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EXHIBIT 10.1
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN
ASTERISK ([*])) AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT DATED AUGUST 28, 1998
CONVERTIBLE SUBORDINATED NOTE AGREEMENT
BY AND BETWEEN
▇▇▇▇▇▇ LABORATORIES
AND
MICRO THERAPEUTICS, INC.
DATED AS OF AUGUST 12, 1998
$5,000,000
5% CONVERTIBLE SUBORDINATED NOTE, DUE AUGUST 19, 2003
CONVERTIBLE SUBORDINATED NOTE AGREEMENT
THIS CONVERTIBLE SUBORDINATED NOTE AGREEMENT (this "Agreement"),
entered into as of the 12th day of August 1998, by and between ▇▇▇▇▇▇
LABORATORIES, an Illinois corporation ("Abbott"), and MICRO
THERAPEUTICS, INC., a Delaware corporation (the "Company").
RECITALS
▇. ▇▇▇▇▇▇ desires to purchase from the Company, and the Company desires
to sell to Abbott, a certain 5% Convertible Subordinated Note, due
August 19, 2003, in the aggregate principal amount of Five Million
Dollars ($5,000,000) (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 Abbott desire to enter into an Exclusive
Distribution Agreement (the "Distribution Agreement") in the form
attached hereto as Exhibit B.
C. The Company and Abbott desire to enter into a Credit Agreement (the
"Credit Agreement") in the form attached hereto as Exhibit C, which
provides that Abbott, as lender, shall loan to the Company, at the
Company's sole option, as borrower, an amount not to exceed an
aggregate of Five Million Dollars ($5,000,000).
D. The Company desires to ▇▇▇▇▇ ▇▇▇▇▇▇ a security interest in the
intellectual property relating to the Company's peripheral blood clot
infusion products pursuant to the Security Agreement in the form
attached hereto as Exhibit D.
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E. The Company and Abbott 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.
F. The Company and Abbott 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
Abbott hereby agree as follows:
1. DESCRIPTION OF NOTE AND COMMITMENT.
1.1 DESCRIPTION OF NOTE. The Company has authorized the
purchase and sale of Five Million Dollars ($5,000,000)
aggregate principal amount of the Note to be dated the Closing
Date of issue, 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 installment of
interest at the rate of ten percent (10%) per annum after the
date due, whether at maturity or by declaration, acceleration
or otherwise, until paid, to be expressed to mature on August
19, 2003, and to be substantially in the form 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 Abbott, and Abbott agrees to
purchase from the Company, the Note in the respective
aggregate principal amount as set forth in Exhibit A at a
purchase price of one hundred percent (100%) of the principal
amount thereof on the Closing Date (as defined herein).
The closing of the purchase and sale of the Note will be made at the
offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, against payment therefor
of the purchase price by wire transfer in immediately available funds
at 1:00 p.m. Pacific time, August 19, 1998, or such later date as shall
mutually be agreed upon by the Company and Abbott (the "Closing Date").
The Note delivered to Abbott on the Closing Date will be delivered
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to Abbott in the form of a single Note in the form attached hereto as
Exhibit A for the full amount of ▇▇▇▇▇▇'▇ purchase.
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 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 Chicago, Illinois are
authorized or required by law to be closed. "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
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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.
"Event of Default" shall have the meaning set forth in Section
9 hereof.
"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 Abbott.
"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.
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"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.
"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
Abbott 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
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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 set forth in the Disclosure Schedule attached
hereto as Exhibit E (the "Disclosure Schedule") or in any document
expressly referenced in the Disclosure Schedule, the Company and its
Subsidiaries represent and warrant to Abbott 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 wherein the nature of
the business transacted by it or the nature of the property
owned or leased by it 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 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. The Company
has no Subsidiaries except those set forth in the Disclosure
Schedule.
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3.5 AUTHORITY. The Company has all requisite corporate power
and authority to enter into this Agreement, the Credit
Agreement and the Security 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, the
Security 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, the
Security Agreement and the Note have been, and the Credit
Facility Note will be, duly executed and delivered by the
Company, and constitute the valid and binding obligation 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
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 hereof are satisfied, the execution and delivery of
this Agreement, the Credit Agreement, the Security 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, or (b)
any material agreement or instrument, permit, franchise,
license, judgment or order, applicable to the Company or its
respective properties or assets.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative 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, the
Credit Agreement or the Security Agreement or the consummation by the
Company of the transactions contemplated hereby or thereby, except for
such 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 Abbott
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; and the
unaudited consolidated statement of operations and statement
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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 Abbott 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 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 Abbott 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
Abbott, 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 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.
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(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.
(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.
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(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.
(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 of the
Closing Date.
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,
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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. 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.
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 rights of creditors 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. No third
party has raised any claim, dispute or controversy
with
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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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
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 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) The operations of the Company do not conflict
with or infringe, and no one has asserted to the
Company that such operations 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
knowledge of the Company, there are no facts or
alleged facts which would reasonably serve as a basis
for any
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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. All tax returns required to be filed by the
Company or its Subsidiaries in any jurisdiction have, in fact,
been filed, and all taxes, assessments, fees and other
governmental charges upon the Company or its Subsidiaries or
upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns 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 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 or any similar security or has solicited or
will solicit an offer to acquire the Note or any similar
security from or has otherwise approached or negotiated or
will approach or negotiate in respect of the Note or any
similar security with any Person other than ▇▇▇▇▇▇. Neither
the Company, directly or indirectly, nor any agent on its
behalf has offered or will offer the Note or any similar
security or has solicited or will solicit an offer to acquire
the Note or any similar security from any Person so as to
require registration of the Note under section 5 of the
Securities Act.
3.19 EMPLOYEE PLANS AND RELATIONS.
(a) Except as provided in the Company SEC Documents,
the Company does not have any: (i)employee benefit
plans, multi-employer plans and employee benefit
plans (as defined in section
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3(2) or section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended); (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.
(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.
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.
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ in writing which materially
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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.
4. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇. Except as contemplated by
this Agreement, ▇▇▇▇▇▇ represents and warrants to the Company as of the
date hereof as follows:
4.1 CORPORATE ORGANIZATION. ▇▇▇▇▇▇ is a corporation duly
incorporated, validly existing and in good standing under the
laws of Illinois. ▇▇▇▇▇▇ is duly qualified to do business and
is in good standing in its state of incorporation and in each
other jurisdiction in which it owns or leases property or
conducts business, except where the failure to be so qualified
would not have a material adverse effect on the business of
▇▇▇▇▇▇. ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇. This Agreement has
been duly executed and delivered by ▇▇▇▇▇▇ and constitutes the
valid and binding obligation of ▇▇▇▇▇▇ 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 Certificate
of Incorporation or Bylaws of ▇▇▇▇▇▇, or (b) any material
agreement or instrument, permit, license, judgment, order,
statute, law, ordinance, rule or regulation applicable to
▇▇▇▇▇▇ or its properties or assets, other than any such
conflicts, violations, defaults, terminations, cancellations
or accelerations which individually or in the aggregate would
not have a material adverse effect on ▇▇▇▇▇▇.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority is required by
or with respect to ▇▇▇▇▇▇ in
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connection with the execution and delivery of this Agreement by ▇▇▇▇▇▇
or the consummation by ▇▇▇▇▇▇ of the transactions contemplated hereby
or thereby.
4.3 RESTRICTED NOTE. ▇▇▇▇▇▇ represents and agrees, and in
entering into this Agreement the Company understands, that
(A)▇▇▇▇▇▇ is acquiring the Note for ▇▇▇▇▇▇'▇ own account, and
for the purpose of investment and not with a view to the
distribution thereof, and that ▇▇▇▇▇▇ has no present intention
of selling, negotiating or otherwise disposing of the Note; it
being understood, however, that the disposition of ▇▇▇▇▇▇'▇
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 ▇▇▇▇▇▇ will only re-offer or resell
the Note purchased by ▇▇▇▇▇▇ 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.
4.4 NO CONFLICT. The execution and delivery of this Agreement
by ▇▇▇▇▇▇ and the performance of ▇▇▇▇▇▇'▇ 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 Certificate of Incorporation or Bylaws of ▇▇▇▇▇▇ or any
of its Subsidiaries, or any material contract, agreement or
commitment binding upon ▇▇▇▇▇▇ 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
▇▇▇▇▇▇; 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 ▇▇▇▇▇▇ or any of its assets or properties.
4.5 BROKERS OR FINDERS. ▇▇▇▇▇▇ has not dealt with any broker
or finder in connection with the transactions contemplated by
this Agreement. ▇▇▇▇▇▇ 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, the
Company and its Subsidiaries covenant and agree with ▇▇▇▇▇▇ 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 operation that
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will vary materially from the methods used by the Company as
of June30, 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. 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 contemporaneous notice
to ▇▇▇▇▇▇, the Company shall not (a) consolidate with or merge
into any other Person, (b) 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 (c) 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.
5.6 SALE OR LEASE OF ASSETS; DISPOSITIONS. Except with
contemporaneous notice to ▇▇▇▇▇▇, 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.
5.7 INDEBTEDNESS. Except with contemporaneous notice to
▇▇▇▇▇▇, 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 except in connection with the purchase of
inventory pursuant to the existing bank line of credit.
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
termination of
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this Agreement. Within thirty (30) days of the Closing Date,
the Company shall deliver to ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇.
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 ▇▇▇▇▇▇ 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, would
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
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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 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 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 ▇▇▇▇▇▇ and shall cause its independent accountants to
afford to ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇ (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 ▇▇▇▇▇▇ may reasonably
request. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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;
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(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.
6. CREDIT AGREEMENT.
6.1 CREDIT AGREEMENT. Concurrently herewith, the Company and
▇▇▇▇▇▇ shall enter into the Credit Agreement in the form
attached hereto as Exhibit C. Pursuant to the Credit
Agreement, at the Company's sole discretion, the Company may
require ▇▇▇▇▇▇, as lender, to loan to the Company, as
borrower, an amount not to exceed an aggregate of Five Million
Dollars ($5,000,000) (the "Credit Facility").
6.2 TERMINATION OF THE CREDIT AGREEMENT. The Company's option
to require ▇▇▇▇▇▇ to loan money pursuant to the Credit
Agreement shall terminate upon the earlier of (a)July 31,
1999, (b)the termination of the Distribution Agreement
pursuant to its terms (except for termination of the
Distribution Agreement by ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ shall have the right to
terminate the Credit Facility upon written notice to the Company. If
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
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
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and technology outside the Field (as such term is defined in the
Distribution Agreement).
8. CONDITIONS PRECEDENT.
8.1 CONDITIONS TO OBLIGATIONS OF ▇▇▇▇▇▇. The obligations of
▇▇▇▇▇▇ to consummate this Agreement are subject to the
satisfaction on or prior to the Closing Date of the following
conditions, unless waived by ▇▇▇▇▇▇:
(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, and ▇▇▇▇▇▇ shall have received a
certificate or certificates signed by the Chief
Executive Officer of the Company to such effect.
(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 ▇▇▇▇▇▇ shall have received a
certificate signed by the Chief Executive Officer of
the Company to such effect.
(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 ▇▇▇▇▇▇
shall have entered into a Distribution Agreement in
the form attached hereto as Exhibit B.
(e) CREDIT AGREEMENT. The Company and ▇▇▇▇▇▇ shall
have entered into a Credit Agreement in the form
attached hereto as Exhibit C.
(f) SECURITY AGREEMENT. The Company and ▇▇▇▇▇▇ shall
have entered into a Security Agreement in the form
attached hereto as Exhibit D.
(g) NOTE. The Company shall have tendered to ▇▇▇▇▇▇
the Note.
8.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the transactions contemplated
hereby are subject to
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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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇. ▇▇▇▇▇▇
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 ▇▇▇▇▇▇
shall have entered into a Distribution Agreement in
the form attached hereto as Exhibit B.
(d) CREDIT AGREEMENT. The Company and ▇▇▇▇▇▇ shall
have entered into a Credit Agreement in the form
attached hereto as Exhibit C.
(e) PAYMENT. ▇▇▇▇▇▇ shall have tendered to the
Company Five Million Dollars ($5,000,000) 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 hereon immediately due and
payable, by notice in writing to the Company:
9.1 PAYMENTS. Default in the payment of the principal and
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 release 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.
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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.
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.
9.6 DEFAULT UNDER OTHER AGREEMENTS. The Company breaches or
defaults on any material covenant, condition or other
provision of the Distribution Agreement and such breach or
default 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 or default.
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 ▇▇▇▇▇▇'▇ 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, ▇▇▇▇▇▇ shall have, in addition to the remedies set
forth in Section 9 hereof, all other remedies otherwise
available at law and equity. In addition, if an Event of
Default shall occur and be continuing, ▇▇▇▇▇▇ may
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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.
10. SUBORDINATION. The indebtedness evidenced by the Note is
hereby expressly subordinated except as otherwise provided in
the Security Agreement attached hereto as Exhibit D, 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, or if the Note
shall be declared due and payable upon the occurrence of an
Event of Default with respect to any Senior Indebtedness, 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.
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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.
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. Subject to and
upon compliance with the provisions of this Section 11, at the
option of ▇▇▇▇▇▇ at any time and at ▇▇▇▇▇▇'▇ sole discretion
without regard to the price of the Common Stock and the
Conversion Price (as defined herein), 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 August 19, 2003. The
price at which shares of Common Stock shall be delivered upon
conversion (the "Conversion Price") shall be initially [*] per
share of Common Stock. The Conversion Price shall be adjusted
in certain instances as provided in this Section 11.
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11.2 EXERCISE OF CONVERSION PRIVILEGE. In order to exercise
the conversion privilege, ▇▇▇▇▇▇ shall surrender the Note duly
endorsed or assigned to the Company or in blank, at any office
or agency of the Company maintained for that purpose,
accompanied by written notice of conversion in the form
provided on the Note (or such other notice as is acceptable to
the Company) at such office or agency that ▇▇▇▇▇▇ elects to
convert such Note. 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 accordance with the
foregoing provisions, and at such time the rights of ▇▇▇▇▇▇ 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
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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 ▇▇▇▇▇▇ 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 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
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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
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for all or any 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
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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
(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
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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 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)
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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;
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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 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 or the 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ at least thirty (30) days prior to
the closing of the transaction that will effect the Change of
Control, and ▇▇▇▇▇▇ may convert the Note in accordance with
Section 11 hereof prior to the transaction or declare an Event
of Default
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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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ and, upon surrender
of the Note at the Company's office by ▇▇▇▇▇▇, the Company
will deliver in exchange therefor, without expense to ▇▇▇▇▇▇,
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 name of
such Person as may be designated by ▇▇▇▇▇▇, 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 satisfactory to the Company of the loss,
theft, mutilation or destruction of the Note, the Company will
make and deliver without expense to ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ home office or at such
other place as ▇▇▇▇▇▇ may designate, and all reasonable
expenses of ▇▇▇▇▇▇ (including, without limitation, the
reasonable fees and expenses of any financial advisor to
▇▇▇▇▇▇) 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 ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ 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 a
Purchaser) in connection with the transactions contemplated by
this Agreement.
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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 Abbott
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, ▇▇▇▇▇▇'▇ pro
rata share of New Securities is the ratio of the number of
shares of Common Stock owned by Abbott (assuming full
conversion of the Note and the Credit Facility Note if issued
and outstanding) immediately prior to the issuance of New
Securities to the total number of shares of Common Stock
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 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
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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 Abbott 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, Abbott 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. Abbott
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 Abbott does not
fully exercise its right to purchase or obtain all such New
Securities that Abbott 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 Abbott
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 Abbott in accordance herewith.
13. INDEMNIFICATION.
13.1 INDEMNIFICATION BY THE COMPANY.
(a) The Company agrees to defend and indemnify
Abbott, its Subsidiaries and their respective
Affiliates, directors, officers, employees and
shareholders, and their respective successors and
assigns (collectively, the "Abbott Indemnitees"),
against and hold
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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
such indemnified person may suffer or incur by reason
of (i) the inaccuracy or breach of any of the
representations, warranties and 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.
Nothing herein shall limit in any way ▇▇▇▇▇▇'▇
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, Abbott (including its Subsidiaries and their
respective Affiliates, directors, officers, employees
and shareholders) 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 ABBOTT. After the Closing Date, Abbott
shall, as to those representations, warranties, covenants and
agreements which are herein made or agreed to by Abbott,
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
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warranty or any non-fulfillment of any covenant or
agreement on the part of Abbott 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 Abbott in connection
with any tender offer by Abbott; and
(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 shall not exceed
[*] .
Abbott 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 [*] .
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
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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 Abbott 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 Abbott are
cumulative to, and are not exclusive of, any rights or
remedies Abbott 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 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 United States certified mail delivery, or
five (5) business days after deposit in the United States
mail. Such certificates, documents or notice may be personally
delivered to an authorized representative of the Company or
Abbott (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 ▇▇▇▇▇▇: ▇▇▇▇▇▇ Laboratories
D-960, AP30
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President, Hospital Products Division
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Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ Laboratories
Legal Division
D-322, AP6D
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Divisional Vice President,
Domestic Legal Operations
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 Abbott and its successors and assigns;
provided, however, that neither the Company nor Abbott 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,
and provided further, Abbott may assign its rights hereunder
after July 31, 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.
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.
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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 Delaware law, 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 shall be resolved as
provided in Exhibit F hereto.
IN WITNESS WHEREOF, the Company and Abbott by their duly authorized
officers, have each caused this Agreement to be executed as of the date
first written above.
ABBOTT:
▇▇▇▇▇▇ LABORATORIES
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Title: President HPD
COMPANY:
MICRO THERAPEUTICS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Title: Executive Vice President
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