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EXHIBIT 10.1
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CONVERTIBLE SUBORDINATED NOTE AGREEMENT
BY AND BETWEEN
CENTURY MEDICAL, INC.
AND
MICRO THERAPEUTICS, INC.
DATED AS OF SEPTEMBER 23, 1998
$3,000,000
5% CONVERTIBLE SUBORDINATED NOTE, DUE SEPTEMBER 30, 2003
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CONVERTIBLE SUBORDINATED NOTE AGREEMENT
THIS CONVERTIBLE SUBORDINATED NOTE AGREEMENT (this "Agreement"), entered
into as of the 23rd day of September 1998, by and between CENTURY MEDICAL, INC.
a Japanese corporation ("Century"), and MICRO THERAPEUTICS, INC., a Delaware
corporation (the "Company").
RECITALS
A. Century desires to purchase from the Company, and the Company
desires to sell to Century, a certain 5% Convertible Subordinated Note, due
September 30, 2003, in the aggregate principal amount of Three Million Dollars
($3,000,000) (the "Note") convertible into shares of the common stock, par value
$0.001 per share, of the Company (the "Common Stock"), in the form attached
hereto as Exhibit A, all as more fully described below, on the terms and
conditions set forth herein.
B. The Company and Century desire to enter into an Exclusive
Distribution Agreement (the "Distribution Agreement") in the form attached
hereto as Exhibit B.
C. The Company and Century desire to enter into a Credit Agreement
(the "Credit Agreement") in the form attached hereto as Exhibit C, which
provides that Century, as lender, shall, following the occurrence of certain
milestones, loan to the Company, at the Company's sole option, as borrower, an
amount not to exceed an aggregate of Two Million Dollars ($2,000,000).
D. The Company and Century desire to make certain representations,
warranties, covenants and agreements in connection with the purchase and sale of
the Note and desire to prescribe certain conditions precedent to such purchase
and sale.
E. The Company and Century desire to make certain representations,
warranties, covenants and agreements in connection with entering into this
Agreement and the Credit Agreement and desire to prescribe certain conditions
precedent to such agreements.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and of the mutual
provisions, agreements and covenants contained herein, the Company and Century
hereby agree as follows:
1. DESCRIPTION OF NOTE AND COMMITMENT.
1.1 DESCRIPTION OF NOTE. The Company has authorized the purchase
and sale of Three Million Dollars ($3,000,000) aggregate principal amount of the
Note to be dated the Closing Date, to bear interest from such date at the rate
of five percent (5%) per annum, payable quarterly in arrears on January 31,
April 30, July 31 and October 31, each year (commencing October 31, 1998) and at
maturity and to bear interest on overdue principal and premium, if any, and (to
the extent legally enforceable) on any overdue payment of principal or interest
at the rate of ten percent (10%) per annum after the date due, whether at stated
maturity or by declaration, acceleration or otherwise, until paid, to be
expressed to mature on September 30, 2003, and to be substantially in the form
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attached hereto as Exhibit A. The Note is not subject to redemption or
prepayment. The Note is convertible into Common Stock on the terms and
conditions set forth in Section 11 hereof.
1.2 COMMITMENT, CLOSING DATE. Subject to the terms and
conditions hereof and on the basis of the representations, warranties, covenants
and agreements set forth herein, the Company agrees to sell to Century, and
Century agrees to purchase from the Company, the Note in the aggregate principal
amount as of Three Million Dollars ($3,000,000) at a purchase price of one
hundred percent (100%) of the principal amount thereof on the Closing Date (as
defined herein).
1.3 DELIVERY OF NOTE; CLOSING. The delivery of the Note shall
occur at the offices of O'Melveny & ▇▇▇▇▇ LLP, Citicorp Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, at 11:00 a.m., Eastern
Daylight Time, September 30, 1998 or such later Business Day as shall be
mutually agreed upon by the Company and Century (the "Closing Date"). The Note
delivered to Century on the Closing Date will be delivered to Century in the
form of a single Note in the form attached hereto as Exhibit A in a principal
amount equal to the full amount of Century's purchase, against delivery by
Century to the Company or its order of immediately available funds in the amount
of the purchase price therefor by wire transfer of immediately available funds
for the account of the Company to account number FNC-▇▇▇▇▇▇▇▇-75 at FC-Silicon
Valley Bank, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇, ABA No.
\\FW:▇▇▇▇▇▇▇▇▇ (correspondent bank via SWIFT: Chase Manhattan Bank, New York,
New York, USA, SWIFT Advice CHASEUS33).
1.4 PLACE OF PAYMENT. Subject to Section 1.5, payments of
principal and interest becoming due and payable on the Note shall be made in the
State of California at the principal office of the Company in such jurisdiction.
The Company may at any time, by notice to Century, change the place of payment
of the Note so long as the place of payment shall be either the principal office
of the Company in such jurisdiction or the principal office of a bank or trust
company in such jurisdiction.
1.5 HOME OFFICE PAYMENT. Notwithstanding Section 1.4, so long as
Century is the holder of the Note, the Company shall pay all sums becoming due
on the Note for principal and interest by wire transfer of immediately available
funds for the account of Century to account number 232811 at The Sumitomo Bank,
Ltd., Shibuya Branch, ▇-▇-▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇-▇▇, ▇▇▇▇▇ ▇▇▇-▇▇▇▇, ▇▇▇▇▇, or by
such other method or at such other location as Century shall specify from time
to time in writing to the Company, without presentation or surrender of the Note
or the making of any notation thereon. The Company shall afford the benefits of
this Section 1.5 to any Holder that is the direct or indirect transferee of the
Note pursuant to the terms of this Agreement.
2. INTERPRETATION OF AGREEMENT; DEFINITIONS.
2.1 DEFINITIONS. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Subsidiary) (i)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds five percent (5%) or more of any
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class of the Voting Stock of the Company or (iii) five percent (5%) or more of
the Voting Stock (or in the case of a Person which is not a corporation, five
percent (5%) or more of the equity interest) of which is beneficially owned or
held by the Company or a Subsidiary. The term "control" 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
Stock, by contract or otherwise.
"Agreement" shall mean this Note Agreement.
"Board of Directors" shall mean either the board of directors of
the Company or any duly authorized committee thereof.
"Board Resolution" shall mean a copy of a resolution certified
by the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification.
"Business Day" shall mean any day other than a Saturday, Sunday,
legal holiday or other day on which commercial banks located in San Francisco,
California or New York, New York are authorized or required by law to be closed.
"Change of Control" shall have the meaning set forth in Section
9.7 hereof.
"Closing Date" shall have the meaning specified in Section 1.2
hereof.
"Commission" shall mean the Securities and Exchange Commission,
or successor regulatory entity.
"Common Stock" shall mean the Common Stock, par value $0.001 per
share, of the Company.
"Company" shall mean Micro Therapeutics, Inc., a Delaware
corporation, and any Person who in accordance with the terms of this Agreement
succeeds to all, or substantially all, of the assets or business of Micro
Therapeutics, Inc.
"Credit Facility Note" shall mean the 5% Convertible Credit
Facility Note issued pursuant to the Credit Facility as defined in Section 6.1
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) that is treated as a single employer together with the Company
under Section 414 of the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time
(the "Code").
"Event of Default" shall have the meaning set forth in Section 9
hereof.
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"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"GAAP" shall mean generally accepted accounting principles at
the time in the United States.
"Holder" shall mean the registered holder of the Note, initially
Century.
"Interest Payment Date" shall mean the Stated Maturity of an
installment of interest on the Note.
"Lien" shall mean any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute or contract,
and including but not limited to the security interest lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
(including, with respect to stock, stockholder agreements, voting trust
agreements, buy-back agreements and all similar arrangements) affecting
property. For the purposes of this Agreement, the Company or a Subsidiary shall
be deemed to be the owner of any property which it has acquired or holds subject
to a conditional sale agreement, capitalized lease or other arrangement pursuant
to which title to the property has been retained by or vested in some other
Person for security purposes and such retention or vesting shall constitute a
Lien.
"Nasdaq" and "Nasdaq National Market" shall have the meanings
specified in Section 11.4(h) hereof.
"Person" shall mean an individual, partnership, corporation,
limited liability company, trust or unincorporated organization, and a
government or agency or political subdivision thereof.
"Preferred Stock" shall mean stock of the Company or a
Subsidiary of any class or series ranking prior to any other class or series of
stock of the Company or the Subsidiary with respect to the payment of dividends
or the distribution of assets upon the liquidation, dissolution or winding up of
the Company or the Subsidiary.
"Purchased Shares" shall have the meaning specified in Section
11.4(f) hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Stated Maturity," when used with respect to the Note or any
installment of interest hereon, shall mean the date specified in the Note as the
fixed date on which the principal of the Note or any installment of interest is
due and payable.
"Subsidiary" shall mean a corporation, partnership or other
entity at least a majority of whose Voting Stock is owned directly or indirectly
by the Company.
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"Voting Stock" shall mean securities of any class or classes,
the holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing similar
functions).
2.2 ACCOUNTING PRINCIPLES. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
2.3 DIRECTLY OR INDIRECTLY. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
2.4 LEGAL HOLIDAYS. In any case where any Interest Payment Date
or Stated Maturity of the Note or the last date on which Century has the right
to convert the Note shall not be a Business Day, then (notwithstanding any other
provision of this Agreement or of the Note) payment of interest or principal or
conversion of the Note, as the case may be, need not be made on such date, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the Interest Payment Date, or at the Stated Maturity, or on such
last day for conversion.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ITS SUBSIDIARIES.
Except as otherwise specifically set forth in the Disclosure Schedule attached
hereto as Exhibit D (the "Disclosure Schedule") or in any document expressly
referenced in the Disclosure Schedule which has been provided to Century
(provided that any such disclosure made in connection with any of the following
representations and warranties shall be deemed disclosed with respect to any
other relevant representation or warranty, whether or not expressly
cross-referenced), the Company and its Subsidiaries represent and warrant to
Century as of the date hereof as follows:
3.1 SUBSIDIARIES OF THE COMPANY. The Disclosure Schedule states
the name of each of the Subsidiaries of the Company, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by the Company and/or
its Subsidiaries. The Company and each of its Subsidiaries has good and
marketable title to all of the shares it purports to own of the stock of each
Subsidiary, free and clear in each case of any Lien.
3.2 CORPORATE ORGANIZATION AND AUTHORITY. The Company, and each
of its Subsidiaries: (a) is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation; (b) has
all requisite power and authority and all necessary licenses and permits to own
and operate its properties and to carry on its business as now conducted and as
presently proposed to be conducted; and (c) is duly licensed or qualified and is
in good standing as a foreign corporation in each jurisdiction in which such
licensing or qualification is required by law or wherein the nature of the
business transacted by it or the nature of the property owned or leased by it
otherwise makes such licensing or qualification necessary.
3.3 CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of Twenty Million (20,000,000) shares of Common Stock, par
value $0.001 per share, and Five Million (5,000,000) shares of Preferred Stock,
par value $0.001 per share. As of June 30, 1998, Six Million
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Six Hundred Eighty-Four Thousand Four Hundred Sixty-Seven (6,684,467) shares of
the Common Stock were issued and outstanding and no shares of the Preferred
Stock were issued and outstanding.
All of the outstanding Common Stock was issued in compliance with
applicable federal and state securities laws and regulations. All of the
outstanding shares of the Common Stock are, and any shares of Common Stock
issuable upon conversion of the Note and the Credit Facility Note will be, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Company's Certificate of Incorporation
or Bylaws, or any agreement to which the Company is a party or is bound.
3.4 EQUITY INVESTMENTS. The Company does not own any equity
stock or interest, directly or indirectly, in any corporation, partnership,
joint venture, firm or other entity except those set forth in the Disclosure
Schedule. The Company has no Subsidiaries.
3.5 AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement and the Credit Agreement and to issue the
Note, and will have all requisite corporate power and authority to issue the
Credit Facility Note and, subject to satisfaction of the conditions set forth
herein and therein, to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, the Credit Agreement and
the Note and the consummation of the transactions contemplated hereby and
thereby have been, and the execution and delivery of the Credit Facility Note
and the consummation of the transactions contemplated thereby will be, duly
authorized by all necessary corporate action on the part of the Company. This
Agreement, the Credit Agreement and the Note have been, and the Credit Facility
Note will be, duly executed and delivered by the Company, and constitute the
legal, valid and binding obligations of the Company, enforceable in accordance
with their respective terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and the effect or availability of rules of law
governing specific performance, injunctive relief or other equitable remedies.
Provided the conditions set forth in Section 8 hereof are satisfied, the
execution and delivery of this Agreement, the Credit Agreement, the Note and the
Credit Facility Note do not or will not, and the consummation of the
transactions contemplated hereby or thereby will not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation under (a) any provision of the Certificate of
Incorporation or Bylaws of the Company, (b) any material agreement or
instrument, permit, franchise, license, judgment or order, applicable to the
Company or its respective properties or assets, or (c) the terms, conditions or
provisions of any order, judgment, decree or ruling of any arbitrator or
Governmental Entity (as defined below) applicable to the Company or any
Subsidiary. Similarly, the execution, delivery and performance of this
Agreement, the Note, the Credit Agreement and the Credit Facility Note do not
result in the creation of any Lien in respect of any property of the Company or
any Subsidiary.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative or regulatory agency or
commission or other governmental authority (a "Governmental Entity") or other
Person or entity, is required by, or with respect to, the Company in connection
with the execution and delivery of this Agreement or the Credit Agreement or the
consummation by the Company of the transactions contemplated hereby or thereby,
except for such
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consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the laws of any foreign country.
3.6 FINANCIAL STATEMENTS. The Company has furnished to Century
its audited consolidated statement of operations, statement of stockholders'
equity and statement of cash flows for the fiscal year ended December 31, 1997
and the Company's audited consolidated balance sheet at December 31, 1997, which
statements include the reports of auditors thereon; and the unaudited
consolidated statement of operations and statement of cash flows for the six (6)
months ended June 30, 1998 and the unaudited consolidated balance sheet at June
30, 1998. The Company will furnish to Century as soon as available its audited
consolidated financial statements for the fiscal year ended December 31, 1998.
The balance sheet at June 30, 1998 is hereinafter referred to as the "Company
Balance Sheet," and all such financial statements are hereinafter referred to
collectively as the "Company Financial Statements." The Company Financial
Statements have been and will be prepared in accordance with GAAP applied on a
consistent basis, except for any change due to the adoption of an accounting
principle established by the FASB, AICPA, SEC or any other accounting standard
setting board, during the periods involved, and fairly present and will present
the consolidated financial position of the Company and the results of its
operations and cash flows as of the date and for the periods indicated thereon.
At the date of the Company Balance Sheet (the "Company Balance Sheet Date"),
neither the Company nor its consolidated Subsidiaries had any liabilities or
obligations, secured or unsecured (whether accrued, absolute, contingent or
otherwise) not reflected on the Company Balance Sheet or the accompanying notes
thereto.
3.7 SECURITIES AND EXCHANGE COMMISSION DOCUMENTS. The Company
has furnished to Century a true and complete copy of the Company's Form 10-KSB
for the year ended December 31, 1997 and Form 10-QSB for each of the quarters
ended March 31, 1998 and June 30, 1998 (the "Company SEC Documents"). As of
their respective filing dates, the Company SEC Documents comply in all material
respects with the requirements of the Exchange Act or the Securities Act, and
none of the Company SEC Documents contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading, except to the extent corrected by a
subsequently filed Company SEC Document.
3.8 BUSINESS CHANGES. Since June 30, 1998, except as otherwise
contemplated by this Agreement or as disclosed in writing to Century, the
Company has conducted its business only in the ordinary and usual course and,
without limiting the generality of the foregoing:
(a) There have been no changes in the condition
(financial or otherwise), business, net worth, assets, properties, employees,
operations, obligations or liabilities of the Company nor any casualty, loss,
damage or destruction (whether or not covered by insurance) of any material
property of the Company, which, in the aggregate, have had or may be reasonably
expected to have a materially adverse effect on the condition, business, net
worth, assets, prospects, properties or operations of the Company or the ability
of the Company to meet its obligations under the Note and/or the Credit Facility
Note.
(b) The Company has not issued, or authorized for
issuance, or entered into any commitment to issue, any equity security, bond,
note or other security of the Company.
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(c) The Company has not incurred debt for borrowed
money, nor incurred any obligation or liability except in the ordinary and usual
course of business and in any event not in excess of Fifty Thousand Dollars
($50,000) for any single occurrence.
(d) The Company has not paid any obligation or
liability, or discharged, settled or satisfied any claim, Lien or encumbrance,
except for current liabilities in the ordinary and usual course of business and
in any event not in excess of Fifty Thousand Dollars ($50,000) for any single
occurrence.
(e) The Company has not declared or made any dividend,
payment or other distribution on or with respect to any share of capital stock
of the Company.
(f) The Company has not purchased, redeemed or otherwise
acquired or committed itself to acquire, directly or indirectly, any share or
shares of capital stock of the Company.
(g) The Company has not mortgaged, pledged, or otherwise
encumbered any of its assets or properties, other than inventory sold in the
normal course of business or accounts receivable.
(h) The Company has not disposed of, or agreed to
dispose of, by sale, lease, license or otherwise, any asset or property,
tangible or intangible, except, in the case of such other assets and property,
in the ordinary and usual course of business, and in each case for a
consideration believed to be at least equal to the fair value of such asset or
property and in any event not in excess of Fifty Thousand Dollars ($50,000) for
any single item or One Hundred Thousand Dollars ($100,000) in the aggregate
other than inventory sold or returned in the normal course of business.
(i) The Company has not purchased or agreed to purchase
or otherwise acquire any securities of any corporation, partnership, joint
venture, firm or other entity; the Company has not made any expenditure or
commitment for the purchase, acquisition, construction or improvement of a
capital asset, except in the ordinary and usual course of business and in any
event not in excess of Fifty Thousand Dollars ($50,000) for any single item or
One Hundred Thousand Dollars ($100,000) in the aggregate.
(j) The Company has not entered into any transaction or
contract, or made any commitment to do the same, except in the ordinary and
usual course of business.
(k) The Company has not sold, assigned, transferred or
conveyed, or committed itself to sell, assign, transfer or convey, any
Proprietary Rights (as defined in Section 3.15 hereof).
(l) The Company has not adopted or amended any bonus,
incentive, profit-sharing, stock option, stock purchase, pension, retirement,
deferred-compensation, severance, life insurance, medical or other benefit plan,
agreement, trust, fund or arrangement for the benefit of employees of any kind
whatsoever, nor entered into or amended any agreement relating to employment,
services as an independent contractor or consultant, or severance or termination
pay, nor agreed to do any of the foregoing.
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(m) The Company has not effected or agreed to effect any
change in its directors, officers or key employees.
(n) The Company has not effected or committed itself to
effect any amendment or modification in its Certificate of Incorporation or
Bylaws, except as contemplated by this Agreement.
(o) The Company has not modified its accounting
principles in any material respect, except for those changes required by the
adoption of an accounting principle promulgated by the FASB, the AICPA, the
Securities and Exchange Commission, or any other accounting standards setting
bodies.
3.9 INDEBTEDNESS. The Disclosure Schedule correctly describes
all debt of the Company and its Subsidiaries in excess of Two Hundred Fifty
Thousand Dollars ($250,000) outstanding as of the Closing Date. Neither the
Company nor any Subsidiary is in default, and no waiver of default is currently
in effect, in the payment of any principal or interest on any indebtedness of
the Company or such Subsidiary, and no event or condition exists with respect to
any indebtedness of the Company or any Subsidiary that would permit (or that
with notice or the lapse of time, or both, would permit) one or more Persons to
cause such indebtedness to become due and payable before its stated maturity or
before its regularly scheduled dates of payment.
3.10 LITIGATION. There is no claim, dispute, action, proceeding,
notice, order, suit, appeal or investigation, at law or in equity, pending
against the Company, or involving any of its assets or properties, before any
court, agency, authority, arbitration panel or other tribunal (other than those,
if any, with respect to which service of process or similar notice has not yet
been made on the Company), and none have been threatened. The Company is aware
of no facts which, if known to stockholders, customers, governmental authorities
or other Persons, would result in any such claim, dispute, action, proceeding,
suit or appeal or investigation which would have a material adverse effect on
the condition (financial or otherwise), business, net worth, assets, prospects,
properties or operations of the Company. The Company is not subject to any
order, writ, injunction or decree of any court, agency, authority, arbitration
panel or other tribunal, nor is it in default with respect to any notice, order,
writ, injunction or decree.
3.11 COMPLIANCE WITH LAW. All material licenses, franchises,
permits, clearances, consents, certificates and other evidences of authority of
the Company which are necessary to the conduct of the Company's business
("Permits") are in full force and effect and the Company is not in violation of
any Permit in any material respect. Except for possible exceptions, the curing
or non-curing of which would not have a material adverse effect on the condition
(financial or otherwise), business, net worth, assets, prospects, properties or
operations of the Company, the business of the Company has been conducted in
accordance with all applicable laws, regulations, orders and other requirements
of governmental authorities.
3.12 TITLE TO PROPERTIES; LEASES. The Company and each of its
Subsidiaries has good and marketable title in fee simple (or its equivalent
under applicable law) to all material parcels of real property and has good
title to all the other material items of property it purports to own, except as
sold or otherwise disposed of in the ordinary course of business. All leases
that
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individually or in the aggregate are material to the Company or its operations
are valid and subsisting and are in full force and effect in all material
respects.
3.13 LICENSES, ETC. The Company and each of its Subsidiaries
owns or possesses all the material trade names, service marks, licenses,
governmental approvals, and rights with respect to the foregoing necessary for
the present conduct of its business, without any known conflict with the rights
of others.
3.14 NO DEFAULT.
(a) Each of the Company's material agreements or
contracts is a legal, binding and enforceable obligation by or against the
Company, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar federal or state laws affecting the
enforceability of the rights of creditors generally and the effect or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies (regardless of whether any such remedy is considered
in a proceeding at law or in equity). To the Company's knowledge, no party with
whom the Company has an agreement or contract is in default thereunder or has
breached any term or provision thereof which is material to the conduct of the
Company's business.
(b) The Company has performed, or is now performing, the
obligations of, and the Company is not in material default (or would by the
lapse of time and/or the giving of notice be in material default) in respect of,
any contract, agreement or commitment binding upon it or its assets or
properties and material to the conduct of its business ("Contracts"). No third
party has raised any claim, dispute or controversy with respect to any of the
Contracts of the Company, whether fully performed or currently being performed,
nor has the Company received written notice or warning of alleged
nonperformance, delay in delivery or other noncompliance by the Company with
respect to its obligations under any of those Contracts, nor are there any facts
which exist indicating that any of those Contracts may be totally or partially
terminated or suspended by the other parties thereto.
3.15 PROPRIETARY RIGHTS.
(a) The Company has provided Century with a complete
list in writing of all patents and applications for patents, trademarks, trade
names, service marks, and copyrights, and applications therefor, owned or used
by the Company or in which it has any rights or licenses, except for software
used by the Company and generally available on the commercial market. The
Company has provided Century with a complete and accurate list of all agreements
of the Company with each officer, employee or consultant of the Company
providing the Company with title and ownership to, or rights to use, patents,
patent applications, trade secrets and inventions developed or used by the
Company in its business. All of such agreements so described are valid,
enforceable and legally binding, subject to the effect of applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the rights of
creditors or availability of rules of law governing specific performance,
injunctive relief or other equitable remedies (regardless of whether any such
remedy is considered in a proceeding at law or in equity).
(b) The Company owns or possesses licenses or other
rights to use all patents, patent applications, trademarks, trademark
applications, trade secrets, service marks, trade
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names, copyrights, inventions, drawings, designs, customer lists, proprietary
know-how or information, or other rights with respect thereto (collectively
referred to as "Proprietary Rights"), used in the business of the Company, and
the same are sufficient to conduct the Company's business as it has been and is
now being conducted.
(c) To the best knowledge of the Company, the
operations, Products, and Proprietary Rights of the Company do not conflict with
or infringe, and no one has asserted to the Company that such operations,
Products, and Proprietary Rights conflict with or infringe, on any Proprietary
Rights owned, possessed or used by any third party. There are no claims,
disputes, actions, proceedings, suits or appeals pending against the Company
with respect to any Proprietary Rights (other than those, if any, with respect
to which service of process or similar notice may not yet have been made on the
Company), and, none has been threatened against the Company. To the best
knowledge of the Company, there are no facts or alleged facts which would
reasonably serve as a basis for any claim that the Company does not have the
right to use, free of any rights or claims of others, all Proprietary Rights in
the development, manufacture, use, sale or other disposition of any or all
products or services presently being used, furnished or sold in the conduct of
the business of the Company as it has been and is now being conducted.
(d) To the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract, proprietary
information and inventions agreement, non-competition agreement, or any other
contract or agreement relating to the relationship of any such employee with the
Company or any previous employer.
3.16 TAXES. The Company and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes,
assessments fees and other governmental charges levied upon them or their
properties, assets, income or franchises, to the extent that such have become
due and payable and before they have become delinquent, and except to the extent
that any such taxes, assessments fees or governmental charges are being
contested in good faith, have been paid. For all taxable years ending on or
before December 31, 1997, the federal income tax liability of the Company and
its Subsidiaries has been satisfied. The Company does not know of any proposed
additional tax assessment against it for which adequate reserves in accordance
with GAAP have not been made on its balance sheet, and no material controversy
in respect of additional federal or state income taxes due since said date is
pending or, to the knowledge of the Company, threatened. The reserves for taxes
on the books of the Company and each of its Subsidiaries are adequate in all
material respects for all open years, and for its current fiscal period.
3.17 USE OF PROCEEDS. The net proceeds from the sale of the Note
will be used to make an infusion of capital into the Company and for other
corporate purposes.
3.18 PRIVATE OFFERING. Neither the Company, directly or
indirectly, nor any agent on its behalf has offered or will offer the Note, any
Credit Facility Note or any similar security or has solicited or will solicit an
offer to acquire the Note, any Credit Facility Note or any similar security from
or has otherwise approached or negotiated or will approach or negotiate in
respect of the Note, any Credit Facility Note or any similar security with any
Person other than Century. Neither the Company, directly or indirectly, nor any
agent on its behalf has offered or will offer the Note, any Credit Facility Note
or any similar security or has solicited or will solicit an offer to acquire the
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Note, any Credit Facility Note or any similar security from any Person so as to
require registration of the Note or any Credit Facility Note under Section 5 of
the Securities Act.
3.19 EMPLOYEE PLANS AND RELATIONS.
(a) Except as provided in the Company SEC Documents,
neither the Company nor any ERISA Affiliate has any: (i) employee benefit plans,
multi-employer plans and employee benefit plans (as defined in section 3(2) or
section 3(3) of ERISA ("Plans"); (ii) bonus, deferred compensation, incentive,
restricted stock, stock purchase, stock option, stock appreciation right,
phantom stock, debenture, supplemental pension, profit-sharing, royalty pool,
commission or similar plan or arrangement; (iii) employment, consulting or
termination agreement; or (iv) other plan, program, agreement, procedure,
policy, commitment, understanding or other arrangement relating to employee
benefits, executive compensation, fringe benefits, severance pay, terms of
employment or services as a director, officer, employee or independent
contractor. The Company and each ERISA Affiliate have operated and administered
each Plan in compliance with all applicable laws, except to the extent that
noncompliance could not be reasonably expected to have a materially adverse
effect on the Company or its operations.
(b) The Company has not been and is not a party to, or
subject to, or affected by, any collective bargaining agreement or other labor
contract. The Company has complied in all respects with all laws, rules and
regulations relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and health
and plant closing.
(c) The execution and delivery of this Agreement and the
Credit Agreement and issuance of the Note and the Credit Facility Note hereunder
will not involve any transaction that is subject to the prohibitions of section
406 of ERISA or in connection with which a tax could be imposed pursuant to
section 4975(c)(1)(A)-(D) of the Code.
3.20 ENVIRONMENTAL MATTERS. The Company is, and at all times
during the period prior to the date hereof the Company has been, in compliance
with all applicable local, state and federal statutes, orders, rules, ordinances
and regulations relating to pollution or protection of the environment,
including, without limitation, laws relating to zoning and land use and to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, hazardous or toxic materials or wastes into or on land, ambient
air, surface water, ground water, personal property or structures (including the
protection, cleanup, removal, remediation or damage thereof), or otherwise
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, discharge or handling of pollutants, contaminants or
hazardous or toxic substances, materials or wastes.
3.21 BROKERS OR FINDERS. The Company has not dealt with any
broker or finder in connection with the transactions contemplated by this
Agreement. The Company has not incurred, and shall not incur, directly or
indirectly, any liability for any brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
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3.22 FULL DISCLOSURE. Neither the Company Financial Statements
referred to in Section 3.6 hereof nor this Agreement, or any other written
statement furnished by the Company to Century in connection with the negotiation
of the sale of the Note, contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein not misleading. There is no fact peculiar to the Company or the
Subsidiaries which the Company has not disclosed to Century in writing which
materially adversely affects nor, so far as the Company can now foresee, will
materially adversely affect, the properties, business, profits or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole.
3.23 NEW SECURITIES. None of the Note, any Common Stock issued
pursuant to conversion of the Note, any Credit Facility Note nor any Common
Stock issued pursuant to conversion of a Credit Facility Note shall constitute
"New Securities" for purposes of and as such term is defined in that certain
Convertible Subordinated Note Agreement, dated November 17, 1997, by and between
the Company and Guidant Corporation, and that certain Convertible Subordinated
Note Agreement, dated August 12, 1998, by and between the Company and ▇▇▇▇▇▇
Laboratories.
4. REPRESENTATIONS AND WARRANTIES OF CENTURY. Except as
contemplated by this Agreement, Century represents and warrants to the Company
as of the date hereof as follows:
4.1 CORPORATE ORGANIZATION. Century is a corporation duly
incorporated, validly existing and in good standing under the laws of Japan.
Century is duly qualified to do business in Japan. Century is duly licensed or
qualified and is in good standing as a foreign corporation in each jurisdiction
in which such licensing or qualification is required by law or wherein the
nature of the business transacted by it or the nature of the property owned or
leased by it otherwise makes such licensing or qualification necessary, other
than to the extent that failure to obtain such licensing or qualification,
either individually or in the aggregate, would not have a material adverse
effect on Century. Century has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted,
and possesses all licenses, franchises, rights and privileges material to the
conduct of its business.
4.2 AUTHORITY. Century has all requisite corporate power and
authority to enter into this Agreement and the related agreements contemplated
herein, and, subject to satisfaction of the conditions set forth herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Century.
This Agreement has been duly executed and delivered by Century and constitutes
the valid and binding obligation of Century enforceable in accordance with its
terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization or other similar federal or state laws affecting the rights of
creditors and the effect or availability of rules of law governing specific
performance, injunctive relief or other equitable remedies. Provided the
conditions set forth in Section 8 are satisfied, the execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby will not, conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation under (a) any
provision of the Articles of Incorporation or Bylaws of Century, or (b) any
material agreement or instrument, permit, license, judgment, order, statute,
law, ordinance, rule or regulation applicable to Century or its properties or
assets, other than any such conflicts, violations, defaults,
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terminations, cancellations or accelerations which individually or in the
aggregate would not have a material adverse effect on Century.
Except as noted in Schedule 4.2, no consent, approval, order or
authorization of, or registration, declaration or filing with, any Japanese
governmental authority is required by or with respect to Century in connection
with the execution and delivery of this Agreement by Century or the consummation
by Century of the transactions contemplated hereby or thereby.
4.3 RESTRICTED NOTE. Century represents and agrees, and in
entering into this Agreement the Company understands, that (a) Century is
acquiring the Note for Century's own account, and for the purpose of investment
and not with a view to the distribution thereof, and that Century has no present
intention of selling, negotiating or otherwise disposing of the Note; it being
understood, however, that the disposition of Century's property shall at all
times be and remain within its control, and (b) the Note has not been registered
under Section 5 of the Securities Act and that Century will only re-offer or
resell the Note purchased by Century under this Agreement pursuant to an
effective registration statement under the Securities Act or in accordance with
an available exemption from the requirements of Section 5 of the Securities Act,
except under circumstances where neither such registration nor such an exemption
from registration is required by law.
4.4 NO CONFLICT. The execution and delivery of this Agreement by
Century and the performance of Century's obligations hereunder, (a) are not in
violation or breach of, and will not conflict with or constitute a default
under, any of the terms of the Articles of Incorporation or Bylaws of Century or
any of its Subsidiaries, or any material contract, agreement or commitment
binding upon Century or any of its assets or properties; (b) will not result in
the creation or imposition of any lien, encumbrance, equity or restriction in
favor of any third party upon any of the assets or properties of Century; and
(c) will not conflict with or violate any applicable law, rule, regulation,
judgment, order or decree of any government, governmental instrumentality or
court having jurisdiction over Century or any of its assets or properties.
4.5 BROKERS OR FINDERS. Century has not dealt with any broker or
finder in connection with the transactions contemplated by this Agreement.
Century has not incurred, and shall not incur, directly or indirectly, any
liability for any brokerage or finders' fees or agents commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
5. COVENANTS OF THE COMPANY. From and after the Closing Date and
continuing so long as any amount remains unpaid on the Note and/or any Credit
Facility Note, the Company and its Subsidiaries covenant and agree with Century
that:
5.1 CORPORATE EXISTENCE. The Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect the
existence, rights and franchises of the Company and its Subsidiaries.
5.2 CONDUCT OF BUSINESS IN NORMAL COURSE. The Company and its
Subsidiaries shall carry on the business and their activities diligently and in
the ordinary course and shall not make or institute any unusual or novel methods
of purchase, sale, lease, management, accounting or
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operation that will vary materially from the methods used by the Company as of
June 30, 1998. The Company and its Subsidiaries shall maintain the business and
their activities in a normal and customary manner consistent with prior
practice.
5.3 MAINTENANCE OF PROPERTIES. The Company will maintain,
preserve and keep, and will cause each of its Subsidiaries to maintain, preserve
and keep, its material properties which are used or useful in the conduct of its
business (whether owned in fee or a leasehold interest) in good repair and
working order and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the efficiency thereof
shall be maintained in all material respects.
5.4 PRESERVATION OF BUSINESS AND RELATIONSHIPS. Neither the
Company nor any of its Subsidiaries will engage in any business if, as a result,
the general nature of the business, taken on a consolidated basis, which would
then be engaged in by the Company and its Subsidiaries would be substantially
changed from the general nature of the business engaged in by the Company and
its Subsidiaries on the date of this Agreement.
5.5 MERGER; ACQUISITIONS. Except with notice to Century as set
forth below, the Company shall not (a) consolidate with or merge into any other
Person, (b) convey, transfer or lease all or substantially all of its assets in
a single transaction or series of related transactions to any Person, (c)
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any Person or division thereof, or (d) otherwise acquire or agree to acquire any
assets which are material to the Company except in the ordinary course of
business consistent with prior practice. Such notice shall be given no earlier
than contemporaneously with public disclosure of the occurrence or pendency of
such an event, and in such notice the Company shall disclose to Century whether
it supports the occurrence of such event.
5.6 SALE OR LEASE OF ASSETS; DISPOSITIONS. Except with
contemporaneous notice to Century, the Company shall not sell, lease, transfer
or otherwise dispose of any of its assets (other than the sale of inventory in
the ordinary course of business), except in the ordinary course of business
consistent with prior practice. In the event that such transfer also constitutes
a Change of Control, the Company shall transfer to such successor entity this
Agreement, the Note, the Credit Agreement, any Credit Facility Note and the
Distribution Agreement, including without limitation any post-termination
obligations contained therein, provided that in the event the Company transfers
less than all or substantially all of its assets to a purchaser, such
agreements, instruments and obligations shall be so transferred only to the
extent the assets transferred are subject thereto.
5.7 INDEBTEDNESS. Except with contemporaneous notice to Century,
the Company shall not incur any indebtedness for borrowed money other than
customary Senior Indebtedness (as defined herein) or guarantee any such
indebtedness or issue or sell any debt securities of the Company or guarantee
any debt securities of others.
5.8 INSURANCE. The Company shall at all times during the term of
this Agreement maintain product liability insurance covering the products with
minimum annual limits of Two Million Dollars ($2,000,000) per occurrence and Two
Million Dollars ($2,000,000) in the aggregate. The Company shall maintain such
insurance for a minimum of five (5) years after
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termination of this Agreement. Within thirty (30) days of the Closing Date, the
Company shall deliver to Century a certificate of insurance evidencing such
insurance and stating that the policy will not be canceled or modified without
at least thirty (30) days prior written notice to Century.
5.9 TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS.
The Company will promptly pay and discharge, and will cause each of its
Subsidiaries promptly to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or such Subsidiary,
respectively, or upon or in respect of all or any part of the property or
business of the Company or such Subsidiary, all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a Lien upon any property of the
Company or such Subsidiary; provided, however, that the Company or such
Subsidiary shall not be required to pay any such tax, assessment, charge, levy,
account payable or claim if (a) the validity, applicability or amount thereof is
being contested in good faith by appropriate actions or proceedings which will
prevent the forfeiture or sale of any property of the Company or such Subsidiary
or any material interference with the use thereof by the Company or such
Subsidiary, and (b) the Company or such Subsidiary shall set aside, in
accordance with GAAP, on its books, reserves deemed by it to be adequate with
respect thereto. The Company will promptly comply and will cause each of its
Subsidiaries to comply with all laws, ordinances or governmental rules and
regulations to which it is subject including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, ERISA and all laws,
ordinances, governmental rules and regulations relating to environmental
protection in all applicable jurisdictions, the violation of which could
materially and adversely affect the properties, business, profits or condition
of the Company and its Subsidiaries, taken as a whole.
5.10 NOTICE OF CLAIMS AND LITIGATION. The Company will give
prompt notice to Century of any claim or action at law or in equity, or before
any governmental, administrative or regulatory body or arbitration panel
instituted against the Company or its Subsidiaries, or disputes that have a high
probability of resulting in a suit of significance against the Company or its
Subsidiaries involving a claim against the Company or its Subsidiaries, for
damages in excess of Two Hundred Fifty Thousand Dollars ($250,000) or which, if
concluded adversely to the Company or its Subsidiaries, could be reasonably
expected to materially and adversely affect the business or assets of the
Company or its Subsidiaries.
5.11 DISPOSAL OF SHARES OF A SUBSIDIARY. Neither the Company nor
its Subsidiaries will sell, pledge or otherwise dispose of any shares of the
stock (including as "stock" for the purposes of this Section 5.11 any options or
warrants to purchase stock or other Securities exchangeable for or convertible
into stock) of a Subsidiary, nor will any Subsidiary issue, sell, pledge,
encumber or otherwise dispose of any shares of its own stock, if the effect of
the transaction would be to reduce the proportionate interest of the Company and
its other Subsidiaries in the outstanding stock of a Subsidiary whose shares are
the subject of the transaction, nor will its Subsidiary issue, sell, pledge,
encumber or dispose of any shares of its own Preferred Stock.
5.12 TRANSACTIONS WITH AFFILIATES. Except for transactions and
arrangements with employee Affiliates, the Company will not, and will not permit
its Subsidiaries to, enter into or be a party to any material transaction or
arrangement or material group of related transactions with any Affiliate
(including, without limitation, the purchase from, sale to or exchange of
property with, or the rendering of any service by or for, any Affiliate), except
pursuant to the reasonable requirements
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of the Company's or its Subsidiaries' business and upon fair and reasonable
terms no less favorable to the Company or its Subsidiaries than would be
obtained in a comparable arm's-length transaction with a Person other than an
Affiliate. To the best knowledge of the Company, the Company has properly
disclosed all affiliate transactions in the Company's filings with the
Securities and Exchange Commission.
5.13 REPORTS AND ACCESS TO INFORMATION. Not more than once
during any twelve (12) month period, the Company shall afford to Century and
shall cause its independent accountants to afford to Century, and its
accountants, counsel and other representatives, reasonable access during normal
business hours to the Company's properties, books, contracts, commitments and
records and to the independent accountants reasonable access to the audit work
papers and other records of the Company's accountants. The Company shall furnish
promptly to Century (a) a copy of each report, schedule and other document filed
or received by the Company during such period pursuant to the requirements of
federal and state securities laws and (b) all other material information
concerning the business, properties and personnel of the Company and any other
materials as Century may reasonably request. Century will not use such
information for purposes other than this Agreement and will otherwise hold all
confidential material contained in such information in confidence (and Century
will cause its consultants and advisors to also hold such information in
confidence).
5.14 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the restricted Common Stock to the public without registration, as long
as a public market exists for the Common Stock, the Company agrees to use its
best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act;
(c) So long as a Holder owns any restricted Common
Stock, furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, and of
the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
5.15 The Company shall promptly give written notice to the
Holder of any default or breach by the Company or its Subsidiaries of any of its
obligations or commitments set forth in this Agreement, the Note, the Credit
Agreement or the Credit Facility Note, or otherwise of any default or other
occurrence that, with lapse of time and/or giving of notice, would constitute an
Event of Default.
6. CREDIT AGREEMENT.
6.1 CREDIT AGREEMENT. Concurrently herewith, the Company and
Century shall enter into the Credit Agreement in the form attached hereto as
Exhibit C. Pursuant to the Credit
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Agreement, at the Company's sole discretion, following the Company's obtaining a
CE ▇▇▇▇ for its Embolyx(TM) product in Europe the Company may require Century,
as lender, to loan to the Company, as borrower, an aggregate principal amount
not to exceed Two Million Dollars ($2,000,000) (the "Credit Facility").
6.2 TERMINATION OF THE CREDIT AGREEMENT. The Company's option to
require Century to loan money pursuant to the Credit Agreement shall terminate
upon the earlier of (a) September 30, 1999, (b) the termination of the
Distribution Agreement pursuant to its terms (except for termination of the
Distribution Agreement by Century without cause) or otherwise resulting from a
material breach or default by the Company of any covenant, condition or other
provision thereof, or (c) notice from Century following an Event of Default.
6.3 DEFAULT AND CROSS DEFAULTS. If an Event of Default occurs,
the Company shall not borrow pursuant to the Credit Facility during the time of
the Event of Default, and Century shall have the right to terminate the Credit
Facility upon written notice to the Company. If Century does not exercise its
right to terminate the Credit Facility during the Event of Default, thirty (30)
days after such Event of Default is cured or remedied, the Company may borrow
pursuant to the Credit Facility unless the Credit Facility has terminated in
accordance with Section 6.2 hereof.
7. ADDITIONAL AGREEMENTS. Notwithstanding the covenants and
agreements of the Company set forth in Section 5 hereof, the Company and Century
further agree that no such covenants and agreements shall prevent any sale,
disposition, spin-off, spin-out, license or any other transfer of the Company's
or any Subsidiary's assets and technology outside the applications in the human
vascular system.
8. CONDITIONS PRECEDENT.
8.1 CONDITIONS TO OBLIGATIONS OF CENTURY. The obligations of
Century to consummate this Agreement are subject to the satisfaction on or prior
to the Closing Date of the following conditions, unless waived by Century:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company and its Subsidiaries set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as if made at and as of the Closing Date, except as otherwise
contemplated by this Agreement.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall have
performed all obligations required to be performed by it under this Agreement
prior to the Closing Date, and no Event of Default shall have occurred and be
continuing.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been no
changes in the condition (financial or otherwise), business, prospects,
employees, operations, obligations or liabilities of the Company which, in the
aggregate, have had or may be reasonably expected to have a materially adverse
effect on the financial condition, business, or operations of the Company on a
consolidated basis.
(d) DISTRIBUTION AGREEMENT. The Company and Century
shall have entered into a Distribution Agreement substantially in the form
attached hereto as Exhibit B.
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(e) CREDIT AGREEMENT. The Company and Century shall have
entered into a Credit Agreement substantially in the form attached hereto as
Exhibit C.
(f) NOTE. The Company shall have tendered to Century the
Note.
(g) OFFICER'S CERTIFICATE. The Company shall have
delivered to Century a certificate signed by the Chief Executive Officer of the
Company and dated as of the Closing Date certifying that the conditions
specified in Sections 8.1(a), (b) and (c) have been satisfied.
(h) SECRETARY'S CERTIFICATE. The Company shall have
delivered to Century a certificate of its Secretary certifying as to the
resolutions attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Note, this Agreement, the Credit
Agreement, the Distribution Agreement and the Credit Facility Note.
8.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to consummate the transactions contemplated hereby are subject to
the satisfaction on or prior to the Closing Date of the following conditions,
unless waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Century set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as if made at and
as of the Closing Date, except as otherwise contemplated by this Agreement.
(b) PERFORMANCE OF OBLIGATIONS OF CENTURY. Century shall
have performed in all material respects all obligations required to be performed
by it under this Agreement prior to the Closing Date.
(c) DISTRIBUTION AGREEMENT. The Company and Century
shall have entered into a Distribution Agreement substantially in the form
attached hereto as Exhibit B.
(d) CREDIT AGREEMENT. The Company and Century shall have
entered into a Credit Agreement substantially in the form attached hereto as
Exhibit C.
(e) PAYMENT. Century shall have tendered to the Company
Three Million Dollars ($3,000,000) in exchange for the Note.
9. EVENTS OF DEFAULT. If any of the events specified in this
Section 9 shall occur (herein individually referred to as an "Event of
Default"), the Holder of the then outstanding Note issued pursuant to this
Agreement may, so long as such condition exists, declare the entire principal
and unpaid accrued interest thereon immediately due and payable, by notice in
writing to the Company:
9.1 PAYMENTS. Default in the payment of the principal or unpaid
accrued interest of the Note when due and payable if such default is not cured
by the Company within ten (10) days after the Holder has given the Company
written notice of such default.
9.2 BANKRUPTCY. The institution by the Company of proceedings to
be adjudicated as bankrupt or insolvent, or the consent by it to institution of
bankruptcy or insolvency proceedings against it or the filing by it of a
petition or answer or consent seeking reorganization or
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relief under the federal Bankruptcy Code, or any other applicable federal or
state law, or the consent by it to the filing of any such petition or the
appointment of a receiver, liquidator, assignee, trustee or other similar
official of the Company, or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the taking of
corporate action by the Company in furtherance of any such action.
9.3 COMMENCEMENT OF AN ACTION. If, within sixty (60) days after
the commencement of an action against the Company (and service of process in
connection therewith on the Company) seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such action shall not have been resolved in
favor of the Company or all orders or proceedings thereunder affecting the
operations or the business of the Company stayed, or if the stay of any such
order or proceeding shall thereafter be set aside, or if, within sixty (60) days
after the appointment without the consent or acquiescence of the Company of any
trustee, receiver or liquidator of the Company or of all or any substantial part
of the properties of the Company, such appointment shall not have been vacated.
9.4 DEFAULT OF SENIOR INDEBTEDNESS. Any declared default of the
Company under any Senior Indebtedness (as defined in Section 10 hereof) that
gives the holder thereof the right to accelerate such Senior Indebtedness, and
such Senior Indebtedness is in fact accelerated by the holder, or in the event
that any Senior Indebtedness has become due and payable upon maturity and has
not been satisfied.
9.5 COVENANTS AND AGREEMENTS. The Company shall default in the
performance of any of its material covenants and agreements set forth in any
provision of this Agreement and the continuance of such default for thirty (30)
days after the Holder has given the Company written notice of such default. Any
representation or warranties by the Company set forth in this Agreement shall
not be true and correct in all material respects as and when made.
9.6 DEFAULT UNDER OTHER AGREEMENTS. The Company breaches or
defaults on any material covenant, condition or other provision of the
Distribution Agreement, or the Company breaches or defaults under the Credit
Agreement resulting in the acceleration of any debt evidenced by the Credit
Facility Note pursuant to Section 7.2 of the Credit Agreement, and such breach,
default or acceleration continues after the applicable grace period, if any,
specified therein but in no event more than thirty (30) days after the Holder
has given the Company written notice of such breach, default or acceleration.
9.7 CHANGE OF CONTROL OF THE COMPANY. Any change in control of
the Company which includes any consolidation of the Company with, or merger of
the Company into, any other Person, any merger of another Person into the
Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock), any
acquisition of at least a majority of the Voting Stock of the Company or any
sale or transfer of all or substantially all of the business or assets of the
Company (a "Change of Control"), or Century's receipt of written notice from the
Company that a Change of Control will occur as described in Section 11.10
hereof.
9.8 OTHER REMEDIES. If any Event of Default shall occur and be
continuing, Century shall have, in addition to the remedies set forth in Section
9 hereof, all other remedies
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otherwise available at law and equity. In addition, if an Event of Default shall
occur and be continuing, Century may terminate its obligations under the Credit
Facility as described in Section 6.2 hereof, and declare the entire principal
and unpaid interest due under the Credit Facility Note, if any, immediately due
and payable in accordance with the terms of the Credit Agreement.
9.9 RESTRAINT FROM EXERCISE OF OPTIONS. For so long as the
Company shall be aware of any Event of Default, the Company shall not borrow
pursuant to the Credit Facility or exercise its option to convert the Note or
any Credit Facility Note into Common Stock and such action by the Company to the
contrary shall be void.
10. SUBORDINATION. The indebtedness evidenced by the Note is hereby
expressly subordinated to the extent and in the manner hereinafter set forth, in
right of payment to the prior payment in full of all the Company's Senior
Indebtedness (as defined herein).
10.1 SENIOR INDEBTEDNESS. As used in the Note, the term "Senior
Indebtedness" shall mean the principal of and unpaid accrued interest on: (a)
all indebtedness of the Company to banks, insurance companies or other financial
institutions regularly engaged in the business of lending money, which is for
money borrowed by the Company (whether or not secured), and (b) any such
indebtedness or any debentures, notes or other evidence of indebtedness issued
in exchange for such Senior Indebtedness, or any indebtedness arising from the
satisfaction of such Senior Indebtedness by a guarantor.
10.2 DEFAULT ON SENIOR INDEBTEDNESS. If there should occur any
receivership, insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization or arrangements with creditors (whether or not pursuant to
bankruptcy or other insolvency laws), sale of all or substantially all of the
assets, dissolution, liquidation or any other marshalling of the assets and
liabilities of the Company, then (a) no amount shall be paid by the Company in
respect of the principal of or interest on the Note at the time outstanding,
unless and until the principal of and interest on the Senior Indebtedness then
outstanding shall be paid in full, and (b) no claim or proof of claim shall be
filed with the Company by or on behalf of the Holder of the Note that shall
assert any right to receive any payments in respect of the principal of and
interest on the Note, except subject to the payment in full of the principal of
and interest on all of the Senior Indebtedness then outstanding. If there occurs
an event of default that has been declared in writing with respect to any Senior
Indebtedness, or in the instrument under which any Senior Indebtedness is
outstanding, permitting the holder of such Senior Indebtedness to accelerate the
maturity thereof, then, unless and until such event of default shall have been
cured or waived or shall have ceased to exist, or all Senior Indebtedness shall
have been paid in full, no payment shall be made in respect of the principal of
or interest on the Note, unless within three (3) months after the happening of
such event of default, the maturity of such Senior Indebtedness shall not have
been accelerated.
10.3 EFFECT OF SUBORDINATION. Subject to the rights, if any, of
the holders of Senior Indebtedness under this Section 10 to receive cash,
securities or other properties otherwise payable or deliverable to the Holder of
the Note, nothing contained in this Section 10 shall impair, as between the
Company and the Holder, the obligation of the Company, subject to the terms and
conditions hereof, to pay to the Holder the principal hereof and interest hereon
as and when the same become due and payable, or shall prevent the Holder of the
Note, upon default hereunder, from exercising all rights, powers and remedies
otherwise provided herein or by applicable law.
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10.4 SUBROGATION. Subject to the payment in full of all Senior
Indebtedness and until the Note shall be paid in full, the Holder shall be
subrogated to the rights of the holders of Senior Indebtedness (to the extent of
payments or distributions previously made to such holders of Senior Indebtedness
pursuant to the provisions of Section 10.2 hereof) to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness. No
such payments or distributions applicable to the Senior Indebtedness shall, as
between the Company and its creditors, other than the holders of Senior
Indebtedness and the Holder, be deemed to be a payment by the Company to or on
account of the Note; and for the purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness to which the Holder would be
entitled except for the provisions of this Section 10 shall, as between the
Company and its creditors, other than the holders of Senior Indebtedness and the
Holder, be deemed to be a payment by the Company to or on account of the Senior
Indebtedness.
10.5 UNDERTAKING. By its acceptance of the Note, the Holder
agrees to execute and deliver such documents as may be reasonably requested from
time to time by the Company or the lender of any Senior Indebtedness in order to
implement the foregoing provisions of this Section 10.
11. CONVERSION OF NOTE.
11.1 CONVERSION PRIVILEGE AND CONVERSION PRICE.
(a) Subject to and upon compliance with the provisions
of this Section 11, at the option of the Company at any time and at the
Company's sole discretion without regard to the price of the Common Stock and
the Conversion Price (as defined herein), except as otherwise specified herein,
the Note may be converted at the principal amount thereof, into fully paid and
nonassessable shares of Common Stock at the Conversion Price, in effect at the
time of conversion. Such conversion right shall expire at the close of business
on September __, 2003. The price at which shares of Common Stock shall be
delivered upon conversion (the "Conversion Price") shall be initially Fifteen
Dollars ($15.00) per share of Common Stock. The Conversion Price shall be
adjusted in certain instances as provided in this Section 11.
(b) Notwithstanding the foregoing, in no event shall the
Company have the right to convert the Note to Common Stock, and any such
conversion of the Note shall be void unless the current market price per share
of Common Stock (as calculated in accordance with Section 11.4(h) below) as of
the Business Day immediately preceding the date of the proposed conversion is
equal to or greater than Eighty Percent (80%) of the Conversion Price.
11.2 EXERCISE OF CONVERSION PRIVILEGE. Upon receipt of notice
from the Company of the exercise of its conversion privilege substantially in
the form attached to Exhibit A, Century shall surrender the Note duly endorsed
or assigned to the Company or in blank, at the office or agency of the Company
maintained for that purpose. Upon conversion the Company shall pay interest
accrued but unpaid on the Note surrendered for conversion through the date of
such conversion.
The Note shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of the whole portion of the principal
amount thereof for conversion in
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accordance with the foregoing provisions, and at such time the rights of Century
under the Note shall cease, and the Person or Persons entitled to receive the
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Company shall issue and shall
deliver at such office or agency a certificate or certificates for the number of
duly authorized, validly issued, fully paid and nonassessable shares of Common
Stock issuable upon conversion, together with payment in lieu of any fraction of
a share, as provided in Section 11.3 hereof.
11.3 FRACTIONS OF SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Note. Instead of any fractional share of
Common Stock which would otherwise be issuable upon the conversion of the Note,
the Company shall pay a cash adjustment in respect of such fraction of a share
of Common Stock in an amount equal to the remaining amount which is not
converted by reason of this Section 11.3.
11.4 ADJUSTMENT OF CONVERSION PRICE.
(a) In case the Company shall pay or make a dividend or
other distribution on any class of capital stock of the Company in Common Stock,
the Conversion Price in effect at the opening of business on the day following
the date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other distribution,
such reduction to become effective immediately after the opening of business on
the day following the date fixed for such determination. For the purposes of
this Section 11.4(a), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not pay any dividend or
make any distribution on shares of Common Stock held in the treasury of the
Company.
(b) In case the Company shall issue rights, options or
warrants to all holders of its Common Stock (not being available on an
equivalent basis to Century upon conversion) entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the current
market price per share of the Common Stock (determined as provided in Section
11.4(h) hereof) on the date fixed for the determination of stockholders entitled
to receive such rights, options or warrants (other than pursuant to a dividend
reinvestment plan), the Conversion Price in effect at the opening of business on
the day following the date fixed for such determination shall be reduced to a
price (calculated to the nearest cent) determined by multiplying such Conversion
Price by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of additional shares
of Common Stock so offered for subscription or purchase would purchase at such
Conversion Price in effect immediately prior to the date fixed for such
determination and the denominator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective
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immediately after the opening of business on the day following the date fixed
for such determination. For purposes of calculating the Conversion Price in this
Section 11.4(b), the number of shares of Common Stock outstanding immediately
prior to the date fixed for such determination of rights, options or warrants
shall be calculated as if all shares had been fully converted into shares of
Common Stock. Also, for the purposes of this Section 11.4(b), the number of
shares of Common Stock at any time outstanding shall not include shares held in
the treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock. The
Company will not issue any rights, options or warrants in respect of shares of
Common Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, in case outstanding shares of Common Stock shall each be combined
into a smaller number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such reduction
or increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision or
combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its indebtedness or
assets (including securities, but excluding any rights, options or warrants
referred to in Section 11.4(b) hereof, any dividend or distribution paid
exclusively in cash and any dividend or distribution referred to in Section
11.4), the Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction the numerator of which shall
be the current market price per share (determined as provided in Section
11.4(h)) of the Common Stock on the date fixed for such determination less the
then fair market value (as determined by an independent majority of the Board of
Directors, whose determination shall be conclusive and described in a board
resolution) of the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock, such adjustment to
become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such distribution. In any case in which this Section 11.4(d) is
applicable, Section 11.4(b) hereof shall not be applicable.
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 11.10 hereof applies
or as part of a distribution referred to in paragraph (d) of this Section 11.4)
in an aggregate amount that, combined together with (i) the aggregate amount of
any other distributions to all holders of its Common Stock made exclusively in
cash within the twelve (12) months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to this paragraph
(e) has been made and (ii) the aggregate of any cash plus the fair market value
(as determined by an independent majority of the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) of
consideration payable in respect of any tender offer by the Company or any of
its Subsidiaries for all or any
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portion of the Common Stock concluded within the twelve (12) months preceding
the date of payment of such distribution and in respect of which no adjustment
pursuant to paragraph (f) of this Section 11.4 has been made, exceeds ten
percent (10%) of the product of the current market price per share of the Common
Stock on the date for the determination of holders of shares of Common Stock
entitled to receive such distribution multiplied by the number of shares of
Common Stock outstanding on such date, then, and in each such case, immediately
after the close of business on such date for determination, the Conversion Price
shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the close of
business on the date fixed for determination of the stockholders entitled to
receive such distribution by a fraction (A) the numerator of which shall be
equal to the current market price per share of the Common Stock (determined as
provided in paragraph (h) of this Section 11.4) on the date fixed for such
determination less an amount equal to the quotient of (x) the excess of such
combined amount over such ten percent (10%) and (y) the number of shares of
Common Stock outstanding on such date for determination and (B) the denominator
of which shall be equal to the current market price per share of the Common
Stock (determined as provided in paragraph (h) of this Section 11.4) on such
date for determination.
(f) In case a tender offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and such
tender offer (as amended upon the expiration thereof) shall require the payment
to stockholders (based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares (as defined herein)) of an
aggregate consideration having a fair market value (as determined by an
independent majority of the Board of Directors, whose determination shall be
conclusive and described in a board resolution) that combined together with (i)
the aggregate of the cash plus the fair market value (as determined by an
independent majority of the Board of Directors, whose determination shall be
conclusive and described in a board resolution), as of the expiration of such
tender offer, of consideration payable in respect of any other tender offer, by
the Company or any Subsidiary for all or any portion of the Common Stock
expiring within the twelve (12) months preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to this paragraph (f) has
been made and (ii) the aggregate amount of any distributions to all holders of
the Common Stock made exclusively in cash within twelve (12) months preceding
the expiration of such tender offer and in respect of which no adjustment
pursuant to paragraph (e) of this Section 11.4 has been made, exceeds ten
percent (10%) of the product of the current market price per share of the Common
Stock (determined as provided in paragraph (h) of this Section 11.4) as of the
last time (the "Expiration Time") tenders could have been made pursuant to such
tender offer (as it may be amended) multiplied by the number of shares of Common
Stock outstanding (including any tendered shares) on the Expiration Time, then,
and in each such case, immediately prior to the opening of business on the day
after the date of the Expiration Time, the Conversion Price shall be adjusted so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on the date of the
Expiration Time by a fraction (A) the numerator of which shall be equal to (1)
the product of (a) the current market price per share of the Common Stock
(determined as provided in paragraph (h) of this Section 11.4) on the date of
the Expiration Time and (b) the number of shares of Common Stock outstanding
(including any tendered shares) on the Expiration Time, less (2) the amount of
cash plus the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares, and (B) the
denominator of which shall be equal to the product of (1) the current market
price per share of the Common Stock (determined as provided in paragraph
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(h) of this Section 11.4) as of the Expiration Time and (2) the number of shares
of Common Stock outstanding (including any tendered shares) as of the Expiration
Time less the number of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted up to any such maximum, being
referred to as the "Purchased Shares").
(g) The reclassification of Common Stock into securities
including securities other than Common Stock (other than any reclassification
upon a consolidation or merger to which Section 11.10 hereof applies) shall be
deemed to involve (i) a distribution of such securities other than Common Stock
to all holders of Common Stock (and the effective date of such reclassification
shall be deemed to be "the date fixed for the determination of stockholders
entitled to receive such distribution" and the "date fixed for such
determination" within the meaning of paragraph (d) of this Section 11.4), and
(ii) a subdivision or combination, as the case may be, of the number of shares
of Common Stock outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
combination becomes effective," as the case may be, and "the day upon which such
subdivision or combination becomes effective" within the meaning of paragraph
(c) of this Section 11.4).
(h) For the purpose of any computation under paragraphs
(d), (e) and (f) of this Section 11.4, the current market price per share of
Common Stock on any date shall be deemed to be the average of the daily Closing
Prices for the five (5) consecutive trading days selected by the Company
commencing not more than twenty (20) trading days before, and ending not later
than, the earlier of the day in question and the day before the "ex" date with
respect to the issuance or distribution requiring such computation. The "Closing
Price" for each trading day shall be the reported last sale price regular way
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, on the National Association of Securities Dealers Automated
Quotations system ("Nasdaq") National Market System ("Nasdaq National Market")
or, if not listed or admitted to trading on Nasdaq National Market, on Nasdaq,
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange or Nasdaq National Market or quoted on Nasdaq, the average
of the closing bid and asked prices in the over-the-counter market as furnished
by any New York Stock Exchange member firm selected from time to time by the
Company for that purpose, or, if the Common Stock does not have any closing bid
and asked prices in the over-the-counter market during the relevant period of
time, the fair market value per share as determined by an independent majority
of the Board of Directors as of the most recent available month-end determined
pursuant to GAAP. For purposes of this paragraph, the term "`ex' date," when
used with respect to any issuance or distribution, shall mean the first date on
which the Common Stock trades regular way on such exchange or in such market
without the right to receive such issuance or distribution.
(i) No adjustment in the Conversion Price shall be
required unless such adjustment (plus any adjustments not previously made by
reason of this paragraph (i)) would require an increase or decrease of at least
one percent (1%) in such price; provided, however, that any adjustments which by
reason of this paragraph (i) are not required to be made shall be carried
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forward and taken into account in any subsequent adjustment. All calculations
under this paragraph (i) shall be made to the nearest cent.
(j) The Company may make such reductions in the
Conversion Price, in addition to those required by paragraphs (a), (b), (c),
(d), (e) and (f) of this Section 11.4, as it considers to be advisable in order
to avoid or diminish any income tax to any holders of shares of Common Stock
resulting from any dividend or distribution of stock or issuance of rights or
warrants to purchase or subscribe for stock or from any event treated as such
for federal income tax purposes or for any other reasons. An independent
majority of the Board of Directors shall have the power to resolve any ambiguity
or correct any error in this Section 11.4 and its actions in so doing shall be
final and conclusive.
11.5 NOTICE OF ADJUSTMENTS OF CONVERSION PRICE. Whenever the
Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion
Price in accordance with Section 11.4 hereof and shall prepare a certificate
signed by the Chief Financial Officer of the Company setting forth the adjusted
Conversion Price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be filed at the
offices of the Company.
(b) a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price shall forthwith be
required, and as soon as practicable after it is required, such notice shall be
mailed by the Company to the Holder in accordance with the terms of Section 14.2
herein.
11.6 NOTICE OF CERTAIN CORPORATE ACTION. In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out of its
earned surplus; or
(b) the Company shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the
Company (other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation, merger or share exchange to which the
Company is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed at the offices of the Company,
and shall cause to be mailed to the Holder at its last addresses as it shall
appear in the Note Register, at least twenty (20) days (or ten (10) days in any
case specified in clause (a) or (b) of this Section 11.6) prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a
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record is to be taken for the purpose of such dividend, distribution, rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such dividend, distribution, rights
or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up. Neither the
failure to give such notice nor any defect therein shall affect the legality or
validity of the proceedings described in clauses (a) through (d) of this Section
11.6.
11.7 COMPANY TO RESERVE COMMON STOCK. The Company shall at all
times reserve and keep available out of its authorized but unissued Common
Stock, for the purpose of effecting the conversion of the Note or the Credit
Facility Note, the full number of shares of Common Stock then issuable upon the
conversion of the Note and any Credit Facility Note.
11.8 TAXES ON CONVERSIONS. The Company will pay any and all
taxes that may be payable in respect of the issuance or delivery of shares of
Common Stock on conversion of the Note pursuant hereto or the Credit Facility
Note pursuant to the Credit Agreement. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of shares of Common Stock in a name other than that
of Century and no such issuance or delivery shall be made unless and until the
Person requesting such issuance has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company that such tax has
been paid.
11.9 COVENANT AS TO COMMON STOCK. The Company covenants that all
shares of Common Stock which may be issued upon conversion of the Note or the
Credit Facility Note will upon issuance be fully paid and nonassessable and,
except as provided in Section 11.8 hereof, the Company will pay all taxes, liens
and charges with respect to the issue thereof.
11.10 PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF
ASSETS. In case of any Change of Control of the Company, the Company will notify
Century at least thirty (30) days prior to the closing of the transaction that
will effect the Change of Control, and Century may convert the Note in
accordance (mutatis mutandis) with Section 11 hereof prior to the transaction or
declare an Event of Default and accelerate the Note and terminate this Agreement
in accordance with Section 11 hereof.
11.11 TRANSFER AND EXCHANGE OF NOTE. The Note may be freely
transferred or assigned by Century without the consent of the Company. Such
transfer and assignment shall be made in accordance with applicable federal and
state securities laws. At any time and from time to time, upon not less than ten
(10) days notice to that effect given by Century and, upon surrender of the Note
at the Company's office by Century, the Company will deliver in exchange
therefor, without expense to Century, except as set forth below, one Note for
the same aggregate principal amount as the then unpaid principal amount of the
Note so surrendered, provided such Note shall be in the amount of the full
principal amount of the Note and there shall be no right to divide the Note,
dated as of the date to which interest has been paid on the Note so surrendered
or, if such surrender is prior to the payment of any interest thereon, then
dated as of the date of issue, registered in the
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name of such Person as may be designated by Century, and otherwise of the same
form and tenor as the Note so surrendered for exchange. The Company may require
the payment of a sum sufficient to cover any stamp tax or governmental charge
imposed upon such exchange or transfer.
11.12 LOSS, THEFT, MUTILATION OR DESTRUCTION OF NOTE. Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
mutilation or destruction of the Note, the Company will make and deliver without
expense to Century thereof, a new Note, of like tenor, in lieu of such lost,
stolen, mutilated or destroyed Note.
11.13 EXPENSES, STAMP TAX INDEMNITY. The Company agrees to pay
duplicating and printing costs and charges for shipping the Note, adequately
insured to Century's home office or at such other place as Century may
designate, and all reasonable expenses of Century (including, without
limitation, the reasonable fees and expenses of any financial advisor to
Century) relating to any proposed or actual amendment, waivers or consents
pursuant to the provisions hereof, including, without limitation, any proposed
or actual amendments, waivers, or consents resulting from any work-out,
re-negotiations or restructuring relating to the performance by the Company of
its obligations under this Agreement and the Note. The Company also agrees that
it will pay and hold Century harmless against any and all liabilities with
respect to stamp and other taxes, if any, which may be payable or which may be
determined to be payable in connection with the execution and delivery of this
Agreement or the Note, whether or not the Note is then outstanding. The Company
agrees to protect and indemnify Century against any liability for any and all
brokerage fees and commissions payable or claimed to be payable to any Person
(other than any Person engaged by Century) in connection with the transactions
contemplated by this Agreement.
11.14 CANCELLATION OF CONVERTED NOTE. The Note delivered for
conversion shall be canceled by or at the direction of the Company.
12. RIGHT OF FIRST OFFER.
12.1 THE RIGHT OF FIRST OFFER. Subject to the terms and
conditions specified in this Section 12, the Company covenants not to sell or
issue any New Securities (as defined herein) without complying with the
provisions of this Section 12.
12.2 GRANT. If the Company proposes to sell or issue any New
Securities to any Person, the Company hereby grants to Century a right of first
offer to purchase a pro rata share of New Securities that the Company may, from
time to time, propose to sell and issue. For purposes of this Section 12,
Century's pro rata share of New Securities is the ratio of the number of shares
of Common Stock owned or which would be owned (assuming full conversion of the
Note and the Credit Facility Note if issued and outstanding) by Century
immediately prior to the issuance of New Securities to the total number of
shares of Common Stock (calculated on a fully diluted basis) outstanding
immediately prior to the issuance of New Securities (assuming full conversion of
all convertible securities).
12.3 DEFINITION OF NEW SECURITIES. "New Securities" shall mean
any capital stock (including Common Stock) of the Company whether now authorized
or not, and rights, options or warrants to purchase capital stock of the
Company, and securities of any type whatsoever that are, or may become,
convertible into capital stock of the Company; provided, however, that the term
"New
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Securities" does not include (a) shares of Common Stock issued upon conversion
of the Note or the Credit Facility Note, (b) shares of Common Stock (or options
therefor) issued or sold to employees, directors, consultants or advisors of the
Company for the primary purpose of soliciting or retaining their services,
provided each such person executes an agreement, in substantially the form as
approved by the Board of Directors, (c) securities issued pursuant to the
acquisition of another Person or business segment of any such Person by the
Company by merger, purchase of substantially all the assets or other
reorganization whereby the Company will own more than fifty percent (50%) of the
voting power of such business entity or business segment, (d) any borrowings,
direct or indirect, from financial institutions or other Persons by the Company,
whether or not presently authorized, including any type of loan or payment
evidenced by any type of debt instrument, provided such borrowings do not have
any equity features including warrants, options or other rights to purchase
capital stock and are not convertible into capital stock of the Company, (e)
securities issued to vendors or customers or to other persons in similar
commercial situations with the Company if such issuance is approved by the Board
of Directors, (f) securities issued in connection with any stock split, stock
dividend or recapitalization of the Company in which all holders of Common Stock
are entitled to receive their proportionate share of such issuance, and (g) any
right, option or warrant to acquire any security convertible into the securities
exempted from the definition of New Securities pursuant to clauses (a) through
(f) above.
12.4 EXERCISE OF RIGHT OF FIRST OFFER. If the Company proposes
to issue New Securities, the Company shall give written notice to Century
stating (a) its bona fide intention to offer or issue New Securities, (b) the
number of such New Securities to be offered, (c) the price and general terms
upon which it proposes to offer such New Securities, and (d) the identity of the
Persons or classes of Persons to whom such New Securities are proposed to be
issued. Within twenty (20) calendar days after receipt of such notice, Century
may elect to purchase or obtain, at the price and on the terms specified in the
notice, up to its pro rata share of such New Securities, as such pro rata share
is calculated pursuant to Section 12.2 hereof, in the event the Company proposes
to issue such New Securities to Persons, by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased. Century
shall retain its right of first offer pursuant to Section 12 hereof until (i)
this Agreement terminates or (ii) upon a Change of Control described in Section
11.10 hereof and shall not be affected in any way by any previous refusals to
exercise its right of first offer and to purchase any New Securities.
12.5 TERMINATION OF RIGHT OF FIRST OFFER. If Century does not
fully exercise its right to purchase or obtain all such New Securities that
Century has the right to purchase or obtain pursuant to Section 12.4 hereof, the
Company may, during the one hundred twenty (120) day period following the
expiration of the period provided in Section 12.4 hereof, offer the remaining
unsubscribed New Securities to the Persons or classes of Person specified in the
notice sent to Century pursuant to Section 12.4 hereof, at a price not less than
that, and upon terms no more favorable to the offeree than those, specified in
such notice. If the Company does not enter into an agreement for the sale of the
New Securities within such period, or if such agreement is not consummated
within one hundred twenty (120) days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such New Securities shall
not be offered unless first reoffered to Century in accordance herewith.
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13. INDEMNIFICATION.
13.1 INDEMNIFICATION BY THE COMPANY.
(a) The Company agrees to defend and indemnify Century,
its Subsidiaries and their respective Affiliates, directors, officers,
employees, shareholders, agents and representatives, and their respective
successors and assigns (collectively, the "Century Indemnitees"), against and
hold each of them harmless from any and all losses, liabilities, taxes, claims,
suits, proceedings, demands, judgments, damages, expenses and costs, including,
without limitation, reasonable counsel fees, costs and expenses incurred in the
investigation, defense or settlement of any claims covered by this indemnity (in
this Section 13 collectively, the "Indemnifiable Damages") which any Century
Indemnitees may suffer or incur by reason of (i) the inaccuracy or breach of any
of the representations, warranties or covenants of the Company contained in this
Agreement or any documents, certificate or agreement delivered pursuant hereto;
or (ii) any claim by any Person under any provision of any federal or state
securities law relating to any transaction, event, act or omission of or by the
Company occurring before or after the Closing Date; provided, however, that the
total indemnity shall not exceed the consideration received by the Company
pursuant to this Agreement and the Credit Agreement. Nothing herein shall limit
in any way Century's remedies in the event of breach by the Company of any of
its covenants or agreements hereunder which are not also a representation or
warranty or for willful fraud or intentionally deceptive material
misrepresentation or omission by the Company in connection herewith or with the
transactions contemplated hereby.
(b) Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, the Century
Indemnitees and the Company and the Affiliates of any of them, shall have the
right to be put in the same financial position as they would have been in had
each of the representations, warranties and covenants of the Company been true
and accurate or the same said parties had not breached any such covenants or had
any of the events, claims or liabilities referred to in Section 13.1(a) not
occurred or been made or incurred.
(c) Any indemnitee under this Agreement may not seek
recovery under the indemnities set forth herein unless and until the
Indemnifiable Damages of such party are greater than Twenty-Five Thousand
Dollars ($25,000) measured on an aggregate basis for all indemnitees, at which
point such indemnity shall apply to all Indemnifiable Damages.
13.2 INDEMNIFICATION BY CENTURY. After the Closing Date, Century
shall, as to those representations, warranties, covenants and agreements which
are herein made or agreed to by Century, indemnify and hold harmless the
Company's officers and directors and in respect of:
(a) any damage, deficiency, losses or costs incurred by
the Company resulting from any material misrepresentation or breach of warranty
or any non-fulfillment of any covenant or agreement on the part of Century under
this Agreement;
(b) any claim by any person under any provision of any
federal or state securities laws relating to any event, act or omission of or by
Century in connection with any tender offer by Century; and
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(c) any claim, action, suit, proceeding, demand,
judgment, assessment, cost and expense, including reasonable counsel fees,
incident to the foregoing; provided that the total indemnity under this Section
13.2 shall not exceed Three Million Dollars ($3,000,000).
Century shall reimburse the Company for any liabilities, damages,
deficiencies, claims, actions, suits, proceedings, demands, judgments,
assessments, costs and expenses to which this Section 13.2 relates only if a
claim for indemnification is made by the Company within the period ending at
September 30, 1999.
13.3 INDEMNIFICATION PROCEDURE. A party seeking indemnification
(the "Indemnitee") shall use its commercially reasonable best efforts to
minimize any liabilities, damages, deficiencies, claims, judgments, assessments,
costs and expenses in respect of which indemnity may be sought under this
Agreement. The Indemnitee shall give prompt written notice to the party from
whom indemnification is sought (the "Indemnitor") of the assertion of a claim
for indemnification; provided, however, that the Indemnitee's failure to notify
the Indemnitor shall not excuse the Indemnitor's obligation to indemnify the
Indemnitee except to the extent that such failure prejudices the Indemnitor's
defense of any such claim. No such notice of assertion of a claim shall satisfy
the requirements of this Section 13 unless it describes in reasonable detail and
in good faith the facts and circumstances upon which the asserted claim for
indemnification is based. If any action or proceeding shall be brought in
connection with any liability or claim to be indemnified hereunder, the
Indemnitee shall provide the Indemnitor twenty (20) calendar days to decide
whether to defend such liability or claim. During such period, the Indemnitee
shall take all necessary steps to protect the interests of itself and the
Indemnitor, including the filing of any necessary responsive pleadings, the
seeking of emergency relief or other action necessary to maintain the status
quo, subject to reimbursement from the Indemnitor of its expenses in doing so.
The Indemnitor shall (with, if necessary, reservation of rights) defend such
action or proceeding at its expense, using counsel selected by the insurance
company insuring against any such claim and undertaking to defend such claim, or
by other counsel selected by it and approved by the Indemnitee, which approval
shall not be unreasonably withheld or delayed. The Indemnitor shall keep the
Indemnitee fully apprised at all times of the status of the defense and shall
consult with the Indemnitee prior to the settlement of any indemnified matter.
Indemnitee agrees to use reasonable efforts to cooperate with Indemnitor in
connection with its defense of indemnifiable claims. In the event the Indemnitee
has a claim or claims against any third party growing out of or connected with
the indemnified matter, then upon receipt of indemnification, the Indemnitee
shall fully assign to the Indemnitor the entire claim or claims to the extent of
the indemnification actually paid by the Indemnitor and the Indemnitor shall
thereupon be subrogated with respect to such claim or claims of the Indemnitee.
14. MISCELLANEOUS.
14.1 POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay
or failure on the part of Century in the exercise of any power or right shall
operate as a waiver thereof; nor shall any single or partial exercise of the
same preclude any other or further exercise thereof, or the exercise of any
other power or right, and the rights and remedies of Century are cumulative to,
and are not exclusive of, any rights or remedies Century would otherwise have.
14.2 NOTICE. Except as otherwise expressly provided herein, any
notice, consent or document required or permitted hereunder shall be given in
writing and it or any certificates or
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other documents delivered hereunder shall be deemed effectively given or
delivered (as the case may be) upon personal delivery (professional courier
permissible) or when mailed by receipted certified mail delivery, or five (5)
business days after deposit in the mail. Such certificates, documents or notice
may be personally delivered to an authorized representative of the Company or
Century (as the case may be) at any address where such authorized representative
is present and otherwise shall be sent to the following address:
If to the Company: Micro Therapeutics, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ #▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Century: Century Medical, Inc.
▇-▇-▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇ ▇▇▇-▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇) ▇▇▇▇-▇▇▇▇
With a copy to: O'Melveny & ▇▇▇▇▇ LLP
Akasaka Twin Tower
East Building 14th Floor
17-22, ▇▇▇▇▇▇▇ ▇-▇▇▇▇▇
▇▇▇▇▇▇-▇▇, ▇▇▇▇▇ ▇▇▇-▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No.: (▇▇) ▇▇▇▇-▇▇▇▇
14.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Company and its successors and assigns and
shall be binding upon and inure to the benefit of Century and its successors and
assigns; provided, however, that, subject to Sections 11.10 and 11.11 hereof,
neither the Company nor Century shall assign this Agreement or any of its
rights, duties or obligations hereunder without the prior written consent of the
other party which consent shall not be unreasonably withheld, conditioned, or
delayed, and provided further, that in any event Century may assign its rights
hereunder after September 30, 1999 without the Company's prior written consent.
14.4 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Note.
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14.5 SEVERABILITY. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
14.6 WAIVER OF CONDITIONS. If on the Closing Date, either party
hereto fails to fulfill each of the conditions specified in Section 8 hereof,
the other party may thereupon elect to be relieved of all further obligations
under this Agreement. Without limiting the foregoing, if the conditions
specified in Section 8 have not been fulfilled, the other party may waive
compliance by such party with any such condition to such extent as such party
may in its sole discretion determine. Nothing in this Section 14.6 shall operate
to relieve either party of any obligations hereunder or to waive any of the
other party's rights against such party.
14.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
14.8 GOVERNING LAW. This Agreement and the Note issued and sold
hereunder shall be governed by and construed in accordance with the law of the
State of New York, without regard to the conflict of laws provisions thereof.
14.9 CAPTIONS. The descriptive headings of the various sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
14.10 DISPUTE RESOLUTION. Disputes arising under, in connection
with or as to the interpretation of this Agreement and/or the Note shall be
resolved as provided in Exhibit E hereto.
14.11 SURVIVAL. The obligations of the Company under Section
11.13 and Article 13 hereof shall survive the payment or transfer of any note,
the enforcement, amendment or waiver of this Agreement, the Credit Agreement,
the Note or the Credit Facility Note, and the termination of this Agreement or
the Credit Agreement.
14.12 ENTIRE AGREEMENT; AMENDMENT AND MODIFICATION. This
Agreement, together with the Credit Agreement, the Note and any Credit Facility
Note, constitutes the entire and final agreement between the parties hereto with
respect to the subject matter hereof and supersedes any and all prior oral or
written agreements or discussions on the subject matter hereof. Neither this
agreement nor any of the other documents or instruments delivered herewith or
executed pursuant hereto may be modified or amended in any respect except in a
writing signed by both parties expressly setting forth such modification or
amendment.
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IN WITNESS WHEREOF, the Company and Century by their duly authorized
officers, have each caused this Agreement to be executed as of the date first
written above.
CENTURY:
CENTURY MEDICAL, INC.
By: /s/ M. SUZUKI
-----------------------------------
Title: President and Chief Executive
Officer
--------------------------------
COMPANY:
MICRO THERAPEUTICS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Title: President and Chief Executive
Officer
--------------------------------
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Schedule 4.2
EXCEPTIONS TO NO CONSENTS
Within twenty days after the delivery of the Note to Century, Century must file
a notice thereof with the Bank of Japan.
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EXHIBIT A
FORM OF 5% CONVERTIBLE SUBORDINATED NOTE
MICRO THERAPEUTICS, INC.
5% Convertible Subordinated Note, due September __, ▇▇▇▇
▇▇. ▇▇▇-▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
$3,000,000 September __, 1998
Micro Therapeutics, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (the "Company"), for value received,
hereby promises to pay to Century Medical, Inc. a Japanese corporation
("Century"), or its registered assigns (Century or its assigns being the
"Holder"), the principal sum of THREE MILLION DOLLARS ($3,000,000) on September
__, 2003 (the "Maturity"), and to pay interest (computed on the basis of a 365
day year) (i) on the unpaid principal balance thereof from the date of this Note
at the rate of five percent (5%) per annum from the date hereof, payable
quarterly in arrears on January 31, April 30, July 31 and October 31 of each
year (each, an "Interest Payment Date") (commencing October 31, 1998) until such
unpaid principal balance shall become due and payable (whether at Maturity, or
by declaration, acceleration or otherwise) and (ii) to the extent permitted by
applicable law on each overdue payment of principal or any overdue payment of
interest, at a rate per annum equal to ten percent (10%) payable quarterly as
aforesaid.
The interest and principal payments payable with respect to this Note,
on any Interest Payment Date, at Maturity or by declaration, acceleration or
otherwise, pursuant to the Note Agreement (as defined herein), shall be paid to
Century in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. Such
interest and principal payments shall be made to Century in accordance with the
provisions of the Note Agreement.
This Note is the sole issue of a 5% Convertible Subordinated Note due
_________, 2003 of the Company issued in an aggregate principal amount of Three
Million Dollars ($3,000,000) pursuant to the Convertible Subordinated Note
Agreement, dated _________, 1998, by and between the Company and Century (the
"Note Agreement"). The Holder of this Note is entitled to the benefits of the
Note Agreement, and may enforce the Note Agreement and exercise the remedies
provided for thereby or otherwise available in respect thereof.
This Note may be transferred or assigned by Century as provided in the
Note Agreement. As provided in the Note Agreement, upon surrender of this Note
for registration of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed by Century or Century's
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attorney duly authorized in writing, a new Note for a like aggregate principal
amount and otherwise of similar tenor, will be issued to, and registered in the
name of, the transferee. Prior to due presentment for registration of transfer,
the Company may treat the person in whose name this Note is registered as the
Holder and owner hereof for the purpose of receiving payments and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
In the case of an Event of Default (as defined in the Note Agreement),
the principal of this Note in certain circumstances may be declared or otherwise
become due and payable in the manner and with the effect provided in the Note
Agreement.
This Note is subject to conversion into Common Stock pursuant to the
terms and conditions of the Note Agreement and conversion (in the case of the
Company) shall be evidenced by a Notice of Conversion as attached hereto. This
Note is not subject to prepayment or redemption by the Company prior to its
expressed Maturity.
The indebtedness evidenced by this Note is, to the extent provided in
the Note Agreement, subordinate and subject in right of payment to the Senior
Indebtedness (as defined in the Note Agreement), and this Note is issued subject
to the provisions of the Note Agreement with respect thereto. Each Holder of
this Note, by accepting the same, agrees to and shall be bound by such
provisions.
No reference herein to the Note Agreement and no provision of this Note
or of the Note Agreement shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of (and premium, if
any) and interest on this Note at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Note as provided in the Note
Agreement.
All terms used in this Note which are defined in the Note Agreement
shall have the meanings assigned to them in the Note Agreement.
This Note has been delivered to Century in New York, New York, and the
Note and the Note Agreement are governed by and shall be construed and enforced
in accordance with and the rights of the parties shall be governed by the law of
the State of New York excluding choice-of-law principles.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: September __, 1998
MICRO THERAPEUTICS, INC.
By:
----------------------------------
Its:
----------------------------------
ATTEST:
By:
-----------------------------
Its:
-----------------------------
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NOTICE OF CONVERSION
Micro Therapeutics, Inc. hereby irrevocably exercises the option to
convert this 5% Convertible Subordinated Note, or portion hereof below
designated, into shares of Common Stock in accordance with the terms of the
Convertible Subordinated Note Agreement, and represents that the shares issuable
and deliverable upon such conversion, together with written confirmation of
transmittal of a wire transfer to Century in payment for any fractional shares
and in payment of accrued but unpaid interest on the Note or portion of the Note
to be converted, and any 5% Convertible Subordinated Note representing any
unconverted principal amount hereof, will be issued and delivered to the current
Holder of the 5% Convertible Subordinated Note.
Principal amount to be converted (if less than all): $__________
MICRO THERAPEUTICS, INC.
By:
--------------------------------
Its:
--------------------------------
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EXHIBIT B
FORM OF EXCLUSIVE DISTRIBUTION AGREEMENT
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EXHIBIT C
FORM OF CREDIT AGREEMENT
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EXHIBIT D
DISCLOSURE SCHEDULE
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EXHIBIT E
DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters may arise
from time to time during the term of this Agreement which relates to either
party's rights and/or obligations under this Agreement and/or the Note. To have
such a dispute resolved by this Alternative Dispute Resolution ("ADR")
provision, a party first must send written notice of the dispute to the other
party for attempted resolution by good faith negotiations between their
respective presidents (or their equivalents) of the affected Subsidiaries,
divisions, or business units within twenty-eight (28) days after such notice is
received (all references to "days" in this ADR provision are to calendar days).
If the matter has not been resolved within twenty-eight (28) days of the notice
of dispute, or if the parties fail to meet within such twenty-eight (28) days,
either party may initiate an ADR proceeding as provided herein. The parties
shall have the right to be represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice to the
other party of the issues to be resolved by ADR. Within fourteen (14)
days after its receipt of such notice, the other party may, by written
notice to the party initiating the ADR, add additional issues to be
resolved within the same ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to
preside in the resolution of any disputes in this ADR proceeding. If the
parties are unable to agree on a mutually acceptable neutral within such
period, (a) if the arbitration is to be held in California pursuant to
Paragraph 3 below, the parties shall request that the President of the
CPR Institute for Dispute Resolution ("CPR"), ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, select a neutral; and (b) if the
arbitration is to be held in Japan pursuant to Paragraph 3 below, the
parties shall request that the Japan Commercial Arbitration Association
("JCAA") select a neutral.
3. No earlier than twenty-eight (28) days or later than fifty-six (56) days
after selection, the neutral shall hold a hearing to resolve each of the
issues identified by the parties. The ADR proceeding shall take place at
a location in Orange County in the State of California and proceed
pursuant to CPR rules if the ADR is initiated and brought by Century, or
in Tokyo, Japan and pursuant to JCAA rules if initiated and brought by
the Company.
4. The rulings of the neutral and the allocation of fees and expenses shall
be binding, non-reviewable, and non-appealable, and may be entered as a
final judgment in any court having jurisdiction. Any arbitral award made
pursuant to the ADR shall be enforceable under the 1958 United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards.
5. Except as provided in paragraph 4 or as required by law, the existence
of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and
briefs), and the rulings shall be deemed Confidential Information. The
neutral shall have the authority to impose sanctions for unauthorized
disclosure of Confidential Information.
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