the end of such fiscal quarter, in each
case presenting data for each business unit of the Company and its Subsidiaries.
(b) Year-End Financial. As soon as available and in any event within
------------------
ninety (90) days after the end of the fiscal year of the Company, the Company
shall deliver (i) the consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flow for such fiscal
year, (ii) a schedule of the outstanding Indebtedness for borrowed money of the
Company and its Subsidiaries describing in reasonable detail each such debt
issue or loan outstanding and the principal amount and amount of accrued and
unpaid interest with respect to each such debt issue or loan, and (iii) a report
with respect to the financial statements from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or another
"Big Six" firm of certified public accountants selected by the Company and
reasonably acceptable to the Purchaser, which report shall be prepared in
accordance with Statement of Auditing Standards No. 58 entitled "Reports on
Audited Financial Statements" and such report shall be "Unqualified" (as such
term is defined in such Statement). Together with each delivery of financial
statements of the Company and its Subsidiaries pursuant to this subsection
8.1(b), the Company shall deliver to the Purchaser a copy of a letter from the
Company to such accounting firm, which letter shall have been delivered to such
accounting firm prior to its delivery of such financial
41
statements, stating that an intent of the Company in engaging the accounting
firm's professional services to prepare the audit report relating to such
financial statements was to benefit and influence the Purchaser and their
successors or assigns. Such letter shall state that the Purchaser intends to
rely on the audit report and the accounting firm's professional services
provided to the Company and its Subsidiaries.
(c) Company's Compliance Certificate. Together with each delivery of
--------------------------------
financial statements of the Company and its Subsidiaries pursuant to Sections
8.1(a) and 8.1(b) above, the Company shall deliver or cause to be delivered a
fully and properly completed compliance certificate (in substantially the form
attached hereto as Exhibit G (or in such other form or substance as shall be
---------
satisfactory to Purchaser) and referred to as a "COMPLIANCE CERTIFICATE") signed
by the chief executive officer or chief financial officer of the Company. The
Company and the Purchaser acknowledge and agree that calculations of covenant
compliance, with respect to the financial covenants contained in Section 9.8
hereof and contained in any such compliance certificate delivered for a month
that is not the last month of a calendar quarter, will be for informational
purposes only and shall not measure compliance (or lack of compliance) with such
financial covenants.
(d) Accountants' Reports. Promptly upon receipt thereof, the Company
--------------------
shall deliver copies of all significant reports submitted by the Company's firm
of certified public accountants in connection with each annual, interim or
special audit or review of any type of the financial statements or related
internal control systems of the Company and its Subsidiaries made by such
accountants, including any comment letter submitted by such accountants to
management in connection with their services.
(e) Management Reports. Together with each delivery of financial
------------------
statements of the Company and its Subsidiaries pursuant to subsections 8.1(a)
and 8.1(b), the Company will deliver a management report (i) describing the
operations and financial condition of the Company and its Subsidiaries for the
month then ended and the portion of the current fiscal year then elapsed (or for
the fiscal year then ended in the case of year-end financial), (ii) setting
forth in comparative form the corresponding figures for the corresponding
periods of the previous fiscal year and the corresponding figures from the most
recent projections for the current fiscal year delivered pursuant to subsection
8.1(f) and (iii) discussing the reasons for any significant variations. The
information above shall be presented in reasonable detail and shall be certified
by the chief financial officer of the Company to the effect that such
information fairly presents the results of operations and financial condition of
the Company and its Subsidiaries as at the dates and for the periods indicated.
In addition to the foregoing management report, the chief financial officer of
the Company shall discuss with the Purchaser on a monthly basis, either in
person or by telephone conference call, the Company's operations and financial
condition for each of the first six months following the Closing Date.
42
(f) Projections/Plan of Operation. As soon as available and in any
-----------------------------
event no later than the last day of the Company's fiscal year, the Company shall
deliver projections of the Company and its Subsidiaries for the forthcoming
fiscal year, prepared on a month by month basis. As soon as available and in
any event within thirty (30) days after the end of the fiscal year of the
Company, the Company shall deliver a plan of operation covering the current and
succeeding fiscal year of the Company, in form and substance reasonably
satisfactory to the Purchaser.
(g) Commission Filings and Press Releases. Promptly upon their
-------------------------------------
becoming available, the Company shall deliver copies of (i) all financial
statements, reports, notices and proxy statements sent or made available by the
Company or any of its Subsidiaries to their security holders, (ii) all regular
and periodic reports and all registration statements and prospectuses, if any,
filed by the Company or any of its Subsidiaries with any securities exchange or
with the Commission or any governmental or private regulatory authority, and
(iii) all press releases and other statements made available by the Company or
any of its Subsidiaries to the public concerning material developments in the
business of the Company or any of its Subsidiaries.
(h) Events of Default, Etc. Promptly upon the Company obtaining
----------------------
knowledge of any of the following events or conditions, the Company shall
deliver copies of all notices given or received by the Company or any of its
Subsidiaries with respect to any such event or condition and a certificate of
the Company's chief executive officer specifying the nature and period of
existence of such event or condition and what action the Company has taken, is
taking and proposes to take with respect thereto: (i) any condition or event
that constitutes an Event of Default; (ii) any notice that any Person has given
to the Company or any of its Subsidiaries or any other action taken with respect
to a claimed default or event or condition in any other agreement to which the
Company or any of its Subsidiaries is a party; or (iii) any event or condition
that could reasonably be expected to result in any material adverse effect on
the Condition of the Company.
(i) Litigation. Promptly upon any officer of the Company obtaining
----------
knowledge of (i) the institution of any material action, suit, proceeding,
governmental investigation or arbitration against or affecting the Company or
any of its Subsidiaries or any property of the Company or any of its
Subsidiaries not previously disclosed by the Company to the Purchaser or (ii)
any material development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or affecting the
Company or any of its Subsidiaries or any property of the Company or any of its
Subsidiaries which, in each case, is reasonably possible to have a material
adverse effect on the Condition of the Company, the Company will promptly give
notice thereof to the Purchaser and provide such other information as may be
reasonably available to them to enable the Purchaser and its counsel to evaluate
such matter.
43
(j) Subsidiaries. Not less than fifteen (15) days prior to creating
------------
a Subsidiary or acquiring the stock of a Person, such that such Person will
become a Subsidiary, the Company shall notify the Purchaser of the Company's or
any of its Subsidiary's intention to create such Subsidiary or acquire such
stock, and following such notice, such Subsidiary will not be created or
acquired until the Company has caused each Subsidiary, to execute a joinder to
the appropriate Security Documents in form and substance satisfactory to the
Purchaser. For purposes of clarification, (I) each newly created or acquired
domestic Subsidiary shall execute and deliver to the Purchaser (a) the Guarantee
and Collateral Agreement, together with all other items customarily delivered in
connection with such a security agreement, (b) an opinion of counsel to the
Company and such Subsidiary addressed to the Purchaser, in form and substance
reasonably satisfactory to the Purchaser, as to such matters as the Purchaser
may reasonably require, including, without limitation, the creation and
perfection of the Purchaser's security interests, and (c) such other approvals,
opinions or documents as the Purchaser may reasonably request; and (II) each
newly created or acquired first tier foreign Subsidiary of the Company or any of
its domestic Subsidiaries, shall execute and deliver (x) the Guarantee and
Collateral Agreement pledging 100% of the stock of each such domestic Subsidiary
and 65% of the stock of the first tier foreign Subsidiary, (y) an opinion of
counsel to the Company, addressed to the Purchaser, in form and substance
reasonably satisfactory to the Purchaser, as to such matters as the Purchaser
may reasonably require, including, without limitation, the creation and
perfection of the Purchaser's security interests, and (z) such other approvals,
opinions or documents as the Purchaser may reasonably request.
(k) Supplemental Schedules; Notices of Corporate Changes. Annually,
----------------------------------------------------
concurrently with the delivery of the projections required by subsection 8.1(f),
the Company shall supplement in writing and deliver to the Purchaser revisions
of the Schedules annexed to this Agreement to the extent necessary to disclose
new or changed facts or circumstances after the Closing Date; provided that
--------
subsequent disclosures shall not constitute a cure or waiver of any Event of
Default resulting from the matters disclosed. The Company shall provide prompt
written notice to the Purchaser of (i) all jurisdictions in which the Company or
any of its Subsidiaries becomes qualified after the Closing Date to transact
business, and (ii) any material change after the Closing Date in the authorized
and issued capital stock or other equity interests of the Company or any of its
Subsidiaries or any other material amendment to their charter, by-laws or other
organization documents, such notice, in each case, to identify the applicable
jurisdictions or capital structures, as applicable.
(l) Other Information. With reasonable promptness, the Company shall
-----------------
deliver such other information and data with respect to the Company or any of
its Subsidiaries as from time to time may be reasonably required by the
Purchaser.
8.2 PRESERVATION OF CORPORATE EXISTENCE. The Company shall, and
-----------------------------------
shall cause each of its Subsidiaries to:
44
(a) preserve and maintain in full force and effect its corporate
existence;
(b) conduct its business in accordance with sound business practices,
keep its properties in good working order and condition (normal wear and tear
excepted), and from time to time make all needed repairs to, renewals of or
replacements of its properties (except to the extent that any of such properties
are obsolete or are being replaced) so that the efficiency of its business
operations shall be fully maintained and preserved; and
(c) file or cause to be filed in a timely manner all reports,
applications, estimates and licenses that shall be required by a Governmental
Authority.
8.3 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause each
----------------------
of its Subsidiaries to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including without
limitation:
(a) all Tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which the Company and each of its Subsidiaries
is obligated to pay, which are due and which, if unpaid, might by law become a
Lien upon its property, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Company or such Subsidiary; and
(c) all payments of principal, interest and other amounts when
due on Indebtedness.
8.4 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause
--------------------
each of its Subsidiaries to comply, in all material respects with all
Requirements of Law and with the directions of any Governmental Authority having
jurisdiction over them or their business or property (including all applicable
Environmental Laws).
8.5 INSPECTION. The Company will permit, and will cause each of its
----------
Subsidiaries to permit, representatives of the Purchaser to visit and inspect
any of their properties, to examine their corporate, financial and operating
records and make copies thereof or abstracts therefrom, and to discuss their
affairs, finances and accounts with their respective directors, officers and
independent public accountants, all at such reasonable times during normal
business hours and as often as may be reasonably requested, upon reasonable
advance notice.
45
8.6 PAYMENT OF NOTE. The Company shall pay the principal of,
---------------
interest on and other amounts due in respect of, the Note on the dates and in
the manner provided in the Note.
8.7 INSURANCE. The Company and its Subsidiaries will maintain or
---------
cause to be maintained with financially sound and reputable insurers that have a
rating of "A" or better as established by Best's Rating Guide (or an equivalent
rating with such other publication of a similar nature as shall be in current
use), public liability and property damage insurance with respect to their
respective businesses and properties against loss or damage of the kinds
customarily carried or maintained by companies of established reputation engaged
in similar businesses and in amounts acceptable to Purchaser and will deliver
evidence thereof to Purchaser.
8.8 BOOKS AND RECORDS. The Company shall, and shall cause each of
-----------------
its Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Company and each of its Subsidiaries in accordance with GAAP
consistently applied to the Company and its Subsidiaries taken as a whole.
8.9 USE OF PROCEEDS. The Company shall use the proceeds of the sale
---------------
of the Note and the Shares hereunder only as follows: (i) for the payment of
fees and expenses in connection with the transactions contemplated hereunder and
in the other Transaction Documents and (ii) to fund the payment of the purchase
price of the Acquisition under the Elekta Purchase Agreement.
8.10 INITIAL INTEREST PAYMENTS. Notwithstanding anything to the
-------------------------
contrary contained herein or in the Note, the Company agrees that the Purchaser
shall deduct $1,475,868.33 from the amount to be paid pursuant to Section 2.1
for the WDSF Note. Such amount shall be retained by the Purchaser and applied as
follows in full satisfaction of the first four interest payments (but
specifically excluding any additional interest accruing under the Note upon and
during the occurrence of an Event of Default) otherwise due and owing under the
Note:
Interest Payment Date Amount
----------------------- -----------
September 30, 1998 $ 465,768.33
December 31, 1998 $ 505,050
March 31, 1999 $ 505,050
The Purchaser agrees to deposit the amount deducted and retained under
this Section 8.10 into an interest bearing account (at the discretion of the
Purchaser) and to pay to the Company all interest received on such deposit on a
quarterly basis.
46
ARTICLE 9
NEGATIVE COVENANTS
------------------
Until the payment by the Company of all principal of and interest on
the Note and all other amounts due at the time of payment of such principal and
interest to the Purchaser under this Agreement and the other Transaction
Documents, including, without limitation, all fees, expenses and amounts due at
such time in respect of indemnity obligations under Article 7, the Company
hereby covenants and agrees with the Purchasers as follows:
9.1 FUNDAMENTAL CHANGES; CONSOLIDATIONS, MERGERS AND ACQUISITIONS.
-------------------------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries directly or
indirectly to: (a) amend, modify or waive any term or provision of its
certificate of incorporation, by-laws or other organization or governing
agreements and documents, unless required by law; (b) enter into any transaction
of merger or consolidation; (c) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution); or (d) except pursuant to the exercise by the
Company of its option to purchase the portion of ITC it does not already own,
acquire by purchase or otherwise all or any substantial part of the business
assets of any other Person.
9.2 TRANSACTIONS WITH AFFILIATES. Except in the ordinary course of
----------------------------
business and consistent with past practices or as set forth on Schedule 9.2, the
------------
Company shall not, and shall not permit any of its Subsidiaries to, (a) enter
into any transaction or agreement with, or make any payment (other than pursuant
to agreements existing on the date hereof or subsequently approved by the
Purchaser) to, any Affiliate, (b) amend or terminate any existing agreement with
any Affiliate, (c) purchase from or provide to an Affiliate any selling,
general, management or administrative services, (d) directly or indirectly make
any sales to or purchases from an Affiliate, or (e) increase the compensation
being paid to an Affiliate.
9.3 NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its
--------------------------
Subsidiaries shall enter into any Contractual Obligation or enter into any
amendment or other modification to any currently existing Contractual Obligation
of the Company or any of their Subsidiaries, which by its terms restricts or
prohibits the ability of the Company to pay the principal of or interest on the
Note or to fully satisfy all of the obligations under the Transaction Documents
of the Company or its Subsidiaries.
9.4 LIMITATION ON INDEBTEDNESS. The Company shall not, and shall not
--------------------------
cause, suffer or permit any of its Subsidiaries to, directly or indirectly,
collectively and in the aggregate, issue, assume or otherwise incur any
Indebtedness, other than:
(a) Indebtedness created under the Transaction Documents;
47
(b) (i) at such time as the financial covenants contained in Sections
9.8(e) and (f) are no longer applicable (and so long as, on a pro forma basis
after giving effect to the incurrence of any Indebtedness proposed to be
incurred under this Section 9.4(b)(i), the Company would be in compliance with
the covenants contained in Sections 9.8(e) and (f)), Indebtedness, including
without limitation Capital Lease Obligations, up to an aggregate outstanding
amount of $10,000,000 (including any Indebtedness previously incurred under (ii)
below), and (ii) prior to such time as the Company may incur Indebtedness under
Section 9.4(b)(i), Indebtedness, including without limitation Capital Lease
Obligations, up to an aggregate outstanding principal amount of $3,500,000, in
either case inclusive of Indebtedness listed on Schedule 5.27;
-------------
(c) Non-current liabilities for post-employment healthcare and
other insurance benefits;
(d) Trade payables and accrued expenses, in each case arising in
the ordinary course of business;
(e) Indebtedness secured by a Lien permitted under Section 9.5(e);
(f) Indebtedness between and/or among the Company and its
Subsidiaries; provided that the obligations of such Indebtedness shall:
--------
(i) be subordinated in right of payment to all Indebtedness
under the Note and this Agreement from and after such time as any portion
of the Indebtedness under the Note and this Agreement shall become due and
payable (whether at stated maturity, by acceleration or otherwise); and
(ii) have such other terms and provisions as the Purchaser may
reasonably require;
(g) Refinancings, refundings or extensions of the foregoing;
provided, that any such refinancings, refundings or extensions shall not:
--------
(i) exceed the principal amount refinanced, refunded or
extended;
(ii) shorten the maturity (or weighted average life to maturity)
of such Indebtedness or convert a revolving credit facility into a facility
which provides for the amortization of principal;
(iii) increase the interest rate applicable to such Indebtedness;
48
(iv) upon the occurrence and during the continuance of an Event
of Default, cause any covenants or undertakings (whether affirmative or
negative) of the Company or its Subsidiaries in respect of such
Indebtedness to be more restrictive than such covenants or undertakings had
been prior to such refinancing, refunding or extension;
(v) facilitate the exercise or enforcement of any remedies of
any obligee of such Indebtedness in respect of any default or event of
default thereunder;
(vi) materially and adversely affect any obligations under the
Transaction Documents to the Purchaser; or
(vii) result in any amendments or modifications of any of the
subordination provisions applicable to such Indebtedness.
9.5 LIMITATION ON LIENS. The Company will not, nor will it permit
-------------------
any of its Subsidiaries, directly or indirectly, to create, incur, assume or
permit to exist any Lien on or with respect to any property or asset (including
any document or instrument with respect to goods or accounts receivable) of the
Company or its Subsidiaries, whether now owned or hereafter acquired, or any
income or profits therefrom, except Permitted Encumbrances. "PERMITTED
ENCUMBRANCES" means the following:
(a) Liens for taxes, assessments or other governmental charges which
are not yet due and payable or which are being contested in good faith with a
reserve or other appropriate provision having been made thereof;
(b) Liens of landlords, carriers, warehousemen, mechanics,
materialmen and other similar Liens imposed by law, which are incurred in the
ordinary course of business for sums not more than thirty (30) days delinquent
or which are being contested in good faith; provided that a reserve or other
--------
appropriate provision shall have been made therefor and the aggregate amount of
such Liens is less than $100,000;
(c) Liens (other than any Lien imposed by ERISA or any rule or
regulation promulgated thereunder) incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the performance of
tenders, statutory obligations, surety, stay, customs and appeal bonds, bids,
leases, government contracts, trade contracts, performance and return of money
bonds and other similar obligations (exclusive of obligations for the payment of
borrowed money);
(d) Deposits in an aggregate amount not to exceed $100,000, made in
the ordinary course of business to secure liability to insurance carriers;
49
(e) Liens for purchase money obligations to acquire assets;
provided that:
--------
(i) such Lien attaches to such asset concurrently with or
within 10 days after acquisition thereof;
(ii) such Lien does not exceed the purchase price of such asset;
and
(iii) the Indebtedness secured by all such Liens, shall not
exceed $1,000,000; and
(iv) any such Lien encumbers only the asset so purchased;
(f) Any attachment or judgment Lien not constituting an Event of
Default;
(g) Leases or subleases granted to others not interfering in any
material respect with the business of the Company or its Subsidiaries;
(h) Easements, rights of way, restrictions and other similar charges
or encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Company or any of its Subsidiaries;
(i) Liens to secure Senior Indebtedness and Indebtedness
permitted under Section 9.4(a);
(j) Liens to secure Indebtedness permitted under Section 9.4(b);
and
(k) Liens existing on the date hereof and renewals and extensions
thereof, which Liens are set forth on Schedule 9.5 hereto.
------------
9.6 DISPOSITIONS OF ASSETS. The Company will not, nor will it permit
----------------------
any of its Subsidiaries, directly or indirectly, to: convey, sell (pursuant to
a sale/leaseback or otherwise), lease, sublease, transfer or otherwise dispose
of, or grant any Person an option to acquire, in one transaction or a series of
transactions, any of its property, business or assets, or the capital stock of
or other equity interests in any of its Subsidiaries, whether now owned or
hereafter acquired, except for:
(a) Bona fide sales of inventory, including real estate acquired in
the ordinary course of business, to customers for fair value in the ordinary
course of business and dispositions of obsolete equipment not used or useful in
the business;
50
(b) Asset Dispositions if all of the following conditions are
met:
(i) the market value of assets sold or otherwise disposed of
(by the Company and its Subsidiaries taken as a whole) in any fiscal
year do not exceed $500,000;
(ii) the Net Proceeds received is at least equal to the fair
market value of such assets;
(iii) at least 75% of the consideration received is Cash;
(iv) after giving effect to the sale or other disposition of
the assets included within the Asset Disposition and the repayment of
Indebtedness with the proceeds thereof, the Company would be in
compliance on a pro forma basis with the covenants set forth in
Section 9.8 hereof recomputed for the most recently ended month for
which information is available and is in compliance with all other
terms and conditions of this Agreement;
(v) no Event of Default then exists or shall result from
such sale or other disposition; or
(c) Sale and leaseback transactions relating to real estate or
capital equipment; provided however, that 50% of the Net Proceeds of any such
----------------
transaction shall be utilized by the Company to prepay the outstanding principal
and any outstanding interest or penalties on the Note pursuant to Section 4 of
the Note.
9.7 LIMITATIONS ON RESTRICTED PAYMENTS. The Company shall not, and
----------------------------------
shall not permit any of its Subsidiaries to declare, or make any Restricted
Payment.
9.8 FINANCIAL COVENANTS. The Company covenants and agrees that until
-------------------
payment in full of all Indebtedness hereunder and under the Note, the Company
shall comply with and shall cause each of its Subsidiaries to comply with all
covenants in this Section 9.8 applicable to such Person.
(a) Interest Coverage. The Company shall not permit Interest Coverage
for any twelve (12) month period ending on the last day of a calendar quarter
during any of the periods set forth below, to be less than the ratio set forth
below for such period:
Period Ratio
------------------------------------------------------- -----------
September 30, 1998 to and including March 31, 1999 2.75 : 1.00
June 30, 1999 to and including September 30, 1999 3.0 : 1.00
December 31, 1999 to and including December 31, 2000 3.5 : 1.00
March 31, 2001 and thereafter 4.0 : 1.00
51
"INTEREST COVERAGE" will be calculated as illustrated on Exhibit H.
---------
Notwithstanding anything to the contrary contained herein or in Exhibit H
---------
hereto, the determination of Interest Coverage for the periods ended September
30, 1998, December 31, 1998 and March 30, 1999 shall not be calculated for a
twelve month period, but rather shall be calculated for the 3 month, 6 month and
9 month periods, respectively, ending on the last day of each such calendar
quarter.
(b) Total Leverage Test. The Company shall not permit the ratio of
Net Funded Indebtedness as of the last day of any calendar quarter during any of
the periods set forth below to Adjusted Operating Cash Flow for the twelve (12)
month period ending on the last day of such calendar quarter to be greater than
the ratio set forth below for such period:
Period Ratio
---------------------------------------------------- ------------
September 30, 1998 5.0 : 1.00
December 31, 1998 to and including March 31, 1999 4.5 : 1.00
June 30, 1999 4.25 : 1.00
September 30, 1999 to and including March 31, 2000 4.0 : 1.00
June 30, 2000 to and including March 31, 2001 3.5 : 1.00
June 30, 2001 and thereafter 3.0 : 1.00
"NET FUNDED INDEBTEDNESS" and "ADJUSTED OPERATING CASH FLOW" will be calculated
as illustrated on Exhibit H. Notwithstanding anything to the contrary contained
---------
herein or in Exhibit H hereto, (x)(i) the determination of EBITDA for the period
---------
ended September 30, 1998 shall be calculated by multiplying the EBITDA of the
Company and its Subsidiaries for the three months then ended by 4; (ii) the
determination of EBITDA for the period ended December 31, 1998 shall be
calculated by multiplying the EBITDA of the Company and its Subsidiaries for the
six months then ended by 2; and (iii) the determination of EBITDA for the period
ended March 31, 1999 shall be calculated by multiplying the EBITDA of the
Company and its Subsidiaries for the nine months then ended by 1.33 and (y) any
calculation of this covenant requiring reference to the Adjusted Operating Cash
Flow of the Company for any of the periods ended on or before June 30, 1999,
shall be calculated assuming that the Capital Expenditures of the Company for
the relevant period are equal to the lesser of the actual Unfinanced Capital
Expenditures for such period or $575,000.
(c) Fixed Charge Coverage. The Company shall not permit Fixed Charge
Coverage for any twelve (12) month period ending on the last day of a calendar
quarter during any of the periods set forth below to be less than the ratio set
forth below for such period:
Period Ratio
---------------------------------------------------- -----------
September 30, 1998 to and including March 31, 1999 1.15 : 1.00
June 30, 1999 to and including September 30, 1999 1.25 : 1.00
December 31, 1999 to December 31, 2000 1.5 : 1.00
March 31, 2001 and thereafter 1.75 : 1.00
52
"FIXED CHARGE COVERAGE" will be calculated as illustrated on Exhibit H.
----------
Notwithstanding anything to the contrary contained herein or in Exhibit H
---------
hereto, the determination of Fixed Charge Coverage for the periods ended
September 30, 1998, December 31, 1998 and March 30, 1999 shall not be calculated
for a twelve month period, but rather shall be calculated for the 3 month, 6
month and 9 month periods, respectively, ending on the last day of each such
calendar quarter.
(d) Capital Expenditures. The Company shall not permit Capital
Expenditures in any fiscal period to exceed the amounts set forth below for each
corresponding period.
Period Amount
----------------------------------------------- ----------
July 1, 1998 through June 30, 1999 $2,300,000
July 1, 1999 through June 30, 2000 $1,900,000
July 1 through June 30 for each annual period
commencing July 1, 2000 and thereafter $1,000,000
(e) Funded Debt to Cash and Cash Equivalents. The Company shall not
permit the ratio of Funded Debt of the Company and its Subsidiaries on a
consolidated basis to the sum of the cash and Cash Equivalents of the Company
and its Subsidiaries on a consolidated basis to be greater than 2.0:1.0;
provided, however, that this Section 9.8(e) shall be of no further force or
-------- -------
effect at such time as the ratio of Net Funded Indebtedness to Adjusted
Operating Cash Flow, as determined in accordance with Section 9.8(b) of this
Agreement without regard to the last sentence thereof, is less than 4.0:1 for
four consecutive fiscal quarters.
(f) Current Ratio. The Company shall not permit the ratio of Current
Assets less cash and Cash Equivalents to Current Liabilities as of the last day
of any calendar quarter during any of the periods set forth below to be less
than the ratio set forth below for such period; provided, however, that this
-------- -------
Section 9.8(f) shall be of no further force or effect at such time as the ratio
of Net Funded Indebtedness to Adjusted Operating Cash Flow, as determined in
accordance with Section 9.8(b) of this Agreement without regard to the last
sentence thereof, is less than 4.0:1.0 for four consecutive fiscal quarters.
Period Ratio
------------------------------------------------------- ------------
September 30, 1998 to and including December 31, 1999 1.5 : 1:00
March 31, 2000 and thereafter 1.75 : 1:00
9.9 EMPLOYEE BENEFIT PLANS. The Company shall not, and shall not permit
----------------------
any of its Subsidiaries or any ERISA Affiliate, without the prior approval of
the
53
Purchaser, (a) to establish or contribute to any employee benefit plan
(within the meaning of Section 3(3)) of ERISA) or other employee benefit
arrangement which (i) is subject to Title IV of ERISA or is otherwise a Defined
Benefit Plan, Multiemployer Plan or multiple employer plan (within the meaning
of Section 413(c) of the Code); or (ii) provides post-retirement welfare
benefits or "parachute payments" (within the meaning of Section 280G(b) of the
Code); or (b) to amend any Plan if the effect of such amendment would cause such
Plan to be a plan or arrangement described in clause (a)(i) hereof or to provide
any of the benefits described in clause (a)(ii) hereof.
9.10 LIMITATION ON BUSINESS OF THE COMPANY. Neither the Company nor
-------------------------------------
any of its Subsidiaries shall engage in any business or transaction other than
the business in which it is currently engaged and the transactions contemplated
by, or permitted under, the Transaction Documents and the Acquisition Documents.
9.11 INVESTMENTS. Except in the ordinary course of business and
-----------
consistent with past practices, the Company shall not, and shall not permit any
of its Subsidiaries, directly or indirectly, to make or own any Investment in
any Person except: (a) Investments in Cash Equivalents; provided that such Cash
Equivalents are not subject to setoff rights in favor of the issuing bank
arising from any existing banking relationship; (b) intercompany loans and
investments to the extent permitted under Sections 9.2 or 9.4; (c) loans and
advances to employees for moving, entertainment, travel and other similar
expenses in the ordinary course of business not to exceed $50,000 in the
aggregate at any time outstanding; (d) loans of up to $2 million to ITC in
accordance with the terms and provisions of that certain Loan and Security
Agreement, dated May 29, 1997, between the Company and ITC (including the
conversion of such loans into shares of ITC's redeemable convertible preferred
stock, par value $.01 per share, representing a 20% ownership interest therein);
(e) the acquisition by the Company of the portion of ITC it does not already own
for $24,500,000 pursuant to the exercise of its option to acquire such ownership
interest in accordance with the terms of that certain Stockholders Option
Agreement dated May 29, 1997 among the Company, ITC and the holders of common
stock and warrants of ITC listed on Schedule A thereto and (f) a loan to or
investment in ITC in an amount not to exceed $800,000, and in a manner
consistent with the terms and conditions previously approved by the Company's
Board of Directors.
9.12 CONTINGENT OBLIGATIONS. The Company shall not, nor shall it
----------------------
permit any of its Subsidiaries directly or indirectly to create or become or be
liable with respect to any Contingent Obligation except those: (a) resulting
from endorsements of negotiable instruments for collection in the ordinary
course of business; (b) arising under the Transaction Documents; (c) existing on
the Closing Date and as described in Schedule 9.12 annexed hereto; (d) arising
-------------
with respect to customary indemnification and purchase price adjustment
obligations incurred in connection with any Asset Dispositions; (e) incurred in
the ordinary course of business with respect to surety and appeal bonds,
performance and return-of-money bonds, letter of credit and similar obligations
not exceeding any time outstanding $150,000 in aggregate liability; (f) incurred
with respect
54
to any Indebtedness permitted pursuant to Section 9.4 hereof; (g) not otherwise
permitted by clauses (a) through (f) above so long as any such Contingent
Obligations, in the aggregate at any time outstanding do not exceed $100,000.
9.13 MANAGEMENT FEES AND COMPENSATION. The Company shall not, nor
--------------------------------
shall it permit any of its Subsidiaries, directly or indirectly, to pay any
management, consulting or similar fees to any Affiliate or to any director,
officer or employee of the Company or any of its Subsidiaries except reasonable
director's fees and expenses and except as set forth on Schedule 9.13.
-------------
Notwithstanding the foregoing, no payments may be made with respect to any items
set forth on Schedule 9.13 upon the incurrence and during the continuation of an
-------------
Event of Default.
9.14 FISCAL YEAR. The Company and its Subsidiaries shall not change
-----------
their fiscal year without the prior consent of the Purchaser.
9.15 SUBSIDIARIES. Except as permitted in Section 8.1(j), the Company
------------
shall not, nor shall any of the Subsidiaries be permitted to, directly or
indirectly, establish, create or acquire any new Subsidiary.
9.16 NO NEGATIVE PLEDGES. Except pursuant to agreements with the
-------------------
creditors of the Senior Indebtedness, the Company will not and will not permit
any of its Subsidiaries directly or indirectly to enter into or assume any
agreement prohibiting the creation or assumption of any Lien upon its properties
or assets, whether now owned or hereafter acquired.
9.17 NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO THE COMPANY.
----------------------------------------------------------
Except as otherwise provided herein, the Company will not and will not permit
any of its Subsidiaries directly or indirectly to create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of the Company or any such Subsidiary to: (a) pay
dividends or make any other distribution on any of such Subsidiary's capital
stock owned by the Company or any Subsidiary; (b) subject to subordination
provisions for the benefit of Purchaser, pay any Indebtedness owed to the
Company or any other Subsidiary; (c) make loans or advances to the Company or
any other Subsidiary; or (d) transfer any of its property or assets to the
Company or any other Subsidiary.
9.18 BANK ACCOUNTS. The Company will not and will not permit any of
-------------
its U.S. Subsidiaries to establish any new bank accounts without prior written
notice to the Purchaser.
55
ARTICLE 10
PREPAYMENT
----------
10.1 OPTIONAL PREPAYMENT. The Company may prepay outstanding
-------------------
principal (together with accrued interest) on the Note at any time without
penalty.
10.2 MANDATORY PREPAYMENT. Subject to Section 7 of the Note, the
--------------------
Company shall prepay outstanding principal (together with accrued interest) on
the Note in accordance with the "Mandatory Prepayment" provisions set forth in
Section 3 of the Note.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Purchaser,
acceptance of the WSDF Note and payment therefor.
11.2 DISPOSITIONS BY THE PURCHASER. At any time prior to the earlier
-----------------------------
to occur of (x) one year from the Closing Date or (y) a Change of Control of the
Company, each of the Purchaser and Whitney covenants and agrees that it will not
sell or otherwise dispose of the Shares.
11.3 NOTICES. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier (with
receipt confirmed), courier service or personal delivery:
(a) if to the Purchaser:
Whitney Subordinated Debt Fund, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
56
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
(b) if to the Company:
Nitinol Medical Technologies, Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: 617-526-5000
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; if mailed, five
Business Days after being deposited in the mail, postage prepaid; or if
telecopied, when receipt is acknowledged.
11.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Subject to applicable securities laws, the Purchaser may assign
any of its rights under any of the Transaction Documents to any Person and any
holder of the Note may assign the Note to any Person. The Company may not
assign any of its rights under this Agreement without the prior written consent
of the Purchaser. Except as provided in Article 7, no Person other than the
parties hereto and their successors and permitted assigns is intended to be a
beneficiary of any of the Transaction Documents.
57
11.5 TERMINATION.
-----------
(a) This Agreement may be terminated prior to the Closing as
follows:
(i) at the election of the Company if any one or more of the
conditions to its obligation to close has not been fulfilled as of August 31,
1998;
(ii) at the election of the Purchaser if any one or more of
the conditions to its obligation to close has not been fulfilled as of August
31, 1998;
(iii) at the election of the Company if the Purchaser has
breached a covenant or agreement contained in this Agreement, which breach
cannot be or is not cured by August 31, 1998;
(iv) at the election of the Purchaser if the Company has
breached a covenant or agreement contained in this Agreement, which breach
cannot be or is not cured by August 31, 1998; or
(v) at any time on or prior to the Closing Date, by mutual
written consent of the Company and the Purchaser.
If this Agreement so terminates, it shall become null and void and
have no further force or effect, except as provided in Section 11.5(b).
(b) If this Agreement is terminated in accordance with Section
11.5(a) and the transactions contemplated by this Agreement are not consummated,
this Agreement shall become null and void and of no further force and effect,
except for (i) the provisions of Section 2.2(b) relating to the obligation of
the Company to pay the Purchaser's reasonable out-of-pocket expenses and (ii)
the provisions of Article 7 and this Article 11. If this Agreement is terminated
in accordance with Section 11.5(a) and the transactions contemplated by this
Agreement are not consummated, none of the parties shall have any liability in
respect of a breach of a representation, warranty, covenant or agreement, except
to the extent that failure to satisfy the conditions of Article 3 or Article 4,
as the case may be, results from the intentional or willful violation by such
party of its obligations contained in this Agreement or any documents delivered
pursuant to this Agreement.
11.6 AMENDMENT AND WAIVER.
--------------------
(a) No failure or delay on the part of any of the parties hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The
58
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the parties hereto at law in equity, or
otherwise.
(b) Any amendment, supplement or modification of or to any provision
of this Agreement, any waiver of any provision of this Agreement and any consent
to any departure by any party from the terms of any provision of this Agreement
shall be effective (i) only if it is made or given in writing and signed by all
of the parties hereto, and (ii) only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Agreement, no notice to or demand on the Company in any case
shall entitle the Company to any other or further notice or demand in similar or
other circumstances.
11.7 SIGNATURES; COUNTERPARTS. Telefacsimile transmissions of any
------------------------
executed original document and/or retransmission of any executed telefacsimile
transmission shall be deemed to be the same as the delivery of an executed
original. At the request of any party hereto, the other parties hereto shall
confirm telefacsimile transmissions by executing duplicate original documents
and delivering the same to the requesting party or parties. This Agreement may
be executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
11.8 HEADINGS. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof
11.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
11.10 DETERMINATIONS, REQUEST OR CONSENTS. All determinations,
-----------------------------------
requests, consents, waivers or amendments to be made by the Purchaser in its
opinion or judgment or with its approval or otherwise pursuant to the
Transaction Documents shall be made (i) if prior to the Closing Date, by the
Purchaser in its sole discretion and (ii) if after the Closing Date, by the
holders of a majority of the aggregate outstanding principal amount of the Note.
11.11 JURISDICTION, JURY TRIAL WAIVER, ETC.. (A) EACH PARTY TO THIS
-------------------------------------
AGREEMENT HEREBY IRREVOCABLY AGREES THAT THE ANY LEGAL ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE OR ANY AGREEMENTS OR
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE
OF SUCH COURTS
59
FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND
ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN
SECTION 11.3, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
(B) EACH OF THE COMPANY AND ITS SUBSIDIARIES HEREBY WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE
COMPANY AND ITS SUBSIDIARIES HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. EACH OF THE COMPANY AND ITS SUBSIDIARIES (1)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE PURCHASER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PURCHASER WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (2) ACKNOWLEDGES THAT
THE PURCHASER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THE WAIVERS
AND CERTIFICATIONS CONTAINED HEREIN.
11.12 SEVERABILITY. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
11.13 RULES OF CONSTRUCTION. Unless the context otherwise requires,
---------------------
"or" is not exclusive, any references to sections or subsections refer to
sections or subsections of this Agreement.
11.14 ENTIRE AGREEMENT. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings other than those set forth or referred to
herein or therein.
60
This Agreement and the other Transaction Documents supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
11.15 CERTAIN EXPENSES. The Company will pay all expenses of the
----------------
Purchaser (including, without limitation, reasonable fees, charges and
disbursements of counsel) in connection with any amendment, supplement,
modification or waiver of or to any provision of this Agreement or any of the
other Transaction Documents or any documents relating thereto (including,
without limitation, a response to a request by the Company for the Purchaser's
consent to any action otherwise prohibited hereunder or thereunder), or consent
to any departure from, the terms of any provision of this Agreement or such
other documents.
11.16 PUBLICITY. Except as may be required by applicable law, none of
---------
the parties hereto shall issue a publicity release or announcement or otherwise
make any public disclosure concerning this Agreement or the transactions
contemplated hereby, without prior approval by the other party hereto. If any
announcement is required by law to be made by any party hereto, prior to making
such announcement such party will deliver a draft of such announcement to the
other party and shall give the other party an opportunity to comment thereon.
11.17 FURTHER ASSURANCES. Each of the parties shall execute such
------------------
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions. authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
61
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
as of the date first above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: EVP/CFO
WHITNEY SUBORDINATED DEBT FUND, L.P.
By:
--------------------------------
Name:
A General Partner
IN WITNESS WHEREOF, solely for purposes of being bound by Section 2.2,
Article 6 and Section 11.2 of this Agreement, ▇.▇. ▇▇▇▇▇▇▇ & Co. has caused this
Agreement to be executed and delivered by its officer hereunto duly authorized
as of the date first above written.
▇.▇. ▇▇▇▇▇▇▇ & CO.
By:
--------------------------------
Name:
Title:
62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
as of the date first above written.
NITINOL MEDICAL TECHNOLOGIES, INC.
By:
--------------------------------
Name:
Title:
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
A General Partner
IN WITNESS WHEREOF, solely for purposes of being bound by Section 2.2,
Article 6 and Section 11.2 of this Agreement, ▇.▇. ▇▇▇▇▇▇▇ & Co. has caused this
Agreement to be executed and delivered by its officer hereunto duly authorized
as of the date first above written.
▇.▇. ▇▇▇▇▇▇▇ & CO.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: General Partner
63
Exhibit A - See Exhibit 10.4 to the Company's Current Report on Form 8-K as
filed with the Securities and Exchange Commission on July 23, 1998 for a copy of
the executed WSDF Note.
Exhibit C - See Exhibit 10.5 to the Company's Current Report on Form 8-K as
filed with the Securities and Exchange Commission on July 23, 1998 for a copy of
the executed Guarantee and Collateral Agreement.
Exhibit E - See Exhibit 10.6 to the Company's Current Report on Form 8-K as
filed with the Securities and Exchange Commission on July 23, 1998 for a copy of
the executed Dutch Pledge Agreement.
Exhibit F - See Exhibit 10.7 to the Company's Current Report on Form 8-K as
filed with the Securities and Exchange Commission on July 23, 1998 for a copy of
the executed Registration Rights Agreement.
EXHIBIT B-1
▇▇▇▇ AND ▇▇▇▇ LLP
Counsellors at Law
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ * Fax ▇▇▇-▇▇▇-▇▇▇▇
July 8, 1998
Whitney Subordinated Debt Fund, L.P.
c/o ▇.▇. ▇▇▇▇▇▇▇ & Co., Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel to Nitinol Medical Technologies, Inc. ("Nitinol"
or the "Company"), a Delaware corporation, and certain of its subsidiaries, as
listed on Exhibit A (the "Subsidiaries", the Company and the Subsidiaries being
---------
collectively referred to herein as the "Borrowers") in connection with the
preparation, execution and delivery of (i) the Subordinated Note and Common
Stock Purchase Agreement (the "Note Purchase Agreement") by and among Nitinol,
Whitney Subordinated Debt Fund, L.P. (the "Lender"), and, for certain purposes,
▇.▇. ▇▇▇▇▇▇▇ & Co. ("▇.▇. ▇▇▇▇▇▇▇" or "Agent") providing for, among other
things, a $20,000,000 loan from the Lender to the Company and the issuance by
the Company of an aggregate of 675,000 shares of common stock, par value $.001
per share (the "Shares"), to the Lender and Whitney, and (ii) the other loan
documents, including (a) the Subordinated Promissory Note (the "WSDF Note")
executed by Nitinol, (b) the Guarantee and Collateral Agreement (the "Guarantee
and Collateral Agreement") made by Nitinol and the Subsidiaries (collectively
with Nitinol, the "Grantors") in favor of the Agent, (c) the Agreement and Deed
of Pledge of Shares in Yellow Tape B.V. and Nitinol Medical Technologies
International, BV (the "Dutch Pledge Agreement") between NMT NeuroSciences
(International), Inc. as pledgor of certain shares in Yellow Tape B.V., Nitinol
Medical Technologies, Inc. as pledgor of certain shares of Nitinol Medical
Technologies International, BV and ▇.▇. ▇▇▇▇▇▇▇, as security trustee and (d) the
Charge Over Shares in NMT NeuroSciences (UK), Ltd. (the "Charge Over Shares")
between NMT NeuroSciences (International), Inc., as chargor, and ▇.▇. ▇▇▇▇▇▇▇,
as trustee. The shares pledged to or for the benefit of the Lender under the
Guarantee and Collateral Agreement, other than the shares of Nitinol Medical
Technologies FSC, Inc., are referred to herein as the "Pledged U.S. Shares."
This opinion is furnished to you pursuant to Section 3.5 of the Note Purchase
Agreement. All capitalized terms used but not defined herein have the respective
meanings given to such terms in the Note Purchase Agreement.
WASHINGTON, DC BOSTON, MA LONDON, UK
--------------------------------------------------------------------------------
▇▇▇▇ AND ▇▇▇▇ LLP INCLUDES PROFESSIONAL CORPORATIONS
▇▇▇▇▇▇▇ ▇▇▇▇ AND ▇▇▇▇ (AN INDEPENDENT JOINT VENTURE LAW FIRM)
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 2
In rendering the opinions expressed below, we have examined:
(a) the Note Purchase Agreement;
(b) the WSDF Note;
(c) the Guarantee and Collateral Agreement;
(d) the Dutch Pledge Agreement;
(e) the Charge Over Shares;
(f) UCC-1 financing statements in the form annexed hereto as Exhibit B
---------
(the "Financing Statements") to be filed in the filing offices listed on
Schedule I;
----------
(g) The Certificate of Incorporation or similar charter document of each
of the Borrowers, each in effect on the date hereof (collectively, the
"Certificates of Incorporation");
(h) the By-laws of each of the Borrowers, each as in effect on the date
hereof, provided to us by the Borrowers (collectively, the "By-Laws");
(i) all records contained in the corporate minute books of each of the
Borrowers, as provided to us by the Borrowers, relating to the period commencing
on January 1, 1997 and ending on the date hereof, and the stock record books of
each of the Borrowers (other than the Company), as provided to us by such
Borrowers;
(j) the certificates of legal existence and corporate good standing listed
on Exhibit C hereto for the Company and each of the Subsidiaries, issued by the
---------
Secretary of State of the State of Delaware and the Secretaries of State of the
other jurisdictions listed thereon;
(k) certified copies of resolutions adopted by the Boards of Directors of
each of the Borrowers approving the transactions contemplated by the Note
Purchase Agreement and authorizing, among other things, the execution, delivery
and performance by the Borrowers of each of the Transaction Documents, as
defined below (the "Authorizing Resolutions");
(l) authorization, incumbency and signature certificates as to the
officers of each of the Borrowers;
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 3
(m) the certificate of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President of the
Company and Treasurer of each of the Subsidiaries, in the form attached hereto
as Exhibit D;
----------
(n) such other documents, instruments and certificates (including, but not
limited to, certificates of public officials and officers of the Borrowers) as
we have considered necessary for purposes of this opinion; and
(o) the Acquisition Documents.
The documents listed in clauses (a)-(c) and (f) are referred to collectively
herein as the "Transaction Documents."
We assume, for purposes of this opinion, that the corporate records
(referred to in clause (i) above) contain an accurate record of all meetings of
the stockholders and directors of each of the Borrowers after January 1, 1997
and that the stock record books of each of the Borrowers are materially complete
and accurate.
In our examination of the documents described above, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all copies of documents
submitted to us, the authenticity of the originals of such latter documents, and
the legal capacity of all individual signatories.
Insofar as this opinion relates to factual information which is in the
possession of the Borrowers, we have relied, with your consent, exclusively upon
certificates, statements and representations made to us by one or more officers
or employees of the Borrowers and other representatives or agents of the Company
and the representations of the Borrowers contained in the Transaction Documents.
Nothing has come to our attention which causes us to believe that you are not
justified in relying upon such certificates, statements and representations of
officers and other representatives or agents of the Company.
Any reference to "our knowledge", or to matters "known to us", "coming to
our attention", or "of which we are aware", or any variation of any of the
foregoing shall mean the conscious awareness of the attorneys in this firm who
have rendered substantive attention to this transaction of the existence or
absence of any facts which would contradict our opinions set forth below. We
have not undertaken any independent investigation to determine the existence or
absence of such facts, and no inference as to our knowledge of the existence or
absence of such facts should be drawn from the fact of our representation of the
Borrowers. Without limiting the foregoing, we have not conducted a search of any
computerized or electronic databases or the dockets of any court or
administrative or other regulatory agency in any jurisdiction.
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 4
We have assumed that all parties to the Transaction Documents other than
the Borrowers have the power and authority and have taken the corporate or
partnership action necessary to execute and deliver the Transaction Documents
and all other instruments to which they are a party in connection therewith, and
that except for the filing of Financing Statements, no consent, approval,
authorization, declaration or filing by or with any governmental commission,
board or agency is required for each of such parties' valid execution and
delivery of such documents. We have assumed each of such parties' due execution
and delivery of the Transaction Documents to which they are a party, and that
such Transaction Documents constitute such parties' valid and binding
obligations, enforceable against them in accordance with their respective terms.
We are expressing no opinion herein as to the application of or compliance with
any federal or state law or regulation to the power, authority or competence of
any party to the documents as to which we are opining herein, other than the
Borrowers.
We express no opinion herein with respect to the laws of any state or
jurisdiction other than the federal laws of the United States of America, the
state laws of the Commonwealth of Massachusetts and the General Corporation Law
statute of the State of Delaware. To the extent that the laws of any other
jurisdiction govern any of the matters as to which we are opining herein, we
have assumed that such laws are identical to the state laws of the Commonwealth
of Massachusetts, and we are expressing no opinion herein as to whether such
assumption is reasonable or correct. We note that the Transaction Documents are
governed by the laws of the State of New York. We further note that Cordis
Innovasive Systems, Inc. ("CIS") is a Florida corporation and, for purposes of
our opinions expressed in paragraphs 2 and 3 below as to no conflict with the
charter and by-laws of CIS and the due execution and delivery of the Guarantee
and Collateral Agreement, respectively, we have assumed that Massachusetts law
governs CIS. We express no opinion herein with respect to compliance with the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended.
The opinions expressed in paragraph l below, insofar as they relate to the
due organization, valid existence and corporate good standing of the Company and
each of the Subsidiaries, and the foreign qualification of certain of the
Subsidiaries are based solely upon the certificates listed on Exhibit C and are
---------
rendered as of the dates of such certificates and limited accordingly.
With respect to our opinions expressed in paragraphs 2, 4 and 9 below, the
Contractual Obligations "known to us" include only those documents to which the
Company and/or the Subsidiaries is a party and which are filed as exhibits to
reports filed by the Company with the Securities and Exchange Commission
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act documents"). The opinion expressed in paragraph 4
as to the Company's issued and outstanding stock is based solely on a
certificate dated as of
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 5
July 2, 1998 of American Stock Transfer and Trust Co., the Company's transfer
agent. The opinions expressed in the third sentence of paragraph 4 and as to the
fully paid and nonassessable nature of the outstanding shares of the Company's
and the Subsidiaries' capital stock are based solely on the Officer's
Certificate attached hereto as Exhibit D.
---------
Our opinions below are qualified to the extent that they may be subject to
or affected by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, usury, or similar laws affecting the rights
of creditors generally, (ii) statutory or decisional law concerning recourse by
creditors to security in the absence of notice or hearing, and (iii) duties and
standards imposed on creditors and parties to contracts, including, without
limitation, requirements of good faith, reasonableness and fair dealing.
Notwithstanding the foregoing, our opinions set forth below are not qualified as
to the application of Massachusetts General Laws Chapter 271, Section 49(a)-(c),
based solely on our understanding that ▇.▇. ▇▇▇▇▇▇▇ & Co., Inc., as agent, has
complied with the notification requirement set forth in (S)49(d) of Chapter 271,
and assuming for this purpose that the laws of the Commonwealth of Massachusetts
govern the Transaction Documents. Furthermore, we express no opinion as to the
availability of any equitable or specific remedy upon any breach of the
documents as to which we are opining here or any of the agreements, documents or
obligations referred to therein, or as to the successful assertion of any
equitable defense, as the availability of such remedies or defenses may be
subject to the discretion of a court. We express no opinion as to the
enforceability of a waiver of rights granted by the Constitution of the United
States of America, or any state thereof, or the vesting of jurisdiction in, or
the consent to the exercise of jurisdiction by, any court where the exercise of
such jurisdiction is within the discretion of such court, or the court is not a
court of general jurisdiction.
We are expressing no opinion as to compliance by the Borrowers with the so-
called "blue sky" or state securities laws (other than the securities laws of
the Commonwealth of Massachusetts), or with state or federal antifraud laws, in
connection with the issuance and sale of the WSDF Note or the Shares.
We express no opinion as to the enforceability of any right of set-off
against any deposit account of a Borrower to the extent that (i) the funds on
deposit in said accounts have been accepted by you with an intent to apply such
funds to a preexisting claim rather than to hold such funds subject to
withdrawals in the ordinary course, (ii) the set-off is directed against checks
held by you for collection only and not for deposit, (iii) the funds on deposit
in said accounts are in any manner special accounts which, by the express terms
on which they are created are made subject to the rights of a third party, or
(iv) the obligations against which any deposit account is set-off are not due
and payable.
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 6
Based upon and subject to the foregoing, and further subject to the
qualifications set forth below, it is our opinion that:
1. The Company and each of its Subsidiaries: (i) is, and after giving
effect to the transactions contemplated by the Transaction Documents and the
Acquisition Documents, will be a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation;
(ii) has, and after giving effect to the transactions contemplated by the
Transaction Documents and the Acquisition Documents, will have all requisite
corporate power and authority to own and operate its property (as such property
is known to us), to lease the property it operates as lessee (as such property
is known to us) and to conduct the business in which it is, to our knowledge,
currently engaged; and (iii) has the corporate power and authority to execute,
deliver and perform its obligations under each Transaction Document to which it
is or will be a party. The Company and NMT Heart Inc. are duly qualified to do
business and in good standing in the Commonwealth of Massachusetts.
2. The execution, delivery and performance by the Company and each of the
Subsidiaries of each Transaction Document and Acquisition Document to which it
is a party and the consummation of the transactions contemplated hereby and
thereby, including without limitation the issuance of the WSDF Note and the
Shares: (i) has been duly authorized by all necessary corporate action; (ii)
does not contravene the terms of the Company's or any of the Subsidiaries'
Certificates of Incorporation or By-laws, and (iii) will not violate, conflict
with or result in any breach or contravention of or the creation of any Lien
under, any Contractual Obligation of the Company or any or the Subsidiaries
known to us or any Requirement of Law applicable to the Company or any of the
Subsidiaries.
3. Each Transaction Document and Acquisition Document to which the
Company and the Subsidiaries are parties has been duly executed and delivered by
the Company and each of the Subsidiaries parties thereto.
4. As of the Closing Date, the authorized capital stock of the Company
consists of 30,000,000 shares of Common Stock, of which 9,828,210 shares were
issued and outstanding as of July 2, 1998 and 3,000,000 shares of preferred
stock, $.001 par value per share (the "Preferred Stock"), of which no shares
were issued and outstanding. The Company has no shares of capital stock held in
treasury. To our knowledge, as of the Closing Date, after giving effect to the
transactions contemplated hereby and by the other Transaction Documents and the
Acquisition Documents, there will be: (i) no shares of issued and outstanding
Preferred Stock; (ii) 10,503,210 shares of Common Stock issued and outstanding;
(iii) an aggregate of 1,865,789 shares of Common Stock reserved for issuance
pursuant to the exercise of stock options issuable in accordance with the terms
of the Company's 1994 Stock Option Plan, 1996 Stock Option Plan, 1996 Stock
Option Plan for Non-Employee
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 7
Directors and the 1998 Stock Incentive Plan and an aggregate of 1,320,002 shares
of Common Stock reserved for issuance pursuant to the exercise of stock options
not issued pursuant to a plan (collectively, the "Options"); (iv) 83,329 shares
of Common Stock reserved for issuance upon exercise of the stock purchase
warrant issued in June 1998 to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc. relating to the acquisition
by the Company of certain technology relating to the CardioSEAL Septal Occluder;
(v) 28,489 shares of Common Stock reserved for issuance upon exercise of the
stock purchase warrant transferred by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc. in June 1998 to
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇; (vi) 99,660 shares of Common Stock reserved for issuance upon
exercise of the stock purchase warrant issued in February 1996 to Junewicz &
Co., Inc.; (vii) 5,263 shares of Common Stock reserved for issuance upon
exercise of the stock purchase warrant issued in April 1996 to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
(together with the warrants described above in (iv), (v) and (vi), the
"Warrants"); and (viii) 84,973 shares of Common Stock reserved for issuance in
connection with the Company's 1997 Employee Stock Purchase Plan. All outstanding
shares of capital stock of the Company issued after January 1, 1997 have been
duly authorized by all necessary corporate action and are validly issued, fully
paid and nonassessable. To our knowledge, the shareholders of the Company have
no preemptive or similar rights with respect to the issuance or sale of the
Shares under any Contractual Obligation known to us.
5. To our knowledge, except for the Warrants and the Options and as set
forth on Schedule 5.19(b) to the Note Purchase Agreement, there are, and after
giving effect to the transactions contemplated by the Transaction Documents and
the Acquisition Documents, there will be, no outstanding securities convertible
into or exchangeable for capital stock of the Company or options, warrants or
other rights to purchase or subscribe to capital stock of the Company or
contracts, commitments, agreement, understandings or arrangements of any kind to
which the Company is a party relating to the issuance of any capital stock of
the Company, any such convertible or exchangeable securities or any such
options, warrants or rights.
6. To our knowledge, except as disclosed in the Transaction Documents,
there are no actions, suits, proceedings, claims or disputes pending or
threatened, at law, in equity, in arbitration or before any federal or state
court or governmental authority or agency against the Company or any Subsidiary.
To our knowledge, no injunction, writ, temporary restraining order, decree or
any order of any nature specifically naming the Company or the Subsidiaries has
been issued by any court or other governmental authority purporting to enjoin or
restrain the execution, delivery and performance of any of the Transaction
Documents.
7. Assuming the accuracy of the representations and warranties contained
in the Note Purchase Agreement, the offer, sale and issuance of the Shares and
the WSDF Note are exempt from the registration requirements under the Securities
Act of 1933, as amended and applicable Massachusetts securities laws.
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 8
8. After giving effect to the transactions contemplated by the
Acquisition Documents, neither the Company nor any Subsidiary is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
9. To our knowledge, except as provided in the Transaction Documents or
disclosed on the Schedules to the Note Purchase Agreement, none of the
Contractual Obligations of the Company known to us (i) restricts the voting or
transfer or requires the registration of any capital stock of the Company, (ii)
requires the Company to repurchase or otherwise acquire, retire or sell any
capital stock of the Company or (iii) restricts the payments of dividends on any
shares of capital stock of the Company.
10. Each of the Note Purchase Agreement, the WSDF Note, the Guarantee and
Collateral Agreement and the Acquisition Documents constitutes the valid and
binding obligation of the Company and the Subsidiaries party thereto,
enforceable against the Company and the Subsidiaries party thereto in accordance
with its terms.
11. The stock certificates representing the Shares are in proper form
under all applicable provisions of Delaware law.
12. Except for filings which are necessary to perfect the security
interests granted under the Transaction Documents, for filings under United
States state and federal securities laws, and any other filings, authorizations
or approvals as are specifically provided for in the Transaction Documents, no
authorizations or approvals of, and no filings with, any governmental or
regulatory authority or agency are necessary under any relevant law for the
execution, delivery or performance by the Company or any of the Subsidiaries of
the Transaction Documents to which it is a party.
13. If the Guarantee and Collateral Agreement were governed by the laws of
the Commonwealth of Massachusetts, then after giving effect to the purchase of
the WSDF Note on the Closing Date, the Guarantee and Collateral Agreement would
create a valid security interest under the Uniform Commercial Code as enacted in
the Commonwealth of Massachusetts (the "Code") in favor of the Agent, for the
benefit of the Lender and the Agent, to secure the Obligations (as defined in
the Guarantee and Collateral Agreement), in all right, title and interest of the
Company and the Grantors (the "Debtors") in and to the Collateral (as defined in
the Guarantee and Collateral Agreement exclusive of the Pledged Securities) in
which a security interest can be created under the Code. The Agent's security
interest in the Collateral will be perfected under Article 9 of the Code upon
due filing of the financing statements in the form attached as Exhibit B in the
---------
offices listed on Schedule I with respect to filings made in filing offices in
----------
the Commonwealth of Massachusetts, or under the Uniform Commercial Code enacted
in the jurisdictions in which such other filing offices are located.
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 9
14. If the Guarantee and Collateral Agreement were governed by the laws
of the Commonwealth of Massachusetts, then after giving effect to the purchase
of the WSDF Note on the Closing Date and assuming that (i) the Agent has, at the
date of this letter, possession of the certificates representing the Pledged
U.S. Shares of the Grantors, together with related stock powers which have been
duly executed in blank by the Borrower and certain of the Grantors, as the case
may be, and maintains continuous possession of the Pledged U.S. Shares and stock
powers, and (ii) on the date hereof the Lender and the Agent do not have notice
of any adverse claim to the Pledged U.S. Shares, then the Agent has a valid and
perfected security interest, for the benefit of the Lender and the Agent, to
secure the Obligations (as defined in the Guarantee and Collateral Agreement),
in all right, title and interest of the Company and the Grantors in and to the
Pledged U.S. Shares, which security interest has priority over any other
security interest in the Pledged U.S. Shares which can be perfected under the
Code.
The foregoing opinions are subject to the following comments and
qualifications:
i. The enforcement against the Borrowers of any rights and remedies is
or may be subject to the effect of certain general principles of contract law
that include (a) the unenforceability of provisions of an agreement to the
effect that provisions therein may only be amended or waived in writing to the
extent that an oral agreement modifying such provisions has been entered into;
and (b) the general rule that, where less than all of an agreement is
enforceable, the balance is enforceable only when the unenforceable provision is
not an essential part of the agreed exchange.
ii. We express no opinion in paragraph 13 as to the creation of security
interests in property in which a security interest cannot be created under the
Code or the perfection of security interests in property in which a security
interest cannot be perfected by the filing of UCC-1 Financing Statements
pursuant to Article 9 of the Code in the filing offices described in Schedule I
----------
hereto. We express no opinion as to the perfection of security interests in
fixtures.
iii. We express no opinion as to the priority of any security interests
granted by the Borrowers to or for the benefit of the Lender except with respect
to Pledged U.S. Shares. We express no opinion as to the existence of, or the
right, title or interest of the Borrowers in, to or under any property in which
it has granted a security interest.
iv. The perfection of the security interests may be terminated as to any
Collateral of a Borrower acquired by such Borrower more than four months after
such Borrower changes its name, identity or corporate structure so as to make
the Financing Statements seriously misleading (within the meaning of Section 9-
402(7) of
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 10
the Code) unless new, appropriate financing statements indicating the new name,
identity or corporate structure of such Borrower are properly filed before the
expiration of such four-month period and all fees in connection therewith are
paid. The perfection of security interests in accounts, including receivables,
general intangibles and certain other Collateral of a Borrower may be terminated
if such Borrower changes the location of its chief executive offices.
v. Pursuant to the Code, continuation statements are required from time
to time to be filed in order to preserve valid, perfected security interests.
vi. We have assumed that the Collateral of the Borrowers is located at
the locations described on Schedule II hereto and that the chief executive
-----------
offices of the Borrowers are located as described on Schedule II.
-----------
vii. We express no opinion as to the adequacy of the description of the
Collateral of the Borrowers as defined in the Note Purchase Agreement insofar as
such description includes terms which are not defined under Article 9 of the
Code.
viii. We express no opinion as to the legal capacity of natural persons.
ix. Under certain circumstances, described in Section 9-306 of the Code,
the right of a secured party to enforce a perfected security interest in the
proceeds of collateral may be limited.
x. The grant of, or any realization on, security interests in
governmental licenses, permits, authorizations and other rights, in contracts
with government or governmental instrumentalities, commissions, boards or
agencies and in the proceeds thereof are or may be subject to restrictions or
limitations set forth therein or in applicable statutes, laws, rules or
regulations, and we express no opinion as to the creation or perfection of
security interests in such rights, contracts or proceeds (to the extent affected
by such restrictions or limitations).
xi. We express no opinion as to the enforceability of prospective
waivers of rights to notice, or to a hearing or other right granted by
constitution or statute, provisions purporting to relieve parties of the
consequences of their own negligence or misconduct, choice of law provisions, or
provisions purporting to establish evidentiary standards.
This opinion is based upon currently existing statutes, rules, regulations
and judicial decisions, and we disclaim any obligation to advise you of any
change in any of these sources of law or subsequent legal or factual
developments which might affect any matters or opinions set forth herein.
Whitney Subordinated Debt Fund, L.P.
July 8, 1998
Page 11
Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters. This opinion
is solely for your benefit, and the benefit of your counsel, in connection with
the consummation of the transactions contemplated by the Note Purchase
Agreement, and may not be quoted or relied upon by any other person or used for
any other purpose, without our prior written consent.
Very truly yours,
/s/ ▇▇▇▇ AND ▇▇▇▇ LLP
▇▇▇▇ AND ▇▇▇▇ LLP
EXHIBIT B-2
[LETTERHEAD OF ▇▇▇▇▇▇▇ - ▇▇▇▇▇▇▇ APPEARS HERE]
Our ref: PJS/9687-l/tsc 8 JULY 1998
Your ref:
Whitney Subordinated Debt Fund, L.P. and
▇ ▇ ▇▇▇▇▇▇▇ & Co., Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
Dear Ladies and Gentlemen:
We have acted as English legal advisers to NMT Neurosciences (International),
Inc ("NMT International"), a Delaware corporation and its wholly owned
subsidiary, NMT Neurosciences (UK) Limited, a company incorporated in England
("NMT UK") in connection with the preparation, execution and delivery of a Deed
of Charge over shares in NMT UK ("the Deed of Charge") between NMT 1nternational
and ▇.▇. ▇▇▇▇▇▇▇ & Co., Inc ("Whitney").
In rendering the opinions expressed below, we have examined:-
(a) the Deed of Charge;
(b) the Certificate of Incorporation of NMT UK;
(c) the Memorandum and Articles of Association of NMT UK certified to be in
effect by a director of NMT UK on 7th July 1998;
(d) the corporate minute books of NMT UK as provided to us by NMT International
from the date of its incorporation to the date hereof;
(e) such other documents as we have considered necessary for purposes of this
opinion.
We assume, for purposes of this opinion, that the corporate minute books
(referred to in clause (d) above) contain an accurate record of all meetings of
the shareholders and directors of NMT UK.
In our examination of the documents described above, we have assumed the
genuineness of all signatures, the capacity, power and authority of all parties
to execute and deliver the Deed of Charge and all other applicable documents,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all copies of documents submitted to us as certified or
photostatic copies, the authenticity of the originals of such latter documents,
the due execution and delivery of the Deed of Charge by NMT International and
Whitney, that the Memorandum and Articles of Association of NMT UK were true
complete and up-to-date as at the
▇▇▇▇▇▇▇ - ▇▇▇▇▇▇▇
solicitors
PAGE 2
▇ ▇ ▇▇▇▇▇▇▇ & CO., INC. 8 JULY 1998
date of this opinion and that the resolutions in the minute books referred to in
clause (d) have not been amended or rescinded and are in full force and effect.
We have assumed that there are no provisions of the laws of any relevant
jurisdiction outside England which would be contravened by the execution,
delivery or performance of the Deed of Charge and that, insofar as any
obligation under the Deed of Charge fails to be performed in any jurisdiction
outside England, its performance will not be illegal or adversely affected by
virtue of the laws or regulations of or applicable in that jurisdiction.
We express no opinion herein with respects to the laws of any state or
jurisdiction other than that of England.
Our opinions below are qualified to the extent that the validity or
enforceability of the documents referred to or of any of the rights granted to
any party pursuant thereto may be subject to or affected by (i) applicable
bankruptcy, insolvency, reorganisation, moratorium, fraudulent conveyance, or
similar laws affecting the rights of creditors generally and (ii) duties and
standards imposed on creditors and parties to contracts, including, without
limitation, requirements of good faith, reasonableness and fair dealing.
Furthermore, we express no opinion as to the availability of any equitable or
specific remedy upon any breach of such documents or any of the agreements,
documents or obligations referred to therein, as the availability of such
remedies may be subject to the discretion of a court.
Based upon and subject to the foregoing, and further subject to the
qualifications set forth below, it is our opinion that:-
(a) NMT UK is a company duly incorporated in England;
(b) The register of members in the corporate minute books of NMT UK records
that NMT International is the holder of the entire issued share capital of
NMT UK consisting of 100 fully paid ordinary shares of (Pounds)1 each, all
of which have been duly issued to NMT International;
(c) To the best of our knowledge, there are no actions, suits, proceedings,
claims or disputes pending or threatened, at law, in equity, in arbitration
or before any court or governmental authority or agency in the UK against
NMT International or NMT UK with respect to the Deed of Charge or the
transactions contemplated thereby. To the best of our knowledge, no
injunction, writ, temporary restraining order, decree or any order of any
nature has been issued by any court or other governmental authority in the
UK purporting to enjoin or restrain the execution, delivery and performance
of the Deed of Charge;
(d) The execution, delivery and performance by NMT International of the Deed of
Charge and the transactions contemplated thereby does not contravene the
terms of NMT's Articles of Association and will not violate, conflict with
or result in any breach or contravention of any requirement of English law;
(e) The Deed of Charge creates an equitable fixed charge over the shares in NMT
UK expressed to be charged thereby;
▇▇▇▇▇▇▇ - ▇▇▇▇▇▇▇
solicitors
PAGE 3
▇ ▇ ▇▇▇▇▇▇▇ & CO., INC. 8 JULY 1998
(f) The Deed of Charge creates a valid and binding obligation of NMT
International, enforceable in accordance with its terms;
(g) Except for filings which are necessary to perfect the security interests
granted under the Deed of Charge and any other filings, authorisations or
approvals as are specifically provided for in the Deed of Charge, no
authorisations or approvals of, and no filings with, any governmental or
regulatory authority or agency in England are necessary under English law
for the execution, delivery or performance by NMT International of the Deed
of Charge.
The foregoing opinions are subject to the following comments and qualifications:
(i) An English court may not give effect to a purported obligation to pay
another party's litigation costs and may make its own order as to costs;
(ii) While English courts have power to give judgment expressed as an order to
pay a currency other than pounds sterling, they may decline to do so in
their discretion and may not enforce the benefit of currency conversion
and indemnity clauses;
(iii) Claims may become barred under the Limitations Act or may be or become
subject to defences of set-off or counterclaim;
(iv) The enforcement of the rights and obligations of the parties to the Deed
of Charge may be limited by the provisions of English law concerning
frustration of contracts;
(v) It is beyond the scope of this opinion to deal comprehensively with
matters concerning property, assets and rights expressed to be subject to
the Deed of Charge and the priority, nature, registration and enforcement
of the Deed of Charge and its effectiveness in all circumstances. In
particular we express no opinion in this letter as to the following
matters:
(a) the marketability or value of any of the shares in NMT UK expressed
to be subject to the Deed of Charge;
(b) the priority of any security or whether any of the shares in NMT UK
are or may become subject to any equities, rights or interests in
favour of any other person in priority to the Deed of Charge or
otherwise;
(vi) The enforcement of security interests is subject to certain rules of law;
for example a person who holds a charge over property cannot sell the
property to himself and owes a duty to take reasonable care to realise
the property for a proper price;
(vii) Clause 9 of the Deed of Charge (Severability) may not be effective under
English law;
(viii) Although Clause 10.2 of the Deed of Charge (Waiver) contemplates written
waivers, an agreement may be varied, amended or discharged by a further
agreement or collateral agreement which may he effected by an oral
agreement or a course of dealing;
▇▇▇▇▇▇▇ - ▇▇▇▇▇▇▇
solicitors
PAGE 4
▇ ▇ ▇▇▇▇▇▇▇ & CO., INC. 8 JULY 1998
(ix) Notwithstanding Clause l of Schedule 3 of the Deed of Charge, as between
NMT International and NMT UK English law entitles NMT International to
receive dividends from NMT UK and to exercise the voting and other rights
in respect of the shares of NMT UK which are subject to the Deed of Charge
while they are registered in the name of NMT International rather than
that of Whitney, whether or not any events of default have occurred. Thus
in theory NMT International could in future procure the issue of further
shares by NMT UK, so diluting the shares which are subject to the Deed of
Charge. Further NMT International could in theory transfer the charged
shares to a third party while they are registered in the name of NMT
International (if NMT International could induce the directors of NMT UK
to issue a duplicate share certificate). To perfect its security Whitney
need to be registered as the holder of the shares. If it is not so
registered, it could protect itself to some extent by serving a stop
notice on NMT UK;
(x) Although the Articles of Association of NMT UK do not give the Directors
of NMT UK the right to refuse registration of any transfer of shares which
are fully paid, they do give the Directors the right to refuse
registration in the case of shares on which NMT UK has a lien. The
Articles of Association could also in theory be amended in the future to
make registration more difficult for Whitney. To perfect its security
Whitney need to be registered as the holder of the shares.
This opinion is based upon currently existing statutes, rules, regulations and
judicial decisions, and we disclaim any obligation to advise you of any change
in any of these sources of law or subsequent legal or factual developments which
might affect any matters or opinions set forth herein.
Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters. This opinion
is solely for your benefit, and the benefit of your Counsel, in connection with
the consummation of the transactions contemplated by the Deed of Charge, and may
not be quoted or relied upon by any other person or used for any other purpose,
without our prior written consent.
Very truly yours,
/s/ ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
EXHIBIT B-3
[LETTERHEAD OF ▇▇▇▇▇ DUTILH APPEARS HERE]
Whitney Subordinated Debt Fund, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
July 9, 1998
Ladies and Gentlemen:
This opinion is rendered to you at your request with respect to certain matters
of Netherlands Law relating to Yellow Tape B.V. ("Yellow Tape") and Nitinol
-----------
Medical Technologies International B.V. ("Nitinol"), each of the companies
-------
organized under Netherlands law, in connection with a notarial agreement and
deed of pledge dated July 9, 1998 among (i) NMT Neurosciences (International),
Inc., a Delaware corporation ("NMT") as pledgor of certain shares in Yellow
---
Tape, (ii) Nitinol Medical Technologies, Inc., a Delaware Corporation (the
"Borrower") as pledgor of certain shares in Nitinol, (iii) ▇.▇. ▇▇▇▇▇▇▇ & Co.,
--------
Inc., a Delaware corporation ("Whitney"), acting not for itself but solely in
-------
its capacity as security agent of Whitney Subordinated Debt Fund, L.P., a
Delaware limited partnership (the "Purchaser") and any holders of any note from
---------
time to time pursuant to the Purchase Agreement (as defined below), (Whitney
acting in such capacity the "Agent"), (iv) Yellow Tape and (v) Nitinol (such
-----
notarial agreement and deed of pledge the "Deed of Pledge").
--------------
As the basis for my opinion, I have exclusively examined the following
documents:
(i) a copy of the deed of incorporation dated December 2, 1997 of Yellow Tape
(the "Yellow Tape Deed of Incorporation"), containing the articles of
---------------------------------
association of Yellow Tape (the "Yellow Tape Articles of Association");
-----------------------------------
-2-
(ii) a copy of the deed of incorporation dated February 24, 1997 of Nitinol
(the "Nitinol Deed of Incorporation"), containing the articles of
-----------------------------
association of Nitinol (the "Nitinol Articles of Association");
-------------------------------
(iii) a facsimile copy of an extract dated July 7, 1998 from the Commercial
Register of the Chamber of Commerce and Industry of Amsterdam under
registration number 33298255 relating to Yellow Tape (the "Yellow Tape
-----------
Extract"), confirmed by me by telephone to be correct as of the date
-------
hereof, except for the fact that the appointment of Messrs. ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as members of the board of managing
directors as of July 7, 1998 has not yet been accounted for in the
Yellow Tape Extract;
(iv) as extract dated June 26, 1998 from the Commercial Register of the
Chamber of Commerce and Industry of Centraal Gelderland under
registration number 10148235 relating to Nitinol (the "Nitinol Extract")
---------------
confirmed by me by telephone to be correct as of the date hereof;
(v) a facsimile copy of the relevant pages of the shareholders' register of
Yellow Tape (the "Yellow Tape Shareholdersregister");
--------------------------------
(vi) a facsimile copy of the relevant pages of the shareholders' register of
Nitinol (the "Nitinol Shareholdersregister");
----------------------------
(vii) a facsimile copy of an executed copy of written resolutions of the board
of managing directors of Yellow Tape dated July 8, 1998 authorizing the
execution of the Deed of Pledge (the "Yellow Tape Resolution");
----------------------
(viii) a facsimile copy of an executed copy of written resolutions of the board
of managing directors of Nitinol dated July 8, 1998 authorizing the
execution of the Deed of Pledge (the "Nitinol Resolution");
------------------
(ix) a copy of a signed statement dated July 8, 1998 by NMT in its capacity
as Yellow Tape's sole shareholder confirming that the execution and
delivery of the Deed of Pledge and all documents relating thereto are
not subject to approval of Yellow Tape's general meeting of
-3-
shareholders pursuant to article 7.9 of the Yellow Tape Articles of
Association (the "NMT Confirmation Statement");
--------------------------
(x) a copy of a signed statement dated July 8, 1998 by the Borrower in its
capacity as Nitinol's sole shareholder confirming that the execution and
delivery of the Deed of Pledge and all documents relating thereto are not
subject to approval of Nitinol's general meeting of shareholders pursuant
to article 13.1 of the Nitinol Articles of Association (the "Borrower
--------
Confirmation Statement");
----------------------
(xi) a facsimile copy of a power of attorney granted by Yellow Tape dated July
8, 1998 authorizing the execution of the Deed of Pledge by each lawyer of
the lawfirm Stibbe Simont ▇▇▇▇▇▇▇ Duhot in Amsterdam (the "Yellow Tape
-----------
Power of Attorney");
-----------------
(xii) a facsimile copy of a power of attorney granted by Nitinol dated July 8,
1998 authorizing the excution of the Deed of Pledge by each lawyer of the
lawfirm Stibbe Simont ▇▇▇▇▇▇▇ Duhot in Amsterdam (the "Nitinol Power of
----------------
Attorney");
--------
(xiii) a facsimile copy of the executed copy of the Deed of Pledge.
(xiv) a facsimile copy of an executed copy of a subordinated note and common
stock purchase agreement dated as of July 8, 1998 among (i) the Borrower,
(ii) the Purchaser and (iii) Whitney (the "Purchase Agreement");
------------------
(xv) a facsimile copy of an executed copy of a guarantee and collateral
agreement dated as of July 8, 1998 among (i) the Borrower and (ii)
certain of the Borrower's US subsidiaries, in favor of the Agent (the
"Guarantee and Collateral Agreement"); and
----------------------------------
(xvi) a facsimile copy of an executed copy of a 10.101% US$20,000,000
subordinated promissory note due September 30, 2003 dated July 8, 1998 by
the Borrower (the "Note").
----
The Purchase Agreement, the Guarantee and Collateral Agreement and the Note
shall hereinafter be jointly referred to as the "New York Documents".
------------------
-4-
As to matters of fact I have relied upon the documents I have examined and upon
statements or certificates of directors or representatives of Yellow Tape,
Nitinol, NMT or the Borrower and of public officials.
The following opinion is limited in all respects to the laws of (i) the
Netherlands with general applicability and (ii) the European Union insofar as
they are directly applicable in the Netherlands, as they stand at the date
hereof and as they are presently interpreted under published case law of the
courts of the Netherlands ("Netherlands Law"). I do not express any opinion on
---------------
tax law, on public international law or on the rules promulgated under or by any
treaty or treaty organization.
In this opinion letter Netherlands legal concepts are expressed in English terms
and not always in their original Netherlands terms. The concepts concerned may
not be identical to the concepts described by the same English terms as they
exist under the laws of other jurisdictions.
In rendering this opinion, I have assumed that:
(a) all original documents are authentic and the signatures thereon are genuine
and all documents submitted to me as final drafts of documents or as
photocopy or facsimile copy are in conformity with the executed originals;
(b) the Yellow Tape Deed of Incorporation has been signed by a civil law
notary (notaris) and the contents of the Yellow Tape Deed of Incorporation
are correct and complete;
(c) the Nitinol Deed of Incorporation has been signed by a civil law notary
(notaris) and the contents of the Nitinol Deed of Incorporation are correct
and complete;
(d) the Yellow Tape Extract was true, complete and correct on the date of its
issue and would be identical and also true, complete and correct if issued
on, as applicable, the date of the execution of each of the Deed of Pledge,
the Yellow Tape Resolution, the NMT Confirmation Statement and the Yellow
Tape Power of Attorney;
-5-
(e) the Nitinol Extract was true, complete and correct on the date of its issue
and would be identical and also true, complete and correct if issued on, as
applicable, the date of the execution of each of the Deed of Pledge, the
Nitinol Resolution, the Borrower Confirmation Statement and the Nitinol
Power of Attorney;
(f) immediately prior to the execution of the Deed of Pledge, the information
contained in the Yellow Tape Shareholdersregister was true and correct;
(g) immediately prior to the execution of the Deed of Pledge, the information
contained in the Nitinol Shareholdersregister was true and correct;
(h) (i) each of the parties to the New York Documents and the Deed of Pledge,
other than Yellow Tape and Nitinol, has been duly incorporated, is and at
the time of the execution of the Deed of Pledge was validly existing and,
to the extent relevant in such party's jurisdiction, in good standing under
the laws applicable to such party, (ii) each of the parties to the New York
Documents and the Deed of Pledge, other than Yellow Tape and Nitinol, has
and had at the time of the execution of the New York Documents and the Deed
of Pledge, all requisite power (corporate and otherwise) to execute and
deliver, and to perform its obligations under, each of the New York
Documents and the Deed of Pledge to which it is a party, and (iii) under
any applicable law, other than Netherlands Law, the New York Documents and
the Deed of Pledge have been duly executed and delivered by each of the
parties thereto;
(i) the New York Documents constitute under any applicable law, other than
Netherlands Law, including the laws of the State of New York to which they
are expressed to be subject, the valid, legal and binding obligations of
all parties thereto, enforceable against such parties in accordance with
their respective terms;
(j) the jurisdiction provision in the Purchase Agreement and the Guarantee and
Collateral Agreement is valid under the laws of the State of New York and
the courts of the State of New York would accept jurisdiction on the basis
thereof;
-6-
(k) at the moment of the execution of the Deed of Pledge (i) NMT was the owner
(eigenaar) and had full right to dispose (beschikkingsbevoegd) of the
Shares 01 (as defined in the Deed of Pledge) and the Rights (as defined in
the Deed of Pledge) relating thereto, and (ii) such Shares 01 and Rights
were not encumbered by any limited rights (beperkte rechten) or attachments
(beslagen);
(l) at the moment of the execution of the Deed of Pledge (i) the Borrower was
the owner (eigenaar) and had full right to dispose (beschikkingsbevoegd) of
the Shares 02 (as defined in the Deed of Pledge) and the Rights (as defined
in the Deed of Pledge) relating thereto, and (ii) such Shares 02 and Rights
were not encumbered by any limited rights (beperkte rechten) or attachments
(beslagen);
(m) the description of the Collateral (as defined in the Deed of Pledge)
sufficiently identifies (omschrijft met voldoende bepaaldheid) such
collateral within the meaning of Article 84, Section 2 of Volume 3 of the
Netherlands Civil Code (the "CC");
--
(n) to the extent future goods (toekomstige goederen) including future
registered claims (toekomstige vorderingen op naam) are part of the Rights
(as defined in the Deed of Pledge), NMT or the Borrower, as applicable,
shall at such future date be the proprietor (rechthebbende) and shall,
under the law applicable to such Rights have the right to dispose of
(beschikkingsbevoegdheid) and shall be validly obligated to pledge such
Rights and such Rights shall not be encumbered by any limited rights
(beperkte rechten) or attachments (beslagen);
(o) the Rights (as defined in the Deed of Pledge) are capable of being pledged
under Netherlands Law;
(p) the obligations under, or pursuant to, the New York Documents, to the
extent secured by the Deed of Pledge, are sufficiently identifiable
(voldoende bepaalbaar) within the meaning of Article 231, Section 2 of
Volume 3 of the CC;
-7-
(q) the Yellow Tape Resolution, the Nitinol Resolution, the NMT Confirmation
Statement, the Borrower Confirmation Statement, the Yellow Tape Power of
Attorney and the Nitinol Power of Attorney have been duly executed, have
not been nor will be, wholly or partly, cancelled or revoked, amended,
terminated or wholly or partly invalidated or declared null and void by a
court of law;
(r) at the time of the Yellow Tape Resolution and the NMT Confirmation
Statement, no depository receipts of shares in Yellow Tape had been issued
and none of the shares in Yellow Tape was pledged or encumbered with a
right of usufruct;
(s) at the time of the Nitinol Resolution and the Borrower Confirmation
Statement, no depository receipts of shares in Nitinol had been issued and
none of the shares in Nitinol was pledged or encumbered with a right of
usufruct;
(t) at the date of the execution of the New York Documents and the Deed of
Pledge on the date of this opinion Yellow Tape had/has not been dissolved
(ontbonden), granted suspension of payments (surscance van betaling
verleend) or declared bankrupt (failliet verklaard); it being hereby
confirmed that our today's inquiries with the Trade Register of the Chamber
of Commerce and Industry in Amsterdam and the District Court of Amsterdam
have not revealed any information that any such event has occurred, but it
should be noted that this is not conclusive evidence that no such event has
occurred; and
(u) at the date of the execution of the New York Documents and the Deed of
Pledge on the date of this opinion Nitinol had/has not been dissolved
(ontbonden), granted suspension of payments (surscance van betaling
verleend) or declared bankrupt (failliet verklaard); it being hereby
confirmed that our today's inquiries with the Trade Register of the Chamber
of Commerce and Industry in Centraal Gelderland and the District Court of
Den ▇▇▇▇ have not revealed any information that any such event has
occurred, but it should be noted that this is not conclusive evidence that
no such event has occurred.
-8-
Based upon and subject to the foregoing and subject to the qualifications listed
below and to any factual matters, documents or events not disclosed to me in the
course of my examination referred to above, I am at the date hereof of the
opinion that:
(1) Yellow Tape has been duly incorporated and is validly existing under
Netherlands Law as a legal entity in the form of a besloten vennootschap
met beperkte aansprakelijkheid (closed company with limited liability).
(2) Nitinol has been duly incorporated and is validly existing under
Netherlands Law as a legal entity in the form of besloten vennootschap met
beperkte aansprakelijkheid (closed company with limited liability).
(3) Yellow Tape has the corporate power to execute, deliver and perform its
obligations under the Deed of Pledge.
(4) Nitinol has the corporate power to execute, deliver and perform its
obligations under the Deed of Pledge.
(5) Yellow Tape has taken all necessary corporate action to authorize the
execution, delivery and performance of its obligations under the Deed of
Pledge and the entry into the Deed of Pledge by Yellow Tape does not
violate the Yellow Tape Articles of Association or any applicable provision
of Netherlands Law.
(6) Nitinol has taken all necessary corporate action to authorize the
execution, delivery and performance of its obligations under the Deed of
Pledge and the entry into the Deed of Pledge by Nitinol does not violate
the Nitinol Articles of Association or any applicable provision of
Netherlands Law.
(7) The Deed of Pledge has been duly executed and delivered by Yellow Tape.
(8) The Deed of Pledge has been duly executed and delivered by Nitinol.
-9-
(9) The Deed of Pledge creates a valid first ranking right of pledge (eerste
pandrecht) on the Shares and the Rights as defined therein, in favor of
Agent, which right of pledge is enforceable in the Netherlands in
accordance with its terms and the applicable provisions of Netherlands Law.
The opinions expressed above are subject to the following qualifications:
(A) The opinions expressed in paragraphs (3) and (4) above are limited by any
applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application at the time of the execution of the
Deed of Pledge, now or hereafter in effect, relating to or effecting the
enforcement or protection of creditors' rights.
(B) The enforcement of the pledge created pursuant to the Deed of Pledge will
not be affected by the bankruptcy (faillissement) or suspension of payments
(surseance van betaling) of Yellow Tape or Nitinol, provided that (i) a
receiver in bankruptcy (curator) may require the holder of such pledge to
foreclose it within a reasonable time, and if such holder fails to do so
the receiver can sell the underlying assets himself and pay the proceeds to
such holder, and (ii) the foreclosure of such pledge can be suspended by a
court, at the request of any interested party, for a period not exceeding
two months.
(C) Any opinions expressed herein with respect to the validity of the Deed of
Pledge or any legal act (rechtshandeling) forming part thereof or
contemplated thereby are limited by the protection afforded by Netherlands
Law pursuant to rules regarding fraudulent conveyance (Actio Pauliana) to
creditors whose interests have been injured.
(D) The obligations of a party to an agreement, to the extent Netherlands Law
is applicable, are subject to and limited by rules of force majeure (niet
toerekenbare tekortkoming), set-off, reasonableness and fairness
(redelijkheid en billijkheid), unforeseen circumstances (onvoorziene
omstandigheden) and other defenses afforded by Netherlands Law to obligors
generally. Under Netherlands Law the remedy of specific performance may not
always and in all circumstances be available.
-10-
(E) The opinion expressed in paragraph (9) above is limited to the extent that
(i) no opinion is rendered that the rights of pledge created by means of
the Deed of Pledge can be enforced in any jurisdiction other than the
Netherlands and that such other jurisdiction would recognize, give such
effect or grant such priority to such rights of pledge as would be the case
in the Netherlands and (ii) the foreclosure under the rights of pledge,
created by the Deed of Pledge, will be subject to certain mandatory share
transfer restrictions (blokkeringsregelingen) in Article 5 of the Yellow
Tape Articles of Association and Article 8 of the Nitinol Articles of
Association.
(F) I do not render any opinion on the recognition or enforceability in the
Netherlands of the security interests purporting to be created pursuant to
the New York Documents.
(G) To the extent Netherlands Law is applicable, any provision in the New York
Documents or the Deed of Pledge to the effect that such agreement or any of
the provisions thereof shall be binding on the successors or assigns of any
party thereto may not be valid in the absence of an agreement with any such
assign or successor.
(H) Any substitution of the Agent as contemplated in Section 8.5 of the
Guarantee and Collateral Agreement (Successors and Assigns) will result in
the former Agent losing the benefit of the Deed of Pledge without the
substitute agent acquiring such benefits. Consequently, in the event of
such substitution, (a) the security interests created in favor of the Agent
pursuant to the Deed of Pledge and (b) the right to administer (beheren)
and dispose of (beschikken) the rights in respects of the Shares (as
referred to in the Deed of Pledge) and the Rights (as referred to in the
Deed of Pledge) will need to be re-established by way of the re-execution
of a replacement Deed of Pledge.
(I) In accordance with Netherlands law a power of attorney can only be made
irrevocable to the extent its object is the performance of
rechtshandelingen (juridical acts) in the interest of the representative
appointed thereby or of a third party. In accordance with Netherlands law
any power of attorney or mandate will terminate upon the faillissement
(bankruptcy) or becomes ineffective upon the surseance van betaling
(suspension of payments) of the issuer thereof.
-11-
(J) Pursuant to Article 7 Volume 2 of the CC any transactions entered in to by
a legal entity (such as Yellow Tape and Nitinol) may be nullified if the
objects of such entity were transgressed thereby and the other party to the
transaction knew or should have known this without independent
investigation. The description of the objects of Yellow Tape in Article 2
of the Yellow Tape Articles of Association include "... to provide security
for the debts of legal persons or of other companies with which the company
is affiliated in a group..." and the description of the objects of Nitinol
in Article 2 of the Nitinol Articles of Association include "... to provide
guarantees and to bind the company, or assets of the company, for the
benefit of enterprises and corporations with which the company is
affiliated in a group...". However, there is no case law confirming that
this fact alone is sufficient to conclude that the granting of such
security, would not be ultra ▇▇▇▇▇. The view is widely expressed in the
literature that a transaction which patently violates the interest of a
company is ultra ▇▇▇▇▇ regardless of the description of the objects in its
article of association.
The opinion speaks as of its date. It is addressed solely to you and your
permitted successors, transferees and assigns. It may not be relied upon by any
person other than you and without my prior written consent, its contents may not
be disclosed to third parties, save to Yellow Tape's and Nitinol's law legal
advisor who may rely upon this opinion as though it were addressed to him.
Sincerely,
/s/ ▇▇▇▇▇▇▇ Norbruis
▇▇▇▇▇▇▇ Norbruis
EXHIBIT D
DATED 1998
------------------------------
(1) NMT NEUROSCIENCES (INTERNATIONAL), INC,
as chargor
(2) ▇. ▇. ▇▇▇▇▇▇▇ & CO., INC, as trustee
---------------------------------------
CHARGE OVER SHARES
in NMT NEUROSCIENCES (UK) LTD
---------------------------------------
▇▇▇▇ & MAW
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Tel: + 44 (▇)▇▇▇-▇▇▇ ▇▇▇▇
Fax: +44 (▇)▇▇▇-▇▇▇ ▇▇▇▇
Ref: 184
CONTENTS
CLAUSE SUBJECT MATTER PAGE
1. Definitions And Interpretation 1
2. Charging Clause 3
3. Warranties And Covenants 4
4. The Agent's Powers 4
5. Coutinuing Security 4
6. Releases Conditional, Retention Of Security 4
7. Third Party Protection 5
8. Indemnities 5
9. Severability 6
10. Amendments, Waivers And Rights 6
11. Assignment 7
12. Law And Jurisdiction 8
13. Notices 8
14. Counterparts 9
SCHEDULE
1. Representations and Warranties 10
2. Covenants 11
3. The Agent's Powers 14
CHARGE OVER SHARES
DATE:
PARTIES:
(1) NMT NEUROSCIENCES (INTERNATIONAL), INC., a company incorporated in
Delaware, whose principal place of business is at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "CHARGOR"); and
(2) ▇. ▇. ▇▇▇▇▇▇▇ & CO., INC, a company incorporated in Delaware, whose
principal place of business is at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ (the "AGENT") as trustee.
BACKGROUND:
(A) Pursuant to a subordinated note and common stock purchase agreement (the
"NOTE PURCHASE AGREEMENT") made on or about the date of this Charge
between (1) Whitney Subordinated Debt Fund, L.P. (the "PURCHASER") and (2)
Nitinol Medical Technologies, Inc. ("NITINOL"), Nitinol has agreed to issue
and the Purchaser has agreed to purchase the WSDF Note (as defined in the
Note Purchase Agreement).
(B) Pursuant to a guarantee and collateral agreement (the "GUARANTEE AND
COLLATERAL AGREEMENT") made on or about the date of this Charge between (1)
various parties, including Nitinol and the Chargor, as grantors and (2) the
Agent as agent for the Purchaser, the CHARGOR has (amongst other things)
granted security for its obligations relating to the Notes (as defined in
the Note Purchase Agreement).
(C) It is a condition precedent to the obligation of the Purchaser to purchase
the WSDF Note from Nitinol under the Note Purchase Agreement that the
Chargor shall have executed and delivered in favour of the Agent this
Charge over 65% of the shares held by it in the Company.
(D) The Agent holds the benefit of this Charge, including without limitation
the security created and other rights granted in it, on trust for the
Lenders and itself.
(E) This document is the deed of the Chargor even if it has not been duly
executed by the Agent or has been duly executed by the Agent, but not as a
deed.
THIS DEED WITNESSES THAT:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS
In this Charge (including time Background):
"BORROWER OBLIGATIONS" has the meaning given to it in the Guarantee and
Collateral Agreement and for the avoidance of doubt includes, without
limitation, any obligation or liability owed by the Charger to the Agent
under this Charge.
1
"CHARGED SECURITIES" means the Shares and all other shares and other assets
and rights from time to time the subject of this Charge.
"COMPANY" means NMT Neurosciences (UK) Limited, a company incorporated in
England with limited liability (registered number 3576961); registered
office ▇/▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇, ▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇.
"EVENT OF DEFAULT" shall have the meaning given to it in the Notes.
"GUARANTEE AND COLLATERAL AGREEMENT" has the meaning given to it in
Background (B).
"INTEREST RATE" means the rate applicable to default interest referred to
in the Notes.
"LENDERS" means the Purchaser and any holder of any Note from time to time.
"LOAN DOCUMENT" shall have the meaning given to it in the Guarantee and
Collateral Agreement.
"LOSSES" means losses, claims, demands, actions, proceedings, damages or
other payments, costs, expenses and other liabilities of any kind.
"NOTE PURCHASE AGREEMENT" has the meaning given to it in Background (A).
"NOTES" and "WSDF NOTE" have the meanings given to them respectively in the
Note Purchase Agreement.
"PURCHASER" has the meaning given to it in Background (A).
"SECURITY INTEREST" means any debenture, mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-off, title retention or other
arrangement or agreement the effect of which is the creation of security.
"SHARES" means the 65 ordinary shares in the capital of the Company
numbered 1 to 65, being 65% of the issued share capital of the Company.
1.2 INDEX AND HEADINGS
The index and headings are for convenience only and shall not affect the
interpretation of this Charge.
1.3 REFERENCES
In this Charge, unless the context requires otherwise, any reference to:
(a) the AGENT, or the CHARGOR respectively includes its successors in
title and assigns and this Charge shall be enforceable notwithstanding
any change in the constitution of the Agent, its absorption in or
amalgamation with any other person or the acquisition of all or part
of its undertaking by any other person;
2
(b) a PARTY or the PARTIES is to a party or the parties (as the case may
be) to this Charge;
(c) a BACKGROUND, CLAUSE or SCHEDULE is to the relevant statement of the
background of, clause of or schedule to this Charge (as the case may
be) and references made in a Schedule to PARAGRAPHS are to paragraphs
of that Schedule;
(d) this CHARGE (including the Schedules, which form part of this Charge
for all purposes) is to this Charge and the security created by,
pursuant to or supplemental to it;
(e) a STATUTE or STATUTORY PROVISION includes any consolidation, re-
enactment, modification or replacement of the same and any subordinate
legislation in force under the same from time to time;
(f) the MASCULINE FEMININE or NEUTER gender respectively includes the
other genders, references to the SINGULAR include the PLURAL (and vice
versa) and references to PERSONS include firms, corporations and
unincorporated associations; and
(g) a DOCUMENT is to that document as varied, supplemented or replaced
from time to time.
1.4 TERMS DEFINED IN NOTE PURCHASE AGREEMENT
Terms defined in the Note Purchase Agreement but not defined in this Charge
shall mean the same in this Charge.
2. CHARGING CLAUSE
As security for the Borrower Obligations, the Chargor, with full title
guarantee, charges to the Agent by way of first fixed charge:
(a) the Shares;
(b) all allotments, accretions, offers, rights, benefits and advantages
whatever at any time accruing, offered or arising in respect of or
incidental to the Shares including (without limitation) any dividends
or other distributions declared from time to time, and
(c) all stocks, shares, rights, money or property accruing to the Shares
or offered at any time by way of conversion, redemption, bonus,
preference, option or otherwise in respect of the Shares.
This is without prejudice to Paragraph 1.1 (Prior to an Event of Default)
of Schedule 3 (The Agent's Powers).
3
3. WARRANTIES AND COVENANTS
The Chargor represents and warrants to the Agent as set out in Schedule 1
(Representations and Warranties) and covenants with the Agent as set out in
Schedule 2 (Covenants).
4. THE AGENT'S POWERS
The Agent shall have the powers set out in Schedule 3 (The Agent's Powers).
5 CONTINUING SECURITY
5.1 CONTINUING SECURITY
This Charge is a continuing security and shall secure the ultimate balance
of the Borrower Obligations, notwithstanding intermediate payment or
discharge of the whole or part of the Borrower Obligations to the Agent and
also notwithstanding liquidation or other incapacity of the Chargor or the
Company, or any change in the constitution, name or style of the Chargor or
the Company or any other event, matter or thing.
5.2 ADDITIONAL TO OTHER RIGHTS
This Charge is in addition to (and shall not merge with, otherwise
prejudice or affect or be prejudiced or affected by) any other remedy,
guarantee, indemnity, Security Interest or other right or interest which
may be or have been created in favour of the Agent in respect of the
Borrower Obligations. Accordingly, this Charge may be enforced
notwithstanding:
(a) the existence or invalidity of all or any of those rights and
interests; and
(b) the Agent or any of the Lenders at any time exchanging, releasing,
varying, abstaining from perfecting or enforcing or otherwise dealing
or omitting to deal with all or any of those rights and interests.
6. RELEASES CONDITIONAL, RETENTION OF SECURITY
6.1 RELEASES CONDITIONAL
Any release, settlement, discharge, re-assignment or arrangement (in this
Clause 6 a "release") made by the Agent on the faith of any assurance,
security or payment shall be conditional on the assurance, security or
payment not being avoided, reduced, clawed back or ordered to be repaid
under any enactment relating to liquidation, bankruptcy or insolvency. If
any avoidance, clawback or reduction occurs or such order is made, the
release given by the Agent shall have no effect and shall not prejudice
the right of the Agent to enforce this Charge in respect of the Borrower
Obligations and, as between the Chargor and the Agent, this Charge shall
(notwithstanding the release) be deemed to have remained at all times in
effect and held by the Agent as security for the Borrower Obligations.
4
6.2 RETENTION
Unless and until the Agent, acting reasonably, is satisfied as to the
solvency of the Chargor, the Agent may retain this Charge after the
payment, discharge or satisfaction of all of the Borrower Obligations and
notwithstanding any such payment, discharge or satisfaction for such period
as the Agent, acting reasonably, may consider that any such payment,
release or discharge is susceptible of being avoided, reduced or ordered to
be repaid under any enactment relating to liquidation, bankruptcy or
insolvency. In the event of the commencement of the bankruptcy or winding-
up of the person making such payment or effecting such discharge or
satisfaction at any time within that period, the Agent shall be entitled to
retain any such security for such further period as the Agent, acting
reasonably, may determine.
7. THIRD PARTY PROTECTION
No purchaser, mortgagee or other person dealing with the Agent shall be
concerned:
(a) to enquire whether any of the Borrower Obligations have become due or
payable or remain unpaid or undischarged or whether the power which
the Agent is purporting to exercise has become exercisable: or
(b) to see to the application of any money paid to the Agent.
8. INDEMNITIES
8.1 COSTS AND EXPENSES
The Chargor shall indemnify the Agent fully (and in the case of legal costs
and expenses on a solicitor and own client basis, such legal costs and
expenses where incurred prior to an enforcement of this Charge to be
limited to reasonable legal costs and expenses) on demand against all
Losses incurred by (or made or brought against) it (or any manager or agent
appointed by it or him) except Losses arising from a wilful misconduct or
gross negligence of the Agent or any Lender:
(a) as a result of any failure by the Chargor to perform any of its
obligations under this Charge;
(b) in the exercise (or purported exercise) of any of the powers or rights
conferred by this Charge or by any other Security Interest granted
(whether by the Chargor, the Company or any third party) for all or
part of the Borrower Obligations; or
(c) for any other matter or thing done or omitted relating to the Charged
Securities or the assets secured by any such other Security Interest,
together in each case with interest calculated on a daily basis from the
date it is incurred or becomes payable by the Agent at the Interest Rate,
compounded quarterly.
5
8.2 CURRENCY INDEMNITY
(1) Any payment by the Chargor under this Charge shall be made in the currency
(in this Clause 8.2 the "CONTRACTUAL CURRENCY") in which the relevant
Borrower Obligations were denominated or incurred. If in respect of any of
the Borrower Obligations the Agent receives payment or that Borrower
Obligation is converted into a claim, proof, judgment or order, in either
case in a currency other than the Contractual Currency, then:
(a) the Chargor shall indemnify the Agent against any loss or liability
directly resulting from the conversion;
(b) if the amount received by the Agent, when converted into the
Contractual Currency by the Agent, is less than the amount of the
relevant Borrower Obligation in the Contractual Currency, then the
Chargor shall on demand pay to the Agent an amount in the Contractual
Currency equal to the difference; and
(c) the Chargor shall on demand pay to the Agent any exchange costs and
taxes payable in Connection with any conversion referred to in this
Clause 8.2.
(2) If and to the extent that the Chargor fails to pay on demand any amount due
under this Charge, the Agent may in its absolute discretion (and without
notice to the Chargor) purchase at any time after that so much of a
currency as the Agent considers necessary or desirable to cover any part of
the Borrower Obligations denominated or incurred in such currency. That
purchase shall be made at the then-prevailing spot rate of exchange
obtained by the Agent (as conclusively determined by the Agent) for
purchasing such currency with sterling. The Chargor agrees to indemnify
the Agent against the full ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (including all costs, charges
and expenses) paid by the Agent for such currency.
(3) All moneys received or held by the Agent from the Chargor or under this
Charge may from time to time be converted into such other currency as the
Agent considers necessary or desirable to cover any part of the Borrower
Obligations denominated or incurred in that currency. That conversion shall
be made at the then-prevailing spot rate of exchange obtained by the Agent
(as conclusively determined by the Agent) for purchasing tile currency to
be acquired with the existing currency.
9. SEVERABILITY
If any part of any provision of this Charge shall be or become invalid or
unenforceable under any applicable law, then the remainder of that
provision and all other provisions of this Charge shall remain valid and
enforceable.
10. AMENDMENTS, WAIVERS AND RIGHTS
10.1 AMENDMENTS
No amendment or variation of the terms of this Charge shall be effective
unless it is made or confirmed in a written document signed by the parties.
6
10.2 WAIVER
No delay in the exercise or non-exercise by the Agent of any of its rights
under or in connection with this Charge shall operate as a release or
waiver of that right. Rather, any such waiver or release must be
specifically granted in writing signed by an authorised signatory of the
Agent and shall:
(a) be confined to the specific circumstances in which it is given;
(b) not affect any other enforcement of the same or any other right; and
(c) (unless it is expressed to be irrevocable) be revocable at any time
in writing.
10.3 RIGHTS AND REMEDIES CUMULATIVE
The rights and remedies of the Agent under this Charge are cumulative and
not exclusive of any rights or remedies of the Agent under the general
law. The Agent may exercise each of its rights as often as it thinks
necessary.
10.4 NO DUTY
The Agent shall be under no duty of any kind to the Chargor in respect of
the exercise or non-exercise of any of its rights under this Charge. The
Chargor shall not rely on such exercise or non-exercise in any way.
11. ASSIGNMENT
11.1 ASSIGNMENT BY AGENT
The Agent may assign all or any of its rights under this Charge to any
successor agent for the Lenders appointed from time to time by the
Lenders, without any requirement to notify the Chargor or obtain its
further consent. Any assignee or successor in title of the Agent shall be
treated for all purposes as if it had been an original party to this
Charge in addition to the Agent.
11.2 DISCLOSURE
Notwithstanding any confidentiality obligation imposed on the Agent, it
may disclose to any assignee, bona fide proposed assignee or person with
whom from time to time it has or wishes to enter into an agreement in
connection with this Charge such information about the Chargor as it
reasonably thinks fit.
11.3 DOCUMENTING ASSIGNMENTS
The Chargor shall on demand enter into such documents effecting such
assignment as the Agent may require and under which:
(a) the Agent will be released from all further liability arising under
this Charge;
(b) the successor shall undertake all obligations of the Agent with
effect from the date of such transfer; and
7
(c) the Chargor will covenant with that successor to observe and perform
its obligations under this Charge.
11.4 NO ASSIGNMENT BY CHARGOR
This Charge shall be binding on the Chargor's successors and assigns, but
the Chargor may not assign, transfer or otherwise dispose of any of its
rights or obligations under this Charge.
12. LAW AND JURISDICTION
12.1 LAW
This Charge shall be governed by and construed in accordance with English
law.
12.2 JURISDICTION
For the exclusive benefit of the Agent, the courts of England shall have
jurisdiction to settle any disputes which may arise in connection with
this Charge; but the Agent may bring proceedings in connection with this
Charge in any other court of competent jurisdiction.
12.3 PROCESS AGENT
(1) The Chargor shall at all times maintain an agent for service of process in
England.
(2) The Chargor appoints the Company (at its registered office from time to
time) as its agent for that purpose. The Chargor may not revoke such
appointment
(3) If for any reason an agent appointed under this Clause 12.3 ceases to act
as such, the Chargor shall promptly appoint another agent and notify the
Agent of its appointment and its name and address. If the Chargor does
not make such an appointment within seven days of that cessation, then the
Agent may do so on its behalf and shall notify the other parties if it
does so.
13. NOTICES
All notices, demands and other communications made by the Agent relating
to this Charge may (without prejudice to any other effective mode of
making the same) be delivered or sent to the agent referred to in Clause
12.3 (Process Agent) or such other address in England and Wales of which
the Agent has received no less than 15 business days' prior written actual
notice from the Chargor, as the case may be, and shall take effect:
(a) if delivered, upon delivery;
(b) if posted, at the earlier of the time of delivery and (if posted in
the United Kingdom by first class registered post) 10.00am on the
second business day after posting; and
8
(c) if sent by facsimile, when a complete and legible copy of the
communication, whether that sent by facsimile or a hard copy sent by
post or delivered by hand, has been received at the appropriate
address,
provided that if any communication would otherwise become effective on a
non-business day or after 5.00pm on a business day, it shall instead
become effective at 10.00am on the next business day. Section 196 of the
Law of Property Act 1925 shall not apply to this Charge.
14. COUNTERPARTS
This Charge may be executed in any number of counterparts, which shall
together constitute one instrument.
EXECUTION:
The parties have shown their acceptance of the terms of this Charge by executing
it, in the case of the Chargor as a deed, at the end of the Schedules.
9
SCHEDULE 1.
REPRESENTATIONS AND WARRANTIES
1. TITLE
1.1 TITLE TO THE SHARES
The Chargor represents and warrants that with regard to the Shares:
(a) it is the sole beneficial and legal owner of them, free from any
options or Security Interest;
(b) they are fully paid;
(c) there are no moneys or liabilities outstanding or payable in respect
of them or any of them;
(d) it is lawfully entitled to create this Charge over them in favour of
the Agent;
(e) they constitute 65% of the issued share capital of the Company; and
(f) they are fully transferable to the Agent or such other person as the
Agent shall direct, without restriction.
1.2 TITLE TO CHARGED SECURITIES
The Chargor further represents and warrants that Paragraph 1.1 (a) to (d)
and (f) will be true and accurate with regard to securities which become
Charged Securities after the execution of this Charge, as at the date on
which they become Charged Securities.
2. NON-COMPETITION
The Chargor represents and warrants that it has not taken or received and
undertakes not to take or receive the benefit of any security (from the
Company or any other person) extending to its liabilities under this
Charge.
10
SCHEDULE 2
COVENANTS
1. NO DISPOSALS OR SECURITY INTERESTS
The Chargor shall not, without the prior written consent of the Agent:
(a) sell, transfer or otherwise deal in any way with any of the Charged
Securities or any interest in them or permit any other person to be
registered as holder of any of them or acquire any rights, including
(without limitation) any option or other future or inchoate rights; or
(b) create (or permit to continue or to be created) or suffer to
subsist any Security Interest over any of the Charged Securities
(whether ranking in priority to, pari passu with or subsequent to this
Charge).
2. DEPOSIT AND REGISTRATION
The Chargor shall:
(a) at any time the Agent so requests, transfer (or ensure that there
are transferred) all or any of the Charged Securities into the name of
the Agent or a nominee of the Agent. The Chargor agrees that the Agent
may hold all or any of the Charged Securities in any nominee and that
all of the Charged Securities held in the name of a nominee shall be
held at the expense, risk and responsibility of the Chargor;
(b) immediately upon execution of this Charge, deposit (or ensure that
there are deposited) with the Agent and permit the Agent to hold and
retain:
(i) all stock and share certificates and documents of title relating
to the Charged Securities;
(ii) transfers of the Charged Securities duly completed in favour of
the Agent (or otherwise as it may direct) and stamped at the
Chargor's expense; and
(iii) such other documents as the Agent may from time to time require
for perfecting its title to the Charged Securities (duly
executed by or signed on behalf of the registered holder) or for
vesting or enabling it to vest the same in itself or its nominee
or in any purchaser, to the intent that the Agent may at any
time without notice present them for registration; and
(c) hold to the order of the Agent and deposit with it forthwith (or
ensure that there are so held and deposited) all documents of title
and related documents from time to time relating to the Charged
Securities.
11
3. NO ISSUE/ALLOTMENT OF SHARES
The Chargor shall ensure that no shares or other securities in or of the
Company will be issued or allotted and no agreement, option or arrangement
to make or call for such issue or allotment will be made or granted without
the Agent's prior written consent (which consent may not be unreasonably
refused if the Agent will, following the transaction for which consent is
sought, retain security over at least 65% of each class of shares in the
issued share capital of the Company).
4. THE COMPANY
(1) The Chargor shall ensure that the Company does not, unless the Agent's
prior written consent has been obtained which consent shall not be
unreasonably refused:
(a) modify the rights and obligations attached to any of the Shares in
any way;
(b) increase, consolidate, sub-divide or reduce its share capital;
(c) alter its memorandum or articles of association;
(d) purchase its own shares or reduce its share capital; or
(e) take any step to place itself in liquidation or administration or
pass any resolution to wind itself up.
(2) The Chargor undertakes that it shall not at any time until the Borrower
Obligations shall have been paid and discharged in full take any step to
place the Company into liquidation or administration; in particular (but
without limitation) the Chargor shall not present or support any petition,
or propose or vote in favour of any resolution, for the winding-up or
administration of the Company.
5. CALLS AND NOTICES
The Chargor shall:
(a) duly and promptly pay (or ensure that there are paid) and hold the
Agent and any nominee harmless against all calls, instalments or other
payments which may be made or become due in respect of any of the
Charged Securities as and when they become due; and
(b) provide the Agent with a copy of any report, accounts, circular,
notice or other item sent or provided to them (or to any person on
their behalf) in connection with the Charged Securities or any of them
immediately on its receipt.
6. NO PREJUDICE
The Chargor shall not do or permit or suffer to be done anything with the
primary intention of depreciating, jeopardising or otherwise prejudicing
the value of the Charged Securities. The Chargor shall immediately inform
the Agent of any such matter of which it becomes aware.
12
7. FURTHER ASSURANCE
The Chargor shall execute and do, and ensure that its nominees execute and
do, at its own expense all such assurances, acts and things as the Agent
may reasonably require from time to time for perfecting or protecting this
Charge over the Charged Securities or any of them or for facilitating the
realisation of the same and in the proper exercise of all powers,
authorities and discretions vested by this Charge in the Agent. The Chargor
shall, and shall ensure its nominees shall, in particular (but without
limitation) promptly execute all transfers, conveyances, assignments,
assurances and legal mortgages of the Charged Securities in such form and
to such person as the Agent may from time to time reasonably require and
give all notices, orders and directions which the Agent may reasonably
require.
8. WAIVERS OF PRE-EMPTION RIGHTS
The Chargor shall ensure that all shareholders of the Company from time to
time enter into waivers in a form satisfactory to the Agent of all pre-
emption rights and restrictions in the Articles of Association of the
Company from time to time or otherwise which may in any respect vary,
restrict or affect the exercise of any rights which may arise in connection
with the enforcement of this Charge or the transfer of the Charged
Securities to the Agent or such other person as the Agent may so direct.
13
SCHEDULE 3
THE AGENT'S POWERS
1. VOTING RIGHTS
1.1 PRIOR TO AN EVENT OF DEFAULT
Until Paragraph 1.2 applies:
(a) the Chargor shall be entitled to receive all distributions paid in
respect of the Charged Securities; and
(b) the Chargor shall be entitled to exercise all voting and other rights
and powers in respect of the Charged Securities; but it shall not do
so if the resolution or other action in question could impair the
Charged Securities or be inconsistent with, or result in any violation
of, any provision of any Loan Document.
1.2 FOLLOWING AN EVENT OF DEFAULT
If at any time an Event of Default is continuing and the Agent so notifies
the Chargor, then this Paragraph 1.2 applies from then on. When it applies,
the Agent or its nominees:
(a) shall be entitled to receive any distributions paid in respect of the
Charged Securities; and
(b) may (and the Chargor may not without the prior written consent of the
Agent) exercise in the name of the Chargor or otherwise (without any
further consent or authority on the part of the Chargor) in respect of
each of the Charged Securities any voting rights and any powers or
rights which may be exercisable by the person in whose name the
Charged Securities are registered or by their bearer or absolute
owner.
2. ENFORCEMENT
2.1 DISAPPLICATION OF LAW OF PROPERTY ▇▇▇ ▇▇▇▇
Neither Section 93 nor Section 103 of the Law of Property ▇▇▇ ▇▇▇▇ shall
apply to this Charge.
2.2 ENFORCEMENT RIGHTS
Immediately on the happening of any Event of Default, this Charge shall
become enforceable and the Agent may enforce all or any part of this Charge
as it thinks fit and may without further notice exercise in relation to the
Charged Securities the power of sale and all other powers conferred on
mortgagees by the Law of Property Act 1925 (or otherwise by law) as
extended, varied or amended by this Charge. All dividends, interest or
other payments received or receivable by the Agent or its nominee in
respect of any of the Charged Securities (whether before or after any Event
of Default) may be applied by the Agent as though they were proceeds of
sale.
14
2.3 NO LIABILITY
The Agent shall not be liable as a mortgagee in possession either to
account as such mortgagee in relation to any of the Charged Securities or
for any loss upon realisation or for any other default or omission for
which such a mortgagee may be liable and shall not be liable for any
failure to make or call for any payment or repayment, to accept or notify
the Chargor of any offer or for any other loss of any nature in connection)
with the Charged Securities.
2.4 DISCRETION OF AGENT
In exercising the power of sale in Paragraph 2.2, the Charged Securities or
any part may be sold or disposed of at such times, in such manner and
generally on such terms and conditions and for such consideration as the
Agent may think fit. Any such sale or disposition may be for cash,
debentures or other obligations, shares, stock, securities or other
valuable consideration and may be payable immediately or by instalments
spread over such period as the Agent shall think fit.
3. APPROPRIATION OF RECEIPTS
3.1 APPLICATION
Whether before or after any Event of Default, the Agent shall appropriate
amounts received by the Agent under the powers conferred by this Charge in
or toward the discharge of the Borrower Obligations in the order set out in
section 6.5 (Application of Proceeds) of the Guarantee and Collateral
Agreement.
3.2 SUSPENSE ACCOUNT
Any moneys received following the exercise of the powers conferred by this
Charge may, at the discretion of the Agent, be placed in a suspense or
securities realised account prior to or after any appropriation and kept
there for so long as the Agent thinks fit.
4. SET-OFF AND ACCOUNTS
The Agent may at any time (without notice and notwithstanding any
settlement of account or other matter whatever) combine, consolidate or
merge all or any of the Chargor's accounts or liabilities to the Agent and
may set off or transfer any sums staying in the credit of any such accounts
or any sum which the Agent may from time to time owe to the Chargor in or
towards the payment, discharge or satisfaction of any of the Borrower
Obligations.
5. POWER OF ATTORNEY
By way of security, the Chargor irrevocably appoints the Agent to be its
attorney and on its behalf and in its name and as its act or deed:
(a) to execute and do all such assurances, acts and things which it ought
lawfully to do under this Charge; and
15
(b) to seal and deliver and otherwise perfect or do any deed, assurance,
agreement, instrument, act or thing which it may deem proper or
desirable in or for the purpose of exercising any of the powers,
authorities and discretions conferred by this Charge or by law on the
Agent.
By this Charge, the Chargor ratifies and confirms (and agree to ratify and
confirm) whatever the Agent as its attorney shall do in the proper and
lawful exercise or purported exercise of all or any of the powers,
authorities and discretions referred to in this Paragraph 5.
16
EXECUTION:
THE CHARGOR
SIGNED AND DELIVERED as )
a deed by ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, )
duly authorised for and on behalf of ) /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
NMT NEUROSCIENCES )
(INTERNATIONAL), INC )
THE AGENT
SIGNED by )
duly authorised for and on behalf of )
▇. ▇. ▇▇▇▇▇▇▇ & CO., INC )
17
EXECUTION:
THE CHARGOR
SIGNED AND DELIVERED as )
a deed by ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, )
duly authorised for and on behalf of )
NMT NEUROSCIENCES )
(INTERNATIONAL), INC )
THE AGENT
SIGNED by )
duly authorised for and on behalf of ) /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
▇. ▇. ▇▇▇▇▇▇▇ & CO., INC )
18
EXHIBIT G
---------
NITINOL MEDICAL TECHNOLOGIES, INC.
COMPLIANCE CERTIFICATE
DATE: ____________, 19__
This certificate is given by Nitinol Medical Technologies, Inc., a
Delaware corporation (the "Company"), pursuant to Section 8. 1 (c) of that
certain Subordinated Note and Common Stock Purchase Agreement dated as of July
8, 1998 by and among the Company, Whitney Subordinated Debt Fund, L.P. and, for
certain purposes, ▇.▇. ▇▇▇▇▇▇▇ & Co., as such agreement may have been amended,
restated, supplemented or otherwise modified from time to time (the
"Agreement"). Capitalized terms used herein without definition shall have the
meanings set forth in the Agreement.
The officer executing this certificate is the Chief Financial Officer
of the Company and as such is duly authorized to execute and deliver this
certificate on behalf of the Company. By executing this certificate such
officer hereby certifies that:
(a) the financial statements delivered with this certificate in
accordance with Section 8. 1 (a) and/or 8. 1 (b) of the Agreement fairly present
in all material respects the results of operations and financial condition of
the Company and its Subsidiaries as of the dates of such financial statements;
(b) he has reviewed the terms of the Agreement and the Note and has
made, or caused to be made under his supervision, a review in reasonable detail
of the transactions and conditions of the Company and its Subsidiaries during
the accounting period covered by such financial statements;
(c) such review has not disclosed the existence during or at the end
of such accounting period, and he has no knowledge of the existence as of the
date hereof, of any condition or event that constitutes an Event of Default,
except as set forth in Exhibit A hereto which includes a description of the
nature and period of existence of such Event of Default and what action the
Company has taken, is undertaking and proposes to take with respect thereto;
(d) the Company and its Subsidiaries are in compliance with the
covenants contained in Articles 8 and 9 of the Agreement. as demonstrated on the
attached worksheets (in substantially the same format as Exhibit H to the
Agreement), except as set forth or described in Exhibit A; and
(e) (i) Interest Coverage is ___:1.00
(ii) Ratio of Net Funded Indebtedness to Adjusted Operating Cash
Flow is __:1.00
(iii) Fixed Charge Coverage is ___:1.00
(iv) Capital Expenditures are $_________.
(v) Funded Debt to Cash and Cash Equivalents is ___:1.00
(vi) Current Assets less cash and Cash Equivalents to Current
Liabilities is __:1.00
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed by its Chief Financial Officer this ___ day of _____________, 19__.
By:
----------------------------
Chief Financial Officer
1
EXHIBIT H
FINANCIAL COVENANT CALCULATIONS
-------------------------------
1. Calculation of Interest Coverage as set forth in Section 9.8(a).
---------------------------------------------------------------
EBITDA:
Net income (or loss) of the Company and its Subsidiaries, for the period in
question, on a consolidated basis determined in accordance with GAAP, but
excluding: (a) the income (or loss) of any Person (other than Subsidiaries of the
Company) in which the Company or any of its Subsidiaries has an ownership
interest, unless received by the Company or its Subsidiaries in a cash distribution;
(b) the income (or loss) of any Person accrued prior to the date it became a
Subsidiary of the Company or is merged into or consolidated with the Company;
and (c) any extraordinary gains and any insurance proceeds received by the
Company or any of its Subsidiaries. $__________
Plus: Any provision for (or less any benefit from) income and franchise Taxes __________
included in the determination of net income
Interest Expense (as defined in the Agreement) net of interest income, __________
deducted in the determination of net income
Depreciation deducted in the determination of net income __________
Amortization deducted in determining net income __________
Losses (or less gains) from Asset Dispositions (as defined in the __________
Agreement) or other non-cash items included in the determination of net
income (excluding sales, expenses or losses related to current assets)
Extraordinary losses (or less gains), as defined under GAAP, net of __________
related tax effects included in the determination of net income
Expenses of the transactions completed pursuant to the Transaction __________
Documents and the Acquisition Documents included in the determination
of net income provided that such expenses were included in the Pro
Forma Balance Sheet, or disclosed in the notes thereto
Expenses, which must be approved in advance by Whitney, related to any __________
write-down of the Company's investment in ITC
One time charges consistent in nature with those set forth on Schedule H, __________
and previously approved by Whitney, reflecting certain one time charges
to be taken by the Company in the 12 months following the
consummation of the Acquisition and in an amount not to exceed
$650,000 in the aggregate
__________
EBITDA $__________
INTEREST COVERAGE:
INTEREST EXPENSE (as defined in the Agreement), net of interest income, included __________
in the determination of net income of the Company and its Subsidiaries on a
consolidated basis
2
Less: Amortization of capitalized fees and expenses incurred with respect to the
Transaction Documents and the Acquisition Documents included in
interest expense __________
Interest paid in kind (PIK) and included in interest expense __________
INTEREST EXPENSES $__________
ACTUAL INTEREST COVERAGE (EBITDA DIVIDED BY INTEREST EXPENSE) __________
Required Interest Coverage __________
In Compliance __________
Yes/No
2. Calculation of Total Leverage Test as set forth in Section 9.8(b).
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NET FUNDED INDEBTEDNESS:
Indebtedness as defined in subclauses (a), (b), (f) and (g) of the definition
thereof: $__________
Net Funded Indebtedness $__________
ADJUSTED OPERATING CASH FLOW (calculated in accordance with Item No. 4 of
this Exhibit): $__________
Actual Total Leverage (Net Funded Indebtedness divided by Adjusted Operating
Cash Flow) __________
Required Total Leverage __________
In Compliance __________
Yes/No
3. Calculation of Unfinanced Capital Expenditures
----------------------------------------------
Capital Expenditures (as defined in the Agreement) $__________
Plus: deposits made during such period in connection with property, plant, and
equipment; less deposits of a prior period included above. __________
Less: Portion of Capital Expenditures financed under capital leases or other
Indebtedness __________
UNFINANCED CAPITAL EXPENDITURES $__________
4. Calculation of Adjusted Operating Cash Flow
-------------------------------------------
ADJUSTED OPERATING CASH FLOW:
EBITDA (calculated in accordance with Item No. 1 of this Exhibit) $__________
------
Less: Unfinanced Capital Expenditures (calculated in accordance with Item
No. 4 of this Exhibit) $__________
3
Other capitalized costs, defined as the gross amount capitalized, for any
fiscal period, as long term assets (net of cash received in respect of long
term assets), other than (a) Capital Expenditures (as defined in the
Agreement) and (b) fees and expenses capitalized with respect to the
Transaction Documents and the Acquisition Documents __________
OPERATING CASH FLOW $__________
Plus: Pro Forma Target Operating Cash Flow (defined below) __________
-------------------------------------
PRO FORMA TARGET OPERATING CASH FLOW means the following with respect to any person whose
stock or assets were acquired by the Company or any of its Subsidiaries (a "Target") during the 12
month period ending on the date of determination:
Operating Cash Flow (calculated as set forth above in this Item 4) for the Target
during the portion of the 12 month period ending on the date of determination that
occurred prior to consummation of the applicable acquisition $__________
Plus: Addbacks approved by the Purchaser __________
Less: Target Capital Expenditures for the Target during the portion of the 12
month period ending on the date of determination that occurred prior to
consummation of the applicable acquisition, calculated as follows:
Amount capitalized as capital expenditures for the period, under GAAP, as
property, plant and equipment or similar fixed asset accounts, including net
present value of multi-year operating leases $__________
Plus: deposits made during the period in connection with property, plant and
equipment; less deposits of a prior period included above __________
Less: net proceeds of asset sales included in capital expenditures above, which
Target has reinvested __________
Target Capital Expenditures __________
PRO FORMA TARGET OPERATING CASH FLOW: $__________
ADJUSTED OPERATING CASH FLOW (sum of Adjusted Operating Cash Flow plus Pro
Forma Target Operating Cash Flow)
5. Calculation of Fixed Charge Coverage as set forth in Section 9.8(b)
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FIXED CHARGES:
Interest Expense $__________
Plus: Any provision for (benefit from) income or franchise taxes included in
the determination of net income, less any increases (decreases) in long-
term and short-term deferred tax liabilities and less any decreases
(increases) in long-term and short-term deferred tax assets __________
Scheduled payments of principal with respect to all Indebtedness
(including the principal portion of scheduled payments of Capital Lease
Obligations) of the Company and its Subsidiaries on a consolidated basis, __________
Cash payments of deferred tax liabilities stated on the Pro Forma Balance
Sheet (without duplication) __________
4
FIXED CHARGES $__________
OPERATING CASH FLOW:
EBITDA $__________
Less: Unfinanced Capital Expenditures (calculated in accordance with Item
No. 3 of this Exhibit). __________
Other Capitalized Costs, defined as the gross amount capitalized, for any
fiscal period, as long term assets (net of cash received in respect of long
term assets), other than (a) Capital Expenditures and (b) fees and
expenses capitalized with respect to the Transaction Documents and the
Acquisition Documents __________
ADJUSTED OPERATING CASH FLOW $__________
ACTUAL FIXED CHARGE COVERAGE (ADJUSTED OPERATING CASH FLOW DIVIDED BY
FIXED CHARGES) __________
Required Fixed Charge Coverage __________
In Compliance __________
Yes/No
5